Company Quick10K Filing
Quick10K
Benefit Street Partners Realty Trust
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-09-11 Sale of Shares, Shareholder Rights, Exhibits
8-K 2019-05-30 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-05-23 Sale of Shares, Shareholder Vote
8-K 2019-03-15 Enter Agreement, Off-BS Arrangement
8-K 2019-01-28 Sale of Shares
8-K 2018-12-11 Amend Bylaw, Exhibits
8-K 2018-11-21 Enter Agreement, Off-BS Arrangement
8-K 2018-10-25 Other Events
8-K 2018-10-19 Sale of Shares
8-K 2018-10-04 Sale of Shares
8-K 2018-09-26 Sale of Shares
8-K 2018-09-12 Amend Bylaw, Exhibits
8-K 2018-08-21 Sale of Shares
8-K 2018-06-22 Shareholder Rights, Amend Bylaw, Exhibits
8-K 2018-05-31 Enter Agreement, Sale of Shares, Shareholder Rights, Shareholder Vote, Other Events, Exhibits
8-K 2018-04-05 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-02-14 Enter Agreement, Sale of Shares, Exhibits
8-K 2018-01-19 Enter Agreement, Exhibits
FCRE FC Global Realty 132
PLYZ Plyzer Technologies 36
UCLE US Nuclear 14
PROP Pledge Petroleum 10
DEAC Elite Data Services 1
MSCG Managed Futures Premier Graham 0
ARGQ Argentum 47 0
NAP Navios Maritime Midstream Partners 0
EMYB Embassy Bancorp 0
ENGT Energy & Technology 0
BSPRT 2019-06-30
Part I
Item 1. Consolidated Financial Statements and Notes (Unaudited)
Note 1 - Organization and Business Operations
Note 2 - Summary of Significant Accounting Policies
Note 3 - Commercial Mortgage Loans
Note 4 - Real Estate Securities
Note 5 - Debt
Note 6 - Earnings per Share
Note 7 - Stock Transactions
Note 8 - Commitments and Contingencies
Note 9 - Related Party Transactions and Arrangements
Note 10 - Fair Value of Financial Instruments
Note 11 - Derivative Instruments
Note 12 - Offsetting Assets and Liabilities
Note 13 - Segment Reporting
Note 14 - Subsequent Events
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 bsprt-exhibit311_q219.htm
EX-31.2 bsprt-exhibit312_q219.htm
EX-32 bsprt-exhibit32_q219.htm

Benefit Street Partners Realty Trust Earnings 2019-06-30

BSPRT 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 bsprt-2019q2x10q.htm 10-Q Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2019
 OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 000-55188
BENEFIT STREET PARTNERS REALTY TRUST, INC.
(Exact name of registrant as specified in its charter) 
Maryland
 
46-1406086
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
9 West 57th Street, Suite #4920
New York, New York
 
10019
(Address of Principal Executive Office)
 
(Zip Code)

(212) 588-6770
(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
None
 
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filer o
Accelerated filer o
Non-accelerated filer   x
Smaller reporting company x
 
Emerging growth filer o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o


1


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares of the registrant's common stock, $0.01 par value, outstanding as of July 31, 2019 was 42,651,847.

2

BENEFIT STREET PARTNERS REALTY TRUST, INC.

TABLE OF CONTENTS




i


PART I
Item 1. Consolidated Financial Statements and Notes (unaudited)

1


BENEFIT STREET PARTNERS REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
 
June 30, 2019
 
December 31, 2018
ASSETS
(Unaudited)
 
 
Cash and cash equivalents
$
164,541

 
$
191,390

Restricted cash
13,693

 
13,029

Commercial mortgage loans, held for investment, net of allowance of 7,904 and 4,836
2,546,617

 
2,206,830

Commercial mortgage loans, held-for-sale, measured at fair value
104,045

 
76,863

Real estate securities, available for sale, measured at fair value
133,757

 
26,412

Derivative instruments, measured at fair value
262

 
846

Other real estate investments, measured at fair value
2,511

 

Receivable for loan repayment (1)
74,712

 
73,684

Accrued interest receivable
14,533

 
12,789

Prepaid expenses and other assets
4,434

 
4,235

Total assets
$
3,059,105

 
$
2,606,078

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Collateralized loan obligations
$
1,885,039

 
$
1,505,279

Repurchase agreements - commercial mortgage loans
132,870

 
149,440

Repurchase agreements - real estate securities
85,022

 
44,539

Other financing and loan participation - commercial mortgage loans

 
9,902

Derivative instruments, measured at fair value
4,234

 
1,319

Interest payable
3,395

 
3,025

Distributions payable
6,083

 
5,834

Accounts payable and accrued expenses
6,955

 
4,497

Due to affiliates
3,266

 
3,229

Total liabilities
$
2,126,864

 
$
1,727,064

Commitment and contingencies (See Note 8)


 


Redeemable convertible preferred stock Series A, $0.01 par value, 40,000 authorized, 32,246 issued and outstanding as of June 30, 2019 and 29,249 issued and outstanding as of December 31, 2018
$
160,823

 
$
145,786

Equity:
 
 
 
Preferred stock, $0.01 par value, 50,000,000 authorized, none issued and outstanding as of June 30, 2019 and December 31, 2018

 

Common stock, $0.01 par value, 949,999,000 shares authorized, 41,720,045 and 39,303,710 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively
419

 
395

Additional paid-in capital
866,975

 
827,558

Accumulated other comprehensive income (loss)
(379
)
 
(459
)
Accumulated deficit
(95,597
)
 
(94,266
)
Total stockholders' equity
$
771,418

 
$
733,228

Total liabilities, redeemable convertible preferred stock and stockholders' equity
$
3,059,105

 
$
2,606,078

___________________
(1) Includes $74.7 million and $73.7 million of cash held by servicer related to loan payoffs pledged to the CLOs as of June 30, 2019 and December 31, 2018, respectively.
The accompanying notes are an integral part of these unaudited consolidated financial statements.

2



BENEFIT STREET PARTNERS REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Interest income:
 
 
 
 
 
 
 
Interest income
$
48,225

 
$
34,127

 
$
94,736

 
$
63,535

Less: Interest expense
25,869

 
14,389

 
46,235

 
33,063

Net interest income
$
22,356

 
$
19,738

 
48,501

 
30,472

Expenses:
 
 
 
 
 
 
 
Asset management and subordinated performance fee
3,805

 
2,266

 
7,449

 
4,507

Acquisition expenses
270

 
51

 
518

 
116

Administrative services expenses
3,556

 
3,125

 
7,519

 
6,321

Professional fees
2,568

 
2,668

 
4,663

 
5,227

Other expenses
836

 
1,150

 
1,732

 
2,142

Total expenses
$
11,035

 
$
9,260

 
21,881

 
18,313

Other (income)/loss:
 
 
 
 
 
 
 
Loan loss provision/(recovery)
$
573

 
$
2,354

 
3,068

 
2,436

Realized (gain)/loss on sale of commercial mortgage loan held-for-sale

 

 
25

 
28

Realized (gain)/loss on sale of commercial mortgage loan, held-for-sale, measured at fair value
(7,237
)
 
(4,042
)
 
(18,418
)
 
(6,346
)
Unrealized (gain)/loss on commercial mortgage loans, held-for-sale, measured at fair value
(568
)
 
(70
)
 
(232
)
 
(705
)
Unrealized (gain)/loss on derivatives
2,004

 
(87
)
 
3,070

 
110

Realized (gain)/loss on derivatives
1,626

 
(271
)
 
3,084

 
(1,517
)
Total other (income)/loss
$
(3,602
)
 
$
(2,116
)
 
$
(9,403
)
 
$
(5,994
)
Income/(loss) before taxes
14,923

 
12,594

 
36,023

 
18,153

Provision/(benefit) for income tax
397

 
492

 
1,607

 
755

Net income
$
14,526

 
$
12,102

 
$
34,416

 
$
17,398

Net income applicable to common stock
$
11,036

 
$
12,086

 
$
27,606

 
$
17,382

 
 
 
 
 
 
 
 
Basic earnings per share
$
0.27

 
$
0.38

 
$
0.68

 
$
0.55

Diluted earnings per share
$
0.27

 
$
0.38

 
$
0.68

 
$
0.55

Basic weighted average shares outstanding
41,226,805

 
31,762,199

 
40,516,456

 
31,717,328

Diluted weighted average shares outstanding
41,239,548

 
31,776,513

 
40,529,371

 
31,731,642


The accompanying notes are an integral part of these unaudited consolidated financial statements.


3



BENEFIT STREET PARTNERS REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
14,526

 
$
12,102

 
$
34,416

 
$
17,398

Unrealized gain/(loss) on available-for-sale securities
(65
)
 
(23
)
 
80

 
(23
)
Comprehensive income attributable to Benefit Street Partners Realty Trust, Inc.
$
14,461

 
$
12,079

 
$
34,496

 
$
17,375




The accompanying notes are an integral part of these unaudited consolidated financial statements.


4


BENEFIT STREET PARTNERS REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except share data)
(Unaudited)
 
Common Stock
 
 
 
 
 
 
 
 
 
Number of Shares
 
Par Value
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Loss
 
Accumulated Deficit
 
Total Stockholders' Equity
Balance, December 31, 2018
39,303,710

 
$
395

 
$
827,558

 
$
(459
)
 
$
(94,266
)
 
$
733,228

Issuance of common stock
1,161,580

 
11

 
19,398

 

 

 
19,409

Common stock repurchases
(387,530
)
 
(4
)
 
(7,203
)
 

 

 
(7,207
)
Common stock issued through distribution reinvestment plan
180,906

 
2

 
3,390

 

 

 
3,392

Share-based compensation

 

 
39

 

 

 
39

Offering costs

 

 
(382
)
 

 

 
(382
)
Net income

 

 

 

 
19,890

 
19,890

Distributions declared

 

 

 

 
(17,449
)
 
(17,449
)
Other comprehensive income

 

 

 
145

 

 
145

Balance, March 31, 2019
40,258,666

 
$
404

 
$
842,800

 
$
(314
)
 
$
(91,825
)
 
$
751,065

Issuance of common stock
1,267,833

 
$
13

 
$
21,175

 
$

 
$

 
$
21,188

Common stock repurchases

 

 

 

 

 

Common stock issued through distribution reinvestment plan
187,146

 
2

 
3,490

 

 

 
3,492

Share-based compensation
6,400

 

 
39

 

 

 
39

Offering costs

 

 
(529
)
 

 

 
(529
)
Net income

 

 

 

 
14,526

 
14,526

Distributions declared

 

 

 

 
(18,298
)
 
(18,298
)
Other comprehensive income

 

 

 
(65
)
 

 
(65
)
Balance, June 30, 2019
41,720,045

 
$
419

 
$
866,975

 
$
(379
)
 
$
(95,597
)
 
$
771,418

 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2017
31,834,072

 
$
320

 
$
704,101

 
$

 
$
(94,082
)
 
$
610,339

Issuance of common stock

 

 

 

 

 

Common stock repurchases
(421,809
)
 
(4
)
 
(7,826
)
 

 

 
(7,830
)
Common stock issued through distribution reinvestment plan
187,851

 
2

 
3,571

 

 

 
3,573

Share-based compensation

 

 
42

 

 

 
42

Net income

 

 

 

 
5,296

 
5,296

Distributions declared

 

 

 

 
(11,246
)
 
(11,246
)
Other comprehensive income

 

 

 

 

 

Balance, March 31, 2018
31,600,114

 
$
318

 
$
699,888

 
$

 
$
(100,032
)
 
$
600,174

Issuance of common stock
834,537

 
8

 
13,715

 

 

 
13,723

Common stock repurchases


 


 


 

 

 

Common stock issued through distribution reinvestment plan
186,008

 
2

 
3,534

 

 

 
3,536

Share-based compensation


 


 
38

 

 

 
38

Net income

 

 

 

 
12,102

 
12,102

Distributions declared

 

 

 

 
(11,427
)
 
(11,427
)
Other comprehensive income

 

 

 
(23
)
 

 
(23
)
Balance, June 30, 2018
32,620,659

 
$
328

 
$
717,175

 
$
(23
)
 
$
(99,357
)
 
$
618,123

The accompanying notes are an integral part of these unaudited consolidated financial statements.

5


BENEFIT STREET PARTNERS REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
Six Months Ended June 30,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
34,416

 
$
17,398

Adjustments to reconcile net income to net cash (used in)/provided by operating activities:
 
 
 
Premium amortization and (discount accretion), net
(3,185
)
 
(1,916
)
Accretion of deferred commitment fees
(1,282
)
 
(856
)
Amortization of deferred financing costs
7,072

 
9,636

Share-based compensation
78

 
80

Unrealized (gain)/loss on commercial mortgage loans held-for-sale
(232
)
 
(705
)
Unrealized (gain)/loss on derivative instruments
3,070

 
110

Loan loss (recovery)/provision
3,068

 
2,436

Origination of commercial mortgage loans, held-for-sale
(324,219
)
 
(317,372
)
Proceeds from sale of commercial mortgage loans, held-for-sale
297,269

 
244,369

Changes in assets and liabilities:
 
 
 
Accrued interest receivable
(462
)
 
(1,199
)
Prepaid expenses and other assets
(2,104
)
 
(1,354
)
Accounts payable and accrued expenses
2,458

 
348

Due to affiliates
37

 
(1,896
)
Interest payable
370

 
1,239

Net cash (used in)/provided by operating activities
$
16,354

 
$
(49,682
)
Cash flows from investing activities:
 
 
 
Origination and purchase of commercial mortgage loans, held for investment
$
(669,044
)
 
$
(815,737
)
Principal repayments received on commercial mortgage loans, held for investment
328,742

 
310,525

Purchase of other real estate investments
(2,511
)
 

Purchase of real estate securities
(107,535
)
 
(13,316
)
Principal repayments received on real estate securities
249

 

Purchase of derivative instruments
(829
)
 
(520
)
Net cash (used in)/provided by investing activities
$
(450,928
)
 
$
(519,048
)
Cash flows from financing activities:
 
 
 
Proceeds from issuances of common stock
$
40,597

 
$
13,723

Proceeds from issuances of redeemable convertible preferred stock
14,979

 
11,277

Common stock repurchases
(7,207
)
 
(7,830
)
Borrowings under collateralized loan obligation
639,899

 
488,000

Repayments of collateralized loan obligation
(260,833
)
 
(141,950
)
Borrowings on repurchase agreements - commercial mortgage loans
728,432

 
1,172,407

Repayments of repurchase agreements - commercial mortgage loans
(745,003
)
 
(933,121
)
Borrowings on repurchase agreements - real estate securities
493,541

 
49,746

Repayments of repurchase agreements - real estate securities
(453,058
)
 
(78,181
)
Repayments on other financing and loan participation - commercial mortgage loans
(10,000
)
 
(26,182
)
Payments of deferred financing costs
(4,395
)
 
(6,164
)
Distributions paid
(28,563
)
 
(15,675
)
Net cash (used in)/provided by financing activities:
$
408,389

 
$
526,050


6


BENEFIT STREET PARTNERS REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

Net change in cash, cash equivalents and restricted cash
$
(26,185
)
 
$
(42,680
)
Cash, cash equivalents and restricted cash, beginning of period
204,419

 
91,708

Cash, cash equivalents and restricted cash, end of period
$
178,234

 
$
49,028

Supplemental disclosures of cash flow information:
 
 
 
Taxes paid
$

 
$
340

Interest paid
38,793

 
22,188

Supplemental disclosures of non-cash flow information:
 
 
 
Payable to broker dealer for purchase of real estate securities
$

 
$
13,500

Distribution payable
6,083

 
3,806

Common stock issued through distribution reinvestment plan
6,884

 
7,109

 
 
 
 
Reconciliation of cash, cash equivalents and restricted cash at end of period:
 
 
 
Cash and cash equivalents
$
164,541

 
$
39,201

Restricted cash
13,693

 
9,827

Cash, cash equivalents and restricted cash, end of period
$
178,234

 
$
49,028

 
 
 
 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

7

BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)



Note 1 - Organization and Business Operations
Benefit Street Partners Realty Trust, Inc. (the "Company") is a real estate finance company that primarily originates, acquires and manages a diversified portfolio of commercial real estate debt investments secured by properties located within and outside the United States. The Company was incorporated in Maryland on November 15, 2012 and commenced operations on May 14, 2013.
The Company made a tax election to be treated as a real estate investment trust (a "REIT") for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2013. The Company believes that it has qualified as a REIT and intends to continue to meet the requirements for qualification and taxation as a REIT. In addition, the Company, through a subsidiary which is treated as a taxable REIT subsidiary (a "TRS") is indirectly subject to U.S federal, state and local income taxes. The majority of the Company's business is conducted through Benefit Street Partners Realty Operating Partnership, L.P. (the “OP”), a Delaware limited partnership. The Company is the sole general partner and directly or indirectly holds all of the units of limited partner interests in the OP.
The Company has no direct employees. Benefit Street Partners L.L.C. serves as the Company's advisor (the "Advisor") pursuant to an Amended and Restated Advisory Agreement, dated January 19, 2018 (the "Advisory Agreement"). The Advisor is a wholly owned subsidiary of Franklin Resources, Inc. which, together with its various subsidiaries, operates as Franklin Templeton. Prior to February 1, 2019, the Advisor was in partnership with Providence Equity Partners L.L.C., a global private equity firm. The Advisor, an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”), is a credit-focused alternative asset management firm. Established in 2008, the Advisor's credit platform manages funds for institutions and high-net-worth investors across various credit funds and complementary strategies including high yield, levered loans, private / opportunistic debt, liquid credit, structured credit and commercial real estate debt. These strategies complement each other as they all leverage the sourcing, analytical, compliance, and operational capabilities that encompass the platform. The Advisor manages the Company's affairs on a day-to-day basis. The Advisor receives compensation and fees for services related to the investment and management of the Company's assets and the operations of the Company.
The Company invests in commercial real estate debt investments, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans. The Company also originates conduit loans which the Company intends to sell through its TRS into commercial mortgage-backed securities ("CMBS") at a profit. The Company also invests in commercial real estate securities. Real estate securities may include CMBS, senior unsecured debt of publicly traded REITs, debt or equity securities of other publicly traded real estate companies and collateralized debt obligations ("CDOs").
Note 2 - Summary of Significant Accounting Policies
Basis of Accounting
The Company's unaudited consolidated financial statements and related footnotes have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America ("GAAP") for interim financial statements and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X, as appropriate. Accordingly, the consolidated financial statements may not include all of the information and notes required by GAAP for annual consolidated financial statements. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the reported periods. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially. Certain prior period amounts have been reclassified to conform with current presentation. In the opinion of management, the interim data includes all adjustments, of a normal and recurring nature, necessary for a fair statement of the results for the periods presented. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the entire year or any subsequent interim periods.
These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of, and for the year ended December 31, 2018, which are included in the Company's Annual Report on Form 10-K filed with the SEC on March 29, 2019. There have been no significant changes to the Company's significant accounting policies during the six months ended June 30, 2019.

8

BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)


Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members, as well as whether the entity is a variable interest entity ("VIE") for which the Company is the primary beneficiary.
The Company has determined the OP is a VIE of which the Company is the primary beneficiary. Substantially all of the Company's assets and liabilities are held by the OP.
The Company consolidates all entities that it controls through either majority ownership or voting rights. In addition, the Company consolidates all VIEs of which the Company is considered the primary beneficiary. VIEs are entities in which equity investors (i) do not have the characteristics of a controlling financial interest and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The entity that consolidates a VIE is its primary beneficiary and is generally the entity with (i) the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE.
The accompanying consolidated financial statements include the accounts of collateralized loan obligations ("CLOs") issued and securitized by wholly owned subsidiaries of the Company. The Company has determined the CLOs are VIEs of which the Company's subsidiary is the primary beneficiary. The assets and liabilities of the CLOs are consolidated in the accompanying consolidated balance sheet in accordance with ASC 810, Consolidation.
Acquisition Expenses
The Company incurs acquisition expenses payable to the Advisor. Acquisition expenses paid to the Company's Advisor in connection with the origination and acquisition of commercial mortgage loan investments and acquisition of real estate securities are evaluated based on the nature of the expense to determine if they should be expensed in the period incurred or capitalized and amortized over the life of the investment. Pursuant to the Advisory Agreement, the Advisor is entitled to reimbursement for insourced acquisition expenses of 0.5%.
Cash and Cash Equivalents
Cash represents deposits with high quality financial institutions. These deposits are guaranteed by the Federal Deposit Insurance Company up to an insurance limit. Cash equivalents include short-term, liquid investments in money market funds with original maturities of 90 days or less when purchased.
Restricted Cash
Restricted cash primarily consists of cash pledged as margin on repurchase agreements and derivative transactions. The duration of this restricted cash generally matches the duration of the related repurchase agreements or derivative transaction.
Commercial Mortgage Loans
Held-for-Investment - Commercial mortgage loans that are held for investment purposes and are anticipated to be held until maturity, are carried at cost, net of unamortized acquisition expenses, discounts or premiums and unfunded commitments. Commercial mortgage loans, held for investment purposes, that are deemed to be impaired are carried at amortized cost less a specific allowance for loan losses. Interest income is recorded on the accrual basis and related discounts, premiums and acquisition expenses on investments are amortized over the life of the investment using the effective interest method. Amortization is reflected as an adjustment to interest income in the Company’s consolidated statements of operations. Guaranteed loan exit fees payable by the borrower upon maturity are accreted over the life of the investment using the effective interest method. The accretion of guaranteed loan exit fees is recognized in interest income in the Company's consolidated statements of operations.
Held-for-Sale - Commercial mortgage loans that are intended to be sold in the foreseeable future are reported as held-for-sale and are transferred at fair value and recorded at the lower of cost or fair value with changes recorded through the statements of operations. Unamortized loan origination costs for commercial mortgage loans held-for-sale that are carried at the lower of cost or fair value are capitalized as part of the carrying value of the loans and recognized upon the sale of such loans. Amortization of origination costs ceases upon transfer of commercial mortgage loans to held-for-sale. During the six months ended June 30, 2019, the Company originated $5.0 million of commercial mortgage loans held-for-sale and sold these loans during the period for net proceeds of approximately $5.0 million.

9

BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)


Held-for-Sale, Accounted for Under the Fair Value Option - The fair value option provides an option to elect fair value as an alternative measurement for selected financial assets, financial liabilities, and written loan commitments. The Company has elected to measure commercial mortgage loans held-for-sale in the Company's TRS under the fair value option. These commercial mortgage loans are included in the Commercial mortgage loans, held-for-sale, measured at fair value in the consolidated balance sheet. Interest income received on commercial mortgage loans held-for-sale is recorded on the accrual basis of accounting and is included in interest income in the consolidated statements of operations. Acquisition expenses on originating these investments are expensed when incurred.
Allowance for Loan Losses
The allowance for loan losses reflects management's estimate of loan losses inherent in the loan portfolio as of the balance sheet date. The reserve is increased or decreased through the loan loss provision or (recovery) on the Company's consolidated statements of operations and is decreased by charge-offs when losses are confirmed through the receipt of assets, such as cash in a pre-foreclosure sale or upon ownership control of the underlying collateral in full satisfaction of the loan upon foreclosure or when significant collection efforts have ceased. The Company uses a uniform process for determining its allowance for loan losses. The allowance for loan losses includes a general, formula-based component and an asset-specific component.
General reserves are recorded when (i) available information as of each balance sheet date indicates that it is probable a loss has occurred in the portfolio and (ii) the amount of the loss can be reasonably estimated. The Company estimates loss rates based on historical realized losses experienced in the industry, given the fact the Company has not experienced significant losses, and takes into account current collateral and economic conditions affecting the probability and severity of losses when establishing the allowance for loan losses. The Company performs a comprehensive analysis of its loan portfolio and assigns risk ratings to loans that incorporate management's current judgments about their credit quality based on all known and relevant internal and external factors that may affect collectability. The Company considers, among other things, payment status, lien position, borrower financial resources and investment in collateral, collateral type, project economics and geographic location as well as national and regional economic factors. This methodology results in loans being segmented by risk classification into risk rating categories that are associated with estimated probabilities of default and principal loss. Ratings range from "1" to "5" with "1" representing the lowest risk of loss and "5" representing the highest risk of loss.
The asset-specific reserve component relates to reserves for losses on individual impaired loans. The Company considers a loan to be impaired when, based upon current information and events, it believes that it is probable that the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. This assessment is made on an individual loan basis each quarter based on such factors as payment status, lien position, borrower financial resources and investment in collateral, collateral type, project economics and geographical location as well as national and regional economic factors. A reserve is established for an impaired loan when the present value of payments expected to be received, observable market prices or the estimated fair value of the collateral (for loans that are dependent on the collateral for repayment) is lower than the carrying value of that loan.
For collateral dependent impaired loans, impairment is measured using the estimated fair value of collateral less the estimated cost to sell. Valuations are performed or obtained at the time a loan is determined to be impaired and designated non-performing, and are updated if circumstances indicate that a significant change in value has occurred. The Advisor generally will use either the income approach through internally developed valuation models to estimate the fair value of the collateral for such loans or obtain external "as is" appraisals for loan collateral.
A loan is also considered impaired if its terms are modified in a troubled debt restructuring ("TDR"). A TDR occurs when a concession is granted and the debtor is experiencing financial difficulties. Impairments on TDR loans are generally measured based on the present value of expected future cash flows discounted at the effective interest rate of the original loans.
The Company generally designates non-performing loans at such time as (i) loan payments become 90-days past due; (ii) the loan has a maturity default; or (iii) in the opinion of the Company, it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan. Income recognition will generally be suspended when a loan is designated non-performing unless the loan is well secured, and resumed only when the suspended loan becomes contractually current and performance is demonstrated to have resumed. A loan will be written off when it is no longer realizable and legally discharged.

10

BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)


Income Taxes
The Company has conducted its operations to qualify as a REIT for U.S. federal income tax purposes beginning with its taxable year ended December 31, 2013. As a REIT, if the Company meets certain organizational and operational requirements and distributes at least 90% of its "REIT taxable income" (determined before the deduction of dividends paid and excluding net capital gains) to its stockholders in a year, it will not be subject to U.S. federal income tax to the extent of the income that it distributes. However, even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on income in addition to U.S. federal income and excise taxes on its undistributed income. The Company, through its TRS, is indirectly subject to U.S. federal, state and local income taxes. The Company’s TRS is not consolidated for U.S. federal income tax purposes, but is instead taxed as a C corporation. For financial reporting purposes, the TRS is consolidated and a provision for current and deferred taxes is established for the portion of earnings recognized by the Company with respect to its interest in its TRS. Total income tax expense for the six months ended June 30, 2019 and June 30, 2018 were $1.6 million and $0.8 million, respectively.
The Company uses a more-likely-than-not threshold for recognition and derecognition of tax positions taken or to be taken in a tax return. The Company has assessed its tax positions for all open tax years beginning with December 31, 2015 and concluded that there were no uncertainties to be recognized. The Company’s accounting policy with respect to interest and penalties related to tax uncertainties is to classify these amounts as provision for income taxes.
The Company utilizes the TRS to reduce the impact of the prohibited transaction tax and to avoid penalty for the holding of assets not qualifying as real estate assets for purposes of the REIT asset tests. Any income associated with a TRS is fully taxable because the TRS is subject to federal and state income taxes as a domestic C corporation based upon its net income.
Derivatives and Hedging Activities
In the normal course of business, the Company is exposed to the effect of interest rate changes and may undertake a strategy to limit these risks through the use of derivatives.  The Company uses derivatives primarily to economically hedge against interest rates, CMBS spreads and macro market risk in order to minimize volatility.  The Company may use a variety of derivative instruments that are considered conventional, including but not limited to: Treasury note futures and credit derivatives on various indices including CMBX and CDX.
The Company recognizes all derivatives on the consolidated balance sheets at fair value.  The Company does not designate derivatives as hedges to qualify for hedge accounting for financial reporting purposes and therefore any net payments under, or fluctuations in the fair value of these derivatives have been recognized currently in unrealized gain/(loss) on derivative instruments in the accompanying consolidated statements of operations. The Company records derivative asset and liability positions on a gross basis with any collateral posted with or received from counterparties recorded separately within Restricted cash on the Company’s consolidated balance sheets. Certain derivatives that the Company has entered into are subject to master netting agreements with its counterparties, allowing for netting of the same transaction, in the same currency, on the same date.
Earnings per Share
The Company’s Series A redeemable convertible preferred stock (the "Preferred Stock") is considered a participating security. As such, the Company is required to include the Preferred Stock in the calculation of basic earnings per share and calculate basic earnings per share using the two-class method. The Company calculates basic earnings per share by dividing net income applicable to common stock for the period by the weighted-average number of shares of common stock outstanding for that period. The Company’s dilutive earnings per share calculation is computed using the more dilutive result of the treasury stock method, assuming the participating security is a potential common share, or the two-class method, assuming the participating security is not converted. Diluted earnings per share reflects the potential dilution that could occur from shares outstanding if potential shares of common stock with a dilutive effect have been issued in connection with the restricted stock plan or upon conversion of the outstanding shares of the Company’s Preferred Stock, except when doing so would be anti-dilutive.
Reportable Segments
The Company has determined that it has three reportable segments based on how the chief operating decision maker reviews and manages the business. The three reporting segments are as follows:
The real estate debt business which is focused on originating, acquiring and asset managing commercial real estate debt investments, including first mortgage loans, subordinate mortgages, mezzanine loans and participations in such loans.
The real estate securities business which is focused on investing in and asset managing commercial real estate securities primarily consisting of CMBS and may include unsecured REIT debt, CDO notes and other securities.

11

BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)


The commercial conduit business in the Company's TRS, which is focused on originating and subsequently selling fixed-rate commercial real estate loans into the CMBS securitization market.
See Note 13 - Segment Reporting for further information regarding the Company's segments.
Redeemable Convertible Preferred Stock
The Company’s Preferred Stock is classified outside of permanent equity in the consolidated balance sheets. Subject to certain conditions, the Preferred Stock is redeemable at the option of the holder of Preferred Stock, outside of the control of the Company. As set forth in the Articles Supplementary (the “Articles Supplementary”) to the Company’s Articles of Amendment and Restatement, the Preferred Stock is redeemable for shares of the Company's common stock, $0.01 par value per share (the "Common Stock") at the option of the shareholder upon a change of control (as defined in the Articles Supplementary) or after the sixth anniversary of the date of issuance. A change in control of the Company occurs if any person acquires more than 50% of the total economic interests or voting power of all securities of the Company, other than in a liquidity event.
Shares of Preferred Stock rank senior to shares of Common Stock with respect to rights to receive dividends and to participate in distributions or payments upon any voluntary or involuntary liquidation, dissolution or winding up of the Company. Dividends payable on each share of Preferred Stock will be equal to the greater of (i) an amount equal to $16.67 per share and (ii) the monthly dividend that would have been paid had such share of Preferred Stock been converted to a share of Common Stock, subject to proration in the event that such share of Preferred Stock was not outstanding for the full month.
Immediately prior to a “Liquidity Event,” each outstanding share of Preferred Stock shall convert (the “Mandatory Conversion”) into 299.2 shares of Common Stock, subject to anti-dilution adjustments (the “Conversion Rate”). A “Liquidity Event” is defined as (i) the listing of the Common Stock on a national securities exchange or quotation on an electronic inter-dealer quotation system; (ii) a merger or business combination involving the Company pursuant to which outstanding shares Common Stock are exchanged for securities of another company which are listed on a national securities exchange or quoted on an electronic inter-dealer quotation system; or (iii) any other transaction or series of transaction that results in all shares of Common Stock being transferred or exchanged for cash or securities which are listed on a national securities exchange or quoted on an electronic inter-dealer quotation system. If there has not been a Liquidity Event within six years from the initial issuance of the Preferred Stock, each holder of Preferred Stock shall have the right to convert all, but not less than all, of the Preferred Stock held by such holder into Common Stock at the Conversion Rate. Each holder also has the option to convert its shares of Preferred Stock into Common Stock upon a change in control (as defined in the Articles Supplementary) of the Company. In addition, neither the Company nor a holder of shares of Preferred Stock may redeem shares of the Preferred Stock until six years from the initial issuance of the Preferred Stock, except in cases of a change in control (as defined in the Articles Supplementary).
Holders of the Preferred Stock are entitled to vote on each matter submitted to a vote of the stockholders of the Company upon which the holders of Common Stock are entitled to vote, upon which the holders of the Preferred Stock and holders of the Common Stock shall vote together as a single class. The number of votes applicable to a share of Preferred Stock will be equal to the number of shares of Common Stock a share of Preferred Stock could have been converted into as of the record date set for purposes of such stockholder vote (rounded down to the nearest whole number of shares of Common Stock). In addition, the affirmative vote of the holders of two-thirds of the outstanding shares of Preferred Stock is required to approve the issuance of any equity securities senior to the Preferred Stock and to take certain actions materially adverse to the holders of the Preferred Stock.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments (Topic 326),” ("ASU 2016-13"). ASU 2016-13 changes how entities measure credit losses for financial assets carried at amortized cost. The update eliminates the requirement that a credit loss must be probable before it can be recognized and instead requires an entity to recognize the current estimate of all expected credit losses. Additionally, the update requires credit losses on available-for-sale debt securities to be carried as an allowance rather than as a direct write-down of the asset. The amendments become effective for reporting periods beginning after December 15, 2019. The amendments may be adopted early for reporting periods beginning after December 15, 2018. While the Company is currently evaluating the impact ASU 2016-13 will have on the Company's consolidated financial statements, the Company expects that the adoption will result in an increased amount of provisions for potential loan losses as well as the recognition of such provisions earlier in the lending cycle.

12

BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)


In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"). The guidance provides amendments to the fair value measurement disclosure requirements of ASC 820. ASU 2018-13 is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. The Company is currently evaluating the impact of this new guidance. The Company does not expect the adoption of ASU 2018-13 to have a material impact on its financial statements and related discourses.
Note 3 - Commercial Mortgage Loans
The following table is a summary of the Company's commercial mortgage loans, held-for-investment, carrying values by class (dollars in thousands):
 
June 30, 2019
 
December 31, 2018
Senior loans
$
2,518,490

 
$
2,198,555

Mezzanine loans
36,031

 
13,111

Total gross carrying value of loans
2,554,521

 
2,211,666

Less: Allowance for loan losses (1)
7,904

 
4,836

Total commercial mortgage loans, held-for-investment, net
$
2,546,617

 
$
2,206,830

(1) Includes $6.5 million and $4.1 million of loan loss provision specifically reserved on 1 loan in non-accrual status as of June 30, 2019 and December 31, 2018, respectively.
The following table presents the activity in the Company's allowance for loan losses (dollars in thousands):
 
Six Months Ended June 30,
 
Year Ended December 31,
 
2019
 
2018
Beginning of period
$
4,836

 
$
1,466

Loan loss provision/(recovery)
3,068

 
3,370

Ending allowance for loan losses
$
7,904

 
$
4,836

As of June 30, 2019 and December 31, 2018, the Company's total commercial mortgage loan portfolio, excluding commercial mortgage loans accounted for under the fair value option, was comprised of 106 and 100 loans, respectively.
The following table represents the composition by loan type of the Company's commercial mortgage loans portfolio, excluding commercial mortgage loans, held-for-sale, measured at fair value (dollars in thousands):
 
 
June 30, 2019
 
December 31, 2018
Loan Type
 
Par Value
 
Percentage
 
Par Value
 
Percentage
Multifamily
 
$
1,305,343

 
50.9
%
 
$
1,001,540

 
45.2
%
Office
 
395,078

 
15.4
%
 
357,819

 
16.1
%
Retail
 
191,528

 
7.5
%
 
262,622

 
11.8
%
Hospitality
 
383,338

 
15.0
%
 
347,080

 
15.6
%
Industrial
 
57,013

 
2.2
%
 
65,871

 
3.0
%
Mixed-Use
 
142,152

 
5.5
%
 
120,647

 
5.4
%
Self-Storage
 
64,171

 
2.5
%
 
49,957

 
2.2
%
Land
 
16,400

 
0.6
%
 
16,400

 
0.7
%
Manufactured Housing
 
8,356

 
0.4
%
 

 
%
Total
 
$
2,563,379

 
100.0
%
 
$
2,221,936

 
100.0
%

13

BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)


As of June 30, 2019 and December 31, 2018, the Company's total commercial mortgage loans, held-for-sale, measured at fair value comprised of 11 and 7 loans, respectively. As of June 30, 2019 and December 31, 2018, the contractual principal outstanding of commercial mortgage loans, held-for-sale, measured at fair value was $104.3 million and $77.1 million, respectively. As of June 30, 2019 and December 31, 2018, none of the Company's commercial mortgage loans, held-for-sale, measured at fair value were in default or greater than ninety days past due.
The following table represents the composition by loan type of the Company's commercial mortgage loans, held-for-sale, measured at fair value (dollars in thousands):
 
 
June 30, 2019
 
December 31, 2018
Loan Type
 
Par Value
 
Percentage
 
Par Value
 
Percentage
Multifamily
 
$
41,530

 
39.9
%
 
$
34,000

 
44.1
%
Hospitality
 

 
%
 
27,800

 
36.1
%
Office
 

 
%
 
15,300

 
19.8
%
Industrial
 
18,950

 
18.2
%
 

 
%
Land
 
10,000

 
9.6
%
 

 
%
Retail
 
33,570

 
32.3
%
 

 
%
Total
 
$
104,050

 
100.0
%
 
$
77,100

 
100.0
%
Credit Characteristics
As part of the Company's process for monitoring the credit quality of its commercial mortgage loans, excluding those held-for-sale, measured at fair value, it performs a quarterly loan portfolio assessment and assigns risk ratings to each of its loans. The loans are scored on a scale of 1 to 5 as follows:
Investment Rating
 
Summary Description
1
 
Investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since time of investment are favorable.
2
 
Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable.
3
 
Performing investments requiring closer monitoring. Trends and risk factors show some deterioration.
4
 
Underperforming investment with the potential of some interest loss but still expecting a positive return on investment. Trends and risk factors are negative.
5
 
Underperforming investment with expected loss of interest and some principal.

14

BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)


All commercial mortgage loans, excluding loans classified as commercial mortgage loans, held-for-sale, measured at fair value within the consolidated balance sheets, are assigned an initial risk rating of 2.0. As of June 30, 2019 and December 31, 2018, the weighted average risk rating of the loans was 2.1 and 2.1, respectively.
The following table represents the allocation by risk rating for the Company's commercial mortgage loans, excluding loans classified as commercial mortgage loans, held-for-sale, measured at fair value:
June 30, 2019
  
December 31, 2018
Risk Rating
  
Number of Loans
  
Par Value
 
Risk Rating
  
Number of Loans
  
Par Value
1
  

  
$

 
1
  
2

  
$
23,250

2
  
95

  
2,287,329

 
2
  
87

  
1,965,186

3
  
10

  
259,250

 
3
  
9

  
202,400

4
  

  

 
4
  
1

  
14,300

5
  
1

  
16,800

 
5
  
1

  
16,800

 
  
106

  
$
2,563,379

 
 
 
100

  
$
2,221,936

As of June 30, 2019, the Company had 1 loan with unpaid contractual principal balance of $16.8 million and carrying value of $8.5 million that had interest past due for greater than 90 days. During the six months ended June 30, 2019, the Company recorded $2.4 million of asset-specific reserve for the loan. This asset-specific reserve is included in loan loss provision/(recovery) on the consolidated statement of operations. As of December 31, 2018, the Company had 1 loan with unpaid contractual principal balance and carrying value of $14.3 million that had interest past due for greater than 90 days.
For the six months ended June 30, 2019 and year ended December 31, 2018, the activity in the Company's commercial mortgage loans, held-for-investment portfolio was as follows (dollars in thousands):
 
Six Months Ended June 30,
 
Year Ended December 31,
 
2019
 
2018
Balance at Beginning of Year
$
2,206,830

 
$
1,402,046

Acquisitions and originations
670,840

 
1,608,512

Principal repayments
(329,396
)
 
(778,520
)
Discount accretion and premium amortization
3,207

 
4,648

Loans transferred to commercial real estate loans, held-for-sale

 
(16,750
)
Net fees capitalized into carrying value of loans
(1,796
)
 
(9,736
)
Loan loss recovery/(provision)
(3,068
)
 
(3,370
)
Balance at End of Period
$
2,546,617

 
$
2,206,830

Note 4 - Real Estate Securities

15

BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)


The following is a summary of the Company's real estate securities, CMBS (dollars in thousands):
June 30, 2019
Type
 
Interest Rate
 
Maturity
 
Par Value
 
Fair Value
CMBS 1
 
5.3%
 
5/15/2022
 
$13,250
 
$13,282
CMBS 2
 
4.5%
 
6/26/2025
 
13,251
 
13,331
CMBS 3
 
4.7%
 
2/15/2036
 
40,000
 
40,080
CMBS 4
 
4.1%
 
5/15/2036
 
18,500
 
18,533
CMBS 5
 
3.8%
 
5/15/2036
 
15,000
 
15,031
CMBS 6
 
3.9%
 
5/15/2037
 
13,500
 
13,500
CMBS 7
 
4.1%
 
5/15/2037
 
15,000
 
15,000
CMBS 8
 
3.9%
 
6/15/2037
 
5,000
 
5,000
 
 
 
 
 
 
 
 
 
December 31, 2018
Type
 
Interest Rate
 
Maturity
 
Par Value
 
Fair Value
CMBS 1
 
5.4%
 
5/15/2022
 
$13,250
 
$13,164
CMBS 2
 
4.6%
 
6/26/2025
 
13,500
 
13,248
The Company classified its CMBS investments as available-for-sale as of June 30, 2019 and December 31, 2018. These investments are reported at fair value in the consolidated balance sheet with changes in fair value recorded in accumulated other comprehensive income (loss).
The following table shows the amortized cost, unrealized gain/(loss) and fair value of the Company's CMBS investments (dollars in thousands):
 
 
Amortized Cost
 
Unrealized Gain
 
Unrealized Loss
 
Fair Value
June 30, 2019
 
$
134,136

 
$
24

 
$
(403
)
 
$
133,757

December 31, 2018
 
$
26,871

 
$

 
$
(459
)
 
$
26,412

As of June 30, 2019 the Company held 8 CMBS positions with an aggregate carrying value of $134.1 million and an unrealized loss of $0.4 million, of which 1 position had an unrealized loss for a period greater than twelve months. As of December 31, 2018, the Company held 2 CMBS positions with an aggregate carrying value of $26.9 million and an unrealized loss of $0.5 million, of which no position had an unrealized loss for a period greater than twelve months.
The Company did not have any realized gain or loss on real estate securities, available for sale, at fair value, during the six months ended June 30, 2019 and six months ended June 30, 2018.
The following table provides information on the amounts of gain/(loss) on the Company's real estate securities, CMBS, available-for-sale (dollars in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Unrealized gain/(loss) available-for-sale securities
$
(65
)
 
$
(23
)
 
$
80

 
$
(23
)
Reclassification of net (gain)/loss on available-for-sale securities included in net income (loss)

 

 

 

Unrealized gain/(loss) available-for-sale securities, net of reclassification adjustment
$
(65
)
 
$
(23
)
 
$
80

 
$
(23
)

16

BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)


The amounts reclassified for net (gain)/loss on available-for-sale securities are included in the realized (gain)/loss on sale of real estate securities in the Company's consolidated statements of operations. The Company's unrealized gain/(loss) on available-for-sale securities is net of tax. Due to the Company's designation as a REIT, there was no tax impact on unrealized gain/(loss) on available-for-sale securities.
Note 5 - Debt
Repurchase Agreements - Commercial Mortgage Loans
The Company has entered into repurchase facilities with JPMorgan Chase Bank, National Association (the "JPM Repo Facility"), U.S Bank National Association (the "USB Repo Facility"), Barclays Bank PLC (the "Barclays Revolver Facility" and the "Barclays Repo Facility"), Wells Fargo Bank, National Association (the "WF Repo Facility"), and Credit Suisse AG (the "CS Repo Facility" and together with JPM Repo Facility, USB Repo Facility, WF Repo Facility, Barclays Revolver Facility and Barclays Repo Facility, the "Repo Facilities").
The Repo Facilities are financing sources through which the Company may pledge one or more mortgage loans to the financing entity in exchange for funds typically at an advance rate of between 65% to 80% of the principal amount of the mortgage loan being pledged.
The details of the Company's Repo Facilities at June 30, 2019 and December 31, 2018 are as follows (dollars in thousands):
As of June 30, 2019
Repurchase Facility
 
Committed Financing
 
Amount Outstanding
 
Interest Expense(1)
 
Ending Weighted Average Interest Rate
 
Maturity
JPM Repo Facility (2)
 
$
520,000

 
$
79,087

 
$
4,170

 
4.76
%
 
1/30/2020
USB Repo Facility (3)
 
100,000

 
12,318

 
405

 
4.65
%
 
6/15/2020
CS Repo Facility (4)
 
300,000

 
20,563

 
4,286

 
4.99
%
 
3/27/2020
WF Repo Facility (5)
 
175,000

 

 
746

 
4.53
%
 
11/21/2020
Barclays Revolver Facility (6)
 
100,000

 

 
518

 
7.25
%
 
9/19/2019
Barclays Repo Facility (7)
 
300,000

 
20,902

 
387

 
4.57
%
 
3/15/2022
Total
 
$
1,495,000

 
$
132,870

 
$
10,512

 
 
 
 
__________________________
(1) For the six months ended June 30, 2019. Includes amortization of deferred financing costs.
(2) Includes a one-year extension at the Company's option.
(3) Includes two one-year extensions at the option of an indirect wholly-owned subsidiary of the Company, which may be exercised upon the satisfaction of certain conditions.
(4) On March 26, 2019, the Company exercised the extension option upon the satisfaction of certain conditions, and extended the term maturity to March 27, 2020.
(5) Includes three one-year extensions at the Company’s option, which may be exercised upon the satisfaction of certain conditions.
(6) Includes a one-year extension at the Company's option.
(7) Includes two one-year extensions at the Company's option.

17

BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)


As of December 31, 2018
Repurchase Facility
 
Committed Financing
 
Amount Outstanding
 
Interest Expense(1)
 
Ending Weighted Average Interest Rate
 
Maturity

JPM Repo Facility (2)
 
$
520,000

 
$
72,906

 
$
4,291

 
4.55
%
 
1/30/2020
GS Repo Facility (3)
 

 

 
257

 
N/A

 
12/27/2018
USB Repo Facility (4)
 
100,000

 

 
160

 
4.71
%
 
6/15/2020
CS Repo Facility (5)
 
300,000

 
76,534

 
2,379

 
4.69
%
 
6/19/2019
WF Repo Facility (6)
 
175,000

 

 

 
4.71
%
 
11/21/2020
Barclays Revolver Facility (7)
 
100,000

 

 
681

 
6.24
%
 
9/19/2019
Total
 
$
1,195,000

 
$
149,440

 
$
7,768

 
 
 
 
_______________________
(1) For the six months ended June 30, 2018. Includes amortization of deferred financing costs.
(2) On January 30, 2018 the committed financing amount was upsized from $300 million to $520 million and the maturity date was amended to January 30, 2020. Includes a one-year extension at the Company's option.
(3) Matured on December 27, 2018. Committed balance was $250 million prior to maturity.
(4) Includes two one-year extensions at the option of an indirect wholly-owned subsidiary of the Company, which may be exercised upon the satisfaction of certain conditions.
(5) On July 19, 2018, the committed financing amount was upsized from $250 million to $300 million. On June 20, 2018, the Company exercised the extension option upon the satisfaction of certain conditions, and extended the term maturity to June 19, 2019.
(6) Includes three one-year extensions at the Company’s option, which may be exercised upon the satisfaction of certain conditions.
(7) On July 30, 2018, the committed financing amount was upsized from $75 million to $100 million. Includes a one-year extension at the Company's option.
The Company expects to use the advances from the Repo Facilities to finance the acquisition or origination of eligible loans, including first mortgage loans, subordinated mortgage loans, mezzanine loans and participation interests therein.
The Repo Facilities generally provide that in the event of a decrease in the value of the Company's collateral, the lenders can demand additional collateral. As of June 30, 2019 and December 31, 2018, the Company is in compliance with all debt covenants.
Other financing and loan participation - Commercial Mortgage Loans
On December 11, 2018, the Company transferred $10.0 million of its interest in a term loan to City National Bank ("City National Financing") via a participation agreement. The Company incurred $0.1 million and $0.2 million of interest expense on the City National Financing for the three months and six months ended June 30, 2019. On April 10, 2019, the Company terminated the participation agreement with City National Bank and paid off the $10.0 million under the participation agreement.
Repurchase Agreements - Real Estate Securities
The Company has entered into various Master Repurchase Agreements (the "MRAs") that allow the Company to sell real estate securities while providing a fixed repurchase price for the same real estate securities in the future. The repurchase contracts on each security under an MRA generally mature in 30-90 days and terms are adjusted for current market rates as necessary.

18

BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)


Below is a summary of the Company's MRAs as of June 30, 2019 and December 31, 2018 (dollars in thousands):
 
 
 
 
 
 
 
 
Weighted Average
Counterparty
 
Amount Outstanding
 
Accrued Interest
 
Collateral Pledged (1)
 
Interest Rate
 
Days to Maturity
As of June 30, 2019
 
 
 
 
 
 
 
 
 
 
JP Morgan Securities LLC
 
$
50,483

 
$
90

 
$
57,000

 
3.27
%
 
10
Wells Fargo Securities, LLC
 
34,539

 
79

 
42,550

 
3.46
%
 
9
Total/Weighted Average
 
$
85,022

 
$
169

 
$
99,550

 
3.35
%
 
9
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
JP Morgan Securities LLC
 
$
21,961

 
$
27

 
$
26,750

 
3.67
%
 
18
Wells Fargo Securities, LLC
 
22,578

 
47

 
28,223

 
3.93
%
 
11
Total/Weighted Average
 
$
44,539

 
$
74

 
$
54,973

 
3.80
%
 
15
________________________
1 Includes $24.3 million and $28.2 million of CLO notes, held by the Company, which are eliminated within the real estate securities, at fair value line in the consolidated balance sheets as of June 30, 2019 and December 31, 2018, respectively.
Collateralized Loan Obligations
On April 15, 2019, the Company called all of the outstanding notes issued by BSPRT 2017-FL1 Issuer, Ltd., a wholly owned indirect subsidiary of the Company. The outstanding principal of the notes on the date of the call was $45.6 million. The Company recognized all the remaining unamortized deferred financing costs of $4.5 million recorded within the Interest expense line of the consolidated statements of operations, which was a non-cash charge.
As of June 30, 2019 and December 31, 2018 the notes issued by BSPRT 2017-FL2 Issuer, Ltd., a wholly owned indirect subsidiary of the Company, are collateralized by interests in a pool of 8 and 12 mortgage assets having a total principal balance of $183.2 million and $244.6 million, respectively (the “2017-FL2 Mortgage Assets”). The sale of the 2017-FL2 Mortgage Assets to BSPRT 2017-FL2 Issuer is governed by a Mortgage Asset Purchase Agreement dated as of November 29, 2017, between the Company and BSPRT 2017-FL2 Issuer, Ltd.
As of June 30, 2019 and December 31, 2018 the notes issued by BSPRT 2018-FL3 Issuer, Ltd. and BSPRT 2018-FL3 Co-Issuer, LLC, wholly owned indirect subsidiaries of the Company, are collateralized by interests in a pool of 40 and 41 mortgage assets having a principal balance of $610.0 million and $609.3 million, respectively (the "2018-FL3 Mortgage Assets"). The sale of the 2018-FL3 Mortgage Assets to BSPRT 2018-FL3 Issuer, Ltd. is governed by a Mortgage Asset Purchase Agreement dated as of April 5, 2018, between the Company and BSPRT 2018-FL3 Issuer, Ltd.
As of June 30, 2019 and December 31, 2018 the notes issued by BSPRT 2018-FL4 Issuer, Ltd. and BSPRT 2018-FL4 Co-Issuer, LLC, each wholly owned indirect subsidiaries of the Company, are collateralized by interests in a pool of 40 and 41 mortgage assets having a principal balance of $868.4 million and $859.3 million, respectively (the "2018-FL4 Mortgage Assets"). The sale of the 2018-FL4 Mortgage Assets to BSPRT 2018-FL4 Issuer is governed by a Mortgage Asset Purchase Agreement dated as of October12, 2018, between the Company and BSPRT 2018-FL4 Issuer.

On May 30, 2019, BSPRT 2019-FL5 Issuer, Ltd. (the “Issuer”) and BSPRT 2019-FL5 Co-Issuer, LLC (the “Co-Issuer”), both wholly owned indirect subsidiaries of the Company, collateralized by interests in a pool of 49 mortgage assets having a principal balance of $810.0 million (the "2019-FL5 Mortgage Assets") entered into an indenture with the OP, as advancing agent, U.S. Bank National Association as note administrator and U.S. Bank National Association as trustee, which governs the issuance of approximately $714.8 million principal balance secured floating rate notes (the “Notes”), of which $639.9 million were purchased by third party investors and $74.9 million purchased by a wholly owned subsidiary of the OP. In addition, concurrently with the issuance of the Notes, the Issuer also issued 95,177 Preferred Shares, par value of $0.001 per share and with an aggregate liquidation preference and notional amount equal to $1,000 per share (the “Preferred Shares”), which were not offered as part of closing the indenture. For U.S. federal income tax purposes, the Issuer and Co-Issuer are disregarded entities.

19

BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)


The Company, through its wholly-owned subsidiaries, holds the preferred equity tranches of the above CLOs of approximately $305.4 million and $288.8 million as of June 30, 2019 and December 31, 2018, respectively. The following table represents the terms of the notes issued by the 2017-FL2 Issuer, 2018-FL3 Issuer, 2018-FL4 Issuer and 2019-FL5 Issuer (the "CLOs), respectively, as of June 30, 2019 (dollars in thousands):
CLO Facility
 
Tranche
 
Par Value Issued
 
Par Value Outstanding (1)
 
Interest Rate
 
Maturity Date
2017-FL2 Issuer
 
Tranche A
 
237,970

 
$

 
1M LIBOR + 82
 
10/15/2034
2017-FL2 Issuer
 
Tranche A-S
 
36,357

 
16,767

 
1M LIBOR + 110
 
10/15/2034
2017-FL2 Issuer
 
Tranche B
 
26,441

 
26,441

 
1M LIBOR + 140
 
10/15/2034
2017-FL2 Issuer
 
Tranche C
 
25,339

 
25,339

 
1M LIBOR + 215
 
10/15/2034
2017-FL2 Issuer
 
Tranche D
 
35,255

 
35,255

 
1M LIBOR + 345
 
10/15/2034
2018-FL3 Issuer
 
Tranche A
 
286,700

 
286,700

 
1M LIBOR + 105
 
10/15/2034
2018-FL3 Issuer
 
Tranche A-S
 
77,775

 
77,775

 
1M LIBOR + 135
 
10/15/2034
2018-FL3 Issuer
 
Tranche B
 
41,175

 
41,175

 
1M LIBOR + 165
 
10/15/2034
2018-FL3 Issuer
 
Tranche C
 
39,650

 
39,650

 
1M LIBOR + 255
 
10/15/2034
2018-FL3 Issuer
 
Tranche D
 
42,700

 
42,700

 
1M LIBOR + 345
 
10/15/2034
2018-FL4 Issuer
 
Tranche A
 
416,827

 
416,827

 
1M LIBOR + 105
 
9/15/2035
2018-FL4 Issuer
 
Tranche A-S
 
73,813

 
73,813

 
1M LIBOR + 130
 
9/15/2035
2018-FL4 Issuer
 
Tranche B
 
56,446

 
56,446

 
1M LIBOR + 160
 
9/15/2035
2018-FL4 Issuer
 
Tranche C
 
68,385

 
68,385

 
1M LIBOR + 210
 
9/15/2035
2018-FL4 Issuer
 
Tranche D
 
57,531

 
57,531

 
1M LIBOR + 275
 
9/15/2035
2019-FL5 Issuer
 
Tranche A
 
407,025

 
407,025

 
1M LIBOR + 115
 
5/15/2029
2019-FL5 Issuer
 
Tranche A-S
 
76,950

 
76,950

 
1M LIBOR + 148
 
5/15/2029
2019-FL5 Issuer
 
Tranche B
 
50,000

 
50,000

 
1M LIBOR + 140
 
5/15/2029
2019-FL5 Issuer
 
Tranche C
 
61,374

 
61,374

 
1M LIBOR + 200
 
5/15/2029
2019-FL5 Issuer
 
Tranche D
 
48,600

 
24,300

 
1M LIBOR + 240
 
5/15/2029
2019-FL5 Issuer
 
Tranche E
 
20,250

 
20,250

 
1M LIBOR + 285
 
5/15/2029
 
 
 
 
$
2,186,563

 
$
1,904,703

 
 
 
 















20

BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)


The following table represents the terms of the notes issued by the 2017-FL1 Issuer, 2017-FL2 Issuer, 2018-FL3 Issuer and 2018-FL4 Issuer, as of December 31, 2018 (dollars in thousands):
CLO Facility
 
Tranche
 
Par Value Issued
 
Par Value Outstanding (1)
 
Interest Rate
 
Maturity Date
2017-FL1 Issuer
 
Tranche A
 
$
223,600

 
$
48,557

 
1M LIBOR + 135
 
6/15/2027
2017-FL1 Issuer
 
Tranche B
 
48,000

 
48,000

 
1M LIBOR + 240
 
6/15/2027
2017-FL1 Issuer
 
Tranche C
 
67,900

 
67,900

 
1M LIBOR + 425
 
6/15/2027
2017-FL2 Issuer
 
Tranche A
 
237,970

 
76,785

 
1M LIBOR + 82
 
10/15/2034
2017-FL2 Issuer
 
Tranche A-S
 
36,357

 
36,357

 
1M LIBOR + 110
 
10/15/2034
2017-FL2 Issuer
 
Tranche B
 
26,441

 
26,441

 
1M LIBOR + 140
 
10/15/2034
2017-FL2 Issuer
 
Tranche C
 
25,339

 
25,339

 
1M LIBOR + 215
 
10/15/2034
2017-FL2 Issuer
 
Tranche D
 
35,255

 
35,255

 
1M LIBOR + 345
 
10/15/2034
2018-FL3 Issuer
 
Tranche A
 
286,700

 
286,700

 
1M LIBOR + 105
 
3/15/2028
2018-FL3 Issuer
 
Tranche A-S
 
77,775

 
77,775

 
1M LIBOR + 135
 
3/15/2028
2018-FL3 Issuer
 
Tranche B
 
41,175

 
41,175

 
1M LIBOR + 165
 
3/15/2028
2018-FL3 Issuer
 
Tranche C
 
39,650

 
39,650

 
1M LIBOR + 255
 
3/15/2028
2018-FL3 Issuer
 
Tranche D
 
42,700

 
42,700

 
1M LIBOR + 345
 
3/15/2028
2018-FL4 Issuer
 
Tranche A
 
416,827

 
416,827

 
1M LIBOR + 105
 
9/15/2035
2018-FL4 Issuer
 
Tranche A-S
 
73,813

 
73,813

 
1M LIBOR + 130
 
9/15/2035
2018-FL4 Issuer
 
Tranche B
 
56,446

 
56,446

 
1M LIBOR + 160
 
9/15/2035
2018-FL4 Issuer
 
Tranche C
 
68,385

 
68,385

 
1M LIBOR + 210
 
9/15/2035
2018-FL4 Issuer
 
Tranche D
 
57,531

 
57,531

 
1M LIBOR + 275
 
9/15/2035
 
 
 
 
$
1,861,864

 
$
1,525,636

 
 
 
 
(1) Excludes $261.4 million and $186.5 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligation line of the consolidated balance sheets as of June 30, 2019 and December 31, 2018.

21

BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)


The below table reflects the total assets and liabilities of the Company's four CLOs. The CLOs are considered VIEs and are consolidated into the Company's consolidated financial statements as of June 30, 2019 and December 31, 2018 as the Company is the primary beneficiary of the VIE. The Company is the primary beneficiary of the CLOs because (i) the Company has the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the right to receive benefits from the VIEs or the obligation to absorb losses of the VIEs that could be significant to the VIE.
Assets (dollars in thousands)
 
June 30, 2019
 
December 31, 2018
Cash (1)
 
$
75,341

 
$
74,157

Commercial mortgage loans, held for investment, net (2)
 
2,389,669

 
1,921,428

Accrued interest receivable
 
6,598

 
6,353

Total Assets
 
$
2,471,608

 
$
2,001,938

 
 
 
 
 
Liabilities
 
 
 
 
Notes payable (3)(4)
 
$
2,146,455

 
$
1,712,129

Accrued interest payable
 
2,851

 
3,163

Total Liabilities
 
$
2,149,306

 
$
1,715,292

_______________________
(1) Includes $74.7 million and $73.7 million of cash held by the servicer related to CLO loan payoffs as of June 30, 2019 and December 31, 2018.
(2) The balance is presented net of allowance for loan loss of $1.1 million and $0.6 million as of June 30, 2019 and December 31, 2018, respectively.
(3) Includes $261.4 million and $186.5 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligation line of the consolidated balance sheets as of June 30, 2019 and December 31, 2018.
(4) The balance is presented net of deferred financing cost and discount of $19.7 million and $20.4 million as of June 30, 2019 and December 31, 2018, respectively.

22

BENEFIT STREET PARTNERS REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)


Note 6 - Earnings Per Share
The Company uses the two-class method in calculating basic and diluted earnings per share. Net income is allocated between our common stock and other participating securities based on their participation rights. Diluted net income per share has been computed using the weighted average number of shares of common stock outstanding and other dilutive securities. The following table presents a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations and the calculation of basic and diluted earnings per share (in thousands, except share and per share data):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Numerator
2019
 
2018
 
2019
 
2018
Net income
$