Franklin BSP Realty Trust(US:FBRT)2024-02-15 19:39Financial Data and Key Metrics Changes - For the year ended 2023, the company reported distributable earnings of $1.92 per fully converted share, a 79% year-over-year increase, equating to a 12.1% return on common equity [12] - The fourth quarter distributable earnings were $0.39 per fully converted share, representing an almost 10% return on common equity, with a dividend coverage of 109% for the quarter [13] - GAAP earnings for the fourth quarter were $30 million, or $0.28 per diluted share, reflecting a 7.2% return on common equity [38] Business Line Data and Key Metrics Changes - The portfolio ended the year at $5 billion, with net portfolio growth of $84 million in Q4, and originated $818 million of new loan commitments for the year [14] - The company ended the quarter with 6 loans on its watch list, down from 3 at the end of Q3, with 95% of loans rated 3 or better [16][33] - The average cost of debt increased modestly to 7.9% during the quarter [20] Market Data and Key Metrics Changes - The company’s multifamily exposure is 77%, with a significant portion in newer vintage assets built between 2020 and 2023 [23] - The weighted average five-mile population size across the portfolio is approximately 240,000 people, indicating a focus on population centers with meaningful employment [24] - The company has seen a robust level of repayments, with 80% of repayments coming from multifamily loans [19] Company Strategy and Development Direction - The company remains focused on delivering long-term shareholder value and is actively working to deploy capital into attractive investments [3] - There is a bullish outlook on the fundamentals of multifamily properties, with a focus on newer vintage, higher quality multifamily in larger liquid markets [36] - The company plans to continue its buyback program, with $36 million remaining in buyback authorization [2] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the portfolio and the ability to generate earnings power as the portfolio grows in 2024 [3] - The company is cautious about borrower behavior, indicating that it is difficult to predict, but remains proactive in managing borrower relationships [31] - Management noted that the competitive landscape remains thinned out, with limited participation from banks, providing opportunities for the company [59] Other Important Information - The general CECL reserve increased by $5.4 million, reflecting a conservative approach to economic conditions [38] - The company has a total foreclosure REO position of three, representing approximately 2% of total assets [42] - The company is actively monitoring the CLO market and prefers CLO financing due to its favorable terms [83] Q&A Session Summary Question: Can you discuss the San Antonio foreclosure and its implications? - Management indicated that the situation was frustrating but ultimately resolved positively, reflecting broader market trends for late 2021 and early 2022 acquisitions [45] Question: What was the original loan balance for the San Antonio property? - The original loan balance was approximately $1.5 million less than the ending balance, with financing provided to the new buyer [54] Question: How is the competitive landscape for multifamily loans? - The company noted that competition is primarily from debt funds and agency bids, with banks largely absent from the market [59] Question: What is the outlook for the CECL reserve going forward? - Management expects the CECL reserve to remain conservative, with no significant changes anticipated in the economic scenario throughout the year [81] Question: Is there potential for raising the dividend in the future? - Management indicated that while there is potential for increased earnings power, any decision on raising the dividend would be made cautiously and in context of overall market conditions [87][88]