株探米国株
英語
エドガーで原本を確認する
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2023
 OR
☐
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-40923
FRANKLIN BSP REALTY TRUST, INC.
(Exact name of registrant as specified in its charter) 
Maryland 46-1406086
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
1345 Avenue of the Americas, Suite 32A
New York, New York
 10105
(Address of Principal Executive Office) (Zip Code)
(212) 588-6770
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.01 per share
 FBRT New York Stock Exchange
7.50% Series E Cumulative Redeemable Preferred Stock, par value $0.01 per share FBRT PRE New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large-accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company ☐
Emerging growth filer ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The number of shares of the registrant's common stock, $0.01 par value, outstanding as of October 25, 2023 was 82,073,180.

FRANKLIN BSP REALTY TRUST, INC.

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PART I. Item 1. Consolidated Financial Statements and Notes (unaudited)
FRANKLIN BSP REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share and per share data)


September 30, 2023 December 31, 2022
ASSETS
Cash and cash equivalents $ 411,437  $ 179,314 
Restricted cash 6,655  11,173 
Commercial mortgage loans, held for investment, net of allowance for credit losses of $37,512 and $40,848 as of September 30, 2023 and December 31, 2022, respectively
 4,913,644  5,228,928 
Commercial mortgage loans, held for sale, measured at fair value 17,000  15,559 
Real estate securities, trading, measured at fair value (includes pledged assets of $227,610 as of December 31, 2022)
 —  235,728 
Real estate securities, available for sale, measured at fair value, amortized cost of $194,171 and $220,635 as of September 30, 2023 and December 31, 2022, respectively (includes pledged assets of $153,648 and $198,429 as of September 30, 2023 and December 31, 2022, respectively)
 193,072  221,025 
Derivative instruments, measured at fair value 35  415 
Receivable for loan repayment (1)
 25,937  42,557 
Accrued interest receivable 38,297  34,007 
Prepaid expenses and other assets 17,501  15,795 
Intangible lease asset, net of amortization 43,604  54,831 
Real estate owned, net of depreciation 104,616  127,772 
Real estate owned, held for sale 103,657  36,497 
Total assets $ 5,875,455  $ 6,203,601 
LIABILITIES AND STOCKHOLDERS' EQUITY
Collateralized loan obligations $ 3,477,444  $ 3,121,983 
Repurchase agreements and revolving credit facilities - commercial mortgage loans 249,345  680,859 
Repurchase agreements - real estate securities 240,010  440,008 
Mortgage note payable 23,998  23,998 
Other financings 23,669  76,301 
Unsecured debt 81,270  98,695 
Derivative instruments, measured at fair value 258  64 
Interest payable 11,504  12,715 
Distributions payable 36,224  36,317 
Accounts payable and accrued expenses 16,884  17,668 
Due to affiliates 16,836  15,429 
Intangible lease liability, held for sale 12,297  — 
Intangible lease liability, net of amortization —  6,428 
Total liabilities $ 4,189,739  $ 4,530,465 
Commitments and Contingencies
Redeemable convertible preferred stock:
Redeemable convertible preferred stock Series H, $0.01 par value, 20,000 authorized and 17,950 issued and outstanding as of September 30, 2023 and December 31, 2022
 $ 89,748  $ 89,748 
Redeemable convertible preferred stock Series I, $0.01 par value, none authorized and outstanding as of September 30, 2023, 1,000 authorized and 1,000 issued and outstanding as of December 31, 2022
 —  5,000 
Total redeemable convertible preferred stock $ 89,748  $ 94,748 
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 September 30, 2023 and December 31, 2022
 $ 258,742  $ 258,742 
Common stock, $0.01 par value, 900,000,000 shares authorized, 83,019,881 and 82,992,784 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
 822  826 
Additional paid-in capital 1,601,282  1,602,247 
Accumulated other comprehensive income (loss) (1,099) 390 
Accumulated deficit (292,833) (299,225)
Total stockholders' equity $ 1,566,914  $ 1,562,980 
Non-controlling interest 29,054  15,408 
Total equity $ 1,595,968  $ 1,578,388 
Total liabilities, redeemable convertible preferred stock and equity $ 5,875,455  $ 6,203,601 
_________________________________________________________
(1) Includes $25.9 million and $42.5 million of cash held by servicer related to the CLOs as of September 30, 2023 and December 31, 2022, respectively. The Company no longer holds a residential mortgage backed securities principal paydown receivable as of September 30, 2023. The Company held a residential mortgage backed securities principal paydown receivable of $0.1 million as of December 31, 2022.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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FRANKLIN BSP REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2023 2022 2023 2022
Income
Interest income $ 137,042  $ 94,131  $ 420,470  $ 239,602 
Less: Interest expense 77,973  46,157  224,347  96,262 
Net interest income 59,069  47,974  196,123  143,340 
Revenue from real estate owned 3,317  2,312  13,067  6,936 
Total income $ 62,386  $ 50,286  $ 209,190  $ 150,276 
Expenses
Asset management and subordinated performance fee $ 7,908  $ 6,430  $ 24,893  $ 19,776 
Acquisition expenses 316  362  977  996 
Administrative services expenses 3,566  3,001  10,993  9,402 
Professional fees 4,153  4,074  11,761  18,287 
Share-based compensation 1,255  669  3,505  1,851 
Depreciation and amortization 1,513  1,295  5,514  3,886 
Other expenses 2,856  1,424  9,323  4,849 
Total expenses $ 21,567  $ 17,255  $ 66,966  $ 59,047 
Other income/(loss)
(Provision)/benefit for credit losses $ (2,379) $ 599  $ (28,363) $ (30,976)
Realized gain/(loss) on extinguishment of debt (2,836) —  2,201  (5,167)
Realized gain/(loss) on sale of available for sale trading securities (486) —  110  — 
Realized gain/(loss) on sale of commercial mortgage loans, held for sale —  9  —  48 
Realized gain/(loss) on sale of commercial mortgage loans, held for sale, measured at fair value 933  4,782  3,027  4,838 
Unrealized gain/(loss) on commercial mortgage loans, held for sale, measured at fair value —  58  44  (3,678)
Gain/(loss) on other real estate investments (4,112) —  (7,142) (29)
Trading gain/(loss) (2,627) (2,744) (605) (113,717)
Unrealized gain/(loss) on derivatives (183) 1,566  (110) (12,824)
Realized gain/(loss) on derivatives 67  (1,624) 684  57,599 
Total other income/(loss) $ (11,623) $ 2,646  $ (30,154) $ (103,906)
Income/(loss) before taxes 29,196  35,677  112,070  (12,677)
(Provision)/benefit for income tax 1,799  (419) 2,408  (281)
Net income/(loss) $ 30,995  $ 35,258  $ 114,478  $ (12,958)
Net (income)/loss attributable to non-controlling interest 772  —  722  — 
Net income/(loss) attributable to Franklin BSP Realty Trust, Inc. $ 31,767  $ 35,258  $ 115,200  $ (12,958)
Less: Preferred stock dividends 6,748  6,899  20,245  34,865 
Net income/(loss) applicable to common stock $ 25,019  $ 28,359  $ 94,955  $ (47,823)
Basic earnings per share $ 0.30  $ 0.34  $ 1.14  $ (0.70)
Diluted earnings per share $ 0.30  $ 0.34  $ 1.14  $ (0.70)
Basic weighted average shares outstanding 82,210,624  83,665,250  82,410,725  67,965,397 
Diluted weighted average shares outstanding 82,210,624  83,665,250  82,410,725  67,965,397 
        
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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FRANKLIN BSP REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2023 2022 2023 2022
Net income/(loss) $ 30,995  $ 35,258  $ 114,478  $ (12,958)
Amounts related to available for sale real estate securities:
Change in net unrealized gain/(loss) $ 448  $ (373) $ (564) $ (373)
Reclassification adjustment for amounts included in net income/(loss) (248) —  (925) — 
$ 200  $ (373) $ (1,489) $ (373)
Amounts related to cash flow hedges:
Change in net unrealized gain/(loss) $ —  $ —  $ —  $ (220)
Reclassification adjustment for amounts included in net income/(loss) —  —  —  282 
$ —  $ —  $ —  $ 62 
Comprehensive (income)/loss attributed to non-controlling interest $ 772  $ —  $ 722  $ — 
Comprehensive income/(loss) attributable to Franklin BSP Realty Trust, Inc. $ 31,967  $ 34,885  $ 113,711  $ (13,269)

The accompanying notes are an integral part of these unaudited consolidated financial statements.
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FRANKLIN BSP REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except share data)
(Unaudited)





Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income/(Loss) Accumulated Deficit Preferred E Total Stockholders' Equity Non-Controlling Interest Total Equity
Number of Shares Par Value
Balance, December 31, 2022 82,992,784  $ 826  $ 1,602,247  $ 390  $ (299,225) $ 258,742  $ 1,562,980  $ 15,408  $ 1,578,388 
Common stock repurchases (313,411) (3) (3,664) —  —  —  (3,667) —  (3,667)
Share-based compensation 442,419  —  1,022  —  —  —  1,022  —  1,022 
Shares canceled for tax withholding on vested equity rewards (57,021) —  (812) —  —  —  (812) —  (812)
Series I Preferred Stock converted into common stock 299,200  3  4,997  —  —  —  5,000  —  5,000 
Net income/(loss) attributable to Franklin BSP Realty Trust, Inc. —  —  —  —  43,830  —  43,830  —  43,830 
Net income/(loss) attributable to non-controlling interest —  —  —  —  —  —  —  9  9 
Distributions declared —  —  —  —  (36,367) —  (36,367) —  (36,367)
Other comprehensive income/(loss) —  —  —  (2,325) —  —  (2,325) —  (2,325)
Contributions/(distributions) in non-controlling interest, net —  —  —  —  —  —  —  5,851  5,851 
Balance, March 31, 2023 83,363,971  $ 826  $ 1,603,790  $ (1,935) $ (291,762) $ 258,742  $ 1,569,661  $ 21,268  $ 1,590,929 
Common stock repurchases (444,726) (5) (5,490) —  —  —  (5,495) —  (5,495)
Common stock issued through distribution reinvestment plan 61,866  1  768  —  —  —  769  —  769 
Share-based compensation 38,770  —  1,227  —  —  —  1,227  —  1,227 
Offering costs —  —  (259) —  —  —  (259) —  (259)
Net income/(loss) attributable to Franklin BSP Realty Trust, Inc. —  —  —  —  39,603  —  39,603  —  39,603 
Net income/(loss) attributable to non-controlling interest —  —  —  —  —  —  —  41  41 
Distributions declared —  —  —  —  (36,221) —  (36,221) —  (36,221)
Other comprehensive income/(loss) —  —  —  636  —  —  636  —  636 
Contributions/(distributions) in non-controlling interest, net —  —  —  —  —  —  —  8,521  8,521 
Balance, June 30, 2023 83,019,881  $ 822  $ 1,600,036  $ (1,299) $ (288,380) $ 258,742  $ 1,569,921  $ 29,830  $ 1,599,751 
Share-based compensation —  —  1,256  —  —  —  1,256  —  1,256 
Offering costs —  —  (10) —  —  —  (10) —  (10)
Net income/(loss) attributable to Franklin BSP Realty Trust, Inc. —  —  —  —  31,767  —  31,767  —  31,767 
Net income/(loss) attributable to non-controlling interest —  —  —  —  —  —  —  (772) (772)
Distributions declared —  —  —  —  (36,220) —  (36,220) —  (36,220)
Other comprehensive income/(loss) —  —  —  200  —  —  200  —  200 
Contributions/(distributions) in non-controlling interest, net —  —  —  —  —  —  —  (4) (4)
Balance, September 30, 2023 83,019,881  $ 822  $ 1,601,282  $ (1,099) $ (292,833) $ 258,742  $ 1,566,914  $ 29,054  $ 1,595,968 

The accompanying notes are an integral part of these unaudited consolidated financial statements.



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FRANKLIN BSP REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except share data)
(Unaudited)




Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income/(Loss) Accumulated Deficit Preferred E Preferred F Total Stockholders' Equity Non-Controlling Interest Total Equity
Number of Shares Par Value
Balance, December 31, 2021 43,965,928  $ 441  $ 903,264  $ (62) $ (167,179) $ 258,742  $ 710,431  $ 1,705,637  $ 5,764  $ 1,711,401 
Common stock issued through distribution reinvestment plan 5,982  —  91  —  —  —  —  91  —  91 
Share-based compensation 499,217  —  500  —  —  —  —  500  —  500 
Net income/(loss) —  —  —  —  (22,507) —  —  (22,507) —  (22,507)
Distributions declared —  —  —  —  (36,743) —  —  (36,743) —  (36,743)
Other comprehensive income/(loss) —  —  —  62  —  —  —  62  —  62 
Balance, March 31, 2022 44,471,127  $ 441  $ 903,855  $ —  $ (226,429) $ 258,742  $ 710,431  $ 1,647,040  $ 5,764  $ 1,652,804 
Common stock repurchases 743  —  —  —  —  —  —  —  —  — 
Share-based compensation 21,459  —  721  —  —  —  —  721  —  721 
Series F Convertible Preferred Stock converted into common stock 39,733,299  397  710,034  —  —  —  (710,431) —  —  — 
Net income/(loss) —  —  —  —  (25,709) —  —  (25,709) —  (25,709)
Distributions declared —  —  —  —  (36,848) —  (36,848) —  (36,848)
Balance, June 30, 2022 84,226,628  $ 838  $ 1,614,610  $ —  $ (288,986) $ 258,742  $ —  $ 1,585,204  $ 5,764  $ 1,590,968 
Common stock repurchases (931,053) (9) (11,026) —  —  —  —  (11,035) —  (11,035)
Common stock issued through distribution reinvestment plan 66,776  1  906  —  —  —  —  907  —  907 
Share-based compensation —  —  630  —  —  —  —  630  —  630 
Net income/(loss) —  —  —  —  35,258  —  —  35,258  —  35,258 
Distributions declared —  —  —  —  (36,549) —  —  (36,549) —  (36,549)
Other comprehensive income/(loss) —  —  —  (373) —  —  —  (373) —  (373)
Balance, September 30, 2022 83,362,351  $ 830  $ 1,605,120  $ (373) $ (290,277) $ 258,742  $ —  $ 1,574,042  $ 5,764  $ 1,579,806 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
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FRANKLIN BSP REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended September 30,
2023 2022
Cash flows from operating activities:
Net income/(loss) $ 114,478  $ (12,958)
Adjustments to reconcile net income to net cash (used in)/provided by operating activities:
Premium amortization and (discount accretion), net $ (10,102) $ (8,780)
Accretion of deferred commitment fees (6,836) (6,795)
Amortization of deferred financing costs 5,968  4,555 
Share-based compensation 3,505  1,850 
Realized (gain)/loss on extinguishment of debt (2,201) 5,167 
Realized (gain)/loss on swap terminations —  (55,301)
Realized (gain)/loss on sale of available for sale trading securities (110) — 
Realized (gain)/loss on sale of commercial mortgage loans, held for sale, measured at fair value (3,027) — 
Unrealized (gain)/loss from commercial mortgage loans, held for sale, measured at fair value (44) 3,678 
Unrealized (gain)/loss from derivative instruments 110  12,824 
(Gain)/loss from other real estate investments 7,142  29 
Trading (gain)/loss 605  113,717 
Depreciation and amortization 6,454  3,886 
Provision/(benefit) for credit losses 28,363  30,976 
Origination of commercial mortgage loans, held for sale (93,250) (343,096)
Proceeds from sale or repayment of commercial mortgage loans, held for sale 94,880  332,794 
Changes in assets and liabilities:
Accrued interest receivable 2,546  7,336 
Prepaid expenses and other assets (1,608) (4,047)
Accounts payable and accrued expenses (5,849) 40,114 
Due to affiliates 1,407  (1,094)
Interest payable (969) 5,780 
Net cash (used in)/provided by operating activities $ 141,462  $ 130,635 
Cash flows from investing activities:
Origination and purchase of commercial mortgage loans, held for investment $ (668,017) $ (1,964,212)
Principal repayments received on commercial mortgage loans, held for investment 921,517  965,681 
Proceeds from sale of other real estate investments —  2,045 
Proceeds from sale of real estate owned, held for sale 39,755  — 
Purchase of real estate owned and capital expenditures (912) — 
Purchase of real estate securities, available for sale (160,267) (74,998)
Proceeds from sale of commercial mortgage loans, held for sale —  9,296 
Proceeds from sale of real estate securities, available for sale, measured at fair value 187,042  3,731,716 
Proceeds from sale of real estate securities, trading, at fair value 217,524  — 
Principal collateral on mortgage investments 17,703  533,852 
Proceeds from sale/(purchase) of derivative instruments 464  (1,333)
Net cash (used in)/provided by investing activities $ 554,809  $ 3,202,047 
Cash flows from financing activities:
Payments for common stock repurchases $ (9,162) $ (11,035)
Shares cancelled for tax withholding on vested equity rewards (812) — 
Borrowings on collateralized loan obligations 573,794  1,630,639 
Repayments of collateralized loan obligations (216,185) (609,530)
Borrowings on repurchase agreements and revolving credit facilities - commercial mortgage loans 532,751  1,791,951 
Repayments of repurchase agreements and revolving credit facilities - commercial mortgage loans (964,265) (2,112,143)
Borrowings on repurchase agreements - real estate securities 829,682  17,711,125 
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FRANKLIN BSP REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Repayments of repurchase agreements - real estate securities (1,029,679) (21,552,296)
Borrowings on other financings 46,842  15,264 
Repayments on other financings (99,474) — 
Repayments of unsecured debt (13,367) (50,000)
Payments of deferred financing costs (10,388) (15,163)
Payments of offering costs (269) — 
Cash collateral received on interest rate swaps —  56,767 
Proceeds from interest rate swap settlements —  8,479 
Distributions paid (108,134) (102,941)
Net cash (used in)/provided by financing activities: $ (468,666) $ (3,238,883)
Net change in cash, cash equivalents and restricted cash 227,605  93,799 
Cash, cash equivalents and restricted cash, beginning of period 190,487  168,199 
Cash, cash equivalents and restricted cash, end of period $ 418,092  $ 261,998 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents, beginning of period 179,314  154,929 
Restricted cash, beginning of period 11,173  13,270 
Cash, cash equivalents and restricted cash, beginning of period $ 190,487  $ 168,199 
Cash and cash equivalents, end of period 411,437  216,985 
Restricted cash, end of period 6,655  45,013 
Cash, cash equivalents and restricted cash, end of period $ 418,092  $ 261,998 
Supplemental disclosures of cash flow information:
Cash payments for income taxes $ 323  $ 1,199 
Cash payments for interest 219,590  85,927 
Supplemental disclosures of non - cash flow information:
Distribution payable $ 36,224  $ 36,546 
Common stock issued through distribution reinvestment plan 769  998 
Loans transferred to real estate owned 80,039  9,296 
Reclassification of assets held for investment to held for sale 114,512  — 
Reclassification of liabilities held for investment to held for sale 13,664  — 
Conversion of Preferred Stock to Common Stock 5,000  710,431 
Exchange of Series D Preferred Stock for Series H Preferred Stock —  89,748 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)


Note 1 - Organization and Business Operations
Franklin BSP Realty Trust, Inc., (the "Company") is a real estate finance company that primarily originates, acquires and manages a diversified portfolio of commercial real estate debt investments secured by properties located within and outside the United States. The Company is a Maryland corporation and has made tax elections to be treated as a real estate investment trust (a "REIT") for U.S. federal income tax purposes since 2013.
The Company believes that it has qualified as a REIT and intends to continue to meet the requirements for qualification and taxation as a REIT. Substantially all of the Company's business is conducted through Benefit Street Partners Realty Operating Partnership, L.P. (the “OP”), a Delaware limited partnership. The Company is the sole general partner and directly or indirectly holds all of the units of limited partner interests in the OP. In addition, the Company, through one or more subsidiaries which are treated as a taxable REIT subsidiary (a “TRS”), is indirectly subject to U.S. federal, state and local income taxes.
The Company has no employees. Benefit Street Partners L.L.C. serves as the Company's advisor (the "Advisor") pursuant
to an advisory agreement, as amended on August 18, 2021 (the "Advisory Agreement"). The Advisor, an investment adviser registered with the SEC, is a credit-focused alternative asset management firm.
Established in 2008, the Advisor's credit platform manages funds for institutions and high-net-worth investors across various credit funds and complementary strategies including high yield, levered loans, private/opportunistic debt, liquid credit, structured credit and commercial real estate debt. These strategies complement each other as they all leverage the sourcing, analytical, compliance, and operational capabilities that encompass the platform. The Advisor manages the Company's affairs on a day-to-day basis. The Advisor receives compensation fees and reimbursements for services related to the investment and management of the Company's assets and the operations of the Company. The advisor is a wholly-owned subsidiary of Franklin Resources, Inc., which together with its various subsidiaries operates as "Franklin Templeton”.
The Company invests in commercial real estate debt investments, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans. The Company also originates conduit loans which the Company intends to sell through its TRS into commercial mortgage-backed securities ("CMBS") securitization transactions. Historically this business has focused primarily on CMBS, commercial real estate collateralized loan obligation bonds ("CRE CLO bonds"), collateralized debt obligations ("CDOs") and other securities. As a result of the October 2021 acquisition of Capstead Mortgage Corporation ("Capstead"), the Company acquired a portfolio of residential mortgage backed securities (“RMBS”) in the form of residential adjustable-rate mortgage pass-through securities ("ARM Agency Securities" or "ARMs") issued and guaranteed by government-sponsored enterprises or by an agency of the federal government. As of September 30, 2023, the Company has fully disposed of all of its ARM Agency Securities and is continuing to reinvest the proceeds from the sale of these securities in its other businesses. The Company also owns real estate that was either acquired by the Company through foreclosure or deed in lieu of foreclosure, or that was purchased for investment, primarily subject to triple net leases.
Note 2 - Summary of Significant Accounting Policies
Basis of Accounting
The Company's unaudited consolidated financial statements and related footnotes have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America ("GAAP") for interim financial statements and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X, as appropriate.
These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of, and for the year ended December 31, 2022, which are included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 16, 2023, as certain disclosures that would substantially duplicate those contained in the audited consolidated financial statements have not been included in this report.
Use of Estimates
GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the reported periods. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially. In the opinion of management, the interim data includes all adjustments, of a normal and recurring nature, necessary for a fair statement of the results for the periods presented. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the entire year or any subsequent interim periods.
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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members, as well as whether the entity is a variable interest entity ("VIE") for which the Company is the primary beneficiary.
The Company has determined the OP is a VIE of which the Company is the primary beneficiary. Substantially all of the Company's assets and liabilities are held by the OP.
The Company consolidates all entities that it controls through either majority ownership or voting rights. In addition, the Company consolidates all VIEs of which the Company is considered the primary beneficiary. VIEs are entities in which equity investors (i) do not have the characteristics of a controlling financial interest and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The entity that consolidates a VIE is its primary beneficiary and is generally the entity with (i) the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE. Non-controlling interest represents the equity of consolidated joint ventures that are not owned by the Company.
The accompanying consolidated financial statements include the accounts of collateralized loan obligations ("CLOs") issued and securitized by wholly owned subsidiaries of the Company. The Company has determined the CLOs are VIEs of which the Company's subsidiary is the primary beneficiary. The assets and liabilities of the CLOs are consolidated in the accompanying consolidated balance sheets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation.
Reclassifications
Certain prior year balances have been reclassified in order to conform to the current period presentation. Our share-based compensation expense of $0.7 million and $1.9 million for the three and nine months ended September 30, 2022, respectively, which was previously included as a component of Professional fees was reclassified to its own line item Share-based compensation on the consolidated statements of operations. For the nine months ended September 30, 2022, $5.2 million related to the remaining unamortized deferred financing costs on the redemption of BSPRT 2018-FL4 during the second quarter of 2022 was reclassified from Interest Expense to Realized gain/(loss) on extinguishment of debt on the consolidated statements of operations and the consolidated statement of cash flows, and ($4.0) thousand of Unrealized gain/(loss) on other real estate investments, measured at fair value and $33 thousand of Realized gain/(loss) on other real estate investments, measured at fair value were combined to be presented as a net result in Gain/(loss)on other real estate investments on the consolidated statements of operations.
Cash and Cash Equivalents
Cash consists of amounts deposited with high quality financial institutions. These deposits are guaranteed by the Federal Deposit Insurance Company up to an insurance limit. Cash and cash equivalent balances may, at a limited number of banks and financial institutions, exceed insurable amounts. The Company believes it mitigates risk by investing in or through major financial institutions and primarily in funds that are currently U.S. federal government insured up to applicable account limits. Recoverability of investments is dependent upon the performance of the issuers. Cash equivalents include short-term, liquid investments in money market funds with original maturities of 90 days or less when purchased.
Recently Issued Accounting Pronouncements
In March 2022, the FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, or ASU 2022-02. ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings ("TDR") and requires disclosure of current-period gross write-offs by year of loan origination. Additionally, ASU 2022-02 updates the accounting for credit losses under ASC 326 and adds enhanced disclosures with respect to loan refinancing and restructuring in the form of principal forgiveness, interest rate concessions, other-than-insignificant payment delays, or term extensions when the borrower is experiencing financial difficulties. On January 1, 2023, the Company adopted ASU 2022-02 on a prospective basis and the adoption had no significant impact to the Company's consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

transition from the London interbank offered rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The guidance is effective upon issuance and generally can be elected over time through December 31, 2024, as extended under ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. During the three months ended September 30, 2023, the Company adopted ASU 2020-04. The adoption of ASU 2020-04 did not have a material impact on the Company's consolidated financial statements.
Note 3 - Commercial Mortgage Loans
Commercial Mortgage Loans, Held for Investment
The following table is a summary of the Company's commercial mortgage loans, held for investment, carrying values by class (dollars in thousands):
September 30, 2023 December 31, 2022
Senior loans $ 4,933,031  $ 5,251,464 
Mezzanine loans 18,125  18,312 
Total gross carrying value of loans 4,951,156  5,269,776 
General allowance for credit losses 37,512  26,624 
Specific allowance for credit losses —  14,224 
Less: Allowance for credit losses 37,512  40,848 
Total commercial mortgage loans, held for investment, net $ 4,913,644  $ 5,228,928 
For the nine months ended September 30, 2023 and year ended December 31, 2022, the activity in the Company's commercial mortgage loans held for investment carrying values, was as follows (dollars in thousands):
Nine Months Ended September 30, 2023 Year Ended
December 31, 2022
Amortized cost, beginning of period $ 5,269,776  $ 4,226,888 
Acquisitions and originations 671,927  2,247,613 
Principal repayments (903,273) (1,109,769)
Discount accretion/premium amortization 9,901  12,614 
Loans transferred from/(to) commercial real estate loans, held for sale —  (9,296)
Net fees capitalized into carrying value of loans (3,910) (13,775)
Transfer to real estate owned (80,039) (80,460)
Principal charge-off (11,499) — 
Cost recovery (1,727) (4,039)
Amortized cost, end of period $ 4,951,156  $ 5,269,776 
Allowance for credit losses, beginning of period $ (40,848) $ (15,827)
General (provision)/benefit for credit losses (10,888) (10,797)
Specific (provision)/benefit for credit losses (12,334) (25,281)
Write offs from specific allowance for credit losses 26,558  11,057 
Allowance for credit losses, end of period $ (37,512) $ (40,848)
Total commercial mortgage loans, held for investment, net $ 4,913,644  $ 5,228,928 

As of September 30, 2023 and December 31, 2022, the Company's total commercial mortgage loan, held for investment portfolio, was comprised of 145 and 161 loans, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

Loan Portfolio by Collateral Type and Geographic Region
The following tables represent the composition by loan collateral type and region of the Company's commercial mortgage loans, held for investment portfolio (dollars in thousands):
September 30, 2023 December 31, 2022
Loan Collateral Type Par Value Percentage Par Value Percentage
Multifamily $ 3,864,857  77.8  % $ 4,030,975  76.1  %
Hospitality 573,075  11.6  % 510,566  9.7  %
Office 288,057  5.8  % 405,705  7.7  %
Retail 34,000  0.7  % 120,017  2.3  %
Industrial 78,050  1.6  % 93,035  1.8  %
Other 123,021  2.5  % 128,676  2.4  %
Total $ 4,961,060  100.0  % $ 5,288,974  100.0  %
September 30, 2023 December 31, 2022
Loan Region Par Value Percentage Par Value Percentage
Southeast $ 2,129,301  43.0  % $ 2,229,756  42.2  %
Southwest 1,877,084  37.8  % 1,763,492  33.3  %
Mideast 447,339  9.0  % 706,192  13.4  %
Far West 96,226  1.9  % 234,891  4.4  %
Great Lakes 163,342  3.3  % 162,162  3.1  %
Various 247,768  5.0  % 192,481  3.6  %
Total $ 4,961,060  100.0  % $ 5,288,974  100.0  %
Allowance for Credit Losses
The allowance for credit losses required under ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments, is deducted from the respective loan's amortized cost basis on the Company's consolidated balance sheet.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

The following schedules present the quarterly changes in the Company's allowance for credit losses for the nine months ended September 30, 2023 (dollars in thousands):
General Allowance for Credit Losses
Specific Allowance for Credit Losses Funded Unfunded Total Total Allowance for Credit Losses
December 31, 2022 $ 14,224  $ 26,624  $ 280  $ 26,904  $ 41,128 
Changes:
Provision/(Benefit) $ 835  (1) $ 2,127  $ 1,398  $ 3,525  $ 4,360 
Write offs (15,059) (1) —  —  —  (15,059)
March 31, 2023 $ —  $ 28,751  $ 1,678  $ 30,429  $ 30,429 
Changes:
Provision/(Benefit) $ 11,893  (2) $ 10,181  $ (450) $ 9,731  $ 21,624 
Write offs (11,893) (2) —  —  —  (11,893)
June 30, 2023 $ —  $ 38,932  $ 1,228  $ 40,160  $ 40,160 
Changes:
Provision/(Benefit) $ (394) (2) $ (1,420) $ 4,193  2,773  $ 2,379 
Write offs $ 394  (2) —  —  —  394 
September 30, 2023 $ —  $ 37,512  $ 5,421  $ 42,933  $ 42,933 
________________________________________
(1) During the year ended December 31, 2022, the Company identified a commercial mortgage loan, held for investment secured by 24 retail properties (the "Walgreens Portfolio"), that was assigned a risk rating of “5” due to certain conditions that negatively impacted the underlying collateral property’s cash flows. The loan was evaluated in accordance with ASC 310 - Receivables and was determined to be a TDR. During the first quarter of 2023, the Company recorded an $0.8 million specific allowance for credit losses on the loan and wrote off the remaining $15.1 million specific allowance for credit losses for the Walgreens Portfolio, net of $0.7 million recoveries recorded. All remaining properties collateralized by the senior mortgage notes were assumed by the Company through foreclosures and deeds-in-lieu of foreclosure and correspondingly were transferred to Real estate owned, net of depreciation in the consolidated balance sheets. During the third quarter of 2023, the Walgreens Portfolio was actively marketed for sale and therefore, the Company classified the portfolio as Real estate owned, held for sale. See Note 5 - Real Estate Owned.
(2) In February 2020, the Company originated a first mortgage loan secured by an office property in Portland, OR. In February 2023, the fully committed $37.3 million senior loan was restructured as a result of financial difficulty to a $25.0 million committed senior loan. In connection with the restructuring, the Company committed a $10.1 million mezzanine note. In accordance with the adoption of ASU 2022-02, the restructuring was classified as a continuation of an existing loan on the senior loan and new loan for the mezzanine note. During the second quarter of 2023, the Company assigned the senior and mezzanine notes a risk rating of "5" and placed the loan on cost recovery status. The Company elected to apply a practical expedient for collateral dependent assets in which the allowance for credit losses is calculated as the difference between the estimated fair value of the underlying collateral, less estimated cost to sell, and the amortized cost basis of the loan. As a result, the Company recorded a specific allowance for credit losses of $11.9 million on this loan in the second quarter of 2023 and subsequently wrote off this specific allowance for credit losses in the same quarter. As of September 30, 2023, the Company recorded recoveries of $0.4 million and $1.1 million for the three and nine months ended September 30, 2023. During the third quarter of 2023, the Company foreclosed upon the mortgage notes through deed-in-lieu of foreclosure. The carrying value of the loan was $20.3 million. In connection therewith, the underlying collateral assets were reclassified to Real estate owned, net of depreciation in the consolidated balance sheets as a result of deed-in-lieu. The transfer was evaluated to be an asset acquisition in accordance with ASC 805. See Note 5 - Real Estate Owned.
The Company recorded an increase in its general provision for credit losses during the three and nine months ended September 30, 2023 of $2.8 million and $16.0 million, respectively. The Company recorded an increase in its general provision for credit losses during the three and nine months ended September 30, 2022 of $0.2 million and $3.4 million, respectively. The primary driver for the increased reserve balance is the change in economic outlook since the end of the prior quarter and year offset slightly by the decrease in loan portfolio.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

Past Due Status
The following table presents a summary of the loans amortized cost basis as of September 30, 2023 (dollars in thousands):
Current Less than 90 days past due
90 or more days past due
 Total
As of September 30, 2023 $ 4,865,233  $ 85,923  $ —  $ 4,951,156 

Non-performing Status
The following table presents the amortized cost basis of our non-performing loans as of September 30, 2023 and December 31, 2022 (dollars in thousands):
September 30, 2023 December 31, 2022
Non-performing loan amortized cost at beginning of year, January 1 $ 117,379  $ 57,075 
Addition of non-performing loan amortized cost 76,412  60,304 
Less: Removal of non-performing loan amortized cost 137,763  — 
Non-performing loan amortized cost end of period (1)
 $ 56,028  $ 117,379 
_________________________________________________________
(1) As of September 30, 2023, and December 31, 2022, the Company had three and two loans, respectively, designated as non-performing. No specific allowances for credit losses were determined for the 3 loans on non-performing status as of September 30, 2023.
As of September 30, 2023, the three designated non-performing loans were all collateralized by multifamily properties. Subsequent to September 30, 2023, the Company foreclosed upon one of the multifamily properties located in Lubbock, TX. The loan had an amortized cost basis of $12.0 million as of September 30, 2023.
Loan Credit Characteristics, Quality and Vintage
As part of the Company's process for monitoring the credit quality of its commercial mortgage loans, excluding those held for sale, measured at fair value, it performs a quarterly loan portfolio assessment and assigns risk ratings to each of its loans. The loans are scored on a scale of 1 to 5 as follows:
Investment Rating
Summary Description
1
Very Low Risk - Investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since time of investment are favorable.
2
Low Risk - Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable.
3
Average Risk - Performing investments requiring closer monitoring. Trends and risk factors show some deterioration.
4
High Risk/Delinquent/Defaulted/Potential For Loss - Underperforming investment with the potential of some interest loss but still expecting a positive return on investment. Trends and risk factors are negative.
5
Impaired/Defaulted/Loss Likely - Underperforming investment with expected loss of interest and some principal.
All commercial mortgage loans, excluding loans classified as commercial mortgage loans, held for sale, measured at fair value within the consolidated balance sheets, are assigned an initial risk rating of 2. As of September 30, 2023 and December 31, 2022, the weighted average risk rating of loans was 2.2 and 2.2, respectively.
The following tables present the par value and amortized cost of our commercial mortgage loans, held for investment as of September 30, 2023 and December 31, 2022, by the Company’s internal risk rating and year of origination.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

September 30, 2023
Amortized Cost by Year of Origination
Risk Rating Number of Loans Total Par Value 2023 2022 2021 2020 2019 Prior Total Amortized Cost % of Portfolio
1 — $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ —  —  %
2 115 4,081,231 475,495  1,460,281  1,917,162  109,700  73,896  35,876  4,072,410  82.3  %
3 27 797,143 1,140  185,400  451,001  82,796  19,176  56,620  796,133  16.0  %
4 3 82,686 —  —  56,825  —  25,788  —  82,613  1.7  %
5 — —  —  —  —  —  —  —  —  —  %
Total 145 $ 4,961,060  $ 476,635  $ 1,645,681  $ 2,424,988  $ 192,496  $ 118,860  $ 92,496  $ 4,951,156  100.0  %
Allowance for credit losses (37,512)
Total carrying value, net $ 4,913,644 
December 31, 2022
Amortized Cost by Year of Origination
Risk Rating Number of Loans Total Par Value 2022 2021 2020 2019 2018 Prior Total Amortized Cost % of Portfolio
1 — $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ —  —  %
2 141 4,783,568 1,778,691  2,483,120  315,269  115,673  75,467  —  4,768,220 90.6  %
3 15 281,071 —  167,707  36,655  54,631  —  21,792  280,785 5.3  %
4 4 160,695 32,305  —  36,356  —  34,731  57,075  160,467 3.0  %
5 1 63,640 60,304  —  —  —  —  —  60,304 1.1  %
Total 161 $ 5,288,974  $ 1,871,300  $ 2,650,827  $ 388,280  $ 170,304  $ 110,198  $ 78,867  $ 5,269,776  100.0  %
Allowance for credit losses (40,848)
Total carrying value, net $ 5,228,928 
Commercial Mortgage Loans, Held for Sale, Measured at Fair Value
As of September 30, 2023 and December 31, 2022, the contractual principal balance outstanding of commercial mortgage loans, held for sale, measured at fair value was $17.0 million and $15.6 million, respectively, which were comprised of one and two loans, respectively. As of September 30, 2023 and December 31, 2022, none of the Company's commercial mortgage loans, held for sale, measured at fair value were in default or greater than ninety days past due.
The following tables represent the composition by loan collateral type and region of the Company's commercial mortgage loans, held for sale, measured at fair value (dollars in thousands):
September 30, 2023 December 31, 2022
Loan Collateral Type Par Value Percentage Par Value Percentage
Hospitality $ 17,000  100.0  % $ —  —  %
Retail —  —  % 12,000  76.8  %
Office —  —  % 3,625  23.2  %
Total $ 17,000  100.0  % $ 15,625  100.0  %
September 30, 2023 December 31, 2022
Loan Region Par Value Percentage Par Value Percentage
Southeast $ 17,000  100.0  % $ 15,625  100.0  %
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

Note 4 - Real Estate Securities
Real Estate Securities Classified As Trading
As of September 30, 2023, the Company did not hold any real estate securities classified as trading.
The following is a summary of the Company's ARMs classified by collateral type and interest rate characteristics as of December 31, 2022 (dollars in thousands):
Carrying Amount
Average Yield (1)
December 31, 2022
Agency Securities:
   Fannie Mae/Freddie Mac ARMs $ 235,728  2.42  %
________________________________________________________
(1) Average yield is presented for the period then ended and is based on the cash component of interest income expressed as a percentage on average cost basis (the “cash yield”).
During the three and nine months ended September 30, 2023, the carrying amount of the Company's ARMs portfolio declined due to (i) $2.6 million and $17.6 million of principal paydowns, respectively, (ii) $122.8 million and $218.2 million of sales, respectively, and (iii) $2.6 million and $0.6 million of net trading losses, respectively, related to principal paydowns, changes in market values and sales of these securities. During the three and nine months ended September 30, 2022, the carrying amount of the Company's ARMs portfolio declined due to (i) $15.1 million and $468.9 million of principal paydowns, respectively, (ii) zero and $3.8 billion of sales, respectively, and (iii) $2.7 million and $113.7 million of net trading losses, respectively, related to principal paydowns and changes in market values of these securities. The net trading gains/losses on ARM Agency Securities were included in Trading gain/(loss) in the Company's consolidated statements of operations.
Real Estate Securities Classified As Available For Sale
The following is a summary of the Company's real estate securities, available for sale, measured at fair value, as of September 30, 2023 and December 31, 2022 (dollars in thousands):
CRE CLO Bonds
Number of Bonds Benchmark Interest Rate Weighted Average Interest Rate
Weighted Average Contractual Maturity (years)
 Par Value Fair Value
September 30, 2023 6 1 Month SOFR 8.20% 11.6 $ 194,225  $ 193,072 
December 31, 2022 7 1 Month SOFR 7.55% 15.4 $ 221,000  $ 221,025 
The Company classified its CRE CLO bonds as available for sale and reports them at fair value in the consolidated balance sheets with changes in fair value recorded in accumulated other comprehensive income/(loss).
The following table shows the amortized cost, allowance for expected credit losses, unrealized gain/(loss) and fair value of the Company's CRE CLO bonds by investment type as of September 30, 2023 and December 31, 2022 (dollars in thousands):
Amortized Cost Credit Loss Allowance Unrealized Gain Unrealized (Loss) Fair Value
September 30, 2023 $ 194,171  $ —  $ 22  $ (1,121) $ 193,072 
December 31, 2022 $ 220,635  $ —  $ 833  $ (443) $ 221,025 
As of September 30, 2023, the Company held six CRE CLO bonds with an amortized cost basis of $194.2 million and a net unrealized loss of $1.1 million, five of which were held in a gross unrealized loss position of $1.1 million. As of December 31, 2022, the Company held seven CRE CLO bonds with an amortized cost basis of $220.6 million and a net unrealized gain of $0.39 million, three of which were held in a gross unrealized loss position of $0.40 million. As of September 30, 2023 and December 31, 2022, zero positions had an unrealized loss for a period greater than twelve months. As of September 30, 2023 and December 31, 2022, the fair value of the Company's CRE CLO bonds that were in an unrealized loss position for less than
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

twelve months, and for which an allowance for credit loss has not been recorded was $164.8 million and $113.7 million, respectively.
Note 5 - Real Estate Owned
Real Estate Owned, Held for Investment
The following table summarizes the Company's real estate owned, held for investment assets as of September 30, 2023 and December 31, 2022 (dollars in thousands):
As of September 30, 2023
Acquisition Date Property Type Primary Location(s) Land Building and Improvements Furniture, Fixtures and Equipment Accumulated Depreciation Real Estate Owned, net
September 2021(1)
 Industrial Jeffersonville, GA $ 3,436  $ 84,259  $ 2,928  $ (4,603) $ 86,020 
August 2023(2)
 Office Portland, OR 16,479  52  2,065  —  18,596 
$ 19,915  $ 84,311  $ 4,993  $ (4,603) $ 104,616 
________________________
See notes below.
As of December 31, 2022
Acquisition Date Property Type Primary Location(s) Land Building and Improvements Furniture, Fixtures and Equipment Accumulated Depreciation Real Estate Owned, net
September 2021(1)
 Industrial Jeffersonville, GA $ 3,436  $ 84,259  $ 2,928  $ (2,877) $ 87,746 
Various(3)
 Retail Various 9,105  31,036  —  (115) 40,026 
$ 12,541  $ 115,295  $ 2,928  $ (2,992) $ 127,772 
________________________
(1) In the third quarter of 2021, the Company and an affiliate of the Company entered into a joint venture agreement and formed a joint venture entity, Jeffersonville Member, LLC (the “Jeffersonville JV”) to acquire a triple net lease property in Jeffersonville, GA. Refer to Note 11 - Related Party Transactions and Arrangements for details.
(2) In August 2023, the Company obtained, through deed-in-lieu of foreclosure, an office property located in Portland, OR in exchange for relief of the associated loan.
(3) Relates to ten retail properties associated with the loan secured by the Walgreens Portfolio that were foreclosed upon as of December 31, 2022. The properties are located throughout the United States of America. During the third quarter of 2023, we classified the Walgreens Portfolio consisting of 24 retail properties as Real estate owned, held for sale in the consolidated balance sheets as discussed in the paragraphs below. Refer to Note 11 - Related Party Transactions and Arrangements for details.
Depreciation expense for the three and nine months ended September 30, 2023 totaled $0.6 million and $2.4 million, respectively. Depreciation expense for the three and nine months ended September 30, 2022 totaled $0.6 million and $1.7 million, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

Real Estate Owned, Held for Sale
The following table summarizes the Company's Real estate owned, held for sale assets and liabilities as of September 30, 2023 and December 31, 2022 (dollars in thousands):
As of September 30, 2023
Property Type Primary Location(s) Assets, Net Liabilities, Net
Retail Various $ 103,657  $ 12,297 
As of December 31, 2022
Property Type Primary Location(s) Assets, Net Liabilities, Net
Multifamily New Rochelle, NY $ 23,520  $ — 
Office St. Louis, MO 12,977  — 
$ 36,497  $ — 
In June 2023, the Company sold the multifamily property located in New Rochelle, NY for $22.8 million. The transaction resulted in a loss of $1.2 million included in Gain/(loss) on other real estate investments in the Company's consolidated statements of operations for the nine months ended September 30, 2023.
During the second quarter of 2023, the Company recorded an impairment loss of $1.9 million included in Gain/(loss) on other real estate investments in the Company's consolidated statements of operations for the St. Louis, MO office property. In August 2023, the Company sold the office property for $12.0 million resulting in an additional loss of $0.3 million included in Gain/(loss) on other real estate investments in the Company's consolidated statements of operations for the three and nine months ended September 30, 2023.
In November 2022, the Company and an affiliate of the Company entered into a joint venture agreement and formed a joint venture entity, BSPRT Walgreens Portfolio, LLC (the "Walgreens JV") to assume the retail Walgreens Portfolio consisting of 24 retail properties with various locations throughout the United States. Refer to Note 11 - Related Party Transactions and Arrangements. As of December 31, 2022, through foreclosures, the Company had acquired ten of the 24 properties, and subsequently acquired the remaining 14 properties during the nine months ended September 30, 2023. During the three months ended September 30, 2023, the Company classified the real estate owned assets and liabilities as held for sale in accordance with ASC 360 - Property, Plant, and Equipment and recognized an impairment loss of $4.0 million included in Gain/(loss) on other real estate investments in the Company's consolidated statements of operations. Refer to Note 12 - Fair Value of Financial Instruments for discussion on the properties fair value measurement. In addition, the Company sold one of the retail properties in the portfolio in September 2023, resulting in a loss of $22 thousand included in Gain/(loss) on other real estate investments in the Company's consolidated statements of operations. As of September 30, 2023, the Company's real estate owned held for sale assets consisted of the remaining 23 retail properties in the Walgreens Portfolio.
Note 6 - Leases
Intangible Lease Assets and Liabilities
The following table summarizes the Company's identified intangible lease assets (primarily in-place leases) and liabilities (primarily below-market leases) recognized in the consolidated balance sheets as of September 30, 2023 and December 31, 2022 (dollars in thousands):
Identified intangible assets: September 30, 2023 December 31, 2022
Gross amount $ 49,363  $ 58,542 
Accumulated amortization (5,759) (3,711)
Total, net $ 43,604  $ 54,831 
Identified intangible liabilities:
Gross amount $ 12,813  $ 6,507 
Accumulated amortization (516) (79)
Total, net $ 12,297  $ 6,428 
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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)


Rental Income
Rental income for the three months ended September 30, 2023 and 2022 totaled $4.7 million and $2.3 million, respectively. Rental income for the nine months ended September 30, 2023 and 2022 totaled $14.0 million and $6.9 million, respectively. Rental income is included in Revenue from real estate owned in the consolidated statements of operations.
The following table summarizes the Company's schedule of future minimum rents on its real estate owned, held for investment properties, with a remaining lease term of approximately 15.1 years, to be recognized (dollars in thousands):
Future Minimum Rents September 30, 2023
2023 (October - December) $ 2,220 
2024 8,207 
2025 8,372 
2026 8,539 
2027 8,710 
2028 and beyond 106,271 
Total future minimum rent $ 142,319 
Amortization Expense
Intangible lease assets are amortized using the straight-line method over the remaining term of the lease. The weighted average life of the intangible assets as of September 30, 2023 is approximately 15.1 years. Amortization expense for the three and nine months ended September 30, 2023 totaled $0.9 million and $3.1 million, respectively. Amortization expense for the three and nine months ended September 30, 2022 totaled $0.7 million and $2.2 million, respectively.
Amortization of acquired below-market leases, net of acquired above-market leases, resulted in an increase to rental revenues of $1.4 million and $1.0 million, respectively, for the three and nine months ended September 30, 2023. There was no amortization of acquired below-market leases for the three and nine months ended September 30, 2022. The following table summarizes the Company's expected acquired below (above) market leases, net amortization over the next five years, exclusive of intangible assets that are held for sale, assuming no further acquisitions or dispositions (dollars in thousands):
Amortization Expense - Acquired below (above) market leases, net September 30, 2023
2023 (October - December) $ 90 
2024 — 
2025 — 
2026 — 
2027 — 
The following table summarizes the Company's expected other identified intangible assets, net amortization over the next five years, exclusive of intangible assets that are held for sale, assuming no further acquisitions or dispositions (dollars in thousands):
Amortization Expense - Other identified intangible assets September 30, 2023
2023 (October - December) $ 981 
2024 2,880 
2025 2,880 
2026 2,880 
2027 2,880 
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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

Note 7 - Debt
Below is a summary of the Company's Repurchase facilities and revolving credit facilities - commercial mortgage loans ("Repo and Revolving Credit Facilities"), Mortgage note payable, Other financing and Unsecured debt as of September 30, 2023 and December 31, 2022 (dollars in thousands):
September 30, 2023
Capacity Amount Outstanding
Interest Expense (1)
 Ending Weighted Average Interest Rate Term Maturity
Repo and revolving credit facilities - commercial mortgage loans(2):
JPM Repo Facility(3)
 $ 500,000  $ 115,274  $ 19,796  7.95  % 07/2026
Atlas Repo Facility(4)
 600,000  38,857  5,375  7.58  % 03/2024
WF Repo Facility(5)
 500,000  28,675  8,822  7.58  % 11/2023
Barclays Revolver Facility(6)
 250,000  —  823  N/A 09/2024
Barclays Repo Facility(7)
 500,000  66,539  10,191  7.19  % 03/2025
Total/Weighted average $ 2,350,000  $ 249,345  $ 45,007  7.65  %
Mortgage note payable:
Debt related to our REO(8)
 N/A $ 23,998  $ 1,464  8.45  % 10/2024
Other financings:
Other financings (9)
 N/A $ 23,669  $ 4,672  8.08  %
Various(9)
Unsecured debt(10):
Junior subordinated notes maturing in:
October 2035(11)
 N/A $ 17,037  $ 1,521  9.13  % 10/2035
December 2035 N/A 39,541  2,593  8.97  % 12/2035
September 2036 N/A 24,692  1,620  8.97  % 09/2036
Total/Weighted average N/A $ 81,270  $ 5,734  9.00  %
________________________________________________________
See notes below.

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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

December 31, 2022
Capacity Amount Outstanding
Interest Expense (1)
 Ending Weighted Average Interest Rate Term Maturity
Repo and revolving credit facilities - commercial mortgage loans(2):
JPM Repo Facility(3)
 $ 500,000  $ 275,423  $ 11,773  7.42  % 10/2024
Atlas Repo Facility(4)
 600,000  168,046  8,676  7.12  % 10/2023
WF Repo Facility(5)
 500,000  79,807  7,492  7.11  % 11/2023
Barclays Revolver Facility(6)
 250,000  —  1,267  N/A 09/2023
Barclays Repo Facility(7)
 500,000  157,583  8,997  6.75  % 03/2025
Total/Weighted average $ 2,350,000  $ 680,859  $ 38,205  7.16  %
Mortgage note payable:
Debt related to our REO(8)
 N/A $ 23,998  $ 1,185  7.32  % 10/2024
Other financings:
Other financings(9)
 N/A $ 76,301  $ 3,069  6.17  %
Various(9)
Unsecured debt(10):
Junior subordinated notes maturing in:
October 2035 N/A $ 34,508  $ 2,046  8.25  % 10/2035
December 2035 N/A 39,513  2,202  8.39  % 12/2035
September 2036 N/A 24,674  1,375  8.39  % 09/2036
Total/Weighted average
N/A
 $ 98,695  $ 5,623  8.34  %
________________________________________________________
(1) Represents year to date expense and includes amortization of deferred financing costs.
(2) The Company may pledge one or more mortgage loans to the financing entity in exchange for funds typically at an advance rate of between 60% to 75% of the principal amount of the mortgage loan being pledged. These loans are all floating rate at the Secured Overnight Financing Rate ("SOFR") plus an applicable spread. Additionally, the Repo and Revolving Credit Facilities generally provide that in the event of a decrease in the value of the Company's collateral, the lenders can demand additional collateral. As of September 30, 2023 and December 31, 2022, the Company is in compliance with all debt covenants.
(3) On July 27, 2023, the Company extended the maturity date from October 6, 2023 to July 26, 2026 with a one-year extension option available at the Company's discretion.
(4) On March 17, 2023, the maturity date was extended to March 15, 2024. During the first quarter of 2023, this repurchase facility was transferred from Credit Suisse to Atlas SP Partners.
(5) On October 25, 2023, the committed financing was decreased from $500 million to $400 million. Additionally, the maturity date was extended to November 21, 2025. There are two more one-year extension options available at the Company's discretion.
(6) The Company may increase the total commitment amount by an amount between $100 million and $150 million for three month intervals, on an unlimited basis prior to maturity. Additionally, on April 24, 2023, the Company extended the maturity date to September 20, 2024.
(7) There are two one-year extension options available at the Company's discretion.
(8) Relates to a mortgage note payable in Jeffersonville JV, a consolidated joint venture. The loan has a principal amount of $112.7 million of which $88.7 million of the loan is owned by the Company and was eliminated in our consolidated financial statements (see Note 5 - Real Estate Owned).
(9) Comprised of two note-on-note financings via participation agreements. From inception of the loan, the Company's outstanding loans could increase as a result of future fundings, leading to an increase in amount outstanding via the participation agreement. The weighted average contractual maturity of these loans is December 2023.
(10) The notes are currently redeemable, in whole or in part, without penalty, at the Company’s option. Interest paid on unsecured debt, including related derivative cash flows, totaled $1.9 million and $5.8 million for the three and nine months ended September 30, 2023, respectively, compared to $1.3 million and $4.1 million for the three and nine months ended September 30, 2022, respectively.
(11) During the nine months ended September 30, 2023 the Company had a realized a gain on extinguishment for debt in the amount of $4.4 million as a result of the repurchase of $17.5 million par value of the Company's unsecured debt during the first quarter of 2023 at a price equal to 75% of par value.
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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)


Repurchase Agreements - Real Estate Securities
The Company has entered into various Master Repurchase Agreements (the "MRAs") that allow the Company to sell real estate securities while providing a fixed repurchase price for the same real estate securities in the future. The repurchase contracts on each security under an MRA generally mature in 30-90 days and terms are adjusted for current market rates as necessary.
Below is a summary of the Company's MRAs which were included in Repurchase agreements - real estate securities in the Company's consolidated balance sheets as of September 30, 2023 and December 31, 2022 (dollars in thousands):
September 30, 2023
Counterparty Amount Outstanding Interest Expense
Collateral Pledged (1)
 Weighted Average Interest Rate Weighted Average Days to Maturity
JP Morgan Securities LLC $ 179,221  $ 3,699  $ 203,463  6.32  % 23
Wells Fargo Securities, LLC 8,994  95  9,993  6.11  % 31
Barclays Capital Inc. 51,795  2,552  58,275  6.17  % 17
Total/Weighted Average $ 240,010  $ 6,346  $ 271,731  6.28  % 22
________________________________________________________
See notes below.
December 31, 2022
Counterparty Amount Outstanding Interest Expense
Collateral Pledged (1)
 Weighted Average Interest Rate Weighted Average Days to Maturity
JP Morgan Securities LLC $ 103,513  $ 1,281  $ 120,751  5.34  % 22
Barclays Capital Inc. 119,351  1,646  144,778  5.18  % 50
Total/Weighted Average $ 222,864  $ 2,927  $ 265,529  5.25  % 37
________________________________________________________
(1) Includes $118.1 million and $67.1 million of CLO notes, held by the Company, which is eliminated within the Real estate securities, trading, at fair value line of the consolidated balance sheets as of September 30, 2023 and December 31, 2022, respectively.

The Company pledges its real estate securities classified as trading as collateral for repurchase agreements with commercial banks and other financial institutions. Repurchase arrangements entered into by the Company involve the sale and a simultaneous agreement to repurchase the transferred assets at a future date and are accounted for as financing agreements. The Company maintains the beneficial interest in the specific securities pledged during the term of each repurchase arrangement and receives the related principal and interest payments.
The Company did not have any outstanding repurchase agreements collateralized by real estate securities classified as trading as of September 30, 2023. Below is a summary of the Company's repurchase agreements collateralized by real estate securities classified as trading included in Repurchase agreements - real estate securities in the Company's consolidated balance sheet as of December 31, 2022 (dollars in thousands):
December 31, 2022
Amount Outstanding Accrued
Interest
Receivable		 Collateral
Carrying
Amount		 Weighted Average
Borrowing
Rates
Repurchase arrangements secured by trading securities with maturities of 30 days or less $ 172,144  $ 544  $ 180,400  4.25  %
Repurchase arrangements secured by trading securities with maturities of 31 to 90 days 45,000  114  47,210  4.51  %
Total/Weighted Average $ 217,144  $ 658  $ 227,610  4.30  %
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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

Average repurchase agreements outstanding were $220.1 million for the three months ended December 31, 2022. Average repurchase agreements outstanding differed from respective quarter-end balances during the indicated periods primarily due to changes in portfolio levels and differences in the timing of portfolio acquisitions relative to portfolio runoff and asset sales. Interest paid on repurchase agreements totaled $0.8 million and $4.6 million for the three and nine months ended September 30, 2023, respectively, compared to $1.5 million and $7.0 million for the three and nine months ended September 30, 2022, respectively.
Collateralized Loan Obligation
The following table represents the terms of the notes issued by 2019-FL5 Issuer, 2019-FL6 Issuer, 2021-FL7 Issuer, 2022-FL8 Issuer, 2022-FL9 Issuer and 2023-FL10 Issuer (collectively the "CLOs"), as of September 30, 2023 and December 31, 2022:
September 30, 2023
CLO Facility
Number of Loans in pool(1)
Benchmark Interest Rate(2)
 Weighted Average Spread Par Value
Par Value Outstanding (3)
 Principal Balance of Collateralized Mortgage Assets Maturity Dates
2021-FL6 Issuer
 60 Term SOFR 1.42  % $ 584,500  $ 583,078  $ 699,595  3/15/2036
2021-FL7 Issuer
 36 Term SOFR 1.64  % 722,250  720,000  882,382  12/21/2038
2022-FL8 Issuer
 46 AVG SOFR 1.78  % 960,000  960,000  1,197,872  2/15/2037
2022-FL9 Issuer
 49 Term SOFR 3.04  % 670,637  670,639  798,766  5/15/2039
2023-FL10 Issuer 28 Term SOFR 2.52  % 573,794  573,794  896,554  9/15/2035
$ 3,511,181  $ 3,507,511  $ 4,475,169 
December 31, 2022
CLO Facility
Number of Loans in pool(1)
Benchmark interest rate(2)
 Weighted Average Spread Par Value
Par Value Outstanding (3)
 Principal Balance of Collateralized Mortgage Assets Maturity Dates
2019-FL5 Issuer
 25 LIBOR 1.77  % $ 664,199  $ 210,339  $ 378,786  5/15/2029
2021-FL6 Issuer
 58 LIBOR 1.42  % 584,500  584,500  691,148  3/15/2036
2021-FL7 Issuer
 39 LIBOR 1.64  % 722,250  722,250  899,729  12/21/2038
2022-FL8 Issuer
 39 AVG SOFR 1.72  % 960,000  960,000  1,198,477  2/15/2037
2022-FL9 Issuer
 50 Term SOFR 3.04  % 670,637  670,639  797,545  5/15/2039
$ 3,601,586  $ 3,147,728  $ 3,965,685 
________________________________________________________
(1) Loan assets may be pledged towards one or multiple CLO pool.
(2) On March 5, 2021, the Financial Conduct Authority of the U.K. (the “FCA”) announced that LIBOR tenors relevant to 2019-FL5 Issuer, 2021- FL6 Issuer, and 2021-FL7 Issuer would cease to be published or no longer be representative after June 30, 2023. The Alternative Reference Rates Committee (the “ARRC”) interpreted this announcement to constitute a benchmark transition event. The benchmark index of 1M LIBOR interest rate will convert from LIBOR to compounded SOFR, plus a benchmark adjustment of 11.448 basis points with a lookback period equal to the number of calendar days in the applicable interest accrual period plus two SOFR business days, conforming with the indenture agreement and recommendations from the ARRC. Compounded SOFR for any interest accrual period shall be the “30-Day Average SOFR” as published by the Federal Reserve Bank of New York on each benchmark determination date. On July 13, 2023, the Company converted the indices for 2021-FL6 Issuer and 2021-FL7 Issuer to 1M Term SOFR + 11.448 basis points and the applicable spreads remains unchanged.
(3) Excludes $610.5 million and $453.4 million, respectively, of CLO notes, held by the Company, which are eliminated within the collateralized loan obligations line in the consolidated balance sheet as of September 30, 2023 and December 31, 2022, respectively.

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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

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 $122.0 million. The Company recognized all the remaining unamortized deferred financing costs of $2.9 million recorded within the Realized gain/(loss) on extinguishment of debt line of the consolidated statements of operations, which was a non-cash charge.
On September 28, 2023, BSPRT 2023-FL10 Issuer, LLC, a wholly-owned indirect subsidiary of the Company, entered into an indenture with the OP, as advancing agent, U.S. Bank Trust Company, National Association, as trustee and note administrator, and U.S. Bank National Association, as custodian and in other capacities, which governs the issuance of approximately $896.6 million principal balance secured floating rate notes, of which $573.8 million were purchased by third party investors and $322.8 million were purchased by a wholly-owned subsidiary of the OP. In addition, concurrently with the issuance of the notes, BSPRT 2023-FL10 Issuer, LLC also issued 75,086 preferred shares, par value of $0.001 per share and with an aggregate liquidation preference and notional amount equal to $1,000 per share, which were not offered as part of closing the indenture. For U.S. federal income tax purposes, BSPRT 2023-FL10 Issuer, LLC is a disregarded entity.
The below table reflects the total assets and liabilities of the Company's outstanding CLOs. The CLOs are considered VIEs and are consolidated into the Company's consolidated financial statements as of September 30, 2023 and December 31, 2022 as the Company is the primary beneficiary of the VIE. The Company is the primary beneficiary of the CLOs because (i) the Company has the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the right to receive benefits from the VIEs or the obligation to absorb losses of the VIEs that could be significant to the VIE. The VIE's are non-recourse to the Company.
September 30, 2023 December 31, 2022
Assets (dollars in thousands)
Cash (1)
 $ 26,725  $ 43,246 
Commercial mortgage loans, held for investment, net (2)
 4,443,255  3,942,918 
Accrued interest receivable 21,013  15,444 
Total Assets $ 4,490,993  $ 4,001,608 
Liabilities (dollars in thousands)
Notes payable, net (3)(4)
 $ 4,118,009  $ 3,601,102 
Accrued interest payable 11,811  10,582 
Total Liabilities $ 4,129,820  $ 3,611,684 
________________________________________________________
(1) Includes $25.9 million and $42.5 million of cash held by the servicer related to CLO loan payoffs as of September 30, 2023 and December 31, 2022, respectively.
(2) The balance is presented net of allowance for credit losses of $23.9 million and $13.2 million as of September 30, 2023 and December 31, 2022, respectively.
(3) Includes $610.5 million and $453.4 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligation line of the consolidated balance sheets as of September 30, 2023 and December 31, 2022, respectively.
(4) The balance is presented net of deferred financing cost and discount of $30.1 million and $19.2 million as of September 30, 2023 and December 31, 2022, respectively.
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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

Note 8 - Earnings Per Share
The Company uses the two-class method in calculating basic and diluted earnings per share. Net income/(loss) is allocated between our common stock and other participating securities based on their participation rights. Diluted net income per share has been computed using the weighted average number of shares of common stock outstanding and other dilutive securities. The following table presents a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations and the calculation of basic and diluted earnings per share for the three and nine months ended September 30, 2023 and 2022 (in thousands, except share and per share data):
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Numerator
Net income/(loss) $ 30,995  $ 35,258  $ 114,478  $ (12,958)
Net (income)/loss from noncontrolling interest 772  —  722  — 
Less: Preferred stock dividends 6,748  6,899  20,245  34,865 
Net income/(loss) applicable to common stock $ 25,019  $ 28,359  $ 94,955  $ (47,823)
Less: Participating securities' share in earnings 287  —  1,300  — 
Net income/(loss) applicable to common stockholders (basic & diluted earnings per share) $ 24,732  $ 28,359  $ 93,655  $ (47,823)
Denominator
Weighted-average common shares outstanding for basic earnings per share 82,210,624  83,665,250  82,410,725  67,965,397 
Weighted-average common shares outstanding for diluted earnings per share 82,210,624  83,665,250  82,410,725  67,965,397 
Basic earnings per share $ 0.30  $ 0.34  $ 1.14  $ (0.70)
Diluted earnings per share $ 0.30  $ 0.34  $ 1.14  $ (0.70)
The effect of the weighted average dilutive shares excluded restricted shares and stock units as of the three months ended September 30, 2023 and 2022 of 809,257 and 516,830 respectively, as the effect was anti-dilutive. The effect of the weighted average dilutive shares excluded restricted shares and stock units for the nine months ended September 30, 2023 and 2022 of 772,945 and 465,237 respectively, as the effect was anti-dilutive.
The effect of the dilutive shares excluded the weighted average common equivalent of convertible preferred shares for the three and nine months ended September 30, 2023 of 5,370,498 as the effect was anti-dilutive. The effect of dilutive shares excluded the weighted average common equivalent of convertible preferred shares for the three and nine months ended September 30, 2022 of 5,789,378 and 21,508,045, respectively as the effect was anti-dilutive.

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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

Note 9 - Redeemable Convertible Preferred Stock and Equity Transactions
The following table presents the summary of the Company's outstanding shares of redeemable convertible preferred stock, perpetual preferred stock, Automatically Convertible Preferred Stock and Common Stock as of September 30, 2023 and December 31, 2022 (dollars in thousands, except share amounts):
Balance as of Shares Outstanding as of
Third Quarter 2023 Dividend Per Share (1)
September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022
Redeemable Convertible Preferred Stock:
Series H Preferred Stock (2)
 $ 89,748  $ 89,748  17,950  17,950  $ 106.22 
Series I Preferred Stock (3)
 $ —  $ 5,000  —  1,000  — 
Perpetual Preferred Stock:
Series E Preferred Stock $ 258,742  $ 258,742  10,329,039  10,329,039  $ 0.46875 
Common Stock:
Common Stock - at par value (4)(5)
 $ 822  $ 826  83,019,881  82,992,784  $ 0.355 
_________________________________________________________
(1) As declared by the Company's board of directors.
(2) On January 19, 2023, the Series H Preferred Stock was amended such that the mandatory conversion date was extended by one year, to January 19, 2024. Unless earlier converted, the Series H Preferred Stock will automatically convert into common stock at a rate of 299.2 shares of common stock per share of Series H Preferred Stock (subject to adjustments as described in the Articles Supplementary for the Series H Preferred Stock) on January 19, 2024. The holder of the Series H Preferred Stock has the right to convert up to 4,487 shares of Series H Preferred Stock one time in each calendar month through December 2023, upon 10 business days’ advance notice to the Company.
(3) On January 19, 2023, all 1,000 outstanding shares of the Company's Series I Preferred Stock each automatically converted into 299.2 shares of Common Stock, pursuant to the terms of the Series I Preferred Stock, resulting in the issuance of 299,200 shares of Common Stock.
(4) Common Stock includes shares issued pursuant to the Company's dividend reinvestment plan ("DRIP") and unvested restricted shares.
(5) The Company did not repurchase any shares during the three months ended September 30, 2023. During the nine months ended September 30, 2023, the Company repurchased 758,137 shares of Common Stock at an average price of $12.08 per share for a total of $9.2 million. All of these shares were retired upon settlement, reducing the total outstanding shares as of September 30, 2023. See discussion in the "Stock Repurchases" section below.
During the nine months ended September 30, 2023 and 2022, the Company paid an aggregate of $87.7 million and $58.1 million, respectively, of common stock distributions comprised of quarterly common dividends of $0.355 per share.
Stock Repurchases
The Company’s board of directors has authorized a $65 million share repurchase program of the Company’s common stock. The Company’s share repurchase program authorizes share repurchases at prices below the most recently reported book value per share as determined in accordance with GAAP. Repurchases made under the program may be made through open market, block, and privately negotiated transactions, including Rule 10b5-1 plans, as permitted by securities laws and other legal requirements. The timing, manner, price and amount of any purchases by the Company will be determined by the Company in its reasonable business judgment and consistent with the exercise of its legal duties and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The share repurchase program does not obligate the Company to acquire any particular amount of common stock. The Company share repurchase program will remain open until at least December 31, 2024, which was extended from December 31, 2023, or until the capital committed to the applicable repurchase program has been exhausted, whichever is sooner. Repurchases under the Company’s share repurchase program may be suspended from time to time at the Company’s discretion without prior notice. As of September 30, 2023, the Company had $39.3 million remaining under the share repurchase program.

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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

The following table is a summary of the Company’s repurchase activity of its common stock during the nine months ended September 30, 2023 (dollars in thousands, except share amounts):
For the Nine Months Ended September 30, 2023
Shares
Amount (1)
Beginning of period, authorized repurchase amount (2)
 $ 48,421 
Repurchases paid 758,137  (9,161)
Remaining as of September 30, 2023
 $ 39,260 
_________________________________________________________
(1) For the nine months ended September 30, 2023, the average purchase price was $12.08 per share.
(2)Amount includes commissions paid associated with share repurchases.
Accumulated Other Comprehensive Income/(Loss)
The following tables set forth the changes in accumulated other comprehensive income/(loss) by component for the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):
For the Three Months Ended
September 30, 2023 September 30, 2022
Total Available for Sale Securities Cash Flow Hedges Total Available for Sale Securities Cash Flow Hedges
Balance, Beginning of Period $ (1,299) $ (1,299) $ —  $ —  $ —  $ — 
Other comprehensive income/(loss) 448  448  —  (373) (373) — 
Reclassification adjustment for amounts included in net income/(loss) (248) (248) —  —  —  — 
Balance, End of Period $ (1,099) $ (1,099) $ —  $ (373) $ (373) $ — 
For the Nine Months Ended
September 30, 2023 September 30, 2022
Total Available for Sale Securities Cash Flow Hedges Total Available for Sale Securities Cash Flow Hedges
Balance, Beginning of Period $ 390  $ 390  $ —  $ (62) $ —  $ (62)
Other comprehensive income/(loss) (564) (564) —  (593) (373) (220)
Reclassification adjustment for amounts included in net income/(loss) (925) (925) —  282  —  282 
Balance, End of Period $ (1,099) $ (1,099) $ —  $ (373) $ (373) $ — 
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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

Note 10 - Commitments and Contingencies
Unfunded Commitments Under Commercial Mortgage Loans
As of September 30, 2023 and December 31, 2022, the Company had the below unfunded commitments to the Company's borrowers (dollars in thousands):
Funding Expiration September 30, 2023 December 31, 2022
2023 (October - December) $ 23,772  $ 73,921 
2024 181,698  312,009 
2025 163,575  70,429 
2026 and beyond 18,617  9,629 
$ 387,662  $ 465,988 
The borrowers are generally required to meet or maintain certain metrics in order to qualify for the unfunded commitment amounts.
Litigation and Regulatory Matters
The Company is not presently named as a defendant in any material litigation arising outside the ordinary course of business. However, the Company is involved in routine litigation arising in the ordinary course of business, none of which the Company believes, individually or in the aggregate, will have a material impact on the Company’s financial condition, operating results or cash flows. Please refer to "Part II, Item 1. Legal Proceedings" for more details about the Company's ongoing litigation matters.
Note 11 - Related Party Transactions and Arrangements
Advisory Agreement Fees and Reimbursements
Pursuant to the Advisory Agreement, the Company is required to make the following payments and reimbursements to the Advisor:
•The Company reimburses the Advisor’s costs of providing services pursuant to the Advisory Agreement, except the salaries and benefits paid by the Advisor to the Company’s executive officers.
•The Company pays the Advisor, or its affiliates, a monthly asset management fee equal to one-twelfth of 1.5% of stockholders' equity as calculated pursuant to the Advisory Agreement.
•The Company will pay the Advisor an annual subordinated performance fee calculated on the basis of total return to stockholders, payable monthly in arrears, such that for any year in which total return on stockholders’ capital (as defined in the Advisory Agreement) exceeds 6.0% per annum, our Advisor will be entitled to 15.0% of the excess total return; provided that in no event will the annual subordinated performance fee payable to our Advisor exceed 10.0% of the aggregate total return for such year.
•The Company reimburses the Advisor for insourced expenses incurred by the Advisor on the Company‘s behalf related to selecting, evaluating, originating and acquiring investments in an amount up to 0.5% of the principal amount funded by the Company to originate or acquire commercial mortgage loans and up to 0.5% of the anticipated net equity funded by the Company to acquire real estate securities investments.
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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

The table below shows the costs incurred due to arrangements with our Advisor and its affiliates during the three and nine months ended September 30, 2023 and 2022 and the associated payable as of September 30, 2023 and December 31, 2022 (dollars in thousands):
Three Months Ended September 30, Nine Months Ended September 30, Payable as of
2023 2022 2023 2022 September 30, 2023 December 31, 2022
Acquisition expenses (1)
 $ 316  $ 362  $ 977  $ 996  $ —  $ — 
Administrative services expenses 3,566  3,001  10,993  9,402  3,566  3,526 
Asset management and subordinated performance fee 7,908  6,430  24,893  19,776  12,389  8,843 
Other related party expenses (2)(3)
 235  226  785  706  881  3,060 
Total related party fees and reimbursements $ 12,025  $ 10,019  $ 37,648  $ 30,880  $ 16,836  $ 15,429 
_________________________________________________________
(1) Total acquisition expenses paid during the three months ended September 30, 2023 and 2022 were $1.8 million and $2.5 million, respectively, of which $1.5 million and $2.1 million, respectively, were capitalized within the commercial mortgage loans, held for investment and real estate securities, available for sale, measured at fair value lines of the consolidated balance sheets. Total acquisition expenses paid during the nine months ended September 30, 2023 and 2022 were $4.1 million and $9.7 million, respectively, of which $3.1 million and $8.7 million were capitalized within the commercial mortgage loans, held for investment line of the consolidated balance sheets.
(2) These are related to reimbursable costs incurred related to the increase in loan origination activities and are included in Other expenses in the Company's consolidated statements of operations.
(3) As of September 30, 2023 and December 31, 2022, the related party payables include $0.6 million and $2.9 million, respectively, of payments made by the Advisor to third party vendors on behalf of the Company.
The payables as of September 30, 2023 and December 31, 2022, in the table above are included in Due to affiliates on the Company's consolidated balance sheets.
Other Transactions
In the third quarter of 2021, the Company and an affiliate of the Company entered into the Jeffersonville JV to acquire a $139.5 million triple net lease property in Jeffersonville, GA. The Company has a 79% interest in the Jeffersonville JV, while the affiliate has a 21% interest. The Company invested a total of $109.8 million, made up of $88.7 million in debt and $21.1 million in equity, representing 79% of the ownership interest in the Jeffersonville JV. The affiliated fund made up the remaining $29.8 million composed of a $24.0 million mortgage note payable and $5.8 million in non-controlling interest. The Company has majority control of Jeffersonville JV and, therefore, consolidates the accounts of Jeffersonville JV into its consolidated financial statements. The Company's $88.7 million mortgage note payable to Jeffersonville JV is eliminated in consolidation (see Note 7 - Debt).
Pursuant to the Company's 2021 Incentive Plan, in the first quarter of 2023 the Company issued awards of restricted stock units to its officers and certain other personnel of the Advisor who provide services to the Company under the Advisory Agreement.
As of September 30, 2023 and December 31, 2022, our commercial mortgage loans, held for investment, includes an aggregate of $123.7 million and $122.9 million, respectively, carrying value of loans to affiliates of our Advisor. The Company recognized $2.8 million and $1.6 million of interest income from these loans for the three months ended September 30, 2023 and 2022 respectively, in the Company’s consolidated statements of operations. The Company recognized $7.4 million and $3.4 million of interest income from these loans for the nine months ended September 30, 2023 and 2022 respectively, in the Company’s consolidated statements of operations.
In November 2022, the Company and an affiliate of the Company entered into the Walgreens JV to acquire the Walgreens Portfolio consisting of 24 retail properties with various locations throughout the United States. The Company has a 76% interest in the Walgreens JV, while the affiliate has a 24% interest. The Company has majority control of Walgreens JV and, therefore, consolidates the accounts of Walgreens JV into our consolidated financial statements. As of September 30, 2023 and December 31, 2022, the Company recorded $24.9 million and $10.5 million, respectively, in non-controlling interest related to the Walgreens JV on its consolidated balance sheets.
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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

Note 12 - Fair Value of Financial Instruments
GAAP establishes a hierarchy of valuation techniques based on the observability of inputs used in measuring financial instruments at fair values. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are described below:
•Level I - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
•Level II - Inputs (other than quoted prices included in Level I) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
•Level III - Unobservable inputs that reflect the entity's own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.
The determination of where an asset or liability falls in the above hierarchy requires significant judgment and factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter.
The Company has implemented valuation control processes to validate the fair value of the Company's financial instruments measured at fair value including those derived from pricing models. These control processes are designed to assure that the values used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, the control processes are designed to assure that the valuation approach utilized is appropriate and consistently applied and the assumptions are reasonable.
Financial Instruments Measured at Fair Value on a Recurring Basis
CRE CLO bonds, recorded in real estate securities, available for sale, measured at fair value on the consolidated balance
sheets are valued utilizing both observable and unobservable market inputs. These factors include projected future cash flows, ratings, subordination levels, vintage, remaining lives, credit issues, and recent trades of similar real estate securities. Depending upon the significance of the fair value inputs used in determining these fair values, these real estate securities are classified in either Level II or Level III of the fair value hierarchy. The Company obtains third party pricing for determining the fair value of each CRE CLO investment, resulting in a Level II classification.
Commercial mortgage loans held for sale, measured at fair value in the Company's TRS are initially recorded at transaction price, which are considered to be the best initial estimate of fair value. The Company engaged the services of a third party independent valuation firm to determine fair value of certain investments held by the Company. Fair value is determined using a discounted cash flow model that primarily considers changes in interest rates and credit spreads, weighted average life and current performance of the underlying collateral. Commercial mortgage loans held for sale, measured at fair value that are originated in the last month of the reporting period are held and marked to the transaction price. The Company classified the commercial mortgage loans held for sale, measured at fair value as Level III.
Other real estate investments, measured at fair value on the consolidated balance sheets are valued using unobservable inputs. The Company engaged the services of a third party independent valuation firm to determine fair value of certain investments, including preferred equity investments, held by the Company. Fair value is determined using a discounted cash flow model that primarily considers changes in interest rates and credit spreads, weighted average life and current performance of the underlying collateral. The Company classified the other real estate investments, measured at fair value as Level III.
The fair value for Treasury note futures is derived using market prices. Treasury note futures trade on the Chicago Mercantile Exchange (“CME”). The instruments are a variety of recently issued 10-year U.S. Treasury notes. The future contracts are liquid and are centrally cleared through the CME. Treasury note futures are generally categorized as Level I of the fair value hierarchy.
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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

The fair value for credit default swaps and interest rate swaps contracts are derived using pricing models that are widely accepted by marketplace participants. Credit default swaps and some interest rate swaps are traded in the over the counter ("OTC") market. The pricing models take into account multiple inputs including specific contract terms, interest rate yield curves, interest rates, credit curves, recovery rates, and/or current credit spreads obtained from swap counterparties and other market participants. Most inputs into the models are not subjective as they are observable in the marketplace or set per the contract. Valuation is primarily determined by the difference between the contract spread and the current market spread. The contract spread (or rate) is generally fixed and the market spread is determined by the credit risk of the underlying debt or reference entity. If the underlying indices are liquid and the OTC market for the current spread is active, credit default swaps and interest rate swaps are categorized in Level II of the fair value hierarchy. If the underlying indices are illiquid and the OTC market for the current spread is not active, credit default swaps are categorized in Level III of the fair value hierarchy. The credit default swaps and interest rate swaps are generally categorized as Level II of the fair value hierarchy.
A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets or liabilities. The Company's policy with respect to transfers between levels of the fair value hierarchy is to recognize transfers into and out of each level as of the beginning of the reporting period. There were no material transfers between levels within the fair value hierarchy for the period ended September 30, 2023. Material transfers between levels within the fair value hierarchy during the period ended December 31, 2022 were specifically related to the transfer of ARM Agency Securities from Level II to Level III.
The following table presents the Company's financial instruments carried at fair value on a recurring basis in the consolidated balance sheets by its level in the fair value hierarchy as of September 30, 2023 and December 31, 2022 (dollars in thousands):
September 30, 2023
Total Level I Level II Level III
Assets, at fair value
Real estate securities, available for sale, measured at fair value $ 193,072  $ —  $ 193,072  $ — 
Commercial mortgage loans, held for sale, measured at fair value 17,000  —  —  17,000 
Treasury Notes 35  35  —  — 
Total assets, at fair value $ 210,107  $ 35  $ 193,072  $ 17,000 
Liabilities, at fair value
Credit default swaps $ 258  $ —  $ 258  $ — 
Total liabilities, at fair value $ 258  $ —  $ 258  $ — 
December 31, 2022
Total Level I Level II Level III
Assets, at fair value
Real estate securities, available for sale, measured at fair value $ 221,025  $ —  $ 221,025  $ — 
Real estate securities, trading, measured at fair value 235,728  —  —  235,728 
Commercial mortgage loans, held for sale, measured at fair value 15,559  —  —  15,559 
Treasury note futures 91  91  —  — 
Interest rate swaps 90  —  90  — 
Credit default swaps 234  —  234  — 
Total assets, at fair value $ 472,727  $ 91  $ 221,349  $ 251,287 
Liabilities, at fair value
Credit default swaps $ 64  $ —  $ 64  $ — 
Total liabilities, at fair value $ 64  $ —  $ 64  $ — 
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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level III category. As a result, the unrealized gains and losses for assets and liabilities within the Level III category may include changes in fair value that were attributable to both observable and unobservable inputs. The following table summarizes the valuation method and significant unobservable inputs used for the Company’s financial instruments that are categorized within Level III of the fair value hierarchy as of September 30, 2023 and December 31, 2022 (dollars in thousands).
The following table contains the Level III inputs used to value assets and liabilities on a recurring basis or where the Company discloses fair value as of September 30, 2023:
September 30, 2023
Asset Category Fair Value Valuation Methodologies
Unobservable Inputs (1)
Weighted Average (2)
 Range
Commercial mortgage loans, held for sale, measured at fair value $ 17,000   Discounted Cash Flow  Yield 8.3% N/A
December 31, 2022
Asset Category Fair Value Valuation Methodologies
Unobservable Inputs (1)
Weighted Average (2)
 Range
Commercial mortgage loans, held for sale, measured at fair value $ 15,559  Discounted Cash Flow Yield 7.2%
6.3% - 7.7%
Real estate securities, trading, measured at fair value $ 235,728  Discounted Cash Flow Yield 3.3%
2.0% - 6.5%
________________________________________________________
(1) In determining certain inputs, the Company evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company specific developments including exit strategies and realization opportunities. The Company has determined that market participants would take these inputs into account when valuing the investments.
(2) Inputs were weighted based on the fair value of the investments included in the range.
Increases or decreases in any of the above unobservable inputs in isolation would result in a lower or higher fair value measurement for such assets. The following table presents additional information about the Company’s financial instruments which are measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 for which the Company has used Level III inputs to determine fair value (dollars in thousands):
September 30, 2023
Commercial Mortgage Loans, held for sale, measured at fair value Real estate securities, trading, measured at fair value
Beginning balance, January 1, 2023 $ 15,559  $ 235,728 
Transfers into Level III (1)
 —  — 
Total realized and unrealized gain/(loss) included in earnings:
Realized gain/(loss) on sale of commercial mortgage loans, held for sale 3,027  — 
Unrealized gain/(loss) on commercial mortgage loans, held for sale and other real estate investments 44  — 
Trading gain/(loss) —  (605)
Originations 93,250  — 
Sales/paydowns (94,880) (235,123)
Transfers out of Level III (1)
 —  — 
Ending Balance, September 30, 2023 $ 17,000  $ — 
________________________________________________________
(1) There were no transfers in or out of Level III as of September 30, 2023.

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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

December 31, 2022
Commercial Mortgage Loans, held for sale, measured at fair value Real estate securities, trading, measured at fair value Other real estate investments, measured at fair value
Beginning balance, January 1, 2022 $ 34,718  $ —  $ 2,074 
Transfers into Level III (1)
 —  4,566,871  — 
Total realized and unrealized gain/(loss) included in earnings:
Realized gain/(loss) on sale of commercial mortgage loans, held for sale 2,358  —  — 
Realized gain/(loss) on sale of available for sale trading securities —  —  (33)
Unrealized gain/(loss) on commercial mortgage loans, held for sale and other real estate investments (511) —  4 
Trading gain/(loss) —  (119,220) — 
Net accretion —  —  — 
Originations 366,692  —  — 
Sales/paydowns (387,698) (4,211,923) (2,045)
Transfers out of Level III —  —  — 
Ending Balance, December 31, 2022 $ 15,559  $ 235,728  $ — 
________________________________________________________
(1) Transfers into Level III include transfers related to ARM Agency Securities transferred from Level II.
The fair value of cash and cash equivalents and restricted cash are measured using observable quoted market prices, or Level I inputs and their carrying value approximates their fair value. The fair value of borrowings under repurchase agreements approximate their carrying value on the consolidated balance sheets due to their short-term nature and are measured using Level III inputs.
Financial Instruments Measured at Fair Value on a Nonrecurring Basis
Real Estate Owned, held for sale, recorded in Real estate owned, held for sale on the consolidated balance sheets are valued at fair value on a non-recurring basis in accordance with ASC 820. As of September 30, 2023, we had assets and liabilities measured at fair value on a nonrecurring basis on our consolidated balance sheets with an aggregate fair value of $91.4 million, net, representing the remaining 23 retail properties in the Walgreens Portfolio, that were written down to estimated fair value less cost to sell for impairment purposes and were classified as Level III investments. The significant unobservable inputs utilized in the analysis were the exit capitalization rates, which ranged from 5.00%-5.75%. As of December 31, 2022, the Company had no assets measured at fair value on a nonrecurring basis on our consolidated balance sheets.
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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

Financial Instruments Not Measured at Fair Value
The fair values of the Company's commercial mortgage loans, held for investment and collateralized loan obligations, which are not reported at fair value on the consolidated balance sheets are reported below as of September 30, 2023 and December 31, 2022 (dollars in thousands):
September 30, 2023 December 31, 2022
Level
Carrying Amount (1)
 Fair Value
Carrying Amount (1)
 Fair Value
Commercial mortgage loans, held for investment Asset III $ 4,951,156  $ 4,961,106  $ 5,269,776  $ 5,278,495 
Collateralized loan obligations(2)
 Liability II 3,477,444  3,436,617  3,121,983  3,055,810 
Mortgage note payable Liability III 23,998  23,998  23,998  23,998 
Other financings Liability III 23,669  23,669  76,301  76,301 
Unsecured debt Liability III 81,270  70,600  98,695  66,300 
________________________________________________________
(1) The carrying value is gross of $37.5 million and $40.8 million of allowance for credit losses as of September 30, 2023 and December 31, 2022, respectively.
(2) Depending upon the significance of the fair value inputs utilized in determining these fair values, our collateralized loan obligations are classified in either Level II or Level III of the fair value hierarchy. Beginning in the third quarter of 2023, the transfers from Level III to Level II were a result of the availability of current and reliable market data provided by third party pricing services or other valuation techniques which utilized observable inputs.
Repurchase agreements - commercial mortgage loans of $249.3 million and $680.9 million as of September 30, 2023 and December 31, 2022, respectively, and repurchase agreements - real estate securities of $240.0 million and $440.0 million as of September 30, 2023 and December 31, 2022, respectively, are not carried at fair value and does not include accrued interest expense, which are presented in Note 7 – Debt. For these instruments, carrying value generally approximates fair value and are classified as Level III.
The fair value of the commercial mortgage loans, held for investment is estimated using a discounted cash flow analysis, based on the Advisor's experience with similar types of investments. The Company estimates the fair value of the collateralized loan obligations using external broker quotes. The Mortgage note payable was recorded at transaction proceeds, which are considered to be the best initial estimate of fair value. The fair value of the Other financings is generally estimated using a discounted cash flow analysis. The fair value of the Unsecured debt is based on discounted cash flows using Company estimates for market yields on similarly structured debt instruments.
Note 13 - Derivative Instruments
The Company uses derivative instruments primarily to manage the fair value variability of fixed rate assets caused by interest rate fluctuations and overall portfolio market risk.
The following derivative instruments were outstanding as of September 30, 2023 and December 31, 2022 (dollars in thousands):
September 30, 2023 December 31, 2022
Fair Value Fair Value
Contract type Notional
Assets
Liabilities Notional
Assets
Liabilities
Credit default swaps $ 21,750  $ —  $ 258  $ 18,000  $ 234  $ 64 
Interest rate swaps —  —  —  9,800  90  — 
Treasury note futures 11,700  35  —  3,500  91  — 
Total $ 33,450  $ 35  $ 258  $ 31,300  $ 415  $ 64 
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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

The following table indicates the net realized and unrealized gains and losses on derivatives, by primary underlying risk exposure, as included in Loss on derivative instruments in the consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30, 2023 Three Months Ended September 30, 2022
Contract type Unrealized Gain/(Loss) Realized Gain/(Loss) Unrealized Gain/(Loss) Realized Gain/(Loss)
Credit default swaps $ 33  $ (46) $ (40) $ (254)
Interest rate swaps (251) 113  1,606  (1,370)
Treasury note futures 35  —  —  — 
Total $ (183) $ 67  $ 1,566  $ (1,624)
Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022
Contract type Unrealized Gain/(Loss) Realized Gain/(Loss) Unrealized Gain/(Loss) Realized Gain/(Loss)
Credit default swaps $ 36  $ (32) $ 515  $ (301)
Interest rate swaps (90) 672  (13,215) 56,961 
Treasury note futures (56) 44  (124) 939 
Total $ (110) $ 684  $ (12,824) $ 57,599 
Interest rate swap agreements are measured at fair value on a recurring basis primarily using Level II Inputs in accordance with ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820). In determining fair value estimates for swaps, the Company utilizes the standard methodology of netting the discounted future fixed cash payments and the discounted future variable cash receipts which are based on expected future interest rates derived from observable market interest rate curves. The Company also incorporates both its own nonperformance risk and its counterparties’ nonperformance risk in determining fair value. In considering the effect of nonperformance risk, the Company considered the impact of netting and credit enhancements, such as collateral postings and guarantees, and has concluded that counterparty risk is not significant to the overall valuation.
Note 14 - Offsetting Assets and Liabilities
The Company's consolidated balance sheets used a gross presentation of repurchase agreements and collateral pledged. The table below provides a gross presentation, the effects of offsetting and a net presentation of the Company's derivative instruments and repurchase agreements within the scope of ASC 210-20, Balance Sheet—Offsetting, as of September 30, 2023 and December 31, 2022 (dollars in thousands):
 


Gross Amounts Not Offset on the Balance Sheet
Assets
Gross Amounts of Recognized Assets
Gross Amounts Offset on the Balance Sheet
Net Amount of Assets Presented on the Balance Sheet
Financial Instruments
Cash Collateral (1)
Net Amount
September 30, 2023
Derivative instruments, at fair value
 $ 35  $ —  $ 35  $ —  $ —  $ 35 
December 31, 2022
Derivative instruments, at fair value $ 415  $ —  $ 415  $ —  $ —  $ 415 
_________________________________________________________
See notes below.
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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)


Gross Amounts Not Offset on the Balance Sheet
Liabilities
 Gross Amounts of Recognized Liabilities
Gross Amounts Offset on the Balance Sheet
Net Amount of Liabilities Presented on the Balance Sheet
Financial Instruments
Cash Collateral (1)
Net Amount
September 30, 2023
Repurchase agreements - commercial mortgage loans $ 249,345  $ —  $ 249,345  $ 249,345  $ —  $ — 
Repurchase agreements - real estate securities 240,010  —  240,010  240,010  —  — 
Derivative instruments, at fair value 258  —  258  —  258  — 
December 31, 2022
Repurchase agreements - commercial mortgage loans $ 680,859  $ —  $ 680,859  $ 680,859  $ —  $ — 
Repurchase agreements - real estate securities 440,008  —  440,008  440,008  —  — 
Derivative instruments, at fair value 64  —  64  —  64  — 
_________________________________________________________
(1) Included in Restricted cash in the Company's consolidated balance sheets.
Note 15 - Segment Reporting
The Company conducts its business through the following segments:
•The real estate debt business focuses on originating, acquiring and asset managing commercial real estate debt investments, including first mortgages, subordinate mortgages, mezzanine loans and participations in such loans.
•The real estate securities business focuses on investing in and asset managing real estate securities. Historically this business has focused primarily on CMBS, CRE CLO bonds, CDO notes, and other securities. As a result of the October 2021 acquisition of Capstead, the Company acquired a small portfolio of ARM Agency Securities (all of which has been disposed of as of September 30, 2023).
•The commercial real estate conduit business operated through the Company's TRS, which is focused on generating risk-adjusted returns by originating and subsequently selling fixed-rate commercial real estate loans into the CMBS securitization market at a profit. The TRS may also hold certain mezzanine loans that don't qualify as good REIT assets due to any potential loss from foreclosure.
•The real estate owned business represents real estate acquired by the Company through foreclosure, deed in lieu of foreclosure, or purchase.
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FRANKLIN BSP REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)

Profit or loss on segment operations is measured by Net income/(loss) included in the consolidated statements of operations. The following table represents the Company's operations by segment for the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):
Three Months Ended September 30, 2023 Total Real Estate Debt and Other Real Estate Investments Real Estate Securities TRS Real Estate Owned
Interest income $ 137,042  $ 131,093  $ 4,908  $ 109  $ 932 
Revenue from real estate owned 3,317  —  —  —  3,317 
Interest expense 77,973  74,002  3,151  307  513 
Net income/(loss) 30,995  35,450  (1,568) 82  (2,969)
Total assets as of September 30, 2023 5,875,455  5,357,513  196,240  56,198  265,504 
Three Months Ended September 30, 2022
Interest income $ 94,131  $ 91,097  $ 1,648  $ 1,386  $ — 
Revenue from real estate owned 2,312  —  —  —  2,312 
Interest expense 46,157  43,260  1,779  786  332 
Net income/(loss) 35,258  35,778  (3,309) 2,107  682 
Total assets as of December 31, 2022 6,203,601  5,444,152  474,231  63,307  221,911 
Nine Months Ended September 30, 2023 Total Real Estate Debt and Other Real Estate Investments Real Estate Securities TRS Real Estate Owned
Interest income $ 420,470  $ 404,300  $ 12,488  $ 1,179  $ 2,503 
Revenue from real estate owned 13,067  —  —  —  13,067 
Interest expense 224,347  211,923  10,139  824  1,461 
Net income/(loss) 114,478  125,723  1,158  (10,610) (1,793)
Total assets as of September 30, 2023 5,875,455  5,357,513  196,240  56,198  265,504 
Nine Months Ended September 30, 2022
Interest income $ 239,602  $ 209,585  $ 25,424  $ 4,593  $ — 
Revenue from real estate owned 6,936  —  —  —  6,936 
Interest expense (1)
 96,262  87,522  6,853  1,123  764 
Net income/(loss) (12,958) 46,306  (63,533) 1,995  2,274 
Total assets as of December 31, 2022 6,203,601  5,444,152  474,231  63,307  221,911 
_________________________________________________________
(1) For the nine months ended September 30, 2022, $5.2 million of deferred financing costs expense related to the redemption of the BSPRT 2018-FL4 Issuer CLO was reclassified from Interest expense to Realized gain/(loss) on extinguishment of debt on the consolidated statements of operations.
For the purposes of the table above, management fees have been allocated to the business segments using an agreed upon percentage of each respective segment's prior period equity. Administrative fees have been allocated to the business segments using a percentage derived from taking the respective business segment's prior period equity as a percent of consolidated equity and multiplying it by the Company's total administrative fee.
Note 16 - Subsequent Events
Subsequent to the quarter ended September 30, 2023, the following events took place:
Loan activity: On October 3, 2023, the Company foreclosed upon a multifamily property located in Lubbock, TX. The loan had an amortized cost basis of $12.0 million as of September 30, 2023 (see Note 3 - Commercial Mortgage Loans).
Debt activity:
On October 12, 2023, the Company entered into a master repurchase agreement ("MRA") with Churchill MRA Funding, with a maximum facility amount of $225 million.
On October 25, 2023, the Wells Fargo Repo Facility capacity was decreased from $500 million to $400 million. Additionally, the maturity date was extended to November 21, 2025. See Note 7 - Debt.
Stock repurchases: Subsequent to September 30, 2023, the Company repurchased 137,444 shares of common stock at a weighted average cost of $12.55 per share (see Part II, Item 2, "Unregistered Sales of Equity Securities and Use of Proceeds" for additional details).
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the accompanying financial statements of Franklin BSP Realty Trust, Inc. the notes thereto and other financial information included elsewhere in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission (the "SEC") on March 16, 2023.
As used herein, the terms "the Company," "we," "our" and "us" refer to Franklin BSP Realty Trust, Inc., a Maryland corporation and, as required by context, to Benefit Street Partners Realty Operating Partnership, L.P., a Delaware limited partnership, which we refer to as the "OP," and to its subsidiaries. We are externally managed by Benefit Street Partners L.L.C. (our "Advisor").
Certain statements included in this Quarterly Report on Form 10-Q 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.
Our forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements, and thus our investors should not place undue reliance on these statements. We believe these factors include but are not limited to those described under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, as such factors may be updated from time to time in our periodic filings with the Securities and Exchange Commission (the “SEC”), which are accessible on the SEC’s website at http://www.sec.gov. These factors include:
•our business and investment strategy;
•our ability to make investments in a timely manner or on acceptable terms;
•the impact of national health crises;
•current credit market conditions and our ability to obtain long-term financing for our investments in a timely manner and on terms that are consistent with what we project when we invest;
•the effect of general market, real estate market, economic and political conditions, including changing interest rate environments (and sustained high interest rates) and inflation;
•our ability to make scheduled payments on our debt obligations;
•our ability to generate sufficient cash flows to make distributions to our stockholders;
•our ability to generate sufficient debt and equity capital to fund additional investments;
•our ability to refinance our existing financing arrangements;
•our ability to recover unpaid principal on defaulted loans;
•the degree and nature of our competition;
•the availability of qualified personnel;
•our ability to recover or mitigate estimated losses on non-performing assets;
•we may be deemed to be an investment company under the Investment Company Act of 1940, as amended (the "Investment Company Act"), and thus subject to regulation under the Investment Company Act;
•our ability to maintain our qualification as a real estate investment trust ("REIT"); and
•other factors set forth under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022.
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Overview
The Company is a Maryland corporation and has made tax elections to be treated as a real estate investment trust ("REIT") for U.S. federal income tax purposes since 2013. The Company, through one or more subsidiaries which are each treated as a taxable REIT subsidiary ("TRS"), is indirectly subject to U.S. federal, state and local income taxes. We commenced business in May 2013. We primarily originate, acquire and manage a diversified portfolio of commercial real estate debt investments secured by properties located within and outside of the United States. Substantially all of our business is conducted through the OP, a Delaware limited partnership. We are the sole general partner and directly or indirectly hold all of the units of limited partner interests in the OP.
The Company has no employees. We are managed by our Advisor pursuant to an Advisory Agreement (the "Advisory Agreement"). Our Advisor manages our affairs on a day-to-day basis. The Advisor receives compensation and fees for services related to the investment and management of our assets and our operations.
The Advisor, an SEC-registered investment adviser, is a credit-focused alternative asset management firm. The Advisor manages funds for institutions and high-net-worth investors across various credit funds and complementary strategies including high yield, levered loans, private / opportunistic debt, liquid credit, structured credit and commercial real estate debt. These strategies complement each other as they all leverage the sourcing, analytical, compliance, and operational capabilities that encompass the Advisor’s robust platform. The Advisor is a wholly-owned subsidiary of Franklin Resources, Inc., which together with its various subsidiaries operates as "Franklin Templeton".
The Company invests in commercial real estate debt investments, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans. The Company also originates conduit loans which the Company intends to sell through its TRS into commercial mortgage-backed securities ("CMBS") securitization transactions. Historically this business has focused primarily on CMBS, commercial real estate collateralized loan obligation bonds ("CRE CLO bonds"), collateralized debt obligations ("CDOs") and other securities. As a result of the October 2021 acquisition of Capstead Mortgage Corporation ("Capstead"), the Company acquired a portfolio of residential mortgage backed securities (“RMBS”) in the form of residential adjustable-rate mortgage pass-through securities ("ARM Agency Securities" or "ARMs") issued and guaranteed by government-sponsored enterprises or by an agency of the federal government. As of September 30, 2023, the Company has fully disposed of all of its ARM Agency Securities and is continuing to reinvest the proceeds from the sale of these securities in its other businesses. The Company also owns real estate that was either acquired by the Company through foreclosure or deed in lieu of foreclosure, or that was purchased for investment, primarily subject to triple net leases.

Book Value Per Share
The following table calculates our book value per share as of September 30, 2023 and December 31, 2022 ($ in thousands, except per share data):
September 30, 2023 December 31, 2022
Stockholders' equity applicable to common stock $ 1,308,172  $ 1,304,238 
Shares:
Common stock 82,210,624  82,479,743 
Equity compensation awards (restricted stock and restricted stock units) 809,257  513,041 
Total outstanding 83,019,881  82,992,784 
Book value per share $ 15.76  $ 15.72 
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The following table calculates our fully-converted book value per share as of September 30, 2023 and December 31, 2022 ($ in thousands, except per share data):
September 30, 2023 December 31, 2022
Stockholders' equity applicable to convertible common stock $ 1,397,920  $ 1,398,986 
Shares:
Common stock 82,210,624  82,479,743 
Equity compensation awards (restricted stock and restricted stock units) 809,257  513,041 
Series H convertible preferred stock 5,370,498  5,370,640 
Series I convertible preferred stock —  299,200 
Total outstanding 88,390,379  88,662,624 
Fully-converted book value per share (1) (2)
 $ 15.82  $ 15.78 
___________________________________________________________
(1) Fully-converted book value per share reflects full conversion of our outstanding series of convertible preferred stock and vesting of our outstanding equity compensation awards.
(2) Excluding the amounts for accumulated depreciation and amortization of real property of $8.4 million and $5.2 million as of September 30, 2023 and December 31, 2022, respectively, would result in a fully-converted book value per share of $15.91 and $15.84 as of September 30, 2023 and December 31, 2022, respectively.
Critical Accounting Estimates
Our financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting estimates are those that require the application of management’s most difficult, subjective or complex judgments on matters that are inherently uncertain and that may change in subsequent periods. In preparing the financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing the financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses.
During the nine months ended September 30, 2023, there were no material changes to our critical accounting estimates as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022.
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Portfolio
As of September 30, 2023 and December 31, 2022, our portfolio consisted of 145 and 161 commercial mortgage loans, held for investment, respectively. The Commercial mortgage loans, held for investment, net of allowance for credit losses, as of September 30, 2023 and December 31, 2022 had a total carrying value of $4,913.6 million and $5,228.9 million, respectively. As of September 30, 2023 and December 31, 2022, our total commercial mortgage loans, held for sale, measured at fair value, was comprised of one loan with a fair value of $17.0 million and two loans with total fair value of $15.6 million, respectively. As of September 30, 2023 and December 31, 2022, we had $193.1 million and $221.0 million, respectively, of Real estate securities, available for sale, measured at fair value. As of September 30, 2023 and December 31, 2022, our real estate owned, held for investment portfolio was composed of 2 and 11 investments, respectively, with carrying values of $104.6 million and $127.8 million, respectively. As of September 30, 2023 and December 31, 2022, we had 23 and two properties classified as real estate owned, held for sale, respectively, with combined carrying values of $103.7 million and $36.5 million, respectively.
As of September 30, 2023, the Company did not hold any real estate securities, trading, measured at fair value. In August 2023, the Company fully disposed of the remaining ARM Agency Securities portfolio acquired from the Capstead merger. As of December 31, 2022, the Company had real estate securities, trading, measured at fair value of $235.7 million. During the nine months ended September 30, 2023, the Company experienced reductions in its ARMs portfolio due to (i) $17.6 million of principal paydowns, (ii) $218.2 million of sales and (iii) $0.6 million of net trading losses related to principal paydowns, changes in market values and sales of these securities.
As of September 30, 2023, we had three loans designated as non-performing status. As of September 30, 2023, no specific allowance for credit losses were recorded on the three non-performing loans, all of which are senior mortgage notes secured by multifamily properties. Subsequent to September 30, 2023, we foreclosed upon one of the three senior mortgage notes collateralized by multifamily properties and acquired title to the property. During the third quarter of 2023, the Company foreclosed upon the mortgage notes secured by an office property in Portland, OR through deed-in-lieu of foreclosure. The carrying value of the loan was $20.3 million prior to foreclosure. In connection therewith, the underlying collateral assets were reclassified to Real estate owned, net of depreciation in the consolidated balance sheets as of September 30, 2023 (see Note 3 - Commercial Mortgage Loans in our consolidated financial statements included in the Form 10-Q).
As of September 30, 2023 and December 31, 2022 our commercial mortgage loans, held for investment excluding commercial mortgage loans on non-performing status, had a weighted average coupon of 9.1% and 8.3%, respectively, and a weighted average remaining contractual maturity life of 1.0 years and 1.4 years, respectively.
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The following charts summarize our commercial mortgage loans, held for investment, by coupon rate type, collateral type geographical region and state as of September 30, 2023 and December 31, 2022:
2584 2588
549755820134 2594
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An investments region classification is defined according to the below map based on the location of investments secured property.
usamapregions22july2015a16.jpg549755820139 2602
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2606 2610


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The following charts show the par value by contractual maturity year for the commercial mortgage loans held for investment (excluding commercial mortgage loans in principal default) in our portfolio as of September 30, 2023 and December 31, 2022:
2963

2966

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The following table shows selected data from our commercial mortgage loans, held for investment in our portfolio as of September 30, 2023 (dollars in thousands):
Loan Type
Risk
Rating (1)
 Property Type State Par Value Amortized
Cost
Origination
Date(2)
Fully Extended Maturity(3)
Interest Rate (4) (5)
Effective Yield(6)
Loan to
Value (7)
Senior Debt 1 3 Hospitality Wisconsin $ 4,795  $ 4,795  11/30/2017 12/9/2023 Adj. 1M SOFR Term + 4.00% 9.43% 77.0%
Senior Debt 2 3 Multifamily Ohio 35,212  35,212  4/23/2018 9/9/2025 1M SOFR Term + 4.50% 9.82% 74.9%
Senior Debt 3 2 Hospitality Louisiana 21,876  21,876  6/28/2018 3/9/2025 1M SOFR Term + 4.25% 9.57% 66.7%
Senior Debt 4 2 Office New Jersey 14,000  14,000  8/28/2018 9/9/2024 1M SOFR Term + 5.50% 10.82% 70.0%
Senior Debt 5 2 Office Maryland 41,286  41,286  4/30/2019 5/9/2025 1M SOFR Term + 3.56% 8.88% 71.0%
Senior Debt 6 3 Hospitality Texas 19,176  19,176  7/18/2019 1/9/2024 1M SOFR Term + 3.84% 9.16% 62.6%
Senior Debt 7 2 Hospitality Michigan 12,922  12,922  9/17/2019 10/9/2025 1M SOFR Term + 4.41% 9.73% 56.4%
Senior Debt 8 2 Hospitality New York 4,754  4,754  7/9/2019 7/9/2025 1M SOFR Term + 5.25% 10.57% 47.7%
Senior Debt 9 2 Office Arizona 14,936  14,936  11/22/2019 12/9/2024 1M SOFR Term + 4.00% 9.32% 70.9%
Senior Debt 10 4 Office Georgia 25,802  25,788  12/17/2019 1/9/2025 Adj. 1M SOFR Term + 4.35% 9.78% 64.9%
Senior Debt 11 2 Manufactured Housing Arkansas 1,309  1,309  4/22/2020 5/9/2025 5.50% 5.50% 62.8%
Senior Debt 12 3 Self Storage New York 29,895  29,895  9/3/2020 10/9/2025 Adj. 1M SOFR Term + 5.00% 10.43% 58.8%
Senior Debt 13 3 Office Texas 17,903  17,903  10/6/2020 10/9/2025 Adj. 1M SOFR Term + 4.50% 9.93% 47.9%
Senior Debt 14 2 Office Massachusetts 63,848  63,703  10/8/2020 10/9/2025 5.15% 5.15% 52.5%
Senior Debt 15 3 Office Michigan 35,000  34,996  10/14/2020 10/9/2024 Adj. 1M SOFR Term + 5.21% 10.65% 66.0%
Senior Debt 16 2 Office Texas 12,750  12,747  11/6/2020 11/9/2025 Adj. 1M SOFR Term + 5.00% 10.43% 67.8%
Senior Debt 17 2 Multifamily Texas 12,550  12,541  1/22/2021 2/9/2026 Adj. 1M SOFR Term + 4.55% 9.98% 73.0%
Senior Debt 18 2 Multifamily Florida 21,000  21,000  12/31/2020 1/9/2025 Adj. 1M SOFR Term + 4.60% 10.03% 66.7%
Senior Debt 19 2 Office California 10,941  10,941  12/31/2020 1/9/2024 1M SOFR Term + 5.56% 10.88% 63.9%
Senior Debt 20 4 Office Colorado 44,913  44,864  3/1/2021 3/9/2026 Adj. 1M SOFR Term + 3.97% 9.40% 53.9%
Senior Debt 21 2 Multifamily Arizona 34,476  34,414  2/2/2021 2/9/2026 1M SOFR Term + 8.00% 13.32% N/A
Senior Debt 22 2 Hospitality North Carolina 23,000  22,982  2/24/2021 3/9/2024 Adj. 1M SOFR Term + 5.79% 11.22% 57.2%
Senior Debt 23 2 Multifamily Texas 34,750  34,750  3/5/2021 3/9/2024 1M SOFR Term + 4.10% 9.42% 78.2%
Senior Debt 24 4 Multifamily Texas 11,970  11,961  3/1/2021 3/9/2025 Adj. 1M SOFR Term + 4.50% 9.93% 83.3%
Senior Debt 25 3 Multifamily Texas 55,000  55,000  3/16/2021 5/9/2026 1M SOFR Term + 4.00% 9.32% 71.6%
Senior Debt 26 2 Multifamily Texas 14,700  14,692  3/15/2021 4/9/2026 Adj. 1M SOFR Term + 3.39% 8.82% 70.6%
Senior Debt 27 2 Multifamily Pennsylvania 8,898  8,889  3/23/2021 4/9/2026 Adj. 1M SOFR Term + 3.80% 9.23% 69.9%
Senior Debt 28 3 Multifamily Texas 18,653  18,644  3/23/2021 12/9/2023 Adj. 1M SOFR Term + 6.25% 11.68% 67.0%
Senior Debt 29 3 Multifamily Texas 19,804  19,793  3/25/2021 4/9/2026 Adj. 1M SOFR Term + 3.60% 9.03% 70.8%
Senior Debt 30 2 Multifamily Texas 43,246  43,236  4/1/2021 4/9/2026 Adj. 1M SOFR Term + 2.95% 8.38% 71.6%
Senior Debt 31 2 Hospitality Louisiana 25,700  25,700  4/15/2021 5/9/2026 Adj. 1M SOFR Term + 5.60% 11.03% 61.0%
Senior Debt 32 2 Mixed Use Washington 32,500  32,500  6/30/2021 1/9/2026 Adj. 1M SOFR Term + 3.70% 9.13% 69.7%
Senior Debt 33 2 Multifamily Texas 75,768  75,738  3/31/2021 4/9/2026 Adj. 1M SOFR Term + 2.95% 8.38% 72.6%
Senior Debt 34 2 Multifamily Texas 20,960  20,919  4/22/2021 5/9/2026 Adj. 1M SOFR Term + 3.60% 9.03% 67.7%
Senior Debt 35 2 Multifamily Texas 30,320  30,309  3/31/2021 4/9/2026 Adj. 1M SOFR Term + 2.95% 8.38% 70.4%
Senior Debt 36 2 Multifamily Texas 35,466  35,458  4/1/2021 4/9/2026 Adj. 1M SOFR Term + 2.95% 8.38% 71.7%
Senior Debt 37 2 Multifamily Texas 33,588  33,581  4/1/2021 4/9/2026 Adj. 1M SOFR Term + 2.95% 8.38% 72.2%
Senior Debt 38 2 Office Florida 6,678  6,676  4/29/2021 5/9/2024 Adj. 1M SOFR Term + 5.25% 10.68% 67.3%
Senior Debt 39 2 Multifamily Florida 151,152  150,422  5/26/2021 6/9/2026 1M SOFR Term + 4.55% 9.87% 43.0%
Senior Debt 40 2 Hospitality Virginia 22,475  22,475  5/27/2021 6/9/2026 Adj. 1M SOFR Term + 5.35% 10.78% 56.8%
Senior Debt 41 2 Hospitality Florida 36,750  36,692  5/20/2021 6/9/2026 Adj. 1M SOFR Term + 6.25% 11.68% 59.2%
Senior Debt 42 2 Multifamily North Carolina 35,116  34,965  7/22/2021 3/9/2027 Adj. 1M SOFR Term + 8.00% 13.43% N/A
Senior Debt 43 2 Multifamily Texas 16,389  16,388  10/6/2021 10/9/2026 Adj. 1M SOFR Term + 3.75% 9.18% 76.9%
Senior Debt 44 3 Multifamily Texas 30,420  30,367  8/20/2021 9/9/2026 Adj. 1M SOFR Term + 3.00% 8.43% 73.5%
Senior Debt 45 2 Multifamily Pennsylvania 47,984  47,874  9/10/2021 10/9/2026 Adj. 1M SOFR Term + 3.15% 8.58% 71.0%
Senior Debt 46 2 Multifamily South Carolina 41,850  41,850  9/2/2021 9/9/2025 Adj. 1M SOFR Term + 3.40% 8.83% 79.9%
Senior Debt 47 3 Multifamily Texas 34,760  34,698  9/20/2021 10/9/2024 Adj. 1M SOFR Term + 3.64% 9.07% 66.0%
Senior Debt 48 2 Multifamily Oregon 8,500  8,486  9/8/2021 9/9/2026 Adj. 1M SOFR Term + 3.75% 9.18% 79.4%
Senior Debt 49 2 Multifamily Texas 14,769  14,769  9/9/2021 9/9/2026 Adj. 1M SOFR Term + 3.15% 8.58% 79.8%
Senior Debt 50 2 Multifamily South Carolina 69,500  69,252  9/20/2021 10/9/2026 Adj. 1M SOFR Term + 3.25% 8.68% 77.1%
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Loan Type
Risk
Rating (1)
 Property Type State Par Value Amortized
Cost
Origination
Date(2)
Fully Extended Maturity(3)
Interest Rate (4) (5)
Effective Yield(6)
Loan to
Value (7)
Senior Debt 51 2 Multifamily Georgia 11,325  11,300  9/22/2021 10/9/2026 Adj. 1M SOFR Term + 3.75% 9.18% 70.0%
Senior Debt 52 2 Multifamily Texas 27,015  26,963  9/30/2021 10/9/2026 Adj. 1M SOFR Term + 3.20% 8.63% 77.3%
Senior Debt 53 2 Hospitality Texas 17,122  17,121  9/30/2021 10/9/2026 Adj. 1M SOFR Term + 5.25% 10.68% 61.0%
Senior Debt 54 2 Multifamily Texas 56,150  56,046  9/30/2021 10/9/2026 Adj. 1M SOFR Term + 3.10% 8.53% 78.9%
Senior Debt 55 2 Multifamily Texas 38,242  38,105  10/14/2021 11/9/2026 Adj. 1M SOFR Term + 2.90% 8.33% 72.2%
Senior Debt 56 2 Multifamily Texas 54,994  54,961  11/23/2021 12/9/2026 Adj. 1M SOFR Term + 3.10% 8.53% 67.2%
Senior Debt 57 3 Multifamily Arizona 38,153  38,087  11/16/2021 12/9/2026 Adj. 1M SOFR Term + 2.90% 8.33% 72.0%
Senior Debt 58 2 Multifamily Texas 67,894  67,879  10/29/2021 11/9/2026 Adj. 1M SOFR Term + 2.85% 8.28% 70.6%
Senior Debt 59 2 Multifamily Texas 32,460  32,388  11/23/2021 12/9/2026 Adj. 1M SOFR Term + 3.25% 8.68% 80.0%
Senior Debt 60 2 Multifamily South Carolina 62,850  62,833  11/10/2021 11/9/2026 Adj. 1M SOFR Term + 3.35% 8.78% 78.0%
Senior Debt 61 2 Multifamily Texas 44,634  44,610  11/16/2021 12/9/2026 Adj. 1M SOFR Term + 3.00% 8.43% 74.8%
Senior Debt 62 2 Multifamily Texas 47,147  47,002  11/9/2021 11/9/2026 Adj. 1M SOFR Term + 2.75% 8.18% 68.1%
Senior Debt 63 2 Multifamily New Jersey 86,000  85,904  2/25/2022 3/9/2026 1M SOFR Term + 3.24% 8.55% 60.0%
Senior Debt 64 3 Multifamily Texas 28,544  28,487  11/22/2021 12/9/2026 Adj. 1M SOFR Term + 2.90% 8.33% 74.2%
Senior Debt 65 3 Manufactured Housing Georgia 6,700  6,685  12/13/2021 12/9/2026 Adj. 1M SOFR Term + 4.50% 9.93% 77.9%
Senior Debt 66 2 Multifamily Texas 58,680  58,640  12/10/2021 1/9/2027 Adj. 1M SOFR Term + 3.45% 8.88% 74.8%
Senior Debt 67 2 Multifamily Georgia 27,850  27,836  11/30/2021 12/9/2026 Adj. 1M SOFR Term + 2.90% 8.33% 72.1%
Senior Debt 68 2 Multifamily Kentucky 14,933  14,897  11/19/2021 12/9/2026 Adj. 1M SOFR Term + 3.20% 8.63% 62.4%
Senior Debt 69 2 Multifamily Texas 38,120  38,039  11/22/2021 12/9/2026 Adj. 1M SOFR Term + 3.00% 8.43% 73.3%
Senior Debt 70 2 Multifamily Florida 33,921  33,902  11/30/2021 12/9/2026 Adj. 1M SOFR Term + 3.20% 8.63% 74.5%
Senior Debt 71 2 Multifamily Texas 41,677  41,653  11/18/2021 12/9/2026 Adj. 1M SOFR Term + 2.90% 8.33% 71.7%
Senior Debt 72 3 Multifamily Texas 66,871  66,834  11/30/2021 12/9/2026 Adj. 1M SOFR Term + 2.88% 8.31% 74.8%
Senior Debt 73 2 Multifamily Texas 64,074  64,039  11/30/2021 12/9/2026 Adj. 1M SOFR Term + 2.88% 8.31% 75.5%
Senior Debt 74 2 Multifamily Texas 17,019  17,005  12/30/2021 1/9/2027 1M SOFR Term + 3.50% 8.82% 71.7%
Senior Debt 75 3 Multifamily Michigan 57,660  57,588  12/9/2021 12/9/2026 Adj. 1M SOFR Term + 2.75% 8.18% 73.9%
Senior Debt 76 3 Multifamily Pennsylvania 22,240  22,224  12/16/2021 1/9/2027 1M SOFR Term + 2.96% 8.28% 79.4%
Senior Debt 77 3 Multifamily Texas 25,241  25,183  12/16/2021 1/9/2027 1M SOFR Term + 2.96% 8.28% 72.9%
Senior Debt 78 2 Multifamily Texas 32,428  32,387  12/16/2021 1/9/2027 1M SOFR Term + 3.20% 8.52% 74.2%
Senior Debt 79 2 Multifamily Florida 78,416  78,147  12/21/2021 1/9/2027 1M SOFR Term + 3.45% 8.77% 78.8%
Senior Debt 80 2 Multifamily North Carolina 81,247  81,144  12/15/2021 1/9/2027 1M SOFR Term + 3.21% 8.53% 76.1%
Senior Debt 81 2 Multifamily North Carolina 24,000  23,983  12/17/2021 1/9/2027 1M SOFR Term + 3.10% 8.42% 72.7%
Senior Debt 82 2 Retail New York 31,000  30,932  12/23/2021 1/9/2027 1M SOFR Term + 3.29% 8.61% 42.5%
Senior Debt 83 3 Multifamily Texas 38,711  38,677  5/12/2022 5/9/2027 1M SOFR Term + 3.55% 8.87% 66.2%
Senior Debt 84 2 Multifamily Georgia 23,855  23,831  1/28/2022 2/9/2027 1M SOFR Term + 2.95% 8.27% 65.6%
Senior Debt 85 2 Multifamily North Carolina 11,100  11,089  1/14/2022 2/9/2027 1M SOFR Term + 3.30% 8.62% 75.7%
Senior Debt 86 3 Multifamily Texas 47,444  47,411  12/21/2021 1/9/2027 1M SOFR Term + 2.86% 8.18% 68.2%
Senior Debt 87 2 Multifamily Texas 36,824  36,798  12/22/2021 1/9/2027 1M SOFR Term + 2.86% 8.18% 69.7%
Senior Debt 88 2 Hospitality North Carolina 10,504  10,477  1/19/2022 2/9/2027 1M SOFR Term + 5.30% 10.62% 68.2%
Senior Debt 89 2 Multifamily Florida 82,000  81,962  2/10/2022 2/9/2027 1M SOFR Term + 3.20% 8.52% 74.5%
Senior Debt 90 2 Industrial Arizona 55,000  54,937  3/15/2022 3/9/2027 1M SOFR Term + 3.50% 8.82% 70.1%
Senior Debt 91 2 Multifamily Texas 39,445  39,395  3/14/2022 3/9/2027 1M SOFR Term + 3.10% 8.42% 74.1%
Senior Debt 92 2 Multifamily Arizona 35,119  35,077  3/2/2022 3/9/2027 1M SOFR Term + 2.95% 8.27% 63.1%
Senior Debt 93 2 Mixed Use New York 19,000  18,978  3/7/2022 3/9/2026 1M SOFR Term + 3.42% 8.74% 65.1%
Senior Debt 94 2 Multifamily North Carolina 85,500  85,452  2/24/2022 3/9/2027 1M SOFR Term + 3.15% 8.47% 69.6%
Senior Debt 95 2 Multifamily North Carolina 31,900  31,877  3/29/2022 4/9/2027 1M SOFR Term + 3.30% 8.62% 76.9%
Senior Debt 96 2 Hospitality Colorado 19,007  18,681  5/20/2022 6/9/2027 1M SOFR Term + 7.05% 12.37% N/A
Senior Debt 97 2 Multifamily Texas 3,333  2,320  7/20/2022 4/9/2027 1M SOFR Term + 6.75% 12.07% N/A
Senior Debt 98 2 Hospitality Georgia 43,457  43,457  3/30/2022 4/9/2027 1M SOFR Term + 4.90% 10.22% 61.1%
Senior Debt 99 2 Hospitality New York 15,424  15,349  11/8/2022 11/9/2027 1M SOFR Term + 5.22% 10.54% 57.7%
Senior Debt 100 3 Multifamily Nevada 8,336  8,118  6/3/2022 6/9/2027 1M SOFR Term + 7.02% 12.34% 15.9%
Senior Debt 101 3 Multifamily Nevada 35,950  35,950  6/3/2022 6/9/2027 1M SOFR Term + 6.05% 11.37% 62.4%
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Loan Type
Risk
Rating (1)
 Property Type State Par Value Amortized
Cost
Origination
Date(2)
Fully Extended Maturity(3)
Interest Rate (4) (5)
Effective Yield(6)
Loan to
Value (7)
Senior Debt 102 3 Multifamily Virginia 56,616  56,455  4/29/2022 5/9/2027 1M SOFR Term + 3.95% 9.27% 73.2%
Senior Debt 103 2 Multifamily Texas 29,799  29,685  10/21/2022 11/9/2027 1M SOFR Term + 4.00% 9.32% 70.9%
Senior Debt 104 2 Multifamily North Carolina 56,859  56,735  8/23/2022 9/9/2027 1M SOFR Term + 6.70% 12.02% 46.5%
Senior Debt 105 2 Multifamily Texas 12,447  12,424  5/2/2022 5/9/2027 1M SOFR Term + 3.55% 8.87% 67.7%
Senior Debt 106 2 Industrial Florida 23,050  22,981  9/13/2022 9/9/2027 1M SOFR Term + 4.90% 10.22% 64.6%
Senior Debt 107 2 Multifamily Tennessee 19,660  19,623  5/18/2022 6/9/2027 1M SOFR Term + 3.50% 8.82% 64.5%
Senior Debt 108 3 Multifamily Texas 28,979  28,912  5/26/2022 6/9/2027 1M SOFR Term + 3.65% 8.97% 71.0%
Senior Debt 109 3 Multifamily Texas 17,330  17,288  5/26/2022 6/9/2027 1M SOFR Term + 3.65% 8.97% 73.9%
Senior Debt 110 2 Multifamily Georgia 70,750  70,629  5/18/2022 6/9/2027 1M SOFR Term + 3.80% 9.12% 77.9%
Senior Debt 111 2 Multifamily North Carolina 83,697  83,535  6/1/2022 6/9/2027 1M SOFR Term + 3.95% 9.27% 71.8%
Senior Debt 112 2 Multifamily North Carolina 45,325  45,239  6/1/2022 6/9/2027 1M SOFR Term + 3.95% 9.27% 75.9%
Senior Debt 113 2 Multifamily North Carolina 57,866  57,751  6/1/2022 6/9/2027 1M SOFR Term + 3.95% 9.27% 73.7%
Senior Debt 114 2 Multifamily North Carolina 20,637  20,594  6/1/2022 6/9/2027 1M SOFR Term + 3.95% 9.27% 75.1%
Senior Debt 115 2 Multifamily Various 145,762  145,446  6/1/2022 6/9/2027 1M SOFR Term + 3.95% 9.27% 67.8%
Senior Debt 116 2 Multifamily Kentucky 56,000  55,902  6/1/2022 6/9/2027 1M SOFR Term + 3.80% 9.12% 73.8%
Senior Debt 117 2 Multifamily North Carolina 11,675  11,657  11/3/2022 11/9/2027 1M SOFR Term + 4.45% 9.77% 74.8%
Senior Debt 118 2 Multifamily Georgia 69,200  68,917  6/14/2022 6/9/2027 1M SOFR Term + 3.45% 8.77% 71.6%
Senior Debt 119 2 Hospitality District of Columbia 29,644  29,439  8/2/2022 8/9/2027 1M SOFR Term + 6.94% 12.26% 71.2%
Senior Debt 120 (8)
 2 Multifamily Pennsylvania —  —  2/17/2023 9/9/2026 1M SOFR Term + 6.31% 11.63% N/A
Senior Debt 121 2 Hospitality Alabama 15,612  15,571  9/20/2022 10/9/2027 1M SOFR Term + 5.75% 11.07% 62.1%
Senior Debt 122 2 Manufactured Housing Florida 11,617  11,576  9/13/2022 9/9/2027 1M SOFR Term + 4.75% 10.07% 53.8%
Senior Debt 123 (8)
 2 Hospitality Texas —  —  1/31/2023 11/9/2027 1M SOFR Term + 7.50% 12.82% 6.2%
Senior Debt 124 2 Multifamily North Carolina 47,854  47,756  12/29/2022 1/9/2028 1M SOFR Term + 4.20% 9.52% 70.1%
Senior Debt 125 2 Multifamily South Carolina 51,000  50,844  12/2/2022 12/9/2027 1M SOFR Term + 3.75% 9.07% 64.6%
Senior Debt 126 2 Multifamily South Carolina 14,635  14,585  12/16/2022 1/9/2027 1M SOFR Term + 4.25% 9.57% 68.1%
Senior Debt 127 2 Hospitality North Carolina 28,300  28,262  12/15/2022 1/9/2025 1M SOFR Term + 5.25% 10.57% 54.9%
Senior Debt 128 2 Multifamily Arizona 55,500  55,326  4/10/2023 4/9/2026 1M SOFR Term + 3.85% 9.17% 44.8%
Senior Debt 129 2 Hospitality Florida 10,500  10,458  4/4/2023 4/9/2028 1M SOFR Term + 5.50% 10.82% 39.6%
Senior Debt 130 2 Hospitality Various 120,000  119,513  2/9/2023 2/9/2028 1M SOFR Term + 4.90% 10.22% 53.6%
Senior Debt 131 2 Multifamily Florida 64,500  64,310  4/19/2023 5/9/2025 1M SOFR Term + 5.00% 10.32% 62.3%
Senior Debt 132 2 Hospitality New York 38,668  38,808  4/17/2023 12/27/2024 1M SOFR Term + 3.75% 9.07% 39.1%
Senior Debt 133 2 Multifamily District of Columbia 21,700  21,603  6/30/2023 7/9/2027 1M SOFR Term + 3.95% 9.27% 29.4%
Senior Debt 134 2 Manufactured Housing Florida 21,000  20,825  7/28/2023 8/9/2028 1M SOFR Term + 4.25% 9.57% 43.2%
Senior Debt 135 2 Multifamily New York 19,793  19,885  6/28/2023 7/9/2028 4.75% 4.75% 85.7%
Senior Debt 136 2 Multifamily Texas 78,335  77,955  8/1/2023 8/9/2028 1M SOFR Term + 3.20% 8.52% 58.7%
Senior Debt 137 2 Hospitality Florida 23,000  22,850  8/10/2023 8/9/2028 1M SOFR Term + 5.45% 10.77% 72.8%
Senior Debt 138 2 Hospitality Georgia 12,420  12,314  8/17/2023 9/9/2028 1M SOFR Term + 4.85% 10.17% 53.5%
Senior Debt 139 3 Hospitality Illinois 16,614  16,614  12/4/2017 10/6/2025 5.99% 5.99% 52.9%
Mezzanine Loan 1 2 Multifamily New York 3,000  2,993 12/23/2021 1/9/2027 1M SOFR Term + 12.00% 17.32% 46.6%
Mezzanine Loan 2 2 Multifamily New York 1,000  999 3/7/2022 3/9/2026 1M SOFR Term + 11.00% 16.32% 68.5%
Mezzanine Loan 3 2 Retail New York 1,350  1,345 11/8/2022 11/9/2027 1M SOFR Term + 9.25% 14.57% 64.6%
Mezzanine Loan 4 (8)
 2 Mixed Use Texas —  — 1/31/2023 11/9/2027 1M SOFR Term + 10.00% 15.32% 6.2%
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Loan Type
Risk
Rating (1)
 Property Type State Par Value Amortized
Cost
Origination
Date(2)
Fully Extended Maturity(3)
Interest Rate (4) (5)
Effective Yield(6)
Loan to
Value (7)
Mezzanine Loan 5 3 Hospitality Ohio 1,140  1,140 3/9/2023 9/9/2025 1M SOFR Term + 4.50% 9.82% 74.9%
Mezzanine Loan 6
 2 Hospitality District of Columbia 11,700  11,648 6/30/2023 7/9/2027 1M SOFR Term + 3.95% 9.27% 45.2%
$ 4,961,060  $4,951,156 Weighted Average: 9.16% 66.0%
__________________________________________________________
(1) For a discussion of risk ratings, see Note 3 - Commercial Mortgage Loans in our Consolidated Financial Statements included in this Form 10-Q.
(2) Date loan was originated or acquired by us. The origination or acquisition date is not updated for subsequent loan modifications.
(3) Fully extended maturity assumes all extension options are exercised by the borrower; provided, however, that our loans may be repaid prior to such date.
(4) Our floating rate loan agreements generally contain the contractual obligation for the borrower to maintain an interest rate cap to protect against rising interest rates. In a simple interest rate cap, the borrower pays a premium for a notional principal amount based on a capped interest rate (the “cap rate”). When the floating rate exceeds the cap rate, the borrower receives a payment from the cap counterparty equal to the difference between the floating rate and the cap rate on the same notional principal amount for a specified period of time. When interest rates rise, the value of an interest rate cap will increase, thereby reducing the borrower's exposure to rising interest rates.
(5) On March 5, 2021, the Financial Conduct Authority of the U.K. (the “FCA”) announced that LIBOR tenors would cease to be published or no longer be representative. The Alternative Reference Rates Committee (the “ARRC”) interpreted this announcement to constitute a benchmark transition event. The benchmark index of LIBOR interest rate will convert from LIBOR to compounded SOFR, plus a benchmark adjustment of 11.448 basis points. As of September 30, 2023, all of our commercial mortgage loans, held for investment which had been indexed at LIBOR were converted to SOFR utilizing the 11.448 basis points adjustment and the applicable spreads remain unchanged. The loans which have the SOFR adjustment are indicated with "Adj. 1M SOFR Term."
(6) Effective yield is calculated as the spread of the loan plus the greater of the applicable index or index floor.
(7) Loan-to-value percentage ("LTV") represents the ratio of the loan amount to the appraised value of the property at the time of origination. However, for predevelopment construction loans at origination, LTV is not applicable and is therefore nil.
(8) Commitment on the loan was unfunded as of September 30, 2023.
The following table shows selected data from our commercial mortgage loans, held for sale, measured at fair value as of September 30, 2023 (dollars in thousands):
Loan Type Property Type State Par Value Interest Rate Effective Yield
Loan to Value (1)
TRS Senior Debt 1 Hospitality Florida $ 17,000  8.28% 8.28% 60.93%
__________________________________________________________
(1) Loan-to-value percentage (LTV) represents the ratio of the loan amount to the appraised value of the property at the time of origination.
The following table shows selected data from our real estate owned, held for investment assets in our portfolio as of September 30, 2023 (dollars in thousands):
Type Acquisition Date Primary Location(s) Property Type Carrying Value
Real Estate Owned 1 September 2021 Jeffersonville, GA Industrial $ 86,020 
Real Estate Owned 2 August 2023 Portland, OR Office 18,596 
$ 104,616 
The following table shows selected data from our real estate owned, held for sale assets in our portfolio as of September 30, 2023 (dollars in thousands):
Type Acquisition Date Primary Location(s) Property Type Assets, Net Liabilities, Net
Real Estate Owned, held for sale 1 Various Various Retail $ 103,657  $ 12,297 
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The following table shows selected data from our real estate securities, CRE CLO bonds, measured at fair value as of September 30, 2023 (dollars in thousands):
Type  Interest Rate Maturity Par Value Fair Value  Effective Yield
CRE CLO bond 1 1 month SOFR + 2.78% 8/19/2035 $ 40,000  $ 39,517  8.1%
CRE CLO bond 2 1 month SOFR + 3.23% 8/19/2035 25,000  24,605  8.6%
CRE CLO bond 3 1 month SOFR + 2.90% 10/19/2039 28,340  28,297  8.2%
CRE CLO bond 4 1 month SOFR + 2.83% 2/19/2038 5,885  5,841  8.2%
CRE CLO bond 5 1 month SOFR + 3.2% 2/19/2038 50,000  49,845  8.5%
CRE CLO bond 6 1 month SOFR + 2.36% 1/25/2037 45,000  44,967  7.7%
$ 194,225  $ 193,072  8.2%


Results of Operations
The Company conducts its business through the following segments:
•The real estate debt business focuses on originating, acquiring and asset managing commercial real estate debt investments, including first mortgages, subordinate mortgages, mezzanine loans and participations in such loans.
•The real estate securities business focuses on investing in and asset managing real estate securities. Historically this business has focused primarily on CMBS, CRE CLO bonds, CDO notes, and other securities. As a result of the October 2021 acquisition of Capstead, the Company acquired a small portfolio of ARM Agency Securities (all of which has been disposed of as of September 30, 2023).
•The commercial real estate conduit business operated through the Company's TRS, which is focused on generating risk-adjusted returns by originating and subsequently selling fixed-rate commercial real estate loans into the CMBS securitization market at a profit. The TRS may also hold certain mezzanine loans that don't qualify as good REIT assets due to any potential loss from foreclosure.
•The real estate owned business represents real estate acquired by the Company through foreclosure, deed in lieu of foreclosure, or purchase.
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Comparison of the Three Months Ended September 30, 2023 to the Three Months Ended September 30, 2022
Net Interest Income
Net interest income is generated on our interest-earning assets less related interest-bearing liabilities and is recorded as part of our real estate debt, real estate securities and TRS segments.
The following table presents the average balance of interest-earning assets less related interest-bearing liabilities, associated interest income and expense and corresponding yield earned and incurred for the three months ended September 30, 2023 and 2022 (dollars in thousands):
Three Months Ended September 30,
2023 2022
Average Carrying Value (1)
Interest Income/Expense (2)(3)
WA Yield/Financing Cost (4)(5)
Average Carrying Value (1)
Interest Income/Expense (2)
WA Yield/Financing Cost (4)(5)
Interest-earning assets:
Real estate debt $ 4,770,339 $ 131,093  11.0  % $ 5,194,777 $ 91,098  7.0  %
Real estate conduit 9,859 109  4.4  % 103,641 1,386  5.4  %
Real estate securities 277,664 4,908  7.1  % 266,388 1,648  2.5  %
Total $ 5,057,862 $ 136,110 10.8  % $ 5,564,806 $ 94,132 6.8  %
Interest-bearing liabilities:
Repurchase Agreements - commercial mortgage loans $ 711,560 $ 16,868  9.5  % $ 709,679 $ 9,763  5.5  %
Other financing and loan participation - commercial mortgage loans 61,125 1,444  9.4  % 47,774 590  4.9  %
Repurchase Agreements - real estate securities 223,199 3,151  5.6  % 283,699 1,779  2.5  %
Collateralized loan obligations 2,974,039 54,608  7.3  % 3,223,925 32,432  4.0  %
Unsecured debt 81,258 1,902  9.4  % 98,657 1,593  6.5  %
Total $ 4,051,181 $ 77,973  7.7  % $ 4,363,734 $ 46,157  4.2  %
Net interest income/spread $ 58,137  3.1  % $ 47,975  2.6  %
Average leverage % (6)
 80.1  % 78.4  %
Weighted average levered yield (7)
 23.1  % 16.0  %
_________________________________________________
(1) Based on amortized cost for real estate debt and real estate securities and principal amount for interest-bearing liabilities. Amounts are calculated based on daily averages for the three months ended September 30, 2023 and 2022, respectively.
(2) Includes the effect of amortization of premium or accretion of discount and deferred fees.
(3) Excludes other income on the real estate owned business segment.
(4) Calculated as interest income or expense divided by average carrying value.
(5) Annualized.
(6) Calculated by dividing total average interest-bearing liabilities by total average interest-earning assets.
(7) Calculated by dividing net interest income/spread by the average interest-earning assets less average interest-bearing liabilities.
Interest Income
Interest income for the three months ended September 30, 2023 and 2022 totaled $137.0 million and $94.1 million, respectively, an increase of $42.9 million. The increase was due primarily to an approximate 307 basis point increase in daily average SOFR and SOFR equivalent rates partially offset by a decrease of $424.4 million in the average carrying value of our real estate debt and a decrease of $93.8 million in the average carrying value of our conduit portfolio. As of September 30, 2023, our portfolio consisted of (i) 145 commercial mortgage loans, held for investment, (ii) one commercial mortgage loan, held for sale, measured at fair value and (iii) six real estate securities, available for sale, measured at fair value. As of September 30, 2022, our portfolio consisted of (i) 166 commercial mortgage loans, held for investment, (ii) three commercial mortgage loans, held for sale, measured at fair value and (iii) three real estate securities, available for sale, measured at fair value and (iv) ARMs.
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Interest Expense
Interest expense for the three months ended September 30, 2023 and 2022 totaled $78.0 million and $46.2 million, respectively, an increase of $31.8 million. The increase was due primarily to an approximate 307 basis point increase in daily average SOFR and SOFR equivalent rates partially offset by a decrease of $249.9 million in the average carrying value of our collateralized loan obligations, a decrease of $60.5 million in the average carrying value of our repurchase agreements - real estate securities and a decrease of $17.4 million in the average carrying value of our unsecured debt.
Revenue from Real Estate Owned
For the three months ended September 30, 2023 and 2022, revenue from real estate owned was $3.3 million and $2.3 million, respectively. The $1.0 million increase was primarily the result of rental income from additional retail properties brought on as real estate owned.
(Provision)/Benefit for Credit losses
Provision for credit losses was $2.4 million during the three months ended September 30, 2023 compared to a benefit of $0.6 million during the three months ended September 30, 2022. The following paragraphs set forth explanations for changes in the general and specific reserves for the three months ended September 30, 2023 and 2022.
For the three months ended September 30, 2023, the increase in general provision of $2.8 million was due primarily to declining performance on certain loans in our portfolio partially offset by a decrease in the size of our loan portfolio compared to the preceding period. For the three months ended September 30, 2022, the increase in general provision of $0.2 million was due primarily to a more pessimistic view of the macroeconomic scenario utilized for the CECL model.
Realized Gain/(Loss) on Extinguishment of Debt
Realized loss on extinguishment of debt for the three months ended September 30, 2023 of $2.8 million was primarily related to the redemption of BSPRT 2019-FL5 in July 2023. There was no realized gain/loss on extinguishment of debt during the three months ended September 30, 2022
Realized Gain/(Loss) on Sale of Available for Sale Trading Securities
Realized loss on sale of available for sale trading securities for the three months ended September 30, 2023 of $0.5 million was primarily related to the sale of six CRE CLO bonds. There were no sales of available for sale trading securities during the three months ended September 30, 2022.
Realized Gain/(Loss) on Sale of Commercial Mortgage Loans, Held for Sale, Measured at Fair Value
Realized gain on commercial mortgage loans, held for sale, measured at fair value for the three months ended September 30, 2023 of $0.9 million was related to the sale of $34.3 million in principal amount of commercial real estate loans into the CMBS securitization market resulting in proceeds of $35.3 million. Realized gain on commercial mortgage loans, held for sale, measured at fair value for the three months ended September 30, 2022 of $4.8 million was related to the sale of $78.5 million in principal amount of commercial real estate loans into the CMBS securitization market resulting in proceeds of $82.3 million.
Unrealized Gain/(Loss) on Commercial Mortgage Loans, Held for Sale, Measured at Fair Value
The Company did not have any commercial mortgage loans, held for sale, measured at fair value held in an unrealized gain or loss position as of September 30, 2023. Unrealized loss on commercial mortgage loans, held for sale, measured at fair value for the three months ended September 30, 2022 was $0.1 million.
Gain/(Loss) on Other Real Estate Investments
Loss on other real estate investments for the three months ended September 30, 2023 of $4.1 million was due primarily to an impairment on the Walgreens Portfolio, a real estate owned, held for sale asset. There was no gain/loss on other real estate investments for the three months ended September 30, 2022.
Trading Gain/(Loss)
Trading loss for the three months ended September 30, 2023 and 2022 of $2.6 million and $2.7 million, respectively, was attributable to $2.6 million and $15.1 million of principal paydowns, respectively, $122.8 million and zero sales of ARM Agency Securities, respectively, and changes in market values on these securities.
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Net Result from Derivative Transactions
Net result from derivative transactions for the three months ended September 30, 2023 of a $0.1 million loss was composed of a realized gain of $0.1 million due primarily to the termination and settlement of interest rate swap positions coupled with an unrealized loss of $0.2 million. This is compared to a net loss on our derivative portfolio of $0.05 million composed of a realized loss of $1.62 million due primarily to the termination and settlement of interest rate swap positions specifically designed to hedge the ARMs portfolio partially offset by an unrealized gain of $1.57 million for the three months ended September 30, 2022.
(Provision)/Benefit for Income Tax
Benefit for income tax for the three months ended September 30, 2023 was $1.8 million compared to a provision of $0.4 million for the three months ended September 30, 2022. The difference is due to change in taxable income/loss in our TRS segment.
Net (Income)/Loss Attributable to Non-controlling Interest
Net loss attributable to non-controlling interest in our consolidated joint ventures for the three months ended September 30, 2023 amounted to $0.8 million. There was no net income/loss attributable to non-controlling interest for the three months ended September 30, 2022.
Preferred Share Dividends
Preferred share dividends were $6.7 million for the three months ended September 30, 2023, compared to $6.9 million for the three months ended September 30, 2022, a decrease of $0.2 million. The decrease is due primarily to fewer preferred shares outstanding following the automatic conversion into Common Stock of the Company's Series C Convertible Preferred Stock in October 2022 and Series I Convertible Preferred Stock in January 2023 (see Note 9 - Redeemable Convertible Preferred Stock and Equity Transactions).
Expenses from operations
Expenses from operations for the three months ended September 30, 2023 and 2022 consisted of the following (dollars in thousands):
Three Months Ended September 30,
2023 2022
Asset management and subordinated performance fee $ 7,908  $ 6,430 
Acquisition expenses 316  362 
Administrative services expenses 3,566  3,001 
Professional fees 4,153  4,074 
Share-based compensation 1,255  669 
Depreciation and amortization 1,513  1,295 
Other expenses 2,856  1,424 
Total expenses from operations $ 21,567  $ 17,255 
The increase in operating expenses was primarily related to (i) an increase in asset management and subordinated performance fees due to incentive fees incurred during the three months ended September 30, 2023, (ii) an increase in share-based compensation expense during the three months ended September 30, 2023 due to the increased number of outstanding equity awards issued under the Company's share plans and (iii) an increase in other expenses primarily related to increases in fees due to various vendors.
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Comparison of the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022
Net Interest Income
Net interest income is generated on our interest-earning assets less related interest-bearing liabilities and is recorded as part of our real estate debt, real estate securities and TRS segments.
The following table presents the average balance of interest-earning assets less related interest-bearing liabilities, associated interest income and expense and corresponding yield earned and incurred for the nine months ended September 30, 2023 and 2022 (dollars in thousands):
Nine Months Ended September 30,
2023 2022
Average Carrying Value (1)
Interest Income/Expense (2)(3)
WA Yield/Financing Cost (4)(5)
Average Carrying Value (1)
Interest Income/Expense (2)
WA Yield/Financing Cost (4)(5)
Interest-earning assets:
Real estate debt (6)
 $ 5,053,900 $ 404,300 10.7  % $ 4,801,389 $ 209,585 5.8  %
Real estate conduit 18,289 1,179 8.6  % 114,588 4,593 5.3  %
Real estate securities 283,598 12,488 5.9  % 1,467,367 25,424 2.3  %
Total $ 5,355,787 $ 417,967 10.4  % $ 6,383,344 $ 239,602 5.0  %
Interest-bearing liabilities:
Repurchase Agreements - commercial mortgage loans $ 683,982 $ 46,471 9.1  % $ 785,341 $ 26,042 4.4  %
Other financing and loan participation - commercial mortgage loans 70,798 4,822 9.1  % 43,073 1,177 3.6  %
Repurchase Agreements - real estate securities 255,671 10,140 5.3  % 1,334,911 4,500 0.4  %
Collateralized loan obligations 3,050,011 157,107 6.9  % 2,818,305 60,259 2.9  %
Unsecured debt 87,056 5,807 8.9  % 102,662 4,284 5.6  %
Total $ 4,147,518 $ 224,347 7.2  % $ 5,084,292 $ 96,262 2.5  %
Net interest income/spread $ 193,620 3.2  % $ 143,340 2.5  %
Average leverage % (7)
 77.4  % 79.6  %
Weighted average levered yield (8)
 21.4  % 14.7  %
_________________________________________________
(1) Based on amortized cost for real estate debt and real estate securities and principal amount for interest-bearing liabilities. Amounts are calculated based on daily averages for the nine months ended September 30, 2023 and 2022, respectively.
(2) Includes the effect of amortization of premium or accretion of discount and deferred fees.
(3) Excludes other income on the real estate owned business segment.
(4) Calculated as interest income or expense divided by average carrying value.
(5) Annualized.
(6) The Company sold the Brooklyn hotel asset in April 2023 resulting in $15.5 million and $4.9 million in coupon and default interest income, respectively, recognized in the Company's real estate debt segment during the nine months ended September 30, 2023.
(7) Calculated by dividing total average interest-bearing liabilities by total average interest-earning assets.
(8) Calculated by dividing net interest income/spread by the average interest-earning assets less average interest-bearing liabilities.
Interest Income
Interest income for the nine months ended September 30, 2023 and 2022 totaled $420.5 million and $239.6 million, respectively, an increase of $180.9 million. The increase was due primarily to an approximate 390 basis point increase in daily average SOFR and SOFR equivalent rates and additional proceeds of $20.4 million from the Brooklyn Hotel sale. As of September 30, 2023, our portfolio consisted of (i) 145 commercial mortgage loans, held for investment, (ii) one commercial mortgage loan, held for sale, measured at fair value and (iii) six real estate securities, available for sale, measured at fair value. As of September 30, 2022, our portfolio consisted of (i) 166 commercial mortgage loans, held for investment, (ii) three commercial mortgage loans, held for sale, measured at fair value, (iii) three real estate securities, available for sale, measured at fair value and (iv) ARMs.
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Interest Expense
Interest expense for the nine months ended September 30, 2023 and 2022 was $224.3 million and $96.3 million, respectively, an increase of $128.1 million. The increase was due primarily to an increase of $231.7 million in the average carrying value of our collateralized loan obligations coupled with an approximate 390 basis point increase in average SOFR and SOFR equivalent rates partially offset by a decrease of $101.4 million in the average carrying value of our repurchase agreements - commercial mortgage loans.
Revenue from Real Estate Owned
For the nine months ended September 30, 2023 and 2022, revenue from real estate owned was $13.1 million and $6.9 million, respectively. The $6.2 million increase was primarily the result of rental income from obtaining possession of additional retail properties brought on as real estate owned.
Provision/(Benefit) for Credit losses
Provision for credit losses was $28.4 million during the nine months ended September 30, 2023 compared to a provision of $31.0 million during the nine months ended September 30, 2022. The following paragraphs set forth explanations for changes in the general and specific reserves for the nine months ended September 30, 2023 and 2022.
For the nine months ended September 30, 2023 and 2022, the increase in general provision of $16.0 million and $3.4 million, respectively, was due primarily to a more pessimistic view of the macroeconomic scenario utilized for the CECL model. For the nine months ended September 30, 2023, this was partially offset by a decrease in the size of our loan portfolio compared to the preceding period.
For the nine months ended September 30, 2023, the increase in specific CECL reserve of $12.4 million was primarily related to the additional specific CECL provision on one office loan located in Portland, OR coupled with higher capitalization rates on the assumed fair value of the properties in the Walgreens Portfolio. Comparatively, for the nine months ended September 30, 2022, a specific CECL allowance of $27.6 million was recorded for the loan collateralized by the Walgreens Portfolio.
Realized Gain/(Loss) on Extinguishment of Debt
Realized gain on extinguishment of debt for the nine months ended September 30, 2023 of $2.2 million was primarily related to the redemption of $17.5 million par value unsecured debt at a price equal to 75% of par value coupled with the repurchases of $2.3 million of bonds of BSPRT 2021-FL7 and $8.25 million of bonds of BSPRT 2019-FL5 partially offset by the redemption of BSPRT 2019-FL5. Realized loss on extinguishment of debt for the nine months ended September 30, 2022 of $5.2 million was primarily related to the redemption of BSPRT 2018-FL4.
Realized Gain/(Loss) on Sale of Available for Sale Trading Securities
Realized gain on sale of available for sale trading securities for the nine months ended September 30, 2023 of $0.1 million was primarily related to the sale of 10 CRE CLO bonds. There were no sales of available for sale trading securities during the nine months ended September 30, 2022.
Realized Gain/(Loss) on Sale of Commercial Mortgage Loans, Held for Sale, Measured at Fair Value
Realized gain on commercial mortgage loans, held for sale, measured at fair value for the nine months ended September 30, 2023 of $3.0 million was related to the sale of $91.9 million in principal amount of commercial real estate loans into the CMBS securitization market resulting in proceeds of $95.1 million. Realized gain on commercial mortgage loans, held for sale, measured at fair value for the nine months ended September 30, 2022 of $4.8 million was related to the sale of $316.4 million in principal amount of commercial real estate loans into the CMBS securitization market resulting in proceeds of $320.2 million.
Unrealized Gain/(Loss) on Commercial Mortgage Loans, Held for Sale, Measured at Fair Value
The Company did not have any commercial mortgage loans, held for sale, measured at fair value held in an unrealized gain or loss position as of September 30, 2023. Unrealized gain on commercial mortgage loans, held for sale, measured at fair value for the nine months ended September 30, 2023 was $44.0 thousand related to the reversal of prior year unrealized gain/loss on a sale of a commercial real estate loan into the CMBS securitization market in the first quarter of 2023. Comparatively, the Company recognized a loss of $3.7 million for the nine months ended September 30, 2022 related to the reversal of unrealized gain/loss on sales of commercial real estate loans into the CMBS securitization market.
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Gain/(Loss) on Other Real Estate Investments
Loss on other real estate investments for the nine months ended September 30, 2023 was $7.1 million compared to $29.0 thousand for the nine months ended September 30, 2022. For the nine months ended September 30, 2023, the loss was the result of a sale of one real estate owned, held for sale property located in New Rochelle, NY, resulting in a loss of $1.2 million, in addition to impairments of our real estate owned, held for sale assets of $1.9 million related to the St. Louis, MO office property and $4.0 million related to the Walgreens Portfolio.
Trading Gain/(Loss)
Trading loss for the nine months ended September 30, 2023 and 2022 of $0.6 million and $113.7 million, respectively, was attributable to $17.6 million and $468.9 million of principal paydowns, respectively, $218.2 million and $3.8 billion of sales of ARM Agency Securities, and changes in market values on these securities. We sold all remaining assets from our ARMs portfolio during the nine months ended September 30, 2023.
Net Result from Derivative Transactions
Net result from derivative transactions for the nine months ended September 30, 2023 of a $0.6 million gain was composed of a realized gain of $0.7 million due primarily to the termination and settlement of interest rate swap positions coupled with an unrealized loss of $0.1 million. This is compared to a net gain on our derivative portfolio of $44.8 million composed of a realized gain of $57.6 million due primarily to the termination and settlement of interest rate swap positions specifically designed to hedge the ARMs portfolio partially offset by an unrealized loss of $12.8 million for the nine months ended September 30, 2022.
(Provision)/Benefit for Income Tax
Benefit for income tax for the nine months ended September 30, 2023 was $2.4 million compared to a provision of $0.3 million for the nine months ended September 30, 2022. The difference is due to change in taxable income/loss in our TRS segment.
Net (Income)/Loss Attributable to Non-controlling Interest
Net loss attributable to non-controlling interest in our consolidated joint ventures for the nine months ended September 30, 2023 amounted to $0.7 million. There was no net income/loss attributable to non-controlling interest for the nine months ended September 30, 2022.
Preferred Share Dividends
Preferred share dividends were $20.2 million for the nine months ended September 30, 2023 compared to $34.9 million for the nine months ended September 30, 2022, a decrease of $14.6 million. The decrease is due primarily to fewer preferred shares outstanding following the automatic conversion into Common Stock of the Company's Series F Convertible Preferred Stock in April 2022, Series C Convertible Preferred Stock in October 2022 and Series I Convertible Preferred Stock in January 2023 (see Note 9 - Redeemable Convertible Preferred Stock and Equity Transactions).
Expenses from Operations
Expenses from operations for the nine months ended September 30, 2023 and 2022 consisted of the following (dollars in thousands):
Nine Months Ended
September 30, 2023 September 30, 2022
Asset management and subordinated performance fee $ 24,893  $ 19,776 
Acquisition expenses 977  996 
Administrative services expenses 10,993  9,402 
Professional fees 11,761  18,287 
Share-based compensation 3,505  1,851 
Depreciation and amortization 5,514  3,886 
Other expenses 9,323  4,849 
Total expenses from operations $ 66,966  $ 59,047 
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The increase in operating expenses was primarily related to (i) an increase in asset management and subordinated performance fees due to incentive fees incurred during the nine months ended September 30, 2023 and (ii) an increase in share-based compensation expense during the nine months ended September 30, 2023 due to an increase in outstanding equity awards issued under the Company's share plans partially offset by a decrease in professional fees primarily related to the reduction in legal costs associated with our recovery efforts related to a hotel asset and the Walgreens Portfolio.
Comparison of the Three Months Ended September 30, 2023 to the Three Months Ended June 30, 2023
Net Interest Income
Net interest income is generated on our interest-earning assets less related interest-bearing liabilities and is recorded as part of our real estate debt, real estate securities and TRS segments.
The following table presents the average balance of interest-earning assets less related interest-bearing liabilities, associated interest income and expense and corresponding yield earned and incurred for the three months ended September 30, 2023 and June 30, 2023 (dollars in thousands):
Three Months Ended
September 30, 2023 June 30, 2023
Average Carrying Value (1)
Interest Income/Expense (2)(3)
WA Yield/Financing Cost (4)(5)
Average Carrying Value (1)
Interest Income/Expense (2)(3)
WA Yield/Financing Cost (4)(5)
Interest-earning assets:
Real estate debt (6)
 $ 4,770,339 $ 131,093 11.0  % $ 4,957,208 $ 147,258 11.9  %
Real estate conduit 9,859 109 4.4  % 29,446 748 10.2  %
Real estate securities 277,664 4,908 7.1  % 272,291 4,012 5.9  %
Total $ 5,057,862 $ 136,110 10.8  % $ 5,258,945 $ 152,018 11.6  %
Interest-bearing liabilities:
Repurchase Agreements - commercial mortgage loans $ 711,560 $ 16,868 9.5  % $ 668,366 $ 15,070 9.0  %
Other financing and loan participation - commercial mortgage loans 61,125 1,444 9.4  % 79,231 1,938 9.8  %
Repurchase Agreements - real estate securities 223,199 3,151 5.6  % 249,732 3,543 5.7  %
Collateralized loan obligations 2,974,039 54,608 7.3  % 3,067,338 52,963 6.9  %
Unsecured debt 81,258 1,902 9.4  % 81,233 1,786 8.8  %
Total $ 4,051,181 $ 77,973 7.7  % $ 4,145,900 $ 75,300 7.3  %
Net interest income/spread $ 58,137 3.1  % $ 76,718 4.3  %
Average leverage % (7)
 80.1  % 78.8  %
Weighted average levered yield (8)
 23.1  % 27.6  %
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(1) Based on amortized cost for real estate debt and real estate securities and principal amount for interest-bearing liabilities. Amounts are calculated based on daily averages for the three months ended September 30, 2023 and June 30, 2023, respectively.
(2) Includes the effect of amortization of premium or accretion of discount and deferred fees.
(3) Excludes other income on the real estate owned business segment.
(4) Calculated as interest income or expense divided by average carrying value.
(5) Annualized.
(6) The Company sold the Brooklyn hotel asset in April 2023 resulting in $15.5 million and $4.9 million in coupon and default interest income, respectively, recognized in the Company's real estate debt segment during the three months ended June 30, 2023.
(7) Calculated by dividing total average interest-bearing liabilities by total average interest-earning assets.
(8) Calculated by dividing net interest income/spread by the average interest-earning assets less average interest-bearing liabilities.
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Interest Income
Interest income for the three months ended September 30, 2023 and June 30, 2023 totaled $137.0 million and $152.9 million, respectively, a decrease of $15.9 million. The decrease was due primarily to a decrease of $186.9 million in the average carrying value of our real estate debt in the three months ended September 30, 2023 and the impact of the $20.4 million of proceeds from the Brooklyn hotel sale recognized in the three months ended June 30, 2023 partially offset by an approximate 27 basis point increase in daily average SOFR and SOFR equivalent rates. As of September 30, 2023, our portfolio consisted of (i) 145 commercial mortgage loans, held for investment, (ii) one commercial mortgage loan, held for sale, measured at fair value and (iii) six real estate securities, available for sale, measured at fair value. As of June 30, 2023, our portfolio consisted of (i) 156 commercial mortgage loans, held for investment, (ii) one commercial mortgage loan, held for sale, (iii) nine real estate securities, available for sale, measured at fair value and (iv) ARMs.
Interest Expense
Interest expense for the three months ended September 30, 2023 and June 30, 2023 totaled $78.0 million and $75.3 million, respectively, an increase of $2.7 million. The increase was primarily due to an approximate 27 basis point increase in daily average SOFR and SOFR equivalent rates partially offset by a decrease of $93.3 million in the average carrying value of our collateralized loan obligations.
Revenue from Real Estate Owned
For the three months ended September 30, 2023 and June 30, 2023, revenue from real estate owned was $3.3 million and $6.4 million, respectively. The $3.1 million decrease was primarily the result of the recognition of inception to date rental income recognized in the three months ended June 30, 2023 coupled with the write off of lease intangibles on one of our real estate owned properties.
(Provision)/Benefit for Credit losses
Provision for credit losses was $2.4 million during the three months ended September 30, 2023 compared to a provision of $21.6 million during three months ended June 30, 2023. The following paragraphs set forth explanations for changes in the general and specific reserves for the three months ended September 30, 2023 and June 30, 2023.
For the three months ended September 30, 2023, the increase in general provision of $2.8 million was due primarily to declining performance on our portfolio partially offset by decrease in our portfolio. For the three months ended June 30, 2023, the increase in general provision of $9.7 million was due primarily to a more pessimistic view of the macroeconomic scenario utilized for the CECL model.
For the three months ended September 30, 2023, the Company recognized $0.4 million of specific CECL benefit on one office loan located in Portland, OR. Comparatively, for the three months ended June 30, 2023, the Company recognized $11.9 million of specific CECL allowance on the same loan.
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Realized Gain/(Loss) on Extinguishment of Debt
Realized loss on extinguishment of debt for the three months ended September 30, 2023 of $2.8 million was related to redemption of BSPRT 2019-FL5. Realized gain on extinguishment of debt for the three months ended June 30, 2023 was $0.3 million related to the repurchase of $2.3 million of BSPRT 2021-FL7 bonds.
Realized Gain/(Loss) on Sale of Available for Sale Trading Securities
Realized loss on sale of available for sale trading securities for the three months ended September 30, 2023 of $0.5 million was primarily related to the sale of six CRE CLO bonds. There were no sales of available for sale trading securities during the three months ended June 30, 2023
Realized Gain/(Loss) on Sale of Commercial Mortgage Loans, Held for Sale, Measured at Fair Value
Realized gain on commercial mortgage loans, held for sale, measured at fair value for the three months ended September 30, 2023 of $0.9 million was related to the sale of $34.3 million in principal amount of commercial real estate loans into the CMBS securitization market resulting in proceeds of $35.3 million. Realized gain on commercial mortgage loans, held for sale, measured at fair value for the three months ended June 30, 2023 of $2.1 million was related to the sale of $57.6 million in principal amount of commercial real estate loans into the CMBS securitization market resulting in proceeds of $59.7 million.
Unrealized Gain/(Loss) on Commercial Mortgage Loans, Held for Sale, Measured at Fair Value
The Company did not have any commercial mortgage loans, held for sale, measured at fair value held in an unrealized gain or loss position as of September 30, 2023. Unrealized loss on commercial mortgage loans, held for sale, measured at fair value for the three months ended June 30, 2023 was $0.3 million.
Gain/(Loss) on Other Real Estate Investments
Loss on other real estate investments for the three months ended September 30, 2023 of $4.1 million was primarily due to an impairment on the Walgreens Portfolio, a real estate owned, held for sale asset compared to a loss of $1.7 million for the three months ended June 30, 2023 primarily due to a loss on sale of one real estate owned, held for sale property located in New Rochelle, NY.
Trading Gain/(Loss)
Trading loss for the three months ended September 30, 2023 and June 30, 2023 of $2.6 million and $0.9 million, respectively, was attributable to $2.6 million and $7.5 million of principal paydowns, respectively, $122,764 and zero of sales of ARM Agency Securities, respectively, and changes in market values on these securities.
Net Result from Derivative Transactions
Net result from derivative transactions for the three months ended September 30, 2023 of a $0.1 million loss was composed of a realized gain of $0.1 million due primarily to the termination and settlement of interest rate swap positions coupled with an unrealized loss of $0.2 million. This is compared to a net gain on our derivative portfolio of $1.0 million composed of a realized gain of $0.6 million due to the termination and settlement of interest rate swap positions coupled with an unrealized gain of $0.4 million for the three months ended June 30, 2023 .
(Provision)/Benefit for Income Tax
Benefit for income tax for the three months ended September 30, 2023 was $1.8 million compared to a provision of $53.0 thousand for the three months ended June 30, 2023. The difference is due to change in taxable income/loss in our TRS segment.
Net Income/(Loss) Attributable to Non-controlling Interest
Net loss attributable to non-controlling interest in our consolidated joint ventures for the three months ended September 30, 2023 and June 30, 2023 amounted to $0.8 million and $41.0 thousand, respectively.
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Preferred Share Dividends
Preferred share dividends were $6.7 million for both the three months ended September 30, 2023 and June 30, 2023. (see Note 9 - Redeemable Convertible Preferred Stock and Equity Transactions).
Expenses from operations
Expenses from operations for the three months ended September 30, 2023 and June 30, 2023 consisted of the following (dollars in thousands):
Three Months Ended
September 30, 2023 June 30, 2023
Asset management and subordinated performance fee $ 7,908  $ 8,900 
Acquisition expenses 316  283 
Administrative services expenses 3,566  3,398 
Professional fees 4,153  2,794 
Share-based compensation 1,255  1,228 
Depreciation and amortization 1,513  2,196 
Other expenses 2,856  4,301 
Total expenses from operations $ 21,567  $ 23,100 
The decrease in operating expenses was primarily related to (i) a decrease in asset management and subordinated performance fees due to a decrease in incentive fees incurred during the three months ended September 30, 2023 and (ii) a decrease in depreciation and amortization due to the reclassification of the Walgreens Portfolio from real estate owned to held for sale partially offset by (iii) an increase in professional fees primarily related to an increase in advisory services provided.
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Liquidity and Capital Resources
Overview
Our expected material cash requirements over the next twelve months and thereafter are composed of (i) contractually obligated payments, including payments of principal and interest and contractually-obligated fundings on our loans; (ii) other essential expenditures, including operating and administrative expenses and dividends paid in accordance with REIT distribution requirements; and (iii) opportunistic investments, including new loans.
Our contractually obligated payments primarily consist of payment obligations under the debt financing arrangements which are set forth below, including in the table under “Contractual Obligations and Commitments.”
We may from time to time purchase or retire outstanding debt securities or repurchase or redeem our equity securities. Such purchases, if any, will depend on prevailing market conditions, liquidity requirements and other factors.
Debt-to-Equity Ratio and Total Leverage Ratio
The following table presents our debt-to-equity and total leverage ratios:
September 30, 2023 December 31, 2022
Net debt-to-equity ratio(1)
 2.2x 2.5x
Total leverage ratio(2)
 2.4x 2.6x
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(1) Represents (i) total outstanding borrowings under secured financing arrangements, including collateralized loan obligations, repurchase agreements - commercial mortgage loans, repurchase agreements - real estate securities, asset-specific financing arrangements, and unsecured debt, less cash, to (ii) total stockholders’ equity, at period end. Recourse debt-to-equity ratio was 0.1x and 0.7x as of September 30, 2023 and December 31, 2022, respectively.
(2) Represents (i) total outstanding borrowings under secured financing arrangements, including collateralized loan obligations, repurchase agreements - commercial mortgage loans, repurchase agreements - real estate securities, asset-specific financing arrangements, and unsecured debt, to (ii) total stockholders’ equity, at period end. Recourse leverage ratio was 0.1x and 0.7x as of September 30, 2023 and December 31, 2022, respectively.
Sources of Liquidity
Our primary sources of liquidity include unrestricted cash, capacity in our collateralized loan obligations available for reinvestment, and financings available and in progress on financing lines.
Our current sources of near-term liquidity as of September 30, 2023 and December 31, 2022 are set forth in the following table (dollars in millions):
September 30, 2023 December 31, 2022
Unrestricted cash $ 411  $ 179 
CLO reinvestment available(1)
 25  16 
Financings available & in progress(2)
 1,359  822 
Total $ 1,795  $ 1,017 
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(1) See discussion below for further information on the Company's collateralized loan obligations.
(2) Represents cash available we can invest at a market advance rate utilizing our available capacity on financing lines.
We expect to use additional debt and equity financing as a source of capital. Our board of directors currently intends to operate at a leverage level of between one to three times book value of equity. However, our board of directors may change this target without shareholder approval. We anticipate that our debt and equity financing sources and our anticipated cash generated from operations will be adequate to fund our anticipated uses of capital.
We have an effective shelf registration statement for offerings of equity securities that is not limited on the amount of securities we may issue.
In addition to our current mix of financing sources, we may also access additional forms of financings, including credit facilities, securitizations, public and private, secured and unsecured debt issuances by us or our subsidiaries, or through capital recycling initiatives whereby we sell certain assets in our portfolio and reinvest the proceeds in assets with more attractive risk-adjusted returns.
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Collateralized Loan Obligations
During the nine months ended September 30, 2023, the Company raised $897 million through the issuance of BSPRT 2023 FL10. Additionally, as of September 30, 2023, the Company had $24.6 million of reinvestment capital available across all outstanding collateralized loan obligations.
CLO Name Debt Amount Reinvestment End Date
BSPRT 2019 FL5(1)
—
 Ended
BSPRT 2021 FL6 $ 583.08  10/06/23
BSPRT 2021 FL7 $ 720.00  01/08/24
BSPRT 2022 FL8 $ 960.00  03/08/24
BSPRT 2022 FL9 $ 670.64  07/08/24
BSPRT 2023 FL10 $ 573.79  04/08/25
______________________________________________________
(1) 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
Repurchase Agreements and Revolving Credit Facilities ("Repo and Revolving Credit Facilities")
The Repo and Revolving Credit Facilities are financing sources through which the Company may pledge one or more mortgage loans to the financing entity in exchange for funds typically at an advance rate of between 60% to 75% of the principal amount of the mortgage loan being pledged.
We expect to use the advances from these Repo and Revolving Credit Facilities to finance the acquisition or origination of eligible loans, including first mortgage loans, subordinated mortgage loans, mezzanine loans and participation interests therein.
The Repo and Revolving Credit Facilities generally provide that in the event of a decrease in the value of our collateral, the lenders can demand additional collateral. Should the value of our collateral decrease as a result of deteriorating credit quality, resulting margin calls may cause an adverse change in our liquidity position.
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The following tables summarize our Repurchase Agreements, Commercial Mortgage Loans and our MRAs for the nine months ended September 30, 2023, 2022, and 2021, respectively:
As of September 30, 2023
Amount Outstanding Average Outstanding Balance
Q1 Q2 Q3 Q1 Q2 Q3
Repurchase Agreements and Revolving Credit Facilities, Commercial Mortgage Loans $ 604,421  $ 695,039  $ 249,345  $ 725,300  $ 796,659  $ 816,929 
Repurchase Agreements, Real Estate Securities 107,934  176,993  240,010  217,389  209,025  349,878 
Repurchase Agreements, Real Estate Securities held as trading 121,000  113,000  —  149,387  117,159  349,878 
Total $ 833,355  $ 985,032  $ 489,355  $ 1,092,076  $ 1,122,843  $ 1,516,685 
As of September 30, 2022
Amount Outstanding Average Outstanding Balance
Q1 Q2 Q3 Q1 Q2 Q3
Repurchase Agreements and Revolving Credit Facilities, Commercial Mortgage Loans $ 522,890  $ 832,034  $ 699,408  $ 813,144  $ 834,337  $ 709,679 
Repurchase Agreements, Real Estate Securities 54,610  53,288  112,613  44,744  54,033  53,688 
Repurchase Agreements, Real Estate Securities held as trading 1,659,931  240,000  225,000  3,055,413  1,818,495  230,011 
Total $ 2,237,431  $ 1,125,322  $ 1,037,021  $ 3,913,301  $ 2,706,865  $ 993,378 
As of September 30, 2021
Amount Outstanding Average Outstanding Balance
Q1 Q2 Q3 Q1 Q2 Q3
Repurchase Agreements and Revolving Credit Facilities, Commercial Mortgage Loans $ 152,925  $ 287,462  $ 550,156  $ 340,485  $ 282,891  $ 331,871 
Repurchase Agreements, Real Estate Securities 88,272  46,510  46,531  123,322  57,301  46,527 
Total $ 241,197  $ 333,972  $ 596,687  $ 463,807  $ 340,192  $ 378,398 
The use of our warehouse lines is dependent upon a number of factors including but not limited to: origination volume, loan repayments and prepayments, our use of other financing sources such as collateralized loan obligations, our liquidity needs and types of loan assets and underlying collateral that we hold.
During the nine months ended September 30, 2023, the maximum average outstanding balance was $1.2 billion, of which $0.9 billion was related to repurchase agreements on our commercial mortgage loans and $0.3 billion for repurchase agreements on our real estate securities.
During the nine months ended September 30, 2022, the maximum average outstanding balance was $5.3 billion, of which $1.1 billion was related to repurchase agreements on our commercial mortgage loans and $4.2 billion for repurchase agreements on our real estate securities.
During the nine months ended September 30, 2021, the maximum average outstanding balance was $475.5 million, of which $363.6 million was related to repurchase agreements on our commercial mortgage loans and $111.9 million for repurchase agreements on our real estate securities.
Distributions
In order to maintain our election to qualify as a REIT, we must currently distribute, at a minimum, an amount equal to 90% of our taxable income, without regard to the deduction for distributions paid and excluding net capital gains. The Company must distribute 100% of its taxable income (including net capital gains) to avoid paying corporate U.S. federal income taxes.
Distributions on our common stock are payable when declared by our board of directors.
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Dividends payable on each share of Series H convertible preferred stock ("Series H Preferred Stock") is generally equal to the quarterly dividend that would have been paid had such share of preferred stock been converted to a share of common stock, except to the extent common stock dividends have been reduced below certain specified levels. To the extent dividends on shares of preferred stock are not authorized and declared by our board of directors and paid by the Company monthly, the dividend amounts will accrue.
Holders of shares of the Company's 7.50% Series E Cumulative Redeemable Preferred Stock ("Series E Preferred Stock") are entitled to receive, when, as and if authorized by our board of directors and declared by the Company, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 7.50% of the $25.00 per share liquidation preference per annum (equivalent to $1.875 per annum per share).
In September 2023, the Company's board of directors declared the following: (i) a third quarter 2023 dividend of $0.355 per share on the Company's common stock (equivalent to $1.42 per annum), (ii) a third quarter 2023 dividend of $106.22 per share on the Company’s Series H Preferred Stock, and (iii) a third quarter 2023 dividend of $0.46875 per share on the Company’s Series E Preferred Stock, all of which were paid in October 2023 to holders of record on September 30, 2023.
Under the Company’s dividend reinvestment plan ("DRIP"), the Company may elect to supply shares for reinvestments via newly issued shares or via shares of common stock acquired by the DRIP administrator on the open market. The below table shows distributions paid in cash on shares outstanding of common stock and amounts paid via newly issued shares under the DRIP during the nine months ended September 30, 2023 and 2022 (dollars in thousands):
Nine Months Ended September 30, 2023
Payment Date  Amount Paid in Cash  Amount Issued under DRIP
January 10, 2023 $ 29,462  $ — 
April 10, 2023 28,850  768 
July 10, 2023 29,472  — 
Total $ 87,784  $ 768 
Nine Months Ended September 30, 2022
Payment Date  Amount Paid in Cash  Amount Issued under DRIP
January 7, 2022 $ 12,435  $ 91 
April 11, 2022 15,616  112 
July 11, 2022 28,979  907 
Total $ 57,030  $ 1,110 
Cash Flows
Cash Flows for the Nine Months Ended September 30, 2023
Net cash provided by operating activities for the nine months ended September 30, 2023 was $141.5 million. Cash inflows were primarily driven by net income of $114.5 million coupled with (i) losses on other real estate investments of $7.1 million and (ii) a non-cash adjustment of $28.4 million related to the increase in provision for credit losses offset by (i) $2.2 million gains from debt extinguishment and (ii) $3.0 million in gains on sale of commercial mortgage loans, held for sale, measured at fair value.
Net cash provided by investing activities for the nine months ended September 30, 2023 was $554.8 million. Cash inflows were primarily driven by (i) the sale of real estate securities, trading, at fair value of $217.5 million, (ii) sale of real estate securities, available for sale, measured at fair value of $187.0 million, (iii) principal repayments on commercial mortgage loans, held for investment of $921.5 million, (iv) proceeds from sale of real estate owned, held for sale of $39.8 million and (v) principal collateral received on mortgage investments of $17.7 million. Inflows were offset by (i) proceeds for originations and purchases of $668.0 million of commercial mortgage loans, held for investment, (ii) $160.3 million for the purchase of real estate securities and (iii) purchase of real estate owned and capital expenditures of $0.9 million.
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Net cash used in financing activities for the nine months ended September 30, 2023 was $468.7 million. Cash outflows were primarily driven by (i) our net repayments on real estate securities MRAs of $200.0 million, (ii) net repayments from borrowings on unsecured debt of $13.4 million, (iii) net repayments on borrowings on repurchase agreements - commercial mortgage loans of $431.5 million, (iv) net repayment from borrowings on other financing of $52.6 million (v) $108.1 million used for cash distributions to stockholders and (iv) payment from common stock repurchases of $9.2 million. Outflows were partially offset by net proceeds of $357.6 million received on collateralized loan obligations.
Cash Flows for the Nine Months Ended September 30, 2022
Net cash provided by operating activities for the nine months ended September 30, 2022 was $130.6 million. This was driven by net loss of $13.0 million, which when excluding the following non-cash items, (i) $113.7 million related to trading losses on real estate securities, at fair value (ii) $12.8 million related to derivative instruments and (iii) $31.0 million increase in provision for credit losses, results in a net cash flow. This inflow is coupled with $48.1 million net changes of assets and liabilities, partially offset by net outflows of (i) $10.3 million related to originations of and proceeds from sales of commercial mortgage loans, held for sale and (ii) realized gains of $55.3 million on swap terminations.
Net cash provided by investing activities for the nine months ended September 30, 2022 was $3,202.0 million. Cash inflows were primarily driven by (i) the sale of real estate securities, available for sale, measured at fair value of $3,731.7 million, (ii) principal repayments on commercial mortgage loans, held for investment of $965.7 million, (iii) principal collateral received on mortgage investments of $533.9 million and (iv) $9.3 million received from sale of commercial mortgage loans, held for sale. Inflows were offset by (i) proceeds for originations and purchases of $1,964.2 million of commercial mortgage loans, held for investment and (ii) $75.0 million for the purchase of real estate securities available for sale.
Net cash used in financing activities for the nine months ended September 30, 2022 was $3,238.9 million. Cash outflows were primarily driven by our (i) net repayments on real estate securities MRAs of $3,841.2 million, (ii) net repayments from borrowings on repurchase agreements - commercial mortgage loans and unsecured debt of $320.2 million and $50.0 million, respectively, (iii) $102.9 million was used for cash distributions to stockholders and (iv) payments for common stock repurchases of $11.0 million. Outflows were offset by (i) net borrowings on CLOs of $1,021.1 million and (ii) a total of $65.2 million of cash collateral and proceeds received on interest rate swaps and settlements.
Election as a REIT
We elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with the taxable year ended December 31, 2013. As a REIT, if we meet certain organizational and operational requirements and distribute at least 90% of our "REIT taxable income" (determined before the deduction of dividends paid and excluding net capital gains) to our stockholders in a year, we will not be subject to U.S. federal income tax to the extent of the income that we distribute. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, and U.S. federal income and excise taxes on our undistributed income.
Contractual Obligations and Commitments
Our contractual obligations, excluding interest obligations (as amounts are not fixed or determinable), as of September 30, 2023 are summarized as follows (dollars in thousands):
Less than 1 year 1 to 3 years 3 to 5 years More than 5 years Total
Unfunded loan commitments (1)
 $ 23,772  $ 345,273  $ 18,617  $ —  $ 387,662 
Repurchase agreements - commercial mortgage loans 28,675  220,670  —  —  249,345 
Repurchase agreements - real estate securities 240,010  —  —  —  240,010 
CLOs (2)
 —  —  —  3,507,511  3,507,511 
Mortgage Note Payable —  —  —  23,998  23,998 
Unsecured debt —  —  —  81,270  81,270 
Other financings 23,669  —  —  —  23,669 
Total $ 316,126  $ 565,943  $ 18,617  $ 3,612,779  $ 4,513,465 
________________________________________________________
(1) The allocation of our unfunded loan commitments is based on the earlier of the commitment expiration date or the loan maturity date.
(2) Excludes $610.5 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligations line of the consolidated balance sheet as of September 30, 2023. This reflects the contractual CLO maturity dates.
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In addition to its cash requirements, the Company pays a quarterly dividend and has an existing share repurchase authorization. As of September 30, 2023, the Company’s quarterly cash dividend was $0.355 per share of common stock (which was paid on an as-converted basis on the Company’s shares of Series H Preferred Stock), and $0.46875 per share on the Company’s shares of Series E Preferred Stock. The payment of future dividends is subject to declaration by the board of directors. The Company’s board of directors also has authorized a $65.0 million share repurchase program, of which $39.3 million remained available as of September 30, 2023. The authorization does not obligate the Company to acquire any specific number of shares, and the Company did not repurchase any shares of its common stock during the three months ended September 30, 2023.
Related Party Arrangements
Refer to “Note 11 - Related Party Transactions and Arrangements” for a summary of the Company’s related party arrangements.
Non-GAAP Financial Measures
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 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 and CLO calls, and (viii) certain other non-cash items. 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 Mortgage Corporation, which the Company has liquidated 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.
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The following table provides a reconciliation of GAAP net income to Distributable Earnings and Run-Rate Distributable Earnings as of the three and nine months ended September 30, 2023 and 2022 (amounts in thousands, except share and per share data):
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
GAAP Net Income (Loss) $ 30,995 $ 35,258 $ 114,478 $ (12,958)
Adjustments:
CLO amortization acceleration (1)
 (1,294) (1,226) (3,959) (4,168)
Unrealized (gain)/loss on financial instruments (2)
 4,295 (1,624) 7,208 16,498
Unrealized (gain)/loss - ARMs — 2,742 415 37,862
(Reversal of)/Provision for credit losses 2,379 (599) 28,363 30,976
Non-Cash Compensation Expense 1,256 833 3,506 833
Depreciation and amortization 1,513 1,295 5,514 3,886
Subordinated performance fee (3)
 1,579 (2,461) 3,599 (5,917)
Loan workout charges/(loan workout recoveries) (4)
 — 205 (5,105) 5,105
Realized (gain)/loss on debt extinguishment / CLO call 2,836 — (2,201) 5,167
Realized trading and derivatives (gain)/loss on ARMs 3,113 (155) 677 21,927 
Run-Rate Distributable Earnings (5)
 $ 46,672 $ 34,268 $ 152,495 $ 99,211
Realized Cash Gain/(Loss) Adjustment on REO (1,571) — (1,571) —
Realized trading and derivatives gain/(loss) on ARMs (3,113) 155 (677) (21,927)
Distributable Earnings $ 41,988 $ 34,423 $ 150,247 $ 77,284
7.5% Cumulative Redeemable Preferred Stock, Series E Dividend (4,842) (4,842) (14,525) (14,525)
Noncontrolling interests in joint ventures net income/(loss) (276) —  (326) — 
Depreciation and amortization attributed to noncontrolling interests of joint ventures 772  —  (15) — 
Distributable Earnings to Common $ 37,642 $ 29,581 $ 135,381 $ 62,759
Average Common Stock & Common Stock Equivalents 1,402,370  1,422,040  1,406,481  1,470,393 
GAAP Net Income/(Loss) ROE 7.7% 8.6% 7.1% (1.9)%
Run-Rate Distributable Earnings ROE 12.1% 8.3% 9.8% 5.8%
Distributable Earnings ROE 10.7% 8.3% 9.6% 4.3%
GAAP Net Income/(Loss) Per Share, Diluted $ 0.30 $ 0.34 $ 1.14  $ (0.70)
GAAP Net Income/(Loss) Per Share, Fully Converted (6)
 $ 0.30 $ 0.34 $ 1.12  $ (0.31)
Run-Rate Distributable Earnings Per Share, Fully Converted (6)
 $ 0.48 $ 0.33 $ 1.55  $ 0.94 
Distributable Earnings Per Share, Fully Converted (6)
 $ 0.43 $ 0.33 $ 1.53  $ 0.70 
____________________________________________________________
(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 $5.1 million of loan workout charges, in aggregate, related to the loan workout charges incurred in the first, second, and third quarters of 2022 amounting to $1.9 million, $3.0 million, and $0.2 million, respectively.
(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.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Credit Risk
Our investments are subject to a high degree of credit risk. Credit risk is the exposure to loss from loan defaults. Default rates are subject to a wide variety of factors, including, but not limited to, borrower financial condition, property performance, property management, supply/demand factors, construction trends, consumer behavior, regional economics, interest rates, the strength of the U.S. economy, and other factors beyond our control. All loans are subject to a certain probability of default. We manage credit risk through the underwriting process, acquiring our investments at the appropriate discount to face value, if any, and establishing loss assumptions. We also carefully monitor the performance of the loans, as well as external factors that may affect their value.
Capital Market Risk
We are exposed to risks related to the debt capital markets, and our related ability to finance our business through borrowings under repurchase obligations or other debt instruments. As a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore requires us to utilize debt or equity capital to finance our business. We seek to mitigate these risks by monitoring the debt capital markets to inform our decisions on the amount, timing and terms of capital we raise.
Market uncertainty and volatility may cause fluctuation in market value of certain asset classes within our portfolio. We have and may continue to receive margin calls from our lenders as a result of the decline in the market value of the assets pledged by us to our lenders under our repurchase agreements and warehouse credit facilities, and if we fail to resolve such margin calls when due by payment of cash or delivery of additional collateral, the lenders may exercise remedies including demanding payment by us of our aggregate outstanding financing obligations and/or taking ownership of the loans or other assets securing the applicable obligations and liquidating them at inopportune prices.
Interest Rate Risk
Our market risk arises primarily from interest rate risk relating to interest rate fluctuations. Many factors including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control contribute to interest rate risk. To meet our short and long-term liquidity requirements, we may borrow funds at fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes in earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. We do not have any foreign denominated investments, and thus, we are not exposed to foreign currency fluctuations.
As of September 30, 2023 and December 31, 2022, our portfolio included 145 and 157 variable rate investments, respectively, based on LIBOR and SOFR (or "indexing rates") for various terms. As of June 2023, the Company has fully transitioned all loans on LIBOR indexing rates to SOFR indexing rates. Borrowings under our financing arrangements are based on SOFR. The following table quantifies the potential changes in interest income net of interest expense should interest rates increase by 50 or 100 basis points or decrease by 25 basis points, assuming that our current balance sheet was to remain constant, and no actions were taken to alter our existing interest rate sensitivity. The changes in the portfolio for each basis points increase/decrease is a change from the base scenario.
Estimated Percentage Change in Interest Income Net of Interest Expense
Change in Interest Rates September 30, 2023 December 31, 2022
(-) 25 Basis Points (1.46) % (1.78) %
Base Interest Rate —  % —  %
(+) 50 Basis Points 2.88  % 3.49  %
(+) 100 Basis Points 5.76  % 6.98  %
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Real Estate Risk
The market values of commercial mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; and demographic factors. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses.    
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), management with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded, as of the end of such period, that our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in our reports that we file or submit under the Exchange Act.
Changes in Internal Control Over Financial Reporting
During the quarter ended September 30, 2023, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
Item 1. Legal Proceedings.
Please refer to “Litigation and Regulatory Proceedings” in “Note 10 - Commitments and Contingencies” to the consolidated financial statements included in this report. The Company believes that these proceedings, individually or in the aggregate, will not have a material impact on the Company’s financial condition, operating results or cash flows.
Loan Fraud Lawsuit
The Company originated a loan in April 2022 secured by a portfolio of 24 properties net leased to Walgreens (the “Collateral Properties”). As described in more detail in Part I, Item 3, "Legal Proceedings" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, due to the sponsor’s fraud and default under the loan the Company foreclosed on all of the Collateral Properties in 2022 and 2023. The Company is marketing the Collateral Properties for sale and is actively pursuing its civil remedies. Note that the collectability, if any, of legal judgments we have achieved to date and that we may achieve in the future is not currently determinable.
Williamsburg Hotel Bankruptcy Case
The sale of the Williamsburg Hotel, the Company’s Brooklyn hotel asset, by a trustee appointed by the United States Bankruptcy Court for the Southern District of New York, was completed on April 18, 2023, after an extensive marketing process, pursuant to the Chapter 11 plan in In re 96 Wythe Acquisition LLC, Case No. 21-22108. The sale closed for a total sale price of $96 million, comprising cash and new indebtedness. As a result of the sale, the Company recovered the full principal amount of its loan (equal to the carrying cost of the loan as of December 31, 2022) and approximately $20 million of additional proceeds after the payment of all related closing expenses. Note that the Company may elect to pursue additional remedies available under the loan documents.
Item 1A. Risk Factors.
Our potential risks and uncertainties are presented in the section entitled "Risk Factors" contained in our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes from these risk factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The Company’s board of directors has authorized a $65 million share repurchase program that permits share repurchases at prices below the most recently reported book value per share as determined in accordance with GAAP. Purchases made under the Company’s program may be made through open market, block, and privately negotiated transactions, including Rule 10b5-1 plans, as permitted by securities laws and other legal requirements. The timing, manner, price and amount of any purchases by the Company are determined by the Company in its reasonable business judgment and consistent with the exercise of its legal duties and are subject to economic and market conditions, stock price, applicable legal requirements and other factors. The Company's share repurchase program does not obligate the Company to acquire any particular amount of common stock. The Company’s share repurchase program has been extended until at least December 31, 2024 or until the capital committed to the repurchase program has been exhausted, whichever is sooner. Repurchases under the share repurchase program may be suspended from time to time at the Company’s discretion without prior notice.
The following table sets forth purchases of the Company's common stock under the share purchase program for the three months ended September 30, 2023 (in thousands, except share and per share data):
Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs
July 1, 2023 - July 31, 2023 —  $ —  —  $ 39,260 
August 1, 2023 - August 31, 2023 —  —  —  39,260 
September 1, 2023 - September 30, 2023 —  — —  39,260 
Total — $ —  — $ 39,260 
    
The Company did not repurchase shares of common stock through its share repurchase program during the three months ended September 30, 2023. Subsequent to September 30, 2023, the Company repurchased 137,444 shares of common stock at a weighted average cost of $12.55 per share. As of October 25, 2023, $37.5 million remains available under the Company’s share repurchase program.
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Unregistered Sales of Equity Securities
None.
Item 3. Defaults upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During the quarter ended September 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
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Item 6. Exhibits.
EXHIBITS INDEX
The following exhibits are included in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 (and are numbered in accordance with Item 601 of Regulation S-K).
Exhibit No. Description
10.1
31.1*
31.2*
32*
101*
104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
_________________________________________________________
*Filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
  Franklin BSP Realty Trust, Inc. 
October 30, 2023 By /s/ Richard J. Byrne
Name: Richard J. Byrne
Title: Chief Executive Officer and President
(Principal Executive Officer)
October 30, 2023 By /s/ Jerome S. Baglien
Name: Jerome S. Baglien
Title: Chief Financial Officer, Chief Operating Officer and Treasurer
(Principal Financial and Accounting Officer)
72
EX-31.1 2 fbrt-exhibit311_q323.htm EX-31.1 Document
    
Exhibit 31.1

I, Richard J. Byrne, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 of Franklin BSP Realty Trust, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

    
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

October 30, 2023
/s/ Richard J. Byrne
Richard J. Byrne
Chief Executive Officer and President
(Principal Executive Officer)



EX-31.2 3 fbrt-exhibit312_q323.htm EX-31.2 Document
    
Exhibit 31.2
    

I, Jerome S. Baglien, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 of Franklin BSP Realty Trust, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

    
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

October 30, 2023

/s/ Jerome S. Baglien
Jerome S. Baglien
Chief Financial Officer, Chief Operating Officer and Treasurer
(Principal Financial and Accounting Officer)



EX-32 4 fbrt-exhibit32_q323.htm EX-32 Document

Exhibit 32
SECTION 1350 CERTIFICATIONS
This Certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal Procedures) of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
The undersigned, who are the Chief Executive Officer and Chief Financial Officer of Franklin BSP Realty Trust, Inc. (the “Company”), each hereby certify to his knowledge as follows:
The Quarterly Report Form 10-Q of the Company for the quarter ended September 30, 2023, which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and all information contained in this Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


October 30, 2023
/s/ Richard J. Byrne
Richard J. Byrne
Chief Executive Officer and President
(Principal Executive Officer)

/s/ Jerome S. Baglien
Jerome S. Baglien
Chief Financial Officer, Chief Operating Officer and Treasurer
(Principal Financial and Accounting Officer)