Investment Strategy - The company primarily focuses on originating, acquiring, and managing a diversified portfolio of commercial real estate debt investments, including first mortgage loans, subordinated mortgage loans, mezzanine loans, and participations in such loans [29]. - The investment objective is to provide common shareholders with attractive, risk-adjusted returns through stable dividends and capital growth [30]. - The company has four primary investment strategies, with the first being the origination and management of commercial real estate debt secured by properties located within and outside the United States [31]. - The company intends to utilize additional debt financing to enhance cash available for investment and improve returns, with careful use of leverage to achieve diversification goals [49]. - The company expects to generate additional revenues from equity participations related to the appreciation in value of underlying assets securing loans [39]. - The company may also invest in real estate securities, such as CMBS, CMBS bonds, and CDO notes, to diversify its investment portfolio [40]. - The company primarily invests in transitional loans, which carry a greater risk of loss compared to conventional mortgage loans [76]. - The company’s ability to generate returns depends on originating investments that exceed borrowing costs, which is influenced by market conditions [61]. Financial Performance - Interest income for the year ended December 31, 2024, totaled $526.1 million, a decrease of $26.4 million from $552.5 million in 2023, primarily due to a non-recurring item of $20.4 million recognized in 2023 and an increase in non-performing loans averaging $190.9 million in 2024 [218]. - Interest expense increased to $338.5 million for the year ended December 31, 2024, up by $32.9 million from $305.6 million in 2023, driven by a $429.6 million increase in the average carrying value of collateralized loan obligations [219]. - Revenue from real estate owned increased to $22.8 million in 2024, up $5.8 million from $17.0 million in 2023, mainly due to rental income from additional multifamily properties [220]. - Provision for credit losses for 2024 was $35.7 million, compared to $33.7 million in 2023, indicating a slight increase in credit risk [221]. - General benefit for credit losses decreased significantly to $0.3 million in 2024 from $21.4 million in 2023, attributed to portfolio turnover and a more favorable macro-economic outlook [222]. - Specific reserve increased by $36.0 million in 2024, primarily related to two non-performing loans secured by office properties in Colorado and Georgia [223]. - The company did not realize any gain or loss on extinguishment of debt for the year ended December 31, 2024, compared to a realized gain of $2.2 million in 2023 [224]. - Average leverage increased to 80.4% in 2024 from 77.7% in 2023, reflecting a higher level of debt relative to equity [1]. Regulatory and Tax Compliance - The company has elected to be taxed as a REIT and intends to continue qualifying as such, distributing at least 90% of its REIT taxable income to avoid U.S. federal income tax [50]. - The company must distribute at least 90% of its REIT taxable income annually to maintain its REIT status, which could limit funds available for investments [130]. - The IRS may challenge the tax treatment of mezzanine loans, which could jeopardize the Company’s REIT qualification [128]. - The company must comply with REIT requirements, which may limit its ability to hedge effectively and could lead to tax liabilities [137]. - Liquidation of assets to repay obligations could jeopardize the company's REIT qualification and result in a 100% prohibited transaction tax on gains [138]. Risk Factors - The company faces significant competition from various financial entities, which may impact investment volume and profit margins [52]. - Interest rate fluctuations could significantly influence the company's net income, with rising rates potentially decreasing net income and asset values [64]. - The company’s commercial real estate debt investments are subject to risks associated with ownership of commercial real estate, including potential defaults [71]. - Delays in liquidating defaulted commercial real estate debt investments could significantly reduce investment returns, with foreclosure processes potentially taking several years and incurring high costs [78]. - The company faces risks associated with subordinate commercial real estate debt, which may involve higher loss potential compared to first mortgage loans [80]. - Construction lending poses risks such as cost overruns and declining real estate values, which could lead to additional funding requirements and losses [81]. - Certain jurisdictions may limit the ability to foreclose on properties, impacting the company's ability to recover investments in case of borrower defaults [82]. - Insurance coverage may not be sufficient for catastrophic losses, potentially impairing the value of the company's assets [83]. - The company may face significant risks related to future funding obligations in its commercial real estate debt portfolio, including potential declines in property values and borrower cash flow issues [96]. Management and Operations - The advisor, Benefit Street Partners L.L.C., manages the company's affairs and is a credit-focused alternative asset management firm established in 2008 [28]. - The company has no employees as of December 31, 2024, relying on affiliates for essential services including asset acquisition and management [53]. - The Company has authorized a $65 million share repurchase program, with $31.1 million remaining available as of February 19, 2025 [184][185]. - The Company has engaged in regular internal and external security audits to mitigate cybersecurity risks [161]. - The Company maintains cybersecurity insurance to cover certain costs related to security failures and specified incidents [164]. - The Company has relationships with third-party service providers to assist with cybersecurity containment and remediation efforts [167]. - The Company has conducted mandatory cybersecurity training for new hires and current employees to enhance data privacy awareness [162]. Market Conditions - The company relies on collateralized debt and loan obligation securitization markets for long-term financing, which may not always be available [62]. - The company relies on the availability of attractive investment opportunities, with loans typically having a term of about 3 to 5 years, impacting operating results based on interest rates and market conditions [77]. - Public health crises, such as the COVID-19 pandemic, have adversely impacted the company's business and may continue to do so [143]. - Natural disasters and climate change could result in significant damage to properties securing the company's loans, adversely affecting its financial condition [151]. Shareholder Considerations - The Company’s charter restricts any person or entity from owning more than 7.9% of the outstanding shares, which may deter potential takeovers [119]. - Certain provisions of the Maryland General Corporation Law may inhibit third-party acquisition proposals, affecting stockholder opportunities for premium pricing [120]. - The Company has qualified as a REIT since the taxable year ended December 31, 2013, but there is no assurance it will maintain this status [126]. - Failure to qualify as a REIT could subject the Company to U.S. federal and state income tax at regular corporate rates, reducing net income available for distribution [127]. - The Advisor's fee structure may create incentives that do not align with optimizing returns for stockholders, potentially leading to riskier investment strategies [113].

The information herein relates to the Company's business and financial information as of December 31, 2024 and does not reflect subsequent developments. Risk Factors Franklin BSP Realty Trust Fourth Quarter 2024 Supplemental Information Important Information Investing in and owning our common stock involves a high degree of risk. See the section entitled "Risk Factors" in our Annual Report on Form 10-K filed with the SEC on February 26, 2024, and the risk disclosures in our subsequent periodic reports filed ...

分组1 - Franklin BSP (FBRT) reported quarterly earnings of $0.30 per share, missing the Zacks Consensus Estimate of $0.34 per share, and down from $0.39 per share a year ago, representing an earnings surprise of -11.76% [1] - The company posted revenues of $55.95 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 13.54%, compared to year-ago revenues of $54.76 million [2] - Over the last four quarters, Franklin BSP has not surpassed consensus EPS estimates, topping revenue estimates only once [2] 分组2 - The stock has added about 2.5% since the beginning of the year, while the S&P 500 has gained 2.9% [3] - The current consensus EPS estimate for the coming quarter is $0.37 on revenues of $51.32 million, and for the current fiscal year, it is $1.52 on revenues of $209.42 million [7] - The Zacks Industry Rank indicates that the REIT and Equity Trust sector is currently in the bottom 46% of over 250 Zacks industries, suggesting potential underperformance compared to higher-ranked industries [8]

Financial Performance - Reported GAAP net income of $30.2 million for Q4 2024, compared to $30.0 million for Q4 2023, and $92.4 million for the full year 2024, down from $144.5 million in 2023[2] - Distributable Earnings of $31.2 million for Q4 2024, down from $39.3 million in Q4 2023, and $100.7 million for the full year 2024, compared to $189.5 million in 2023[3] - Net income attributable to Franklin BSP Realty Trust, Inc. for 2024 was $95.9 million, a decline of 34% compared to $145.2 million in 2023[31] - Distributable earnings for 2024 were $100.7 million, down 47% from $189.5 million in 2023[32] - Basic earnings per share for 2024 were $0.82, a decrease of 42.3% from $1.42 in 2023[31] - Total income decreased to $210.5 million in 2024, down 20.2% from $264.0 million in 2023[31] Asset and Liability Management - As of December 31, 2024, total assets increased to $6,002.4 million from $5,955.2 million in 2023, representing a growth of 0.8%[29] - Total liabilities increased to $4,392.6 million in 2024 from $4,279.2 million in 2023, reflecting a rise of 2.6%[29] - Cash and cash equivalents decreased to $184.4 million in 2024 from $337.6 million in 2023, a decline of 45.5%[29] Loan Activity - Core portfolio principal balance as of December 31, 2024, was $5.0 billion, with 99% in senior mortgage loans and 93% floating rate[5] - Closed $441 million of new loan commitments in Q4 2024 at a weighted average spread of 344 basis points[5] - Originated $2.0 billion in new loan commitments in 2024, with 52% of the book originated post Fed's interest rate hikes[6] - Received over $1.6 billion in loan payoffs and sold $159.5 million in REO assets in 2024[6] Dividend and Shareholder Returns - Declared a Q4 common stock cash dividend of $0.355, representing an annualized yield of 9.3% on book value[5] - Repurchased 391,863 shares of common stock at an average price of $12.42 per share, increasing book value by $0.02 per share[5] - The company maintained a preferred stock dividend of $26.99 million for both 2024 and 2023[32] Income and Interest - Net interest income for the year ended December 31, 2024, was $187.6 million, a decrease of 24% from $246.9 million in 2023[31] - The company reported a provision for credit losses of $35.7 million in 2024, compared to $33.7 million in 2023[32]

Core Viewpoint - The analysis of Franklin BSP Realty Trust (NYSE: FBRT) indicates that the firm's GAAP net income may not accurately reflect its core profitability [1]. Group 1 - The initial assessment of Franklin BSP Realty Trust was conducted on August 28, highlighting concerns regarding the representation of its financial performance [1].

Financial Performance - GAAP Net Income was $30.2 million, or $0.30 per diluted common share and fully converted share[9, 10] - Distributable Earnings were ($4.0) million, or ($0.10) per fully converted share, including $36.4 million of losses realized within the quarter[9, 10] - A cash dividend of $0.355 per share was declared, representing an annualized yield of 9.3% on book value per share, fully converted[9, 10] - GAAP dividend coverage was 85% and Distributable Earnings dividend coverage was (28%)[9, 10] Capitalization and Liquidity - Book value per share, fully converted, is $15.24, slightly down from $15.27 last quarter[9, 10] - Net debt to equity is 2.7x, while recourse net debt to equity is 0.1x[9, 14] - 93% of financing sources are non-mark-to-market on the core book[9, 14] - Liquidity stands at $1.1 billion, including $346 million in cash and $138 million available for CLO reinvestment/ramp[9, 17] Portfolio and Investments - Core Portfolio principal balance decreased by $274 million during the quarter[9, 13] - $380 million of new loan commitments were closed, and $325 million of principal balance was funded, including future funding on existing loans[9, 13] - Loan repayments totaled $510 million[9, 13] - The Core Portfolio consists of 157 CRE loans with a $5.2 billion principal balance, averaging $33 million in size, with 74% in multifamily properties[9, 18, 20]

Financial Data and Key Metrics Changes - FBRT reported GAAP earnings of $0.30 per diluted common share and distributable earnings of negative $0.10 per diluted common share for Q3 2024 [18] - Distributable earnings excluding realized losses were $0.31 per diluted common share, which excludes $36.4 million of losses related to the REO Walgreens portfolio [19] - Net interest income was slightly lower quarter-over-quarter due to a decrease in loan portfolio size [20] Business Line Data and Key Metrics Changes - The company added $380 million in new loan commitments during the quarter, primarily in the multifamily sector [22] - Loan repayments totaled $510 million in Q3, with $40 million coming from office loans [22] - Approximately 40% of the portfolio was originated after January 2023, indicating a shift towards higher quality loans [10] Market Data and Key Metrics Changes - The average cost of debt on the core portfolio remained flat at SOFR plus 2.03% [23] - The company closed a $1 billion CRE CLO with an 86.5% advance rate and a weighted average cost of funds of SOFR+199 [24] - The multifamily sector accounted for 74% of the core portfolio, with a focus on favorable supply-demand dynamics [27][29] Company Strategy and Development Direction - FBRT is focused on addressing legacy loans and enhancing credit quality through new originations and loan modifications [17][40] - The company aims to liquidate its REO portfolio quickly and reinvest proceeds into new originations [37] - The management believes in a proactive approach to resolving issues rather than "extend and pretend" strategies [34] Management's Comments on Operating Environment and Future Outlook - The management expressed concerns about the office sector, predicting that delinquencies could surpass historical highs [33] - They anticipate a stabilization in market conditions, particularly in the multifamily sector, with potential rent increases from 2026 to 2028 [29] - The management remains confident in the earnings power of the platform once REO assets are resolved [66] Other Important Information - The company has $1.1 billion in available liquidity, which is expected to be deployed in the near future [15] - The board has extended the stock buyback allocation through December 31, 2025, with $31 million remaining [16] Q&A Session Summary Question: Can you provide additional color on the conduit business and expectations going forward? - The conduit had an exceptional third quarter, but rates may impact future performance. CMBS remains one of the cheapest financing options [42] Question: How do you view the available-for-sale securities and their management going forward? - The company has not been active buyers recently due to aggressive credit spread tightening, viewing the bond portfolio as a liquidity management tool [43] Question: Can you discuss the sentiment in lease-up and potential timing of monetizations for REOs? - Four properties are under contract, with hopes to complete sales by the end of Q1 next year. The focus is on stabilizing and quickly liquidating REO assets [46] Question: What are the expectations around repayments and portfolio growth in the next quarters? - The company expects normalized repayments and aims to replace what's paying off to avoid shrinking the portfolio [48] Question: Is the outlook for increasing leverage realistic for 2025? - The management believes there is significant earnings power without needing to increase leverage, focusing on high-quality new loans [55] Question: How is the conduit business performing in terms of locked pipeline and hedges? - The conduit business is well-managed, with no locked or committed loans currently, and the focus is on selling loans to manage exposure [58]

Core Viewpoint - Franklin BSP (FBRT) reported a quarterly loss of $0.10 per share, significantly missing the Zacks Consensus Estimate of $0.26, and down from earnings of $0.43 per share a year ago, indicating a negative earnings surprise of -138.46% [1] Financial Performance - The company posted revenues of $49.67 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 0.86%, and down from $62.39 million in the same quarter last year [2] - Over the last four quarters, Franklin BSP has consistently failed to surpass consensus EPS and revenue estimates [2] Stock Performance - Franklin BSP shares have declined approximately 3.9% since the beginning of the year, contrasting with the S&P 500's gain of 20.1% [3] Future Outlook - The company's earnings outlook will be crucial for determining the stock's immediate price movement, with current consensus EPS estimates at $0.41 for the coming quarter and $1.38 for the current fiscal year [4][7] - The estimate revisions trend for Franklin BSP is currently mixed, resulting in a Zacks Rank 3 (Hold), suggesting the shares are expected to perform in line with the market in the near future [6] Industry Context - The REIT and Equity Trust industry, to which Franklin BSP belongs, is currently ranked in the bottom 44% of over 250 Zacks industries, indicating potential challenges ahead [8]

Financial Performance - Reported GAAP net income of $30.2 million for Q3 2024, compared to a loss of $(3.8) million in Q2 2024[2] - Diluted earnings per share (EPS) of $0.30 for Q3 2024, up from $(0.11) in Q2 2024[2] - Net income attributable to Franklin BSP Realty Trust, Inc. for the three months ended September 30, 2024, was $31,614 thousand, slightly down from $31,767 thousand in the prior year[13] - GAAP net income for the three months ended September 30, 2024, was $30.173 million, a decrease from $30.995 million in the same period of 2023[15] - Distributable earnings for the nine months ended September 30, 2024, were $69.438 million, down from $150.247 million in 2023[15] - Distributable earnings per share, fully converted, was $(0.10) for the three months ended September 30, 2024, compared to $0.43 in 2023[15] - The GAAP net income return on equity (ROE) for the three months ended September 30, 2024, was 7.9%, slightly up from 7.7% in 2023[15] Portfolio and Assets - Core portfolio principal balance of $5.2 billion as of September 30, 2024, with 99% in senior mortgage loans and 95% floating rate[4] - Total assets increased to $6,334,976 thousand as of September 30, 2024, up from $5,955,180 thousand as of December 31, 2023, representing a growth of approximately 6.35%[12] - Total liabilities increased to $4,720,994 thousand as of September 30, 2024, compared to $4,279,223 thousand as of December 31, 2023, reflecting an increase of approximately 10.3%[12] - Total stockholders' equity decreased to $1,524,234 thousand as of September 30, 2024, down from $1,586,209 thousand as of December 31, 2023[12] Revenue and Income - Total income for the three months ended September 30, 2024, was $49,670 thousand, down 20.4% from $62,386 thousand in the same period last year[13] - Net interest income for the three months ended September 30, 2024, was $44,258 thousand, a decrease of 25.1% compared to $59,069 thousand for the same period in 2023[13] - Revenue from real estate owned for the three months ended September 30, 2024, was $5,412 thousand, an increase of 63.4% from $3,317 thousand in the same period last year[13] Expenses and Losses - Interest expense rose to $89,884 thousand for the three months ended September 30, 2024, compared to $77,973 thousand in the same period of 2023, marking an increase of 15.5%[13] - The company reported a provision for credit losses of $268 thousand for the three months ended September 30, 2024, compared to a benefit of $(2,379) thousand in the same period last year[13] - Recognized a net benefit for credit losses of $0.3 million during the quarter[5] - The company recorded a realized cash loss adjustment on REO of $(40.113) million for the nine months ended September 30, 2024[15] - Unrealized losses on financial instruments amounted to $8.435 million for the nine months ended September 30, 2024, compared to $7.208 million in 2023[15] Liquidity and Dividends - Total liquidity of $1.1 billion, including $346 million in cash and cash equivalents[4] - Declared a cash dividend of $0.355 per common share for Q3 2024, representing an annualized yield of 9.3% on book value[4] Transactions and Commitments - Closed $380 million in new loan commitments in Q3 2024, totaling $1.6 billion for the first three quarters of 2024[4] - Closed a $1.024 billion managed Commercial Real Estate CLO, resulting in financing of $886.2 million[4] - Sold 16 of 21 retail properties in the Walgreens Portfolio for $60.9 million during Q3 2024[5] Other Adjustments - The company has $11.9 million of GAAP loss adjustments that would run through distributable earnings if cash losses are realized[14] - The company amortized CLO issuance costs over the expected lifetime of the CLOs starting Q1 2024, making previous adjustments unnecessary[14] - The company recovered $5.1 million of loan workout charges during the second quarter of 2023[14]

Core Thesis - Franklin BSP Realty Trust's profitability has been misrepresented by GAAP net income, with core profitability being significantly better, leading to a pessimistic market valuation that is beginning to correct itself [1][7] Profitability Analysis - Over the last five years, Franklin's GAAP net income increased from $66.91 million in 2019 to $68.96 million in the trailing twelve months (TTM), compounding at 0.5% annually, while net operating profit after tax (NOPAT) rose from $84.27 million to $94 million, compounding at 1.84% annually [2] - NOPAT margin has declined from 42.26% in 2019 to 17.11% in the TTM, indicating a decrease in profitability relative to operating revenue [2] - The company's invested capital turns improved from 0.21 in 2019 to 0.29 in the TTM, but returns on invested capital (ROIC) fell from 8.76% to 4.88% during the same period [2] Economic Value Creation - Management has generated economic earnings, but the firm experienced an economic loss of -$65.74 million from 2019 to TTM, with a loss of -$42.88 million in the TTM period alone [3][4] - Franklin's historical ROIC is close to its weighted average cost of capital (WACC), making it sensitive to declines in profitability or increases in WACC, which occurred in 2022 [4] Free Cash Flow (FCF) Generation - Free cash flow generation has been poor, improving from -$73 million in 2019 to -$3.57 million in the TTM, with a yield on FCF of -0.32% [4] Valuation Metrics - The economic book value (EBV) indicates that Franklin is undervalued, with a price-to-economic-book-value ratio of 1.16, suggesting attractiveness for potential investors [5] - If the stock price reaches $18.26, it would signal the end of the current buy opportunity, and shareholders should consider exiting their positions [5][7]