FBRT 10-Q Quarterly Report Sept. 30, 2023

FRANKLIN BSP REALTY TRUST, INC.

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bsprt-20230930

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


☐			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.

TABLE OF CONTENTS


PART I						Page
Item 1. Consolidated Financial Statements and Notes (unaudited)						1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						37
Item 3. Quantitative and Qualitative Disclosures about Market Risk						67
Item 4. Controls and Procedures						68
PART II

Item 1. Legal Proceedings						69
Item 1A. Risk Factors						69
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						69
Item 3. Defaults Upon Senior Securities						70
Item 4. Mine Safety Disclosures						70
Item 5. Other Information						70
Item 6. Exhibits						71
Signatures						72

Table of Contents

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.

Table of Contents

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.

Table of Contents

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.

Table of Contents

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.

Table of Contents

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.

Table of Contents

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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FRANKLIN BSP REALTY TRUST, INC.

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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FRANKLIN BSP REALTY TRUST, INC.

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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FRANKLIN BSP REALTY TRUST, INC.

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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FRANKLIN BSP REALTY TRUST, INC.

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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FRANKLIN BSP REALTY TRUST, INC.

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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FRANKLIN BSP REALTY TRUST, INC.

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 no t 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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FRANKLIN BSP REALTY TRUST, INC.

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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FRANKLIN BSP REALTY TRUST, INC.

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.

Table of Contents

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 no t 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	%

Table of Contents

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.

Table of Contents

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.

Table of Contents

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 no t 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.

Table of Contents

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 )	$	—

Table of Contents

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.

Table of Contents

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.

Table of Contents

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	$	—

Table of Contents

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.

Table of Contents

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".

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:

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An investments region classification is defined according to the below map based on the location of investments secured property.

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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:

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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%

Table of Contents


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%

Table of Contents


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%

Table of Contents

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

Hospitality

Ohio

1,140

3/9/2023

9/9/2025

1M SOFR Term + 4.50%

9.82%

74.9%

Mezzanine Loan 6

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%

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

Retail

103,657

12,297

Table of Contents

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 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.


	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	%

_________________________________________________

(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.

(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

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

______________________________________________________

(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

______________________________________________________

(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 w as $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 wa s $3,238.9 million . Cash outflows were primarily driven by our (i) net repayments on real estate securities MRAs o f $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 th e 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						Indenture, dated as of September 28, 2023, by and among BSPRT 2023-FL10 Issuer, LLC, Benefit Street Partners Realty Operating Partnership, L.P., as advancing agent, U.S. Bank Trust Company, National Association, as trustee and note administrator, and U.S. Bank National Association as custodian (incorporated by reference to Exhibit 10.1 of the registrant’s Current Report on Form 8-K filed with the SEC on October 3, 2023).
31.1 *						Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a - 14(a) or 15(d) - 14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *						Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a - 14(a) or 15(d) - 14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 *						Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 *						XBRL (eXtensible Business Reporting Language). The following materials from Benefit Street Partners Realty Trust, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) the Consolidated Statement of Changes in Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements.
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)

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Part I. Item 1. Consolidated Financial Statements and Notes (unaudited)Note 1 - Organization and Business Operations Note 2 - Summary Of Significant Accounting Policies Note 3 - Commercial Mortgage Loans Note 4 - Real Estate Securities Note 5 - Real Estate Owned Note 6 - Leases Note 7 - Debt Note 8 - Earnings Per Share Note 9 - Redeemable Convertible Preferred Stock and Equity Transactions Note 10 - Commitments and Contingencies Note 11 - Related Party Transactions and Arrangements Note 12 - Fair Value Of Financial Instruments Note 13 - Derivative Instruments Note 14 - Offsetting Assets and Liabilities Note 15 - Segment Reporting Note 16 - Subsequent Events Item 2. Management's Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits

Exhibits

10.1 Indenture, dated as of September 28, 2023, by and among BSPRT 2023-FL10 Issuer, LLC, Benefit Street Partners Realty Operating Partnership, L.P., as advancing agent, U.S. Bank Trust Company, National Association, as trustee and note administrator, and U.S. Bank National Association as custodian (incorporated by reference to Exhibit 10.1 of the registrants Current Report on Form 8-K filed with the SEC on October 3, 2023). 31.1* Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a - 14(a) or 15(d) - 14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a - 14(a) or 15(d) - 14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32* Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

FBRT 10-Q Quarter ended Sept. 30, 2023

Exhibits