Franklin BSP Realty Trust, Inc.

Good day and welcome to the Franklin BSP Realty Trust third quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn our conference over to Lindsay Crabb, Director of Investor Relations. Please go ahead.

Good morning. Thank you, Wyatt, for hosting our call today, and thanks, everyone, for joining us. With me on the call today are Richard Byrne, Chairman and CEO of FBRT, Jerry Baglian, Chief Financial Officer and Chief Operating Officer of FBRT, and Michael Camperato, President of FBRT. Before you 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 reports, and actual future results may differ materially. The information conveyed on this call is current only as of the date of this call, November 5, 2024. 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 at www.fbrtreet.com. 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 to everyone, and thank you for joining us on this Election Day morning. As Lindsay mentioned, our earnings release and supplemental deck were published to our website yesterday. We're going to begin today's call on slide four by reviewing our third quarter results, and then we'll, as always, open the call to your questions. Also, as always, I will provide a brief overview of the quarter's key developments, and then Jerry will discuss our financial results, and Mike will cover market conditions, our watch list, and our REO portfolio. So with all that, let me start out with an overarching comment about how we and probably mostly every CRE lender thinks about the world. When we think about our portfolio, we think about it in two buckets. Loans originated during the Fed's zero interest rate policy. and loans originated post the unprecedented rise in rates. The underlying metrics of most loans originated pre-rate hikes have, as you all know, deteriorated since underwriting as property values have declined and LTVs rose as a result of the dramatic increase in rates. The more serious problem, of course, with legacy loans has been and continues to be the significant deterioration in the office sector post-COVID. Thankfully, our office exposure is now only 4% of our book. We received two full payoffs in office loans for 40 million in this quarter, and our pre-2024 originated traditional multi-tenant office exposure is now only 147 million, or 2.6%. In addition to the notional exposure decreasing meaningfully, quarter over quarter, the remaining office exposure has already been significantly marked down in prior quarters to reflect current market conditions. So by contrast to the legacy loans, both office and non-office, the loans we're originating post-rate hikes are among the highest quality, lowest loan-to-value loans we have seen in many years and were originated at some of the highest spreads we've seen in years. We continue to make significant progress turning over our book by originating new loans at current interest rates and valuations and cycling through our legacy book. In all, approximately 40% of our portfolio was originated after January 2023. We think this stat will be an extremely important metric for all CRE lenders because it measures the recycling of our book into these new relatively attractive loans set off of remarked property valuations. A robust origination and repayment activity has resulted in over $1.6 billion of new loan commitments year-to-date. We are encouraged by repayments on our legacy portfolio this year. We've received $1 billion year-to-date and $510 million in the third quarter alone. Of course, payoffs are a blessing and a curse, but in the current market environment, we are pleased to see the liquidity in our portfolio. Our team has made headway resolving watch list loans and REO assets from our legacy portfolio. Currently, 154 out of our 157 positions in our book are risk-rated two or three, and our overall risk rating of the entire book is 2.2. We reduced our watch list loans from seven to three this quarter, with only 1.3 of our book is represented by these watch list loans. Three multifamily properties were upgraded due to credit enhancing modifications and additional borrower equity coming to the table. One hospitality asset was sold at a price above our debt basis. Our foreclosure REO position portfolio increased in size to 13 positions this quarter. But as Mike will detail, it is likely to decline due to recently negotiated PSAs on four properties. The balance of our foreclosure REO consists of primarily multifamily properties and strong markets. As Mike mentioned last quarter, while we would like to resolve the REO portfolio as quickly as possible, we believe that there is value in holding some of these assets until we find the best possible execution. Our liquidity position is robust. At the end of the quarter, we had $1.1 billion in available liquidity, which was strengthened by our CLO issuance near the end of the third quarter. The balance is higher than the previous quarter due to the timing of repayments and additional space on our warehouse lines. and we expect to deploy much of this liquidity, including $346 million of cash, in the relatively near future. While we did not purchase stock in the third quarter, it is an important part of our capital allocation strategy. We have $31 million remaining on our buyback allocation, and our board has extended it through December 31, 2025. FDRT is well-positioned. The team is effectively addressing positions, modifying loans, selling REO assets, and enhancing our overall credit quality of our loan portfolio through new originations. Our balance sheet features a robust, multifamily-focused loan portfolio that we expect to perform well, especially as market conditions stabilize. With all that, let me now turn the call over to Jerry.