Good morning, and welcome to the Franklin BSP Realty Trust third quarter 2023 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Lindsey Crabbe, Director of Investor Relations. Please go ahead. Good morning. Thank you, Jason, for hosting our call today, and thank you everyone for joining us. Welcome to the Franklin BSP Realty Trust third quarter earnings conference call. As the operator mentioned, I am Lindsey Crabbe. With me on the call today are Richard Byrne, Chairman and CEO of FBRT, Jerome Baglien, Chief Financial Officer and Chief Operating Officer of FBRT, and Michael Comparato, President of FBRT. Before we begin, I want to mention that some of today's comments are forward-looking statements and are based on certain assumptions. Those comments and assumptions are subject to inherent risks and uncertainties as described in our most recently filed SEC periodic reports, and actual future results may differ materially. The information conveyed on this call is current only as of the date of this call, October 31st, 2023. The company assumes no obligation to update any statements made during this call, including any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Additionally, we will refer to certain non-GAAP financial measures, which are reconciled to GAAP figures in our earnings release and supplementary slide deck, each of which are available on our website at www.fbrtreit.com. We will refer to the supplementary slide deck on today's call. With that, I will turn the call over to Rich Byrne. Great. Thanks, Lindsey, and good morning, everyone. Thank you all for joining us today. As Lindsey said, I'm Rich Byrne. I'm Chairman and CEO of FBRT. As Lindsey also mentioned, our earnings release and supplemental deck were published to our website yesterday. We're going to begin today's call by reviewing our third quarter results, and then, of course, as always, we'll open up the call for your questions. I'm going to start on slide four. So let's just jump in. FBRT earned distributable earnings of $0.43 per fully converted share in the third quarter. This represented a 10.7% return on equity. As you all may recall, we realized a one-time gain in the second quarter from the resolution of our Williamsburg hotel loan. Excluding the impact of the Williamsburg loan and another small one-time charge, our portfolio produced distributable earnings, which were just very similar to what we earned in the second quarter. Our third quarter distributable earnings once again comfortably covered our common dividend of $0.355. This produced dividend coverage of nearly 120%. This represents a yield of approximately 11.6% on our current share price as of last week on October 27th. Our portfolio ended the quarter at $5 billion, of which 78% of our portfolio's collateral is multifamily. Q3 was a lighter originations quarter for us, resulting in a slight decrease in our portfolio. We originated $153 million of new loan commitments and received repayments of $290 million. Year to date, we have originated $586 million of new loan commitments. Deal flow remained subdued in the quarter, but the spread and terms on the new deals we did were very attractive. In fact, it was one of the best markets that we have seen in years. Also, deal flow has picked up meaningfully in the past 30 days or so. Since the end of the third quarter, we have funded $138 million already in new loan commitments. Mike will cover this in more detail in his commentary. During the quarter, we closed an approximately $900 million CRE CLO at a SOFR + 229 cost of debt with an 18-month reinvestment period. This further lowered our recourse net debt to equity to 0.1 times. The issuance increased our overall lending capacity and improved our total liquidity position. At the end of the quarter, we had $411 million of unrestricted cash, which represents 7% of our total assets, and total liquidity of $1.8 billion. As I mentioned, we are comfortably over-covering our dividend despite all of this undeployed capital. When we do deploy this capital, we expect it to be meaningfully accretive to earnings. In the meantime, this liquidity cushion will help to protect us against any unforeseen credit events. Last quarter, we provided more details on our approach to risk management and our active engagement with borrowers. Our average risk rating remained unchanged at 2.2 for the quarter. Our portfolio has continued to perform well. Our watch list at September 30 consisted of three loans versus five in the prior quarter. All three loans on our watch list are rated four and represent only 1.7% of our total portfolio. Also, we took no asset-specific CECL charges. Our general CECL reserve modestly increased by $2.8 million in the quarter. We had two positions held as foreclosure REO at the end of the quarter, effectively unchanged from the prior quarter. The vast, vast majority of our foreclosure REO consisted of our Walgreens retail portfolio. The total foreclosure REO represents about 1.9% of our total assets. In a moment, Mike's going to provide a fulsome update on both our watch list and REO in his comments. Finally, our company's buyback authorization had $39 million remaining at quarter end. We will not hesitate to repurchase our shares when we determine it to be the best use of our capital. As such, we have been active in the market post-quarter end. We purchased 2.2 million of our shares through October 25th. That was earlier last week. Our board of directors has extended our company buyback program through December 31, 2024. Our commercial real estate lend, let me just end here with by saying the commercial real estate lending market faces both opportunities and challenges going forward. We continue to actively look to originate new deals and think the vintage of deals we are seeing now is very attractive. We will continue to be selective as we originate loans, looking for the best credits at the best terms. Our capital position remains strong, and we are confident we will continue to strike the right balance between playing offense and playing defense. With that, I'll turn the call over to Jerry now to discuss our financial results. Great. Thanks, Rich. Good morning, everyone. I'm Jerome Baglien, I'm the Chief Financial Officer and Chief Operating Officer of FBRT. I appreciate everyone being on the call today. Moving on to our results. Let's start on slide five. FBRT generated GAAP earnings of $31 million, or $0.30 per diluted common share, representing a 7.7% return on common equity in the third quarter. Our general reserve increased by $2.8 million this quarter to $42.9 million, resulting in a $0.03 reduction to GAAP earnings. Like Rich said, we did not have an asset-specific charge this quarter. Our distributable earnings in the third quarter were $42 million. We are pleased to report we completed the exit of the residential ARM book that we inherited from our merger in October of 2021. We incurred a $0.04 loss per share related to these third quarter sales. A walkthrough of our distributable earnings to GAAP net income can be found in the earnings release. Book value is down slightly this quarter to $15.82 from $15.85. The largest driver of the decline was a write-down on the Walgreens retail portfolio due to changes in the valuation based on market rates. This resulted in a $0.05 per share reduction to book value. Further reducing book value this quarter was the increase to our general CECL provision and costs associated with calling FL5, a CLO we issued in 2019. These reductions were partially offset by distributable earnings in excess of our common distributions. Moving on to slide seven. This summarizes our portfolio progression. Our repayments have been consistent with past quarters, despite a more difficult funding environment when those loans reach maturity. 14 loans were repaid in the quarter, and most of our repayments were from multifamily and hospitality loans, contributing 68% and 23% of the balance, respectively, and one loan was taken as REO. We provided more transparency on our loan book in the MD&A section of our third quarter 10-Q, including each loan's risk rating, origination date, and asset location, as well as other details. Slide eight highlights our capitalization. Our average cost of debt during the quarter was 7.7%. The increase in our cost of debt has trended up with increases in SOFR as our debt primarily floats. We issued our 10th CLO in September, which brings 85% of our total portfolio financing through CLOs. The market was open to our issuance and we were pleased with our execution. 90% of our financing on our core book is now non-recourse, non-mark-to-market. We will continue to take advantage of CLO reinvestment on our deals and move newly originated loans off warehouse lines and into CLOs. With that, I'll turn it over to Mike to give you an update on our portfolio. Thanks, Jerry. Good morning, everyone, and thank you for joining us. I'm Mike Comparato, President of FBRT. I would like to start on slide 12, bringing your attention to the key attributes of our commercial loan portfolio. Our portfolio ended the quarter with $5 billion of assets spread across 145 loans, with an average loan size of $34 million. Multifamily continues to be our largest exposure, 78% as of quarter end. As I've said before, we continue to be bullish on the fundamentals of multifamily at the property level and will continue to focus our portfolio origination there. It is the most recession-resistant asset class, has meaningfully better liquidity than other asset classes due to agency financing, and is currently a meaningfully cheaper alternative to homeownership, given current housing mortgage rates. During the quarter, we originated four loans at a weighted average spread of 398 basis points. These transactions were primarily in multifamily and hospitality and were located across the Sun Belt. Although transactional volume remains slow, our originations have picked up meaningfully in the last three-four weeks. We are underwriting very attractive terms on some of the strongest credit profiles we've seen in years. Competition for loans remains subdued, with many of the usual suspects remaining sidelined, accumulating cash to address legacy portfolio concerns. Our portfolio is well positioned, but we expect market distress to continue as more than $1.5 trillion in commercial real estate debt comes due over the next several years. We will not be immune from such issues. However, given our asset allocation and asset quality within the portfolio, we are confident in our ability to navigate this market dislocation. Like most other commercial mortgage REIT portfolios, 90% of our borrowers have interest rate caps activated and have not meaningfully felt the effect of the increase in interest rates. Loan maturity continues to be the catalyst for action to be taken. Predicting borrower behavior is very difficult in this environment. We are proactive in getting ahead of issues with borrowers, extending or modifying loans now when appropriate, and resolving a manageable number of loans per quarter. To date, we're actually quite pleased with borrower behavior, both their financial commitment to assets and from a communication standpoint. As things stand today, we do not expect to see the extent of dislocation we've seen in office spread to other asset classes. Office is fundamentally challenged, as we have discussed on prior calls, and we have not seen any improvement in conditions. Our office exposure has been minimally reduced but still remains at 6%. Our largest office loan is triple net leased for over 15 years to a large public company as our corporate headquarters and our traditional multi-tenant office exposure, when excluding this loan, has an average loan size of only $22.4 million. Slide 14 summarizes our watch list loans. As Rich mentioned, we have three loans on watch list as of September 30th, representing approximately $83 million in value, with no additions this quarter no new additions this quarter. Two assets were removed from our watch list loan. One loan, a garden-style apartment community, was removed by way of an upgrade from a four rating to a three rating following our quarterly asset review process, and that loan was subsequently paid off after quarter end. The other loan, a CBD office complex, was taken as REO during the quarter. We took an asset-specific reserve on this loan during the second quarter. The three loans that remain on watch list and are risk graded four were a CBD high-rise office building in Denver, Colorado, a suburban Class A office building in Alpharetta, Georgia, and a 16-building apartment complex in Lubbock, Texas, that was subsequently taken as REO in Q4 with a carrying value of $12 million or approximately $50,000 per unit. As Rich mentioned, our total REO positions at quarter end stood at two. We liquidated the St. Louis office property during the quarter with a carrying value of $11.8 million. We also foreclosed on the Portland office property in Q3 with a quarter-ending value of $18.8 million. The vast majority of our REO exposure sits within the Walgreens retail portfolio. We sold one store during the quarter at a 5.5 cap, leaving us with 23 stores with a carrying value of approximately $91 million. As we mentioned last quarter, we intend to liquidate this portfolio as the market permits. However, we are patient sellers and comfortable holding these assets until we reach pricing levels that we feel are appropriate. In aggregate, our foreclosure REO balance ended the quarter slightly lower at $110 million, which is approximately 1.9% of our total assets. With that, I would like to turn it back to the operator to begin the Q&A session. Thank you. We'll now begin the question-and-answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Stephen Laws from Raymond James. Please go ahead. Hi, good morning. Congratulations on a really solid quarter. I know it's a very difficult environment out there, as we're seeing with many. You know, Mike, I wanted to touch base with some comments. I guess both you and Rich mentioned it about origination activity or transactions picking up in the last few weeks. Can you maybe talk about, you know, how you see the balance sheet, you know, shifting in the coming quarters? You know, you've got, like, almost no recourse debt on your bank lines given the recent CLO. Is that something you'll take back up ahead of a CLO next year? Or how do you really see originations relative to repayments in the coming quarters? Thanks, Steven, and good morning, and thanks for the question. You know, we are out there actively trying to originate loans. As we said in the prepared remarks, the loans we're seeing today are, you know, some of the best we've seen in years, some of the highest coupons we've seen in decades. So, we are actively looking to put money to work in this environment. That's going to be done, you know, with warehouse financing. And as we aggregate warehouse financing, if we're able to do enough of it, that puts us in a position to issue another CLO, you know, obviously pending conditions of the market pricing, leverage, and things of that nature, of course, we would consider it again. I think you know, we do all of our CLOs as reinvestments, so we're going to always keep those full first, just from an efficiency standpoint. So we would have to originate, you know, an incremental probably $700 million-$1 billion of loans, before we would issue a new one in 2024. Hey, hey, it's Steven. Hey, it's Rich. Just to add on, I think part of your question also, you know, sort of addressed how we think about deploying cash into originations. I mean, we ended the quarter with $411 million of cash. It feels to us like we had a pretty, you know, quiet quarter in the last few quarters, in fact, with $150 million of originations this quarter. But, you know, compared to some of our peers, you know, that, that's bigger than, sort of the zero that a lot of other people are posting. I think our approach is, you know, clearly there were, we would have done more deals if, if, you know, the market had been a little bit, more robust. But as Mike said, the vintage is great. With $411 million in cash and 78% multifamily, only 6% office, feels to us like we certainly have some liquidity we can continue to deploy and, you know, $1.8 billion in total. Which, you know, just do the math, obviously grows our ROE. You know, with 120% dividend coverage, doesn't feel like we have a lot of pressure on us to do that. But, you know, you're going to see us continue to spend that cash and grow our earnings. You know, we want we'll keep some cash around, but, you know, $411 million seems excessive. Yeah. Yeah, I appreciate the comments and, and obviously, stock buyback, another good use of, of some of that. You know, one follow-up. Regarding the pipeline, can you talk about what you're seeing build there? Any, you know, concentrations, type of borrowers, type of assets, you know, certain markets? Is it, is it more construction or lighter stuff? You know, how what are you seeing build in the, in the pipeline this month? So our focus even continues to be multifamily and hospitality. So it's almost exclusively those two asset classes right now. Maybe a small spattering of industrial. We are doing some multifamily construction loans. I frankly find them to be probably the best risk return in the market today. Unfortunately, they're not the greatest asset in the world just because they kind of dribble out capital over a 12- 18-month construction period. But generally speaking, multifamily, hospitality, I can't quite put my finger on the and I'm going to say meaningful pickup in origination in the past 30 days. I think a lot of it, though, is some capitulation from sellers. I do believe that people are starting to accept the reality of higher rates, and rates are, you know, higher for longer, and people are tapping out and selling assets. So we've actually been providing, you know, acquisition financing as well as some traditional, you know, refinancing, which is largely, you know, cash in refis at this point. That's great color. Thanks, Mike. Appreciate the comments this morning. Thanks, Steve. The next question comes from Matthew Erdner from Jones Trading. Please go ahead. Hey, good morning, guys. Thanks for taking the question. Could you talk about a little bit about multifamily insurance and just kind of NOIs and if there's anything that you guys are seeing there in terms of, you know, LTVs maybe creeping a little bit up, due to pressure on their margins? Sure. Hey, Matt, good morning. Thanks for, thanks for the question. I think we're having, you know, an insurance issue mostly in coastal locations, is where we have noticed the biggest uptick. You know, coastal Florida, coastal Carolinas, Houston, New Orleans, et cetera. And the pickups have been meaningful. So, you know, in some instances, we're seeing year-over-year increases there that is, you know, more than doubling. So it is, it has not been an easy pill to swallow on the insurance side of things. You saw insurers pull out of California, so I think there's an overall insurance overhang that's really driving premiums right now. We are obviously factoring that into all of our, our going forward underwriting and origination. And we're dealing, you know, with it the best we can within the existing portfolio. But it's a well-known fact, and there's really no avoiding it at this point. Right. Yeah, thanks for that. And then kind of turning to the distressed market, where are you expecting to see some of that activity there? And then, do you guys expect to kind of get involved in that space or just kind of watch and pay attention to it? Yeah, historically, we haven't found the discounted loan market or the NPL market to be an overly efficient use of our time. I think we've built, you know, an industry-leading origination platform for the middle market at BSP. It's kind of what we do and what we do best. In times like these, you have a lot of non-real estate players that show up to bank auctions where they're selling portfolios of loans. You get the hedge fund universe. You just get a bunch of, you know, opportunistic investors that come in. So we find our day jobs hard enough when we're just competing with the normal competitive set. When you bring another, you know, several dozen guys into the room, you know, I've been doing this close to 30 years. I've never bought a loan once. Just never the best bid, and that's scenario. So not a market that we actively participate in and wouldn't expect us to play an active role in it going forward. Gotcha. Thank you, Mike. The next question comes from Steve Delaney from JMP Securities. Please go ahead. Good morning, everyone. Congratulations on another strong quarter. Let me start with the new CLO. I was wondering, Mike, the ROE there, and I think you have to obviously, for now, we just look through the reinvestment period, right? Because things can change when it de-levers. But what would you just estimate, you know, kind of a target range for what type of return on equity within the CLO would you expect to realize? Thanks. Jerry, you want to cover that? Yeah, happy to. Hi, Jerry. Hey, morning. You know, I think when we start out, we're in the high teens on that in terms of what we've contributed day one. You know, as we turn it over and we turn over our CLOs quite a bit, if you look at the actual amount of reinvest we use.... I expect it to probably stay there, if not get better, based on kind of new spreads that we're able to get in the market today. So even with, you know, the wider cost of, you know, spread in the market today, we're making up for that on the asset side. So Yeah. This is just as accretive as some of the deals we've done in the past, which is why, you know, you've seen us be patient with this. We were able to accumulate a pool that worked, and this is working in essentially the same range as our older deals. So, you know, the reason we all highlighted and said we're pretty happy with the execution is because I think we're going to have really good execution over the life of this deal. Yeah. Well, it was number 10, so I think the street knows what they're getting when they buy one of your transactions. What was the length of the reinvestment period? This one was 18. 18 months. Okay, yeah. Yep. Okay, very good. Yeah, and Steve, just a little color on that. Sure. Market convention has been two years on reinvest. Right. This was the first managed deal that had gone to market in over a year. So we just wanted to give a little cushion to investors to feel a little bit better about buying into the first, you know, managed CRE CLO in over a year. And I think it was, you know, the right move for everybody to get that done. Great. Thanks for explaining that, Mike. Just the final question, the leverage ticked down a little bit to 2.2. I'm wondering, does it actually go down a little bit further with the CLO? It closed at the end of September, so I guess I'm just thinking mechanically, were you able to move cash around and pay off, you know, other debt, you know, maybe with involving more leverage? How does that, how did it all shake out at quarter end? And, you know, where, where do you see your leverage, you know, now after the CLO and your financings have been rebalanced? Yeah, I'll start on that, and you guys can chime in. You know, in terms of where we ended, we closed the deal just before the end of the quarter. So Yes ... you know, that created a decent amount of cash in terms of how we were able to, you know, rebalance what was on warehouse lines. And, you know, having obviously ending with $400 million of cash means we were able to take down some of the borrowing where we didn't necessarily need it, you know, in the very near term. I don't expect us to run at quite this low of a leverage level, but, you know, as you just heard earlier, that, you know, we do have a decent forward pipeline in terms of how we think we'll deploy some of this. And as we deploy it, you know, we will put some leverage on that. So, some of this was just repositioning, you know, through the execution of the CLO, and some of it's just a build of cash ahead of redeploying as new opportunities start to come in. Thanks. Appreciate everyone's comments this morning, and good job. Thanks. Thanks, Steve. Thanks. The next question comes from Sarah Barcomb, from BTIG. Please go ahead. Hey, everyone. Thanks for taking the question. So it was, it was good to see some new investments get done, as many of your peers had 0, 0 originations this quarter. It looks like the Q3 deals were done at less than 60% average LTVs. My question is whether any of these SOFR + 400, coupon deals were underwritten with negative leverage. Can you give some color surrounding the rent growth assumptions and cash flow coverage on these properties, and their ability to service the debt? And separately, I'm also curious if you're doing these deals with existing sponsors or, or new sponsors. Any color there? Hey, Sarah. Good morning. Thanks for the question. I'm going to start backward. Both. So some were with existing clients, and some were new clients that we picked up during the quarter. One of which, you know, very institutional and very glad we were able to transact with them. Yeah, with respect to coverage, I would say almost nothing covers today, right? I mean, we're lending at 9.5% coupons if, you know, just roughly speaking. I will say the hotel loan that we originated, actually, I think that was post quarter end. That was a very, very low LTV loan. I think it was like 30-35 LTV for us on the senior. So that actually does have some coverage. But everything else that we're doing is definitely negative leverage. They're all being structured with interest reserves and our typical kind of interest reload structure that usually has recourse to the sponsorship. And they are bridging to, you know, better days, brighter days, hopefully, and ultimately to agency execution. So I think the idea is we'll pay 9-9.5% today. Hopefully, that is an expense we're only paying for 12 or 18 months, and then we can bridge into, you know, an agency execution that has a six handle on it. So it, it's negative leverage today with hopes of being, you know, agency as a takeout. Okay, thanks for the detail there. And then my follow-up. So we saw one multifamily asset foreclose and another four-rated asset repay in full. So two different outcomes for four-rated assets. I'm curious if there were any loan modifications during the quarter? And given we're seeing about $3 billion or so of maturities next year, can you talk about your outlook for potentially modifying some of these loans? Sure. We definitely had modifications during the quarter. I think as we've said last quarter and this quarter in the prepared remarks... Yeah, we're trying to take a very proactive stance on addressing pending maturities. I will say borrowers have been very communicative with us. They're engaging us. We're having, you know, overall productive dialogue, and I think we're getting these amendments done and modifications done, thus far, that are all, you know, net benefit to our current credit position. I foresee us continuing on, you know, that path, throughout 2024. We're gonna be modifying and working with borrowers, you know, kind of across the board. But I'll say again, what I said during COVID, you know, we have to go into these negotiations, you know, understanding this is a difficult time. It's not their fault, it's not our fault, it's the reality that we're living with, but we're not their partner, we are their lender. And we expect that, you know, this is not gonna be lender just gives six things and borrower doesn't chip in. So it's an active negotiation, but we are fully expecting borrowers to come to the table with something, whether it's a pay down, whether it's amortization, whether it's recourse to increase our LTV on our existing credit position. Thank you. Our next question comes from Jade Rahmani from KBW. Please go ahead. Thank you very much for taking the question. A few multifamily REITs have reported a market slowdown in new lease rent growth in September and October, particularly in the Sun Belt and Phoenix, as well as a decline in occupancy that looks to be above normal seasonality. They attribute this to elevated supply, driven by the strong completions, and then they also are citing a behavioral characteristic from so-called merchant developers that are in a race to get to stabilized occupancy and hence offering concessions and free rent. Can you talk to this trend and whether you think this phenomenon is big enough to weigh on credit for the bridge lending sector as well as overall multifamily? Hey, Jade. Good morning. It's Mike. Thanks, thanks for the question. I... Man, spot on. So addressed the markets and the issue perfectly. We're definitely seeing supply as a short-term issue. And I think the markets you identified, you know, specifically Phoenix, you know, I'd say specifically suburban Austin and specifically downtown Nashville probably are the three softest markets that we're seeing today. And, you know, again, your question was spot on. It is a lot of the newly, you know, delivered stuff where developers are offering, you know, two months of concession to just get people in the door, and it's affecting kind of everyone everywhere. So, I think it's definitely gonna have a short-term impact. I do not think that, that phenomenon is strong enough to impact credit on a macro basis. Obviously, it's gonna affect, you know, NOIs in the short term. But I'm looking through that, and, you know, I don't want to be overly bullish, 'cause after all, I am a credit guy, right? But I'm looking through that, and banks are gone. While we're providing construction lending and filling a void in some capacity, and there's some, you know, competitors like us out there that are filling that void as well, it's nowhere even remotely close to the total amount of capital or credit that's left the construction loan space. And I say that because what's important is supply falls off a cliff in 2025 and looking forward. So I think as you have, you know, this period of high supply today, it's gonna be offset by, you know, muted supply, you know, 18 months out. And I couple that with the fact that it's 8% to get a mortgage to buy a house. I think we are going to have millions of forced renters for the foreseeable future, and I actually think you could have somewhat of a perfect storm in multi in 2025, 2026, 2027, where there's actually meaningful rent growth again because of the lack of supply and the amount of people that can't afford a home and are have to be renters. Great answer, and thanks for taking the question. Thanks, Jade. This concludes our question-and-answer session. I would like to turn the conference back over to Lindsey Crabbe for any closing remarks. We appreciate you joining us today. If you have any further questions, please reach out to me or our team. Thank you. Thanks, everyone. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.