Franklin BSP Realty Trust, Inc. Announces Third Quarter 2021 Results

Franklin BSP Realty Trust, Inc. (NYSE: FBRT) (“FBRT” or the “Company”) today announced financial results for the quarter ended September 30, 2021.

Third Quarter 2021 Summary

  • GAAP Net Income of $38.5 million or $0.67 per diluted share(1), representing a 14.5% ROE
  • Distributable Earnings (a non-GAAP financial measure) of $40.0 million or $0.69 per diluted share(1), representing a 15.0% annualized distributable earnings ROE (a non-GAAP financial measure)
  • Book value of $17.78 per diluted share reflecting merger consideration and transaction expenses
  • Net core portfolio growth of $138 million bringing our core portfolio to $3.3 billion of principal balance
  • Declared and paid a $0.355 cash dividend
  • Closed merger with Capstead Mortgage Corporation on October 19, 2021 increasing our total equity to over $1.8 billion
  • Successful listing of our common stock on the NYSE on October 19, 2021

Richard Byrne, President and Chief Executive Office of FBRT, said, “We are pleased to report our third quarter results showcasing another exceptional quarter followed by the close of our merger with Capstead Mortgage Corporation in October, bringing our equity capitalization to over $1.8 billion. Our earnings and book value growth this quarter are representative of our differentiated strategy and strong deal flow. Looking forward into the fourth quarter, our pipeline remains robust at more than $1 billion and since quarter end we have already closed more than $277 million of additional core loan commitments. As the Capstead portfolio continues to decrease due to strategic sales and natural runoff, we expect to put that capital to work into our commercial strategy to deliver long-term value for our stockholders.”

Portfolio and Investment Activity

Core portfolio: For the quarter ended September 30, 2021, we closed $519 million of loan commitments, funded $474 million of principal balance and received loan repayments of $337 million. This activity resulted in net core portfolio growth of $138 million. Our core portfolio at the end of the quarter had 150 loans with an aggregate principal balance of approximately $3.3 billion. The average loan size was $22 million. Over 99% of our aggregate principal balance is in senior mortgage loans with approximately 96% in floating rate loans. When looking at the sector composition of our portfolio, approximately 57% is collateralized by multifamily properties. As of September 30, 2021, we had one non-performing loan.

Conduit: For the quarter ended September 30, 2021, we closed $69 million of fixed rate loans that we sold through our conduit program. For the same period, we sold $145 million of conduit loans for a gain of $8.8 million gross of derivatives.

Book Value

As of September 30, 2021, our diluted book value per common share was $18.60 as compared to $18.28 as of June 30, 2021. Our diluted book value per common share as of September 30, 2021, adjusted for the Capstead merger consideration and transaction expenses, was $17.78.

Distributable Earnings

Distributable Earnings is a non-GAAP measure, which we define as GAAP net income (loss), adjusted for (i) non-cash CLO amortization acceleration and amortization over our expected useful life of our CLOs, (ii) unrealized gains and losses on loans and derivatives, including CECL reserves and impairments, (iii) non-cash equity compensation expense, (iv) depreciation and amortization, (v) non-cash incentive fee accruals, and (vi) certain other non-cash items.

We believe that Distributable Earnings provides meaningful information to consider in addition to our GAAP results. We believe Distributable Earnings is a useful financial metric for existing and potential future holders of our common stock as historically, over time, Distributable Earnings has been an indicator of our dividends per share. As a REIT, we generally must distribute annually at least 90% of our net taxable income, subject to certain adjustments, and therefore we believe our dividends are one of the principal reasons stockholders may invest in our common stock. Further, Distributable Earnings helps us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations and is one of the performance metrics we consider when declaring our dividends.

Distributable Earnings does not represent net income (loss) and should not be considered as an alternative to GAAP net income (loss). Our methodology for calculating Distributable Earnings may differ from the methodologies employed by other companies and thus may not be comparable to the Distributable Earnings reported by other companies.

Please refer to the financial statements and reconciliation of GAAP net income to distributable earnings included at the end of this release for further information.

Supplemental Information

The Company has published a supplemental earnings presentation for the quarter ended September 30, 2021 on its website to provide additional disclosure and financial information. These materials can be found on the Company’s website at http://www.fbrtreit.com under the Investor Relations tab.

Conference Call and Webcast

The Company will host a conference call and live audio webcast to discuss its financial results on Thursday, November 11, 2021 at 10:00 a.m. ET. Participants are encouraged to pre-register for the call and webcast at https://dpregister.com/sreg/10161768/ef73514ef0. If you are unable to pre-register, the conference call may be accessed by dialing (866) 777-2509 (Domestic) or (412) 317-5413 (International). Ask to join the Franklin BSP Realty Trust conference call. Participant should call in at least five minutes prior to the start of the call.

The call will also be accessible via live webcast at https://ccmediaframe.com/?id=JHQPsiG8. Please allow extra time prior to the call to download and install audio software, if needed. A slide presentation containing supplemental information may also be accessed through the Company’s website in advance of the call.

An audio replay of the live broadcast will be available approximately one hour after the end of the conference call on FBRT’s website. The replay will be available for 90 days on the Company’s website.

About Franklin BSP Realty Trust, Inc.

Franklin BSP Realty Trust, Inc. (NYSE: FBRT) is a real estate investment trust that originates, acquires and manages a diversified portfolio of commercial real estate debt secured by properties located in the United States. As of September 30, 2021, FBRT had over $3 billion of assets. FBRT is externally managed by Benefit Street Partners L.L.C. For further information, please visit www.fbrtreit.com.

Forward-Looking Statements

This communication includes forward-looking statements. These forward-looking statements generally can be identified by phrases such as “will,” “should,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of similar import. Similarly, statements herein that describe management’s beliefs, intentions or goals also are forward-looking statements. It is uncertain whether any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what impact they will have on the results of operations and financial condition of the Company or the price of FBRT stock. These forward-looking statements involve certain risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from those indicated in such forward-looking statements, including but not limited to the risks and important factors contained and identified in FBRT’s filings with the Securities and Exchange Commission (“SEC”), including the proxy statement/prospectus filed with the SEC on September 7, 2021, as supplemented on September 23, 2021, and October 6, 2021, and its Quarterly Reports on Form 10-Q and Annual Report on Form 10-K, any of which could cause actual results to differ materially from the forward-looking statements. The forward-looking statements included in this communication are made only as of the date hereof. FBRT does not undertake any obligation to update the forward-looking statements to reflect subsequent events or circumstances, except as required by law.

FRANKLIN BSP REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

 

September 30, 2021

 

December 31, 2020

ASSETS

(Unaudited)

 

 

Cash and cash equivalents

$

91,374

 

 

$

82,071

 

Restricted cash

9,531

 

 

10,070

 

Commercial mortgage loans, held for investment, net of allowance of $15,499 and $20,886 as of September 30, 2021 and December 31, 2020, respectively

3,247,646

 

 

2,693,848

 

Commercial mortgage loans, held for sale, measured at fair value

99

 

 

67,649

 

Real estate securities, available for sale, measured at fair value, amortized cost of $0 and $179,392 as of September 30, 2021 and December 31, 2020, respectively

 

 

171,136

 

Derivative instruments, measured at fair value

 

 

25

 

Other real estate investments, measured at fair value

2,547

 

 

2,522

 

Receivable for loan repayment (1)

123,311

 

 

98,551

 

Accrued interest receivable

17,132

 

 

15,295

 

Prepaid expenses and other assets

4,023

 

 

8,538

 

Intangible lease asset, net of amortization

49,192

 

 

13,546

 

Real estate owned, net of depreciation

90,623

 

 

26,510

 

Total assets

$

3,635,478

 

 

$

3,189,761

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Collateralized loan obligations

$

1,792,353

 

 

$

1,625,498

 

Repurchase agreements - commercial mortgage loans

550,156

 

 

276,340

 

Repurchase agreements - real estate securities

46,531

 

 

186,828

 

Mortgage note payable

23,998

 

 

29,167

 

Other financing and loan participation - commercial mortgage loans

37,434

 

 

31,379

 

Unsecured debt

60,000

 

 

 

Derivative instruments, measured at fair value

 

 

403

 

Interest payable

972

 

 

2,110

 

Distributions payable

20,447

 

 

15,688

 

Accounts payable and accrued expenses

9,318

 

 

5,125

 

Due to affiliates

17,140

 

 

9,525

 

Total liabilities

$

2,558,349

 

 

$

2,182,063

 

Commitment and contingencies (See Note 10 to the Consolidated Financial Statements included in the Form 10-Q)

 

 

 

Redeemable convertible preferred stock Series A, $0.01 par value, 60,000 authorized and 25,567 and 40,515 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

$

127,603

 

 

$

202,292

 

Redeemable convertible preferred stock Series C, $0.01 par value, 20,000 authorized and 1,400 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

6,969

 

 

6,962

 

Redeemable convertible preferred stock Series D, $0.01 par value, 20,000 authorized and 17,950 issued and outstanding as of September 30, 2021 and none issued or outstanding as of December 31, 2020, respectively

89,677

 

 

 

Equity:

 

 

 

Preferred stock, $0.01 par value, 50,000,000 authorized and none issued or outstanding as of September 30, 2021 and December 31, 2020, respectively

 

 

 

Common stock, $0.01 par value, 949,999,000 shares authorized, 44,162,657 and 44,510,051 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

443

 

 

446

 

Additional paid-in capital

906,517

 

 

912,725

 

Accumulated other comprehensive income (loss)

 

 

(8,256

)

Accumulated deficit

(59,844

)

 

(106,471

)

Total stockholders' equity

$

847,116

 

 

$

798,444

 

Non-controlling interest

5,764

 

 

 

Total equity

$

852,880

 

 

$

798,444

 

Total liabilities, redeemable convertible preferred stock and equity

$

3,635,478

 

 

$

3,189,761

 

(1)

Includes $123.3 million and $98.6 million of cash held by servicer related to the CLOs as of September 30, 2021 and December 31, 2020, respectively.

FRANKLIN BSP REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2021

 

2020

 

2021

 

2020

Income:

 

 

 

 

 

 

 

Interest income

$

47,747

 

 

$

44,414

 

 

$

138,969

 

 

$

135,509

 

Less: Interest expense

11,988

 

 

15,113

 

 

35,994

 

 

54,740

 

Net interest income

35,759

 

 

29,301

 

 

102,975

 

 

80,769

 

Revenue from real estate owned

1,015

 

 

1,017

 

 

2,447

 

 

3,474

 

Total income

$

36,774

 

 

$

30,318

 

 

$

105,422

 

 

$

84,243

 

Expenses:

 

 

 

 

 

 

 

Asset management and subordinated performance fee

8,265

 

 

3,749

 

 

19,682

 

 

11,399

 

Acquisition expenses

690

 

 

166

 

 

1,012

 

 

483

 

Administrative services expenses

2,980

 

 

3,128

 

 

9,532

 

 

10,180

 

Professional fees

2,488

 

 

2,470

 

 

7,262

 

 

8,476

 

Real estate owned operating expenses

 

 

509

 

 

 

 

3,250

 

Depreciation and amortization

 

 

591

 

 

812

 

 

1,765

 

Other expenses

709

 

 

571

 

 

2,115

 

 

3,213

 

Total expenses

$

15,132

 

 

$

11,184

 

 

$

40,415

 

 

$

38,766

 

Other (income)/loss:

 

 

 

 

 

 

 

Provision/(benefit) for credit losses

(1,613

)

 

(3,710

)

 

(5,452

)

 

14,929

 

Impairment losses on real estate owned assets

 

 

 

 

 

 

398

 

Realized (gain)/loss on extinguishment of debt

 

 

 

 

 

 

(438

)

Realized (gain)/loss on sale of real estate securities

 

 

4,390

 

 

1,375

 

 

10,137

 

Realized (gain)/loss on sale of commercial mortgage loan held for sale

(206

)

 

 

 

(206

)

 

(252

)

Realized (gain)/loss on sale of real estate owned assets, held for sale

(8,698

)

 

(1,424

)

 

(9,810

)

 

(1,424

)

Realized (gain)/loss on sale of commercial mortgage loan, held for sale, measured at fair value

(9,061

)

 

(1,940

)

 

(22,211

)

 

(11,106

)

Unrealized (gain)/loss on commercial mortgage loans, held for sale, measured at fair value

1,104

 

 

(263

)

 

 

 

76

 

Unrealized (gain)/loss on other real estate investments, measured at fair value

(1

)

 

(6

)

 

(27

)

 

37

 

Unrealized (gain)/loss on derivatives

(1,428

)

 

(4,310

)

 

(374

)

 

625

 

Realized (gain)/loss on derivatives

1,902

 

 

4,722

 

 

(357

)

 

13,050

 

Total other (income)/loss

$

(18,001

)

 

$

(2,541

)

 

$

(37,062

)

 

$

26,032

 

Income before taxes

39,643

 

 

21,675

 

 

102,069

 

 

19,445

 

Provision/(benefit) for income tax

1,148

 

 

178

 

 

3,418

 

 

(2,466

)

Net income

$

38,495

 

 

$

21,497

 

 

$

98,651

 

 

$

21,911

 

Net income applicable to common stock

$

29,490

 

 

$

16,739

 

 

$

75,905

 

 

$

10,466

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.67

 

 

$

0.38

 

 

$

1.72

 

 

$

0.24

 

Diluted earnings per share

$

0.67

 

 

$

0.38

 

 

$

1.71

 

 

$

0.24

 

Basic weighted average shares outstanding

44,185,241

 

 

44,405,196

 

 

44,245,733

 

 

44,348,282

 

Diluted weighted average shares outstanding

44,200,563

 

 

44,421,084

 

 

44,261,469

 

 

44,361,739

 

RECONCILIATION OF GAAP NET INCOME TO DISTRIBUTABLE EARNINGS

(In thousands, except share and per share data)

(Unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2021

 

2020

 

2021

 

2020

GAAP Net Income

$

38,495

 

 

$

21,497

 

 

$

98,651

 

 

$

21,911

 

Adjustments:

 

 

 

 

 

 

 

CLO amortization acceleration (1)

(867

)

 

(691

)

 

(2,401

)

 

953

 

Unrealized (gain)/loss on financial instruments (2)

(325

)

 

(4,579

)

 

(401

)

 

738

 

Incentive fees

4,280

 

 

 

 

8,046

 

 

 

Depreciation and amortization

 

 

591

 

 

812

 

 

1,765

 

Increase/(decrease) in provision for credit losses

(1,613

)

 

(3,710

)

 

(5,452

)

 

14,929

 

Impairment losses on real estate owned assets

 

 

 

 

 

 

398

 

Distributable earnings

$

39,970

 

 

$

13,108

 

 

$

99,255

 

 

$

40,694

 

Average Equity

$

1,063,428

 

 

$

974,733

 

 

$

1,044,583

 

 

$

966,519

 

Annualized GAAP ROE

14.5

%

 

8.8

%

 

12.6

%

 

3.0

%

Annualized distributable earnings ROE

15.0

%

 

5.4

%

 

12.7

%

 

5.5

%

Distributable earnings per share

$

0.69

 

 

$

0.23

 

 

$

1.73

 

 

$

0.71

 

(1)

 

Adjusted for non-cash CLO amortization acceleration to effectively amortize issuance costs of our CLOs over the expected lifetime of the CLOs. We assume our CLOs will be outstanding for four years and amortized the financing costs over four years in our distributable earnings as compared to effective yield methodology in our GAAP earnings.

(2)

 

Adjusted for unrealized gains and losses on loans and derivatives.

 

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