Franklin BSP Realty Trust (NYSE:FBRT) FY Conference Transcript

Summary of Franklin BSP Realty Trust (FBRT) FY Conference Call Company Overview - Company Name: Franklin BSP Realty Trust (FBRT) - Ticker Symbol: FBRT - Type: Commercial Mortgage REIT - Public Since: 2021 via a reverse merger with Capstead Mortgage - External Manager: Benefit Street Partners, owned by Franklin Templeton - Assets Under Management (AUM): $90 billion, with $13 billion in commercial real estate [2][3] Financial Performance - Core Portfolio Size: $4.4 billion, aiming for a target of around $5 billion [4] - Net Leverage: Approximately 2.5 times as of September 30 [4] - Dividend Yield: Currently at 14%, significantly high compared to the book value [5][15] - Stock Price: Trading at about 70% of book value [5] Portfolio Composition - Asset Focus: 75% of the portfolio is in multifamily assets, with the remainder in hospitality and industrial [4][5] - Geographic Focus: Primarily in the Southwest, Southeast, and Sunbelt areas, with significant exposure to Texas and the Carolinas [6] - Office Assets: Only about 2% of the portfolio is in office assets, with no new loans originated in this category since 2020 [7] Recent Developments - CLO Issuance: Issued a $1.1 billion CLO to recapitalize and free up cash for reinvestment into the core loan portfolio [9] - Acquisition of NewPoint: Closed on July 1, 2025, acquiring agency licenses and a bridge loan portfolio, which is expected to enhance origination capabilities [10][11] - NewPoint's Performance: Achieved record agency originations of $2.1 billion in the latest quarter [10] - Mortgage Servicing Rights (MSRs): Integration of MSRs expected to contribute to book value growth over time [12] Future Outlook - Dividend Coverage: Management is focused on achieving dividend coverage by the second half of 2026, with a path outlined for improvement [15][19] - Earnings Growth: Expected contributions from CLO issuance, REO asset management, and NewPoint integration to enhance earnings per share [16][18] - REO Management: Strategy to stabilize and sell multifamily REO assets rather than liquidating immediately, with expectations of adding 8-12 cents to earnings per share [17][18] Key Risks and Considerations - Market Conditions: The company is navigating a challenging environment with legacy portfolio issues but has maintained a focus on multifamily assets to mitigate risks [7] - Interest Rate Impact: Portfolio is divided between loans originated before and after interest rate hikes, with 40% of the portfolio in pre-hike loans [6] Conclusion Franklin BSP Realty Trust is strategically positioned within the commercial mortgage REIT sector, focusing on multifamily assets and leveraging recent acquisitions to enhance growth and dividend coverage. The company is actively managing its portfolio and capital structure to navigate current market challenges and capitalize on future opportunities.