Franklin BSP Realty Trust(FBRT) - 2022 Q1 - Quarterly Report

Financial Performance - The book value per share decreased to $15.24 as of March 31, 2022, down from $16.75 as of December 31, 2021, reflecting a decline of about 9.0%[179] - The Company’s total stockholders' equity applicable to common stock was $677.9 million as of March 31, 2022, compared to $736.5 million as of December 31, 2021[179] - Interest income for Q1 2022 totaled $75.3 million, an increase of $33.1 million from $42.2 million in Q1 2021, driven by higher average carrying values of real estate debt and securities[215] - Net interest income for Q1 2022 was $52.8 million, compared to $30.9 million in Q1 2021, reflecting a significant increase in interest-earning assets[213] - Net interest income for the three months ended March 31, 2022, was $52.8 million, a decrease from $53.1 million for the three months ended December 31, 2021, reflecting a spread of 2.5% compared to 2.8%[218] - Distributable Earnings for the three months ended March 31, 2022, were $12.1 million, down from $26.6 million in the prior year[262] - Run-Rate Distributable Earnings for Q1 2022 were $40.1 million, compared to $26.6 million in Q1 2021[262] - The company reported a GAAP net income of $(22.5) million compared to $30.1 million for the same period in 2021[262] - The company reported a GAAP Common ROE of (7.2)% for Q1 2022, down from 11.8% in Q1 2021[262] Asset and Loan Portfolio - As of March 31, 2022, the total carrying value of commercial mortgage loans held for investment was $4,530.5 million, an increase from $4,211.1 million as of December 31, 2021, representing a growth of approximately 7.6%[182] - The value of the residential ARM Agency Securities portfolio decreased to $1.9 billion as of March 31, 2022, down from $4.6 billion as of December 31, 2021, indicating a reduction of approximately 58.7%[182] - The Company’s real estate securities, trading, measured at fair value, were valued at $1,949.3 million as of March 31, 2022, down from $4,566.9 million as of December 31, 2021[182] - The company held 166 commercial mortgage loans for investment and nine for sale, measured at fair value as of March 31, 2022[215] - The company has diversified its portfolio across various property types, including hospitality, multifamily, and office spaces[201] - The company has maintained a diversified loan portfolio across various property types, including office, multifamily, and hospitality[203] - The company has a significant focus on multifamily properties, with 70% of the total par value allocated to this sector[203] - The company has a significant focus on multifamily properties, with 30 out of 40 senior debts categorized under this type[206] Debt and Financing - Senior Debt 1 has a par value of $4.849 billion with an interest rate of 1 month LIBOR + 4.00% and an effective yield of 5.0%[201] - Senior Debt 2 has a par value of $57.075 billion with an interest rate of 1 month LIBOR + 5.19% and an effective yield of 6.2%[201] - The loan-to-value ratio for Senior Debt 1 is 77.0%, indicating a relatively high leverage[201] - The effective yield for Senior Debt 36 is 6.5% with a loan-to-value ratio of 87.4%, suggesting strong asset backing[201] - The effective yield on senior debt ranges from 3.0% to 9.5%, with an average yield of approximately 5.3%[203] - The loan-to-value (LTV) ratios for the senior debt portfolio vary, with the highest at 84.2% and the lowest at 53.9%[203] - The company is actively managing its debt portfolio, with a notable number of loans having LTV ratios above 70%[203] - The company expects to operate at a leverage level of between one to three times the book value of equity, with plans to use additional debt and equity financing as a source of capital[226] - The Company incurred $0.2 million of interest expense on a term loan with Sterling National Bank for the three months ended March 31, 2022, with an outstanding participation balance of $37.9 million[233] - The average interest rate on junior subordinated notes as of March 31, 2022, was 5.29%, with total borrowings outstanding of $98.62 million[233] Market and Investment Strategy - The company does not intend to continue investing in ARM Agency Securities or RMBS, focusing instead on reinvesting cash and proceeds into other segments[212] - Future outlook indicates a cautious approach to new debt issuance, focusing on maintaining favorable LTV ratios and effective yields[203] - The company is exploring opportunities for market expansion, particularly in the multifamily sector, to enhance its debt portfolio performance[203] - Future strategies may include further market expansion and potential acquisitions in the multifamily sector[206] Operational Expenses and Cash Flow - Total expenses from operations for Q1 2022 were $20.1 million, an increase from $11.9 million in Q1 2021, attributed to the Capstead acquisition and increased professional fees[215] - Net cash used in operating activities for Q1 2022 was $32.3 million, driven by a net loss of $22.5 million and net outflows of $74.2 million related to commercial mortgage loans[248] - Net cash provided by investing activities for Q1 2022 was $2,262.9 million, primarily from the sale of real estate securities totaling $2,190.1 million[248] - Net cash used in financing activities for Q1 2022 was $2,269.2 million, mainly due to net repayments on CMBS MRAs of $2,464.2 million[248] Shareholder Returns and Capital Management - The company declared a quarterly cash dividend of $0.355 per share on common stock and Series F Preferred Stock for Q1 2022, equivalent to $1.42 per annum[245] - The company's Board of Directors authorized a $65.0 million share repurchase program, effective after the completion of a $35.0 million program related to a merger[253] - The company raised $1.2 billion of capital through the issuance of BSPRT 2022-FL8 Issuer, Ltd. during the three months ended March 31, 2022[228] Risk Management - The company is exposed to credit risk, with default rates influenced by various economic factors, and manages this risk through careful underwriting[263] - The company must distribute at least 90% of its taxable income to maintain its REIT status, avoiding U.S. federal income tax on distributed income[250]