Franklin BSP Realty Trust, Inc.

Good day and welcome to the Franklin BSD Realty Trust second quarter 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded I would now like to turn the conference over to Lindsay Crabb, Director of Investor Relations. Please go ahead.

Thank you so much. Good morning. Welcome to the Franklin BSP Realty Trust Second Quarter Earnings Conference Call. As the operator mentioned, I'm Lindsay Crabb. With me on the call today are Richard Wern, Chairman and CEO of FBRT, Gary Baglian, Chief Financial Officer and Chief Operating Officer of FBRT, and Michael Camperato, President of FBRT. Before we begin, I want to mention that some of today's comments are forward-looking statements and are based on certain assumptions. Those comments and assumptions are subject to inherent risks and uncertainties, as described in our most recently filed SEC periodic report, and actual future results may differ materially. The information conveyed on this call is current only as the date of this call, August 1st, 2023. The company assumes no obligation to update any statements made during this call, including any forward-looking statements. whether as a result of new information, future events, or otherwise, except as required by law. Additionally, we will refer to certain non-GAAP financial measures which are reconciled to GAAP figures in our earnings release and supplementary slide deck, each of which are available on our website. We will refer to the supplementary slide deck on today's call. With that, I'll turn the call over to Rich Byrne.

Great. Thanks, Lindsay. And good morning, everyone. Thank you all for joining us today. I, as Lindsay said, am Rich Byrne. I'm the chairman and CEO of FDRT. Also, as Lindsay mentioned, our earnings release and supplemental deck were just published to our website yesterday, so you can look at them there. We're going to begin today's call by reviewing our second quarter results. And then, of course, as always, we'll open the call up for your questions. I'm going to start on slide four. FBRT delivered very strong earnings in the second quarter. In particular, our distributable earnings per share increased 50% this quarter, with the company generating 66 cents per fully converted share compared to 44 cents in the prior quarter. Our quarterly dividend of 35.5 cents remains well covered by our distributable earnings. It also is well covered by our gap earnings. This dividend level represents a yield of approximately 9% on our June 30th book value of $1,585 per fully converted share. The large increase in distributable earnings this quarter was largely attributable to the gain from our resolution of Williamsburg, our Williamsburg hotel loan. In April, the hotel sold for $96 million. We recovered 100% of the principal on the loan and approximately $20 million of additional proceeds. Jerry, when I turn it over to him, will provide more explanation about the sale and the accounting treatment of the gain later in this call. Excluding the impact of the Williamsburg loan, our portfolio performed as expected this quarter, with earnings modestly improving due to the benefit of higher base rates on our floating rate portfolio. Our book value increased by 7 cents in the quarter to 1585. The retention of excess earnings over our dividend more than offset the increase in our general CECL provisions and our one asset specific CECL provision. And speaking of reserves, we took a proactive approach to risk management as evidenced by the increases this quarter and every quarter that we've taken on our portfolio. Notably, Four assets were moved onto watch list in the second quarter with a risk rating of four. And of those, two were office loans and two were multifamily loans. And one loan on our Portland office complex that was previously on watch list was moved to a five and is now on non-accrual status. We also took an asset-specific reserve on that loan. In its entirety, our watch list consists of five loans, which are four four-rated loans and one five-rated loan. And that aggregates to approximately $145 million in value, which represents 2.9% of our $5.1 billion portfolio. We believe... these watch list ads and the reserves attached to them are appropriate for our portfolio. Mike will go into greater detail about our watch list loans and our approach to our credit quality assessments, hence our ratings later in the call. Turning to our REO properties, we have a few updates on those as well. Our total REO loan positions decreased this quarter with the sale of our multifamily asset in New Rochelle, which closed in the second quarter. The asset sold for our marked value on the position, so no additional write-down was required. Regarding our Walgreens portfolio, as of quarter end, we now own all 24 Walgreens properties underlying this loan. The leases on all 24 stores currently have 15-year lease terms. We intend to focus on liquidating the portfolio beginning in the third quarter. The 24 stores make up an asset value of approximately $100 million, which is the vast majority of our foreclosure REO balance at quarter end. I would now like to cover a few more points before I turn things over to Jerry. One. Despite the subdued transaction environment during the quarter, we originated 230 million in new loan commitments, maintaining our portfolio size of 5.1 billion. Our portfolio is well diversified across 156 loans with an average loan size of 33 million. Multifamily represents 77% of our portfolio. And as we have said before, multifamily lending will remain our focus. Mike will provide more detail on our recent investments and our pipeline in his commentary. We had $1.2 billion in total liquidity as of June 30th. Of that, $225 million was our cash balances. This gives us maximum flexibility to take advantage of opportunities while also maintaining a strong liquidity cushion to protect our portfolio from any unforeseen credit events. We repurchased 5.5 million of common stock during the quarter. In aggregate, over the past two years, we've purchased more than 60 million of our stock. We still have 39 million remaining on the company's buyback authorization, and we will not hesitate to repurchase our shares when we determine it to be the best use of our capital. To conclude, While we continue to see a challenging environment for commercial real estate and the market overall, we believe our portfolio is well positioned. We are focused on maintaining a strong capital position, which will allow us to continue to invest in our portfolio, but also play offense when we see good opportunities to originate. We are confident we can navigate through the challenging market conditions while delivering long-term value to our shareholders. With that, I'll let Jerry discuss our financial performance. Over to you, Jerry.