Franklin BSP Realty Trust, Inc. [FBRT] Filings

10-Q 1 bsprt-20230630.htm 10-Q bsprt-20230630

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, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-40923

FRANKLIN BSP 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.)

1345 Avenue of the Americas, Suite 32A New York, New York						10105
(Address of Principal Executive Office)						(Zip Code)

(212) 588-6770

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	FBRT	New York Stock Exchange
7.50% Series E Cumulative Redeemable Preferred Stock, par value $0.01 per share	FBRT PRE	New York Stock Exchange

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 x			Accelerated filer o
Non-accelerated filer o			Smaller reporting company ☐
			Emerging growth filer ☐

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

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

The number of shares of the registrant's common stock, $0.01 par value, outstanding as of July 26, 2023 was 82,210,624.

FRANKLIN BSP REALTY TRUST, INC.

TABLE OF CONTENTS


PART I						Page
Item 1. Consolidated Financial Statements and Notes (unaudited)						1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						53
Item 3. Quantitative and Qualitative Disclosures about Market Risk						86
Item 4. Controls and Procedures						87
PART II

Item 1. Legal Proceedings						88
Item 1A. Risk Factors						88
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						88
Item 3. Defaults Upon Senior Securities						89
Item 4. Mine Safety Disclosures						89
Item 5. Other Information						89
Item 6. Exhibits						90
Signatures						91

Table of Contents

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

FRANKLIN BSP REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except share and per share data)


	June 30, 2023		December 31, 2022
ASSETS
Cash and cash equivalents	$	224,696	$	179,314
Restricted cash	7,444		11,173
Commercial mortgage loans, held for investment, net of allowance for credit losses of $38,932 and $40,848 as of June 30, 2023 and December 31, 2022, respectively	5,023,579		5,228,928
Commercial mortgage loans, held for sale, measured at fair value	34,250		15,559
Real estate securities, trading, measured at fair value (includes pledged assets of $118,455 and $227,610 as of June 30, 2023 and December 31, 2022, respectively)	125,215		235,728
Real estate securities, available for sale, measured at fair value, amortized cost of $192,471 and $220,635 as of June 30, 2023 and December 31, 2022, respectively (includes pledged assets of $181,463 and $198,429 as of June 30, 2023 and December 31, 2022, respectively)	191,849		221,025
Derivative instruments, measured at fair value	251		415

Receivable for loan repayment (1)	66,835		42,557
Accrued interest receivable	38,348		34,007
Prepaid expenses and other assets	15,862		15,795
Intangible lease asset, net of amortization	66,008		54,831
Real estate owned, net of depreciation	179,252		127,772
Real estate owned, held for sale	11,760		36,497


Total assets	$	5,985,349	$	6,203,601
LIABILITIES AND STOCKHOLDERS' EQUITY
Collateralized loan obligations	$	3,031,984	$	3,121,983
Repurchase agreements - commercial mortgage loans	695,039		680,859
Repurchase agreements - real estate securities	289,993		440,008
Mortgage note payable	23,998		23,998
Other financing and loan participation - commercial mortgage loans	82,348		76,301
Unsecured debt	81,246		98,695
Derivative instruments, measured at fair value	299		64
Interest payable	12,669		12,715
Distributions payable	36,221		36,317
Accounts payable and accrued expenses	12,460		17,668
Due to affiliates	15,929		15,429
Intangible lease liability, net of amortization	13,664		6,428
Total liabilities	$	4,295,850	$	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 June 30, 2023 and December 31, 2022	$	89,748	$	89,748
Redeemable convertible preferred stock Series I, $0.01 par value, none authorized and outstanding as of June 30, 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 June 30, 2023 and December 31, 2022	$	258,742	$	258,742
Common stock, $0.01 par value, 900,000,000 shares authorized, 83,019,881 and 82,992,784 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	822		826
Additional paid-in capital	1,600,036		1,602,247
Accumulated other comprehensive income (loss)	(1,299)		390
Accumulated deficit	(288,380)		(299,225)
Total stockholders' equity	$	1,569,921	$	1,562,980
Non-controlling interest	29,830		15,408
Total equity	$	1,599,751	$	1,578,388
Total liabilities, redeemable convertible preferred stock and equity	$	5,985,349	$	6,203,601

_________________________________________________________

(1) Includes $66.1 million and $42.5 million of cash held by servicer related to the CLOs as of June 30, 2023 and December 31, 2022, respectively, as well as $0.8 million and $0.1 million of RMBS principal paydowns receivable as of June 30, 2023 and December 31, 2022, respectively.

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

Table of Contents

FRANKLIN BSP 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,
	2023		2022		2023		2022
Income
Interest income	$	152,892	$	70,213	$	283,428	$	145,471
Less: Interest expense	75,299		32,807		146,374		55,287
Net interest income	77,593		37,406		137,054		90,184
Revenue from real estate owned	6,438		2,312		9,750		4,624
Total income	$	84,031	$	39,718	$	146,804	$	94,808
Expenses
Asset management and subordinated performance fee	$	8,900	$	6,601	$	16,985	$	13,346
Acquisition expenses	283		319		661		634
Administrative services expenses	3,398		3,048		7,427		6,401
Professional fees	2,794		8,054		7,608		14,213
Share-based compensation	1,228		682		2,250		1,182
Depreciation and amortization	2,196		1,296		4,001		2,591
Other expenses	4,301		1,663		6,467		3,425
Total expenses	$	23,100	$	21,663	$	45,399	$	41,792
Other income/(loss)
(Provision)/benefit for credit losses	$	(21,624)	$	(32,530)	$	(25,984)	$	(31,575)
Realized gain/(loss) on extinguishment of debt	270		15		5,037		15
Realized gain/(loss) on sale of available for sale trading securities	—		—		596		—
Realized gain/(loss) on sale of commercial mortgage loans, held for sale	—		39		—		39

Realized gain/(loss) on sale of commercial mortgage loans, held for sale, measured at fair value	2,094		(1,833)		2,094		56
Unrealized gain/(loss) on commercial mortgage loans, held for sale, measured at fair value	(303)		(2,797)		44		(3,736)
Gain/(loss) on other real estate investments	(1,691)		—		(3,030)		(29)
Trading gain/(loss)	(946)		(22,538)		2,022		(110,973)
Unrealized gain/(loss) on derivatives	393		(9,427)		73		(14,390)
Realized gain/(loss) on derivatives	573		25,193		617		59,223
Total other income/(loss)	$	(21,234)	$	(43,878)	$	(18,531)	$	(101,370)
Income/(loss) before taxes	39,697		(25,823)		82,874		(48,354)
(Provision)/benefit for income tax	(53)		114		609		138
Net income/(loss)	$	39,644	$	(25,709)	$	83,483	$	(48,216)
Net (income)/loss attributable to non-controlling interest	(41)		—		(50)		—
Net income/(loss) attributable to Franklin BSP Realty Trust, Inc.	$	39,603	$	(25,709)	$	83,433	$	(48,216)
Less: Preferred stock dividends	6,749		6,955		13,497		27,966

Net income/(loss) applicable to common stock	$	32,854	$	(32,664)	$	69,936	$	(76,182)

Basic earnings per share	$	0.39	$	(0.43)	$	0.83	$	(1.27)
Diluted earnings per share	$	0.39	$	(0.43)	$	0.83	$	(1.27)
Basic weighted average shares outstanding	82,252,979		75,837,621		82,512,434		59,985,361
Diluted weighted average shares outstanding	82,252,979		75,837,621		82,512,434		59,985,361

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

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income/(loss)	$	39,644	$	(25,709)	$	83,483	$	(48,216)

Amounts related to available for sale real estate securities:
Change in net unrealized gain/(loss)	$	636	$	—	$	(1,012)	$	—
Reclassification adjustment for amounts included in net income/(loss)	—		—		(677)		—
	$	636	$	—	$	(1,689)	$	—
Amounts related to cash flow hedges:
Change in net unrealized gain/(loss)	$	—	$	—	$	—	$	(220)
Reclassification adjustment for amounts included in net income/(loss)	—		—		—		282
	$	—	$	—	$	—	$	62
Comprehensive (income)/loss attributed to non-controlling interest	$	(41)	$	—	$	(50)	$	—
Comprehensive income/(loss) attributable to Franklin BSP Realty Trust, Inc.	$	40,239	$	(25,709)	$	81,744	$	(48,154)

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

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(In thousands, except share data)

(Unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income/(Loss)		Accumulated Deficit		Preferred E		Total Stockholders' Equity		Non-Controlling Interest		Total Equity
	Number of Shares	Par Value
Balance, December 31, 2022	82,992,784	$	826	$	1,602,247	$	390	$	(299,225)	$	258,742	$	1,562,980	$	15,408	$	1,578,388

Common stock repurchases	(313,411)	(3)		(3,664)		—		—		—		(3,667)		—		(3,667)

Share-based compensation	442,419	—		1,022		—		—		—		1,022		—		1,022
Shares canceled for tax withholding on vested equity rewards	(57,021)	—		(812)		—		—		—		(812)		—		(812)
Series I preferred stock exchanged for common stock	299,200	3		4,997		—		—		—		5,000		—		5,000

Net income/(loss) attributable to Franklin BSP Realty Trust, Inc.	—	—		—		—		43,830		—		43,830		—		43,830
Net income/(loss) attributable to non-controlling interest	—	—		—		—		—		—		—		9		9
Distributions declared	—	—		—		—		(36,367)		—		(36,367)		—		(36,367)
Other comprehensive income/(loss)	—	—		—		(2,325)		—		—		(2,325)		—		(2,325)
Contributions in non-controlling interest, net	—	—		—		—		—		—		—		5,851		5,851
Balance, March 31, 2023	83,363,971	$	826	$	1,603,790	$	(1,935)	$	(291,762)	$	258,742	$	1,569,661	$	21,268	$	1,590,929

Common stock repurchases	(444,726)	(5)		(5,490)		—		—		—		(5,495)		—		(5,495)
Common stock issued through distribution reinvestment plan	61,866	1		768		—		—		—		769		—		769
Share-based compensation	38,770	—		1,227		—		—		—		1,227		—		1,227


Offering costs	—	—		(259)		—		—		—		(259)		—		(259)
Net income/(loss) attributable to Franklin BSP Realty Trust, Inc.	—	—		—		—		39,603		—		39,603		—		39,603
Net income/(loss) attributable to non-controlling interest	—	—		—		—		—		—		—		41		41
Distributions declared	—	—		—		—		(36,221)		—		(36,221)		—		(36,221)
Other comprehensive income/(loss)	—	—		—		636		—		—		636		—		636
Contributions in non-controlling interest, net	—	—		—		—		—		—		—		8,521		8,521
Balance, June 30, 2023	83,019,881	$	822	$	1,600,036	$	(1,299)	$	(288,380)	$	258,742	$	1,569,921	$	29,830	$	1,599,751

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

Table of Contents

FRANKLIN BSP REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(In thousands, except share data)

(Unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income/(Loss)		Accumulated Deficit		Preferred E		Preferred F		Total Stockholders' Equity		Non-Controlling Interest		Total Equity
	Number of Shares	Par Value
Balance, December 31, 2021	43,965,928	$	441	$	903,264	$	(62)	$	(167,179)	$	258,742	$	710,431	$	1,705,637	$	5,764	$	1,711,401


Common stock issued through distribution reinvestment plan	5,982	—		91		—		—		—		—		91		—		91
Share-based compensation	499,217	—		500		—		—		—		—		500		—		500

Net income/(loss)	—	—		—		—		(22,507)		—		—		(22,507)		—		(22,507)
Distributions declared	—	—		—		—		(36,743)		—		—		(36,743)		—		(36,743)
Other comprehensive income/(loss)	—	—		—		62		—		—		—		62		—		62
Balance, March 31, 2022	44,471,127	$	441	$	903,855	$	—	$

Franklin BSP Realty Trust, Inc. [FBRT] Filings
Franklin BSP Realty Trust, Inc. [FBRT-PE] Filings
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10-K	[2022-02-25]
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10-K	[2021-03-11]
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10-Q	[2020-08-14]
10-Q	[2020-05-15]
10-K	[2020-03-17]
10-Q	[2019-11-13]
10-Q	[2019-08-13]
10-Q	[2019-05-14]
10-K	[2019-03-29]
10-Q	[2018-11-13]
10-Q	[2018-08-10]
10-Q	[2018-05-14]
10-K	[2018-03-16]
10-Q	[2017-11-14]
10-Q	[2017-08-11]
10-Q	[2017-05-12]
10-K	[2017-03-29]
10-Q	[2016-11-14]
10-Q	[2016-08-12]
10-Q	[2016-05-13]
10-K	[2016-03-11]
10-Q	[2015-11-12]
10-Q	[2015-08-11]
10-Q	[2015-05-15]
10-K	[2015-04-24]
10-Q	[2014-11-14]
10-Q	[2014-08-08]
10-Q	[2014-05-12]
10-K	[2014-03-13]
10-Q	[2013-11-14]
10-Q	[2013-08-13]
10-Q	[2013-05-15]

Franklin BSP Realty Trust, Inc. [FBRT] Filings

Franklin BSP Realty Trust, Inc. [FBRT-PE] Filings