Franklin BSP Realty Trust, Inc. Announces Second Quarter 2023 Results
Reported GAAP net income of
Reported Distributable Earnings (a non-GAAP financial measure) of
Second Quarter 2023 Summary
-
Produced a second quarter GAAP and Distributable Earnings ROE (a non-GAAP financial measure) of
9.8% and16.5% , respectively -
Book value of
per diluted common share on a fully converted basis(1), an increase of$15.85 $0.07 -
Declared second quarter common stock cash dividend of
, representing a$0.35 59.0% yield on book value -
GAAP and Distributable Earnings dividend coverage of
111% and185% , respectively -
Closed
of new investments at a weighted average spread of 432 basis points$230 million -
Total liquidity of
, which includes$1.2 billion in cash$225 million -
Repurchased 444,726 shares of common stock at an average price of
per share for an aggregate of$12.36 $5.5 million -
Received proceeds of
on the$96 million Brooklyn hotel loan, representing the full principal amount of the loan and approximately in additional proceeds after payment of all related closing expenses$20 million
Richard Byrne, Chairman and Chief Executive Officer of FBRT, said, “FBRT posted strong earnings producing a
Further commenting on the Company's results, Michael Comparato, President of FBRT, added, “Our portfolio is conservatively positioned and is further enhanced by a strong balance sheet with low leverage. Given the turbulence of the market, we continue to aggressively monitor our portfolio and remain disciplined in our asset selection. In addition, we are actively exploring generative artificial intelligence (“AI”) to assess how AI can incrementally enhance our processes.”
Core portfolio: For the quarter ended June 30, 2023, the Company closed
On April 18, 2023, the Company announced the successful completion of the sale of the Williamsburg Hotel, FBRT’s
Conduit: For the quarter ended June 30, 2023, the Company closed
Allowance for credit losses: During the quarter, FBRT recognized an incremental provision for credit losses of approximately
Book Value
As of June 30, 2023, book value was
Share Repurchase Program
The Company has a
Subsequent Event
On July 17, 2023, the Company called all of the outstanding notes issued by BSPRT 2019-FL5 Issuer, Ltd., a wholly owned indirect subsidiary of the Company. The outstanding principal of the notes on the date of the call was
Distributable Earnings and Run-Rate Distributable Earnings
Distributable Earnings is a non-GAAP measure, which the Company defines as GAAP net income (loss), adjusted for (i) non-cash CLO amortization acceleration and amortization over the expected useful life of the Company's CLOs, (ii) unrealized gains and losses on loans, derivatives and residential adjustable-rate mortgage pass-through securities ("ARM Agency Securities" or "ARMS"), including CECL reserves and impairments, (iii) non-cash equity compensation expense, (iv) depreciation and amortization, (v) subordinated performance fee accruals/(reversal), (vi) loan workout charges, (vii) realized gains and losses on debt extinguishment, (viii) certain other non-cash items, and (ix) impairments of acquisition assets related to the Capstead merger. Further, Run-Rate Distributable Earnings, a non-GAAP measure, presents Distributable Earnings before trading and derivative gain/loss on ARMs.
The Company believes that Distributable Earnings and Run-Rate Distributable Earnings provide meaningful information to consider in addition to the disclosed GAAP results. The Company believes Distributable Earnings is a useful financial metric for existing and potential future holders of its common stock as historically, over time, Distributable Earnings has been an indicator of dividends per share. As a REIT, the Company generally must distribute annually at least
Distributable Earnings and Run-Rate Distributable Earnings do not represent net income (loss) and should not be considered as an alternative to GAAP net income (loss). The methodology for calculating Distributable Earnings and Run-Rate 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 and Run-Rate 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 June 30, 2023 on its website to provide additional disclosure and financial information. These materials can be found on FBRT’s website at http://www.fbrtreit.com under the Presentations tab.
1 Fully converted per share information in this press release assumes applicable conversion of the Company's series of outstanding convertible preferred stock into common stock and full vesting of the Company's outstanding equity compensation awards.
Conference Call and Webcast
The Company will host a conference call and live audio webcast to discuss its financial results on Tuesday, August 1, 2023, at 9:00 a.m. ET. Participants are encouraged to pre-register for the call and webcast at https://dpregister.com/sreg/10180657/f9e08ee979. If you are unable to pre-register, the conference call may be accessed by dialing (844) 701-1166 (Domestic) or (412) 317-5795 (International). Ask to join the Franklin BSP Realty Trust conference call. Participants 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=sIB611E6. 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 FBRT'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
Forward-Looking Statements
Certain statements included in this press release are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of the Company and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as "may," "will," "seeks," "anticipates," "believes," "estimates," "expects," "plans," "intends," "should" or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.
The Company's forward-looking statements are subject to various risks and uncertainties. Factors that could cause actual outcomes to differ materially from our forward-looking statements include macroeconomic factors in
FRANKLIN BSP REALTY TRUST, INC. CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands, except share and per share data) |
|||||||
|
June 30, 2023 |
|
December 31, 2022 |
||||
ASSETS |
|
|
|
||||
Cash and cash equivalents |
$ |
224,696 |
|
|
$ |
179,314 |
|
Restricted cash |
|
7,444 |
|
|
|
11,173 |
|
Commercial mortgage loans, held for investment, net of allowance for credit losses of |
|
5,023,579 |
|
|
|
5,228,928 |
|
Commercial mortgage loans, held for sale, measured at fair value |
|
34,250 |
|
|
|
15,559 |
|
Real estate securities, trading, measured at fair value (includes pledged assets of |
|
125,215 |
|
|
|
235,728 |
|
Real estate securities, available for sale, measured at fair value, amortized cost of |
|
191,849 |
|
|
|
221,025 |
|
Derivative instruments, measured at fair value |
|
251 |
|
|
|
415 |
|
Receivable for loan repayment (1) |
|
66,835 |
|
|
|
42,557 |
|
Accrued interest receivable |
|
38,348 |
|
|
|
34,007 |
|
Prepaid expenses and other assets |
|
15,862 |
|
|
|
15,795 |
|
Intangible lease asset, net of amortization |
|
66,008 |
|
|
|
54,831 |
|
Real estate owned, net of depreciation |
|
179,252 |
|
|
|
127,772 |
|
Real estate owned, held for sale |
|
11,760 |
|
|
|
36,497 |
|
Total assets |
$ |
5,985,349 |
|
|
$ |
6,203,601 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
||||
Collateralized loan obligations |
$ |
3,031,984 |
|
|
$ |
3,121,983 |
|
Repurchase agreements - commercial mortgage loans |
|
695,039 |
|
|
|
680,859 |
|
Repurchase agreements - real estate securities |
|
289,993 |
|
|
|
440,008 |
|
Mortgage note payable |
|
23,998 |
|
|
|
23,998 |
|
Other financing and loan participation - commercial mortgage loans |
|
82,348 |
|
|
|
76,301 |
|
Unsecured debt |
|
81,246 |
|
|
|
98,695 |
|
Derivative instruments, measured at fair value |
|
299 |
|
|
|
64 |
|
Interest payable |
|
12,669 |
|
|
|
12,715 |
|
Distributions payable |
|
36,221 |
|
|
|
36,317 |
|
Accounts payable and accrued expenses |
|
12,460 |
|
|
|
17,668 |
|
Due to affiliates |
|
15,929 |
|
|
|
15,429 |
|
Intangible lease liability, net of amortization |
|
13,664 |
|
|
|
6,428 |
|
Total liabilities |
$ |
4,295,850 |
|
|
$ |
4,530,465 |
|
Commitments and Contingencies |
|
|
|
||||
Redeemable convertible preferred stock: |
|
|
|
||||
Redeemable convertible preferred stock Series H, |
$ |
89,748 |
|
|
$ |
89,748 |
|
Redeemable convertible preferred stock Series I, |
|
— |
|
|
|
5,000 |
|
Total redeemable convertible preferred stock |
$ |
89,748 |
|
|
$ |
94,748 |
|
Equity: |
|
|
|
||||
Preferred stock, |
$ |
258,742 |
|
|
$ |
258,742 |
|
Common stock, |
|
822 |
|
|
|
826 |
|
Additional paid-in capital |
|
1,600,036 |
|
|
|
1,602,247 |
|
Accumulated other comprehensive income (loss) |
|
(1,299 |
) |
|
|
390 |
|
Accumulated deficit |
|
(288,380 |
) |
|
|
(299,225 |
) |
Total stockholders' equity |
$ |
1,569,921 |
|
|
$ |
1,562,980 |
|
Non-controlling interest |
|
29,830 |
|
|
|
15,408 |
|
Total equity |
$ |
1,599,751 |
|
|
$ |
1,578,388 |
|
Total liabilities, redeemable convertible preferred stock and equity |
$ |
5,985,349 |
|
|
$ |
6,203,601 |
|
______________________________________________________________________ | ||
(1) |
Includes |
FRANKLIN BSP REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) (Unaudited) |
|||||||||||||||
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Income |
|
|
|
|
|
|
|
||||||||
Interest income |
$ |
152,892 |
|
|
$ |
70,213 |
|
|
$ |
283,428 |
|
|
$ |
145,471 |
|
Less: Interest expense |
|
75,299 |
|
|
|
32,807 |
|
|
|
146,374 |
|
|
|
55,287 |
|
Net interest income |
|
77,593 |
|
|
|
37,406 |
|
|
|
137,054 |
|
|
|
90,184 |
|
Revenue from real estate owned |
|
6,438 |
|
|
|
2,312 |
|
|
|
9,750 |
|
|
|
4,624 |
|
Total income |
$ |
84,031 |
|
|
$ |
39,718 |
|
|
$ |
146,804 |
|
|
$ |
94,808 |
|
Expenses |
|
|
|
|
|
|
|
||||||||
Asset management and subordinated performance fee |
$ |
8,900 |
|
|
$ |
6,601 |
|
|
|
16,985 |
|
|
|
13,346 |
|
Acquisition expenses |
|
283 |
|
|
|
319 |
|
|
|
661 |
|
|
|
634 |
|
Administrative services expenses |
|
3,398 |
|
|
|
3,048 |
|
|
|
7,427 |
|
|
|
6,401 |
|
Professional fees |
|
2,794 |
|
|
|
8,054 |
|
|
|
7,608 |
|
|
|
14,213 |
|
Share-based compensation |
|
1,228 |
|
|
|
682 |
|
|
|
2,250 |
|
|
|
1,182 |
|
Depreciation and amortization |
|
2,196 |
|
|
|
1,296 |
|
|
|
4,001 |
|
|
|
2,591 |
|
Other expenses |
|
4,301 |
|
|
|
1,663 |
|
|
|
6,467 |
|
|
|
3,425 |
|
Total expenses |
$ |
23,100 |
|
|
$ |
21,663 |
|
|
$ |
45,399 |
|
|
$ |
41,792 |
|
Other income/(loss) |
|
|
|
|
|
|
|
||||||||
(Provision)/benefit for credit losses |
|
(21,624 |
) |
|
|
(32,530 |
) |
|
|
(25,984 |
) |
|
|
(31,575 |
) |
Realized gain/(loss) on extinguishment of debt |
|
270 |
|
|
|
15 |
|
|
|
5,037 |
|
|
|
15 |
|
Realized gain/(loss) on sale of available for sale trading securities |
|
— |
|
|
|
— |
|
|
|
596 |
|
|
|
— |
|
Realized gain/(loss) on sale of commercial mortgage loans, held for sale |
|
— |
|
|
|
39 |
|
|
|
— |
|
|
|
39 |
|
Realized gain/(loss) on sale of commercial mortgage loans, held for sale, measured at fair value |
|
2,094 |
|
|
|
(1,833 |
) |
|
|
2,094 |
|
|
|
56 |
|
Unrealized gain/(loss) on commercial mortgage loans, held for sale, measured at fair value |
|
(303 |
) |
|
|
(2,797 |
) |
|
|
44 |
|
|
|
(3,736 |
) |
Gain/(loss) on other real estate investments |
|
(1,691 |
) |
|
|
— |
|
|
|
(3,030 |
) |
|
|
(29 |
) |
Trading gain/(loss) |
|
(946 |
) |
|
|
(22,538 |
) |
|
|
2,022 |
|
|
|
(110,973 |
) |
Unrealized gain/(loss) on derivatives |
|
393 |
|
|
|
(9,427 |
) |
|
|
73 |
|
|
|
(14,390 |
) |
Realized gain/(loss) on derivatives |
|
573 |
|
|
|
25,193 |
|
|
|
617 |
|
|
|
59,223 |
|
Total other income/(loss) |
$ |
(21,234 |
) |
|
$ |
(43,878 |
) |
|
$ |
(18,531 |
) |
|
$ |
(101,370 |
) |
Income/(loss) before taxes |
|
39,697 |
|
|
|
(25,823 |
) |
|
|
82,874 |
|
|
|
(48,354 |
) |
(Provision)/benefit for income tax |
|
(53 |
) |
|
|
114 |
|
|
|
609 |
|
|
|
138 |
|
Net income/(loss) |
$ |
39,644 |
|
|
$ |
(25,709 |
) |
|
$ |
83,483 |
|
|
$ |
(48,216 |
) |
Net (income)/loss attributable to non-controlling interest |
|
(41 |
) |
|
|
— |
|
|
|
(50 |
) |
|
|
— |
|
Net income/(loss) attributable to Franklin BSP Realty Trust, Inc. |
$ |
39,603 |
|
|
$ |
(25,709 |
) |
|
$ |
83,433 |
|
|
$ |
(48,216 |
) |
Less: Preferred stock dividends |
|
6,749 |
|
|
|
6,955 |
|
|
|
13,497 |
|
|
|
27,966 |
|
Net income/(loss) applicable to common stock |
$ |
32,854 |
|
|
$ |
(32,664 |
) |
|
$ |
69,936 |
|
|
$ |
(76,182 |
) |
|
|
|
|
|
|
|
|
||||||||
Basic earnings per share |
$ |
0.39 |
|
|
$ |
(0.43 |
) |
|
$ |
0.83 |
|
|
$ |
(1.27 |
) |
Diluted earnings per share |
$ |
0.39 |
|
|
$ |
(0.43 |
) |
|
$ |
0.83 |
|
|
$ |
(1.27 |
) |
Basic weighted average shares outstanding |
|
82,252,979 |
|
|
|
75,837,621 |
|
|
|
82,512,434 |
|
|
|
59,985,361 |
|
Diluted weighted average shares outstanding |
|
82,252,979 |
|
|
|
75,837,621 |
|
|
|
82,512,434 |
|
|
|
59,985,361 |
|
FRANKLIN BSP REALTY TRUST, INC.
RECONCILIATION OF GAAP NET INCOME TO DISTRIBUTABLE EARNINGS
(In thousands, except share and per share data)
(Unaudited)
The following table provides a reconciliation of GAAP net income to Distributable Earnings and Run-Rate Distributable Earnings as of the three and six months ended June 30, 2023 and June 30, 2022 (amounts in thousands, except share and per share data):
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
GAAP Net Income (Loss) |
$ |
39,644 |
|
|
$ |
(25,709 |
) |
|
$ |
83,483 |
|
|
$ |
(48,216 |
) |
Adjustments: |
|
|
|
|
|
|
|
||||||||
CLO amortization acceleration (1) |
|
(1,197 |
) |
|
|
3,202 |
|
|
|
(2,665 |
) |
|
|
2,225 |
|
Unrealized (gain)/loss on financial instruments (2) |
|
1,601 |
|
|
|
12,224 |
|
|
|
2,913 |
|
|
|
18,122 |
|
Unrealized (gain)/loss - ARMs |
|
1,149 |
|
|
|
7,658 |
|
|
|
415 |
|
|
|
35,120 |
|
Subordinated performance fee (3) |
|
2,614 |
|
|
|
(3,456 |
) |
|
|
2,020 |
|
|
|
(3,456 |
) |
Non-Cash Compensation Expense |
|
1,228 |
|
|
|
— |
|
|
|
2,250 |
|
|
|
— |
|
Depreciation and amortization |
|
2,196 |
|
|
|
1,296 |
|
|
|
4,001 |
|
|
|
2,591 |
|
(Reversal of)/Provision for credit losses |
|
21,624 |
|
|
|
32,530 |
|
|
|
25,984 |
|
|
|
31,575 |
|
Loan workout charges/(loan workout recoveries) (4) |
|
(5,105 |
) |
|
|
3,000 |
|
|
|
(5,105 |
) |
|
|
4,900 |
|
Realized gain on debt extinguishment |
|
(270 |
) |
|
|
— |
|
|
|
(5,037 |
) |
|
|
— |
|
Realized trading and derivatives (gain)/loss on ARMs |
|
(202 |
) |
|
|
(5,946 |
) |
|
|
(2,436 |
) |
|
|
22,082 |
|
Run Rate Distributable Earnings (5) |
$ |
63,282 |
|
|
$ |
24,799 |
|
|
$ |
105,823 |
|
|
$ |
64,943 |
|
Realized trading and derivatives gain/(loss) on ARMs |
|
202 |
|
|
|
5,946 |
|
|
|
2,436 |
|
|
|
(22,082 |
) |
Distributable Earnings |
$ |
63,484 |
|
|
$ |
30,745 |
|
|
$ |
108,259 |
|
|
$ |
42,861 |
|
|
|
(4,842 |
) |
|
|
(4,842 |
) |
|
$ |
(9,683 |
) |
|
$ |
(9,683 |
) |
Noncontrolling interests in joint ventures net income/(loss) |
|
(41 |
) |
|
|
— |
|
|
|
(50 |
) |
|
|
— |
|
Depreciation and amortization attributed to noncontrolling interests of joint ventures |
|
(426 |
) |
|
|
— |
|
|
|
(787 |
) |
|
|
— |
|
Distributable Earnings to Common |
$ |
58,175 |
|
|
$ |
25,903 |
|
|
$ |
97,739 |
|
|
$ |
33,178 |
|
Average Common Stock & Common Stock Equivalents |
|
1,413,493 |
|
|
|
1,470,643 |
|
|
|
1,408,571 |
|
|
|
1,495,106 |
|
GAAP Net Income/(Loss) ROE |
|
9.8 |
% |
|
|
(8.3 |
)% |
|
|
5.2 |
% |
|
|
(3.9 |
)% |
Run-Rate Distributable Earnings ROE |
|
16.4 |
% |
|
|
5.4 |
% |
|
|
6.8 |
% |
|
|
3.7 |
% |
Distributable Earnings ROE |
|
16.5 |
% |
|
|
7.0 |
% |
|
|
6.9 |
% |
|
|
2.2 |
% |
GAAP Net Income/(Loss) Per Share, Diluted |
$ |
0.39 |
|
|
$ |
(0.43 |
) |
|
$ |
0.83 |
|
|
$ |
(1.27 |
) |
GAAP Net Income/(Loss) Per Share, Fully Converted (6) |
$ |
0.39 |
|
|
$ |
(0.34 |
) |
|
$ |
0.83 |
|
|
$ |
(0.64 |
) |
Run-Rate Distributable Earnings Per Share, Fully Converted (6) |
$ |
0.66 |
|
|
$ |
0.22 |
|
|
$ |
1.07 |
|
|
$ |
0.61 |
|
Distributable Earnings Per Share, Fully Converted (6) |
$ |
0.66 |
|
|
$ |
0.29 |
|
|
$ |
1.10 |
|
|
$ |
0.37 |
|
___________________________________________________________________ | ||
(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) |
|
Represents unrealized gains and losses on (i) commercial mortgage loans, held for sale, measured at fair value, (ii) other real estate investments, measured at fair value and (iii) derivatives. |
(3) |
|
Represents accrued and unpaid subordinated performance fee. In addition, reversal of subordinated performance fee represents cash payments of the subordinated performance fee made during the period. |
(4) |
|
Represents loan workout charges the Company incurred, which the Company deemed likely to be recovered. Reversal of loan workout charges represent recoveries received. During the second quarter of 2023, the Company recovered |
(5) |
|
Distributable Earnings before realized trading and derivative gain/loss on residential adjustable-rate mortgage securities (“Run-Rate Distributable Earnings”) (a non-GAAP financial measure). |
(6) |
|
Fully Converted assumes conversion of our series of convertible preferred stock and full vesting of our outstanding equity compensation awards. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230731669426/en/
Investor Relations Contact:
Lindsey Crabbe
l.crabbe@benefitstreetpartners.com
(214) 874-2339
Source: Franklin BSP Realty Trust, Inc.