Franklin BSP Realty Trust, Inc.

Hello and welcome to the Franklin VFP Realty Trust fourth quarter 2024 earnings conference call. All participants will be in listen-only mode. Did 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 from the question queue, please press star then two. As a reminder, today's call is being recorded. I would now like to hand the conference over to Lindsay Crabb. Please go ahead.

Good morning. Thank you, MJ, for hosting our call today. Welcome to the FBRT Fourth Quarter 2024 Earnings Conference Call. As the operator mentioned, I'm Lindsay Crabb. 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 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 reports, and actual future results may differ materially. The information conveyed on this call is current only as of the date of this call, February 14th, 2025. 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.fbrtreit.com. We will refer to the supplementary slide deck on today's call. With that, I'll turn it over to Rich Byrne.

Great. Thanks, Lindsay, and good morning, everyone, and thank you for joining us today. 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. We're going to review our fourth quarter results, and then we'll open up the call, as always, to your questions. Jerry will cover our financial results, and Mike will discuss market positions, our watch list, and our REO portfolio. I'm going to highlight key developments from both the fourth quarter and the full year of 2024. With that, maybe just to start, we continue to view our portfolio into three buckets. Loans originated post-interest rate hikes, loans originated pre-interest rate hikes, and office loans. First, let's discuss post-interest rate hike loans. In 2024, we originated $2 billion in in new loan commitments, including 441 in the fourth quarter. Last quarter, we began tracking the percentage of our portfolio that has been originated since January 2023, reflecting current interest rates and valuations. Including origination through January 2025, 52% of our portfolio is loans originated post-interest rate hikes. We believe this is a very important statistic because these are some of the most attractive loans that we have originated in years. We are originating in the current vintage with relatively low competition. This has enabled us to add high-quality borrowers and loans with low LTVs to our book. Okay, as for pre-rate hike loans, our high-quality predominantly multifamily legacy portfolio provides us with a lot of flexibility and negotiating leverage as borrowers approach maturity. Many of our 2021 and 2022 vintage loans have been repaid. In fact, we've received $1.1 billion of full payoffs from this vintage in this past year, in 2024. In other cases, we are actively pursuing modifications with borrowers who improve our debt position. In some cases, Of course, we must take properties as real estate owns, stabilize the asset, and then sell. We are confident that we will achieve better outcomes, even if we need to endure some near-term earnings drag while waiting to maximize recovery. Lastly, regarding the office sector, after two office loan payoffs in Q4, both were at par, and excluding our largest office loan, which is a triple net lease headquarters and distribution facility, Our traditional multi-tenant office exposure at year-end was only 2.3% of our total portfolio. Importantly, this remaining exposure has been significantly marked down in previous quarters to reflect current market conditions. While we did not reach dividend coverage this quarter, we believe that our current dividend level is appropriate given the future earnings potential embedded in our REO and non-performing loans. Despite a very active origination year, our portfolio remained flat to 2023, ending the year at $5.0 billion of principal balance. Our 2024 originations were offset by $1.6 billion in repayments. These repayments, of course, are a blessing and a curse, but we are always happy to see pre-rate high loans repay in full. We ended the year with $535 million in liquidity, including $184 million in unrestricted cash. We continue to strategically invest our liquidity in new assets to further enhance FBRT's earnings. Currently, 151 of our 155 positions are risk-rated 2 or 3, resulting in an overall risk rating of 2.3. As of quarter end, our watch list makes up 3.8% of our portfolio and consists of four names, a net increase of one name during the quarter. A specific CECL charge was taken on the five-rated loan that was added. However, the new five-rated loan was foreclosed on in Q1 in 2025 and has already sold above our debt basis. This reduces the watch list to 2.3% of our portfolio. Jerry will cover this in more detail, and Mike will provide more detailed update on the remaining watch list assets as well as our REO portfolio. Lastly, for me, we remain confident in FBRT's portfolio. In 2025, we are focusing on really two things, actively managing our legacy loan portfolio and pursuing portfolio originations. We see significant opportunities in new originations. as demonstrated by the $3.6 billion we have originated across our real estate platform in 2024. And with that, I'll hand it over to Jerry.