Franklin BSP Realty Trust, Inc. (NYSE: FBRT) (“FBRT” or the
“Company”) today announced financial results for the quarter and
full year ended December 31, 2022.
Reported GAAP net income of $27.2 million and $14.2 million for
the three and twelve months ended December 31, 2022, respectively.
Reported diluted earnings per share ("EPS") to common stockholders
of $0.25 and $(0.38) for the three and twelve months ended December
31, 2022, respectively.
Reported Distributable Earnings (a non-GAAP financial measure)
of $38.8 million and $116.1 million, or $0.37 and $1.07 per diluted
common share on a fully converted basis(1), for the three and
twelve months ended December 31, 2022, respectively.
Fourth Quarter 2022 Summary
- Produced a fourth quarter GAAP and Distributable Earnings ROE
(a non-GAAP financial measure) of 6.4% and 9.2%, respectively
- Book value of $15.78 per diluted common share on a fully
converted basis(1)
- Declared fourth quarter common stock cash dividend of $0.355,
representing a 9.0% yield on book value
- GAAP and Distributable Earnings dividend coverage of 72% and
104%, respectively
- Closed $209 million of new loan commitments at a weighted
average spread of 433 basis points
- Repurchased 485,316 shares of common stock at an average price
of $11.42 per share for an aggregate of $5.5 million
Full Year 2022 Summary
- Produced a full year GAAP and Distributable Earnings ROE of
(0.3)% and 6.6%, respectively
- Closed $2.3 billion of new loan commitments at a weighted
average spread of 462 basis points, ending the year with a core
portfolio aggregate principal balance of $5.3 billion
- Closed two managed Commercial Real Estate Collateralized Loan
Obligations for a combined $2.0 billion with two-year re-investment
periods and a blended weighted average cost of capital of
SOFR+2.15% before transaction costs
- Repurchased 1,416,369 million shares of common stock at an
average price of $11.71 per share for an aggregate of $16.6
million, which represents a $0.07 per share increase to book
value
- Benefit Street Partners L.L.C., the Company's advisor (the
"Advisor"), completed its $35 million share purchase program
Richard Byrne, Chairman and Chief Executive Officer of FBRT,
said, “FBRT delivered strong fourth quarter results, posting our
third consecutive quarter of distributable earnings growth. Our
distributable earnings over-covered our fourth quarter dividend
despite lower origination volume and a relatively flat portfolio.
Importantly, our liquidity position of approximately $1.0 billion
coupled with our low leverage of 2.5 times demonstrates our
conservative balance sheet and puts us in a position to take
advantage of attractive opportunities that may arise."
Further commenting on the Company's results, Michael Comparato,
Head of Commercial Real Estate of the Advisor, added, “Similar to
the third quarter, we were extremely selective on our fourth
quarter originations. While our origination activity was
intentionally lower, loan spreads continue to be meaningfully
higher than prior quarters. We continue to position ourselves
defensively in the current environment, while concurrently looking
for opportunities. We are now originating at the most attractive
spreads we have seen in recent years, and credit quality on new
originations is improving simultaneously. With these levels and the
continued benefit from higher SOFR rates, we expect our earnings to
continue to perform well in this environment."
1 Fully converted per share information in this press release
assumes applicable conversion of the Company's Series H and Series
I preferred stock, which pursuant to their terms will automatically
convert to common stock in the future, and the vesting of the
Company's outstanding equity compensation awards.
Core portfolio: For the quarter ended December 31, 2022, the
Company closed $209 million of loan commitments and funded $267
million of principal balance on new and existing loans. The Company
received loan repayments of $247 million. The Company's core
portfolio at the end of the quarter consisted of 161 loans with an
aggregate principal balance of approximately $5.3 billion. The
average loan size was approximately $33 million. Over 99% of the
aggregate principal balance of the Company's portfolio is in senior
mortgage loans with approximately 98% in floating rate loans and
approximately 76% of the portfolio is collateralized by multifamily
properties. During the quarter, two loans were added to the
Company's watch list and three positions were added to foreclosure
REO, two of which were previously on watch list. As of year-end,
the Company had two non-performing loans.
Conduit: For the quarter ended December 31, 2022, the Company
closed $24 million of fixed rate loans that were sold or will be
sold through the Company's conduit program. For the same period,
the Company sold $52 million of conduit loans.
Asset Current Expected Credit Loss ("CECL") Provision: During
the quarter, the Company recognized an incremental increase in the
CECL reserve of approximately $5.1 million.
Book Value
As of December 31, 2022, book value was $15.78 per diluted
common share on a fully converted basis(1).
Share Repurchase Program
During the quarter, the Company repurchased 485,316 shares of
the Company's common stock under the Company's $65 million share
repurchase program. These shares were repurchased at an average
gross price of $11.42 per share, inclusive of any broker's fees or
commissions, for an aggregate of $5.5 million. As of December 31,
2022, the Company's current share repurchase program had $48.4
million of capacity remaining.
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)
non-cash subordinated performance fee accruals, (vi) loan workout
charges, (vii) certain other non-cash items, and (viii) 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 90% of its taxable income, subject to
certain adjustments, and therefore believes dividends are one of
the principal reasons stockholders may invest in its common stock.
Further, Distributable Earnings helps investors evaluate
performance excluding the effects of certain transactions and GAAP
adjustments that the Company does not believe are necessarily
indicative of current loan portfolio performance and the Company's
operations and is one of the performance metrics the Company's
board of directors considers when dividends are declared. The
Company believes Run-Rate Distributable Earnings is a useful
financial metric because it presents the Distributable Earnings of
its core businesses, net of the impacts of the realized trading and
derivative gain/loss on the residential adjustable-rate mortgage
securities acquired from Capstead, which the Company is actively in
the process of liquidating from its portfolio.
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 published a supplemental earnings presentation for
the quarter ended December 31, 2022 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 Presentations tab.
Conference Call and Webcast
The Company will host a conference call and live audio webcast
to discuss its financial results on Thursday, February 23, 2023 at
9:00 a.m. ET. Participants are encouraged to pre-register for the
call and webcast at
https://dpregister.com/sreg/10174781/f5951cae6d. 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=XFEkJiua. 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 December 31, 2022,
FBRT had approximately $6.2 billion of assets. FBRT is externally
managed by Benefit Street Partners L.L.C., a wholly owned
subsidiary of Franklin Resources, Inc. For further information,
please visit www.fbrtreit.com.
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, including but not limited to the risks and
important factors contained and identified in the Company’s filings
with the Securities and Exchange Commission (“SEC”), including its
Annual Report on Form 10-K for the fiscal year ended December 31,
2021 and its subsequent filings with the SEC, 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.
FRANKLIN BSP REALTY TRUST,
INC.
CONSOLIDATED BALANCE
SHEETS
(In thousands, except share
and per share data)
December 31, 2022
December 31, 2021
ASSETS
Cash and cash equivalents
$
179,314
$
154,929
Restricted cash
11,173
13,270
Commercial mortgage loans, held for
investment, net of allowance for credit losses of $40,848 and
$15,827 as of December 31, 2022 and December 31, 2021,
respectively
5,228,928
4,211,061
Commercial mortgage loans, held for sale,
measured at fair value
15,559
34,718
Real estate securities, trading, measured
at fair value
235,728
4,566,871
Real estate securities, available for
sale, measured at fair value, amortized cost of $220,635 as of
December 31, 2022
221,025
—
Derivative instruments, measured at fair
value
415
436
Other real estate investments, measured at
fair value
—
2,074
Receivable for loan repayment (1)
42,557
252,351
Accrued interest receivable
34,007
30,109
Prepaid expenses and other assets
15,795
13,595
Intangible lease asset, net of
amortization
54,831
48,472
Real estate owned, net of depreciation
127,772
90,048
Real estate owned, held for sale
36,497
—
Cash collateral receivable from derivative
counterparties
—
56,767
Total assets
$
6,203,601
$
9,474,701
LIABILITIES AND STOCKHOLDERS'
EQUITY
Collateralized loan obligations
$
3,121,983
$
2,162,190
Repurchase agreements - commercial
mortgage loans
680,859
1,019,600
Repurchase agreements - real estate
securities
440,008
4,178,784
Mortgage note payable
23,998
23,998
Other financing and loan participation -
commercial mortgage loans
76,301
37,903
Unsecured debt
98,695
148,594
Derivative instruments, measured at fair
value
64
32,295
Interest payable
12,715
2,692
Distributions payable
36,317
30,346
Accounts payable and accrued expenses
17,668
12,705
Due to affiliates
15,429
17,538
Intangible lease liability, net of
depreciation
6,428
—
Total liabilities
$
4,530,465
$
7,666,645
Redeemable convertible preferred
stock:
Redeemable convertible preferred stock
Series C, $0.01 par value, 20,000 authorized and 1,400 issued and
outstanding as of December 31, 2021
—
6,971
Redeemable convertible preferred stock
Series D, $0.01 par value, 20,000 authorized and 17,950 issued and
outstanding as of December 31, 2021
—
89,684
Redeemable convertible preferred stock
Series H, $0.01 par value, 20,000 authorized and 17,950 issued and
outstanding as of December 31, 2022
89,748
—
Redeemable convertible preferred stock
Series I, $0.01 par value, 1,000 authorized and 1,000 issued and
outstanding as of December 31, 2022
5,000
—
Total redeemable convertible preferred
stock
$
94,748
$
96,655
Equity:
Preferred stock, $0.01 par value;
100,000,000 shares authorized, 7.5% Cumulative Redeemable Preferred
Stock, Series E, 10,329,039 shares issued and outstanding as of
December 31, 2022 and 2021
258,742
258,742
Series F Preferred stock, $0.01 par value,
40,000,000 authorized, 39,733,299 issued and outstanding as of
December 31, 2021
—
710,431
Common stock, $0.01 par value, 900,000,000
shares authorized, 82,992,784 and 43,965,928 issued and outstanding
as of December 31, 2022 and 2021, respectively
826
441
Additional paid-in capital
1,602,247
903,264
Accumulated other comprehensive income
(loss)
390
(62
)
Accumulated deficit
(299,225
)
(167,179
)
Total stockholders' equity
$
1,562,980
$
1,705,637
Noncontrolling interest
15,408
5,764
Total equity
$
1,578,388
$
1,711,401
Total liabilities, redeemable
convertible preferred stock and equity
$
6,203,601
$
9,474,701
(1)
Includes $42.5 million and $187.0 million
of cash held by the servicer related to the CLOs as of December 31,
2022 and 2021, respectively, as well as $0.1 million and $65.3
million of RMBS principal paydowns receivable as of December 31,
2022 and 2021, respectively.
FRANKLIN BSP REALTY TRUST,
INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except share
and per share data)
(Unaudited)
Year Ended December
31,
2022
2021
2020
Income:
Interest income
$
357,705
$
216,890
$
179,872
Less: Interest expense
165,708
60,835
66,556
Net interest income
191,997
156,055
113,316
Revenue from real estate owned
9,655
4,759
4,299
Total income
$
201,652
$
160,814
$
117,615
Expenses:
Asset management and subordinated
performance fee
26,157
28,110
15,178
Acquisition expenses
1,360
1,203
696
Administrative services expenses
12,928
7,658
13,120
Impairment of acquired assets
—
88,282
—
Professional fees
22,566
11,650
10,964
Share-based compensation expense
2,519
—
—
Real estate owned operating expenses
—
—
3,653
Depreciation and amortization
5,408
2,107
2,233
Other expenses
6,572
3,946
3,312
Total expenses
$
77,510
$
142,956
$
49,156
Other (income)/loss:
Provision/(benefit) for credit losses
$
36,115
$
(5,192
)
$
13,296
Impairment losses on real estate owned
assets
—
—
398
Realized (gain)/loss on extinguishment of
debt
(15
)
—
(3,678
)
Realized (gain)/loss on sale of commercial
mortgage loans, held for sale
354
(26
)
(184
)
Realized (gain)/loss on sale of real
estate owned assets, held for sale
—
(9,809
)
(1,851
)
Realized (gain)/loss on sale of other real
estate investments, measured at fair value
33
—
—
Realized (gain)/loss on sale of commercial
mortgage loans, held for sale, measured at fair value
(2,358
)
(24,208
)
(15,931
)
Unrealized (gain)/loss on commercial
mortgage loans, held for sale, measured at fair value
511
(469
)
75
Unrealized (gain)/loss on other real
estate investments, measured at fair value
659
19
32
Trading (gain)/loss
119,220
36,128
10,137
Unrealized (gain)/loss on derivatives
15,840
(7,402
)
995
Realized (gain)/loss on derivatives
(60,033
)
(484
)
12,486
Total other (income)/loss
$
110,326
$
(11,443
)
$
15,775
Income/(loss) before taxes
13,816
29,301
52,684
Provision/(benefit) for income tax
(399
)
3,599
(2,062
)
Net income/(loss)
$
14,215
$
25,702
$
54,746
Net (income)/loss attributable to
noncontrolling interest
216
—
—
Net income/(loss) attributable to
Franklin BSP Realty Trust, Inc.
$
14,431
$
25,702
$
54,746
Net income/(loss) attributable to
common shareholders
$
(27,310
)
$
(7,885
)
$
39,826
Basic net income per share
$
(0.38
)
$
(0.18
)
$
0.90
Diluted net income per share
$
(0.38
)
$
(0.18
)
$
0.90
Basic weighted average shares
outstanding
71,628,365
43,419,209
44,384,813
Diluted weighted average shares
outstanding
71,628,365
43,434,731
44,398,879
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 for the
years ended December 31, 2022, December 31, 2021 and December 31,
2020 (dollars in thousands):
Year Ended December
31,
2022
2021
2020
GAAP Net Income
$
14,215
$
25,702
$
54,746
Adjustments:
Depreciation and amortization
5,408
2,107
2,234
Impairment of Acquired Assets
—
88,282
—
CLO amortization acceleration (1)
(438
)
250
264
Unrealized (gain)/loss on financial
instruments (2)
17,010
(7,853
)
1,102
Unrealized (gain)/loss - ARMs
43,557
20,670
—
Subordinated performance fee
(8,380
)
9,846
—
Non-Cash Compensation Expense
3,485
—
—
Increase/(decrease) in provision for
credit losses
36,115
(5,192
)
13,296
Loan Workout Charges (3)
5,104
—
—
Impairment losses on real estate owned
assets
—
—
398
Realized trading and derivatives
(gain)/loss on ARMs
21,726
13,600
—
Run Rate Distributable Earnings
(4)
$
137,802
$
147,412
$
72,040
Realized trading and derivatives
gain/(loss) on ARMs
(21,726
)
(13,600
)
—
Distributable Earnings
$
116,076
$
133,812
$
72,040
7.5% Cumulative Redeemable Preferred
Stock, Series E Dividend
$
(19,367
)
$
(4,842
)
$
—
Noncontrolling interests in joint ventures
net (income)/loss
216
—
—
Depreciation and amortization attributed
to noncontrolling interests of joint ventures
(1,415
)
—
—
Distributable Earnings attributable to
stockholders and noncontrolling interests
95,510
128,970
72,040
Average Common Stock and Common Stock
Equivalents
1,456,871
1,146,009
974,184
GAAP Net Income/(Loss) ROE
(0.3
) %
1.8
%
5.6
%
Run-Rate Distributable Earnings ROE
8.0
%
12.4
%
7.4
%
Distributable Earnings ROE
6.6
%
11.3
%
7.4
%
GAAP Net Income/(Loss) Per Share,
Diluted
$
(0.38
)
$
(0.18
)
$
0.90
GAAP Net Income/(Loss) Per Share, Fully
Converted (5)
$
(0.06
)
$
0.33
$
0.96
Run-Rate Distributable Earnings Per Share,
Fully Converted (5)
$
1.31
$
2.23
$
1.27
Distributable Earnings Per Share, Fully
Converted (5)
$
1.07
$
2.02
$
1.27
(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 loan workout expenses the
Company incurred, which the Company deems likely to be
recovered.
(4)
Distributable Earnings before realized
trading and derivative gain/loss on residential adjustable-rate
mortgage securities (“Run-Rate Distributable Earnings”) (a non-GAAP
financial measure).
(5)
Fully Converted assumes conversion of our
Series H and Series I Preferred Stock, which by their terms
automatically convert to common stock in the future, and the
vesting of the Company's outstanding equity compensation
awards.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230222005908/en/
Investor Relations Contact: Lindsey Crabbe
l.crabbe@benefitstreetpartners.com (214) 874-2339
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