Q2 2025 Franklin BSP Realty Trust Inc Earnings Call

Operator: Good day and welcome to the Franklin BSP Realty Trust second quarter 2025 earnings conference call. All participants will be in listen-only mode. If you need assistance, please signal the conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Lindsey Crabb, Director, Investor Relations. Please go ahead.

Good day and welcome to the Franklin bsp. Realy trust second quarter 2025 earnings conference call.

All participants will be in listen-only mode. If you need assistance, please signal the conference specialist by pressing a the star key followed by zero.

After today's presentation, there will be an opportunity to ask questions to ask a question. You may press star then 1 on a touchtone phone to withdraw your question. Please press star then 2. Please note. This event is being recorded. I would now like to turn the conference over to Lindsay crab director investor relations. Please go ahead

Lindsey Crabb: Good morning. Thank you for hosting our call today and welcome to the Franklin BSP Realty Trust second quarter earnings conference call. As the operator mentioned, I am Lindsey Crabb. With me on the call today are Richard Byrne, Chairman and CEO of SBRT, Jerome Baglien, Chief Financial Officer and Chief Operating Officer of SBRT, and Mike Comparato, President of SBRT. 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, July 31st, 2025.

Good morning, thank you for hosting our call today and welcome to the Franklin bsp. Realy trust second quarter Ernie's conference call at the operator mentioned. I am lindsy crab with me on the call today are Richard Byrne chairman and CEO of fbrt, Jerry bagwan Chief Financial Officer and Chief Operating Officer of fbrt and might comparado president of sbrt. 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 an actual future results May differ materially

Lindsey Crabb: We assume 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.sbrtreit.com. We will refer to this slide deck on today's call. With that, I'll turn the call over to Rich Byrne.

the information conveyed on this call is currently, as of the date of this call July 31st, 2025

We assume 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 accepted required by law.

Additionally, we will refer to certain non-gaap Financial measures which are reconciled the Gap figures in our earnings, release been supplementary slide deck. Each of which are available on our website at www.fbr.gov.pk

We will refer to the slide deck on today's call with that. I'll turn the call over to richburn.

Richard Byrne: Great. Thanks, Lindsey, and good morning, everyone, and thank you for joining us today. But before we begin, I just want to take a moment on behalf of our entire team to express our deepest sympathy for those affected this week by the tragic events at 345 Park Avenue. This hit very close to home. Our thoughts are with the victims, their families, and all those affected. Now, we'll begin today's call on slide four by reviewing our second quarter results, and then we'll open the call up to your questions, as always. I'll begin with key developments from the second quarter. Jerry will walk through our financial results, and he'll provide details on our successful closing of the New Point acquisition. Then Mike will update you on market conditions, our watch list, and REO activity.

Great. Thanks Lindsay and good morning, everyone. And thank you for joining us today.

But before we begin, I just want to take a moment uh on behalf of our entire team to express our deepest, sympathy for those affected this week by the tragic events at 3:45 Park Avenue.

This hit very close to home.

Our thoughts are with the victims their families and all those affected.

Now we'll begin. Uh today's call on slide 4 by reviewing our second quarter results and then we'll open the call up to your questions. As always

I'll begin with key developments from the second quarter. Jerry will walk through our financial results and he'll provide details on our successful closing of the new Point acquisition. Then Mike will update you. On market conditions, our watch list and Areo activity.

Richard Byrne: We selectively originated $61 million in new loan commitments this quarter, primarily in multifamily assets. Our originations were deliberately lower this quarter as we maintained a higher cash balance ahead of our July 1st New Point closing. We received $317 million in loan repayments in the second quarter across four different property types. This continues to be an encouraging trend and one that we are well positioned to capitalize on moving into the back half of 2025. As we redeploy these funds into new loans and more attractive credit metrics, it will clearly benefit us. Our portfolio of post-interest rate hike loan originations was 56% of our portfolio at quarter end and meaningfully ahead of our peers. This reflects how active we have been in the market over the past two and a half years. Distributable earnings were 27 cents per fully converted share.

We selectively originated 61 million in new loan commitments. This quarter primarily in multi Family Assets. Our originations were deliberately lower this quarter as we maintained a higher cash. Balance ahead of our July 1st new Point closing.

We received 317 million in Loan repayments in the second quarter across 4 different property types.

This continues to be an encouraging Trend and 1 that we are well, positioned to capitalize on moving into the back half of 2025.

as we redeploy These funds into new loans and more attractive credit metrics, uh,

it will clearly benefit us.

Our portfolio.

Post interest rate hike loan. Originations was 56% of our portfolio at quarter end and meaningfully ahead of our peers. This reflects how active we have been in the market, over the past 2 and a half years,

Richard Byrne: We believe there is a clear path to growing this to a level that supports our dividend. Jerry will lay this out in detail momentarily. Our average risk rating at quarter end was 2.3, with 137 of 145 positions risk-rated two or three. And our watch list loans represent only 5% of our total portfolio. We also made significant progress on our REO portfolio this quarter. Our acknowledge and address mindset has not changed. We sold three multifamily assets totaling $56 million, which in aggregate was above our principal basis at the time of foreclosure. These results reinforce our strategy of being selective and patient in managing REO to maximize our recoveries. Since the New Point acquisition closed on July 1st, I'll speak to our liquidity position, excluding the cash that was paid at closing.

Distributable earnings were 27 cents per fully converted share. We believe there is a clear path to Growing this to a level that supports our dividend.

Jerry will lay this out in detail momentarily.

First grading a quarter end was 2.3 with 137 of 145 positions risk-rated, 2, or 3.

And our watch list loans represent only 5% of our total portfolio.

We also made significant progress on our REO portfolio. This quarter.

Our acknowledge and address mindset has not changed. We sold 3 multifamily assets totaling 56 million which in aggregate was above our principal basis at the time of foreclosure

These results reinforce our strategy of being selective.

patient in managing Aro to maximize our recoveries

Richard Byrne: Liquidity then was, or now is $501 million, including $77 million in unrestricted cash, with significant capacity remaining on our warehouse lines and through CLO reinvestment. Acquiring New Point is a significant milestone for us. It expands our platform within our core competency, multifamily lending. The transaction brings significant synergies to FBRT, including scaled origination and servicing capabilities, which will significantly increase our addressable market. It also adds a fully integrated mortgage servicing platform, which enhances income stability and provides an immediate avenue for reoccurring book value per share growth. We are confident New Point will be a long-term driver of both earnings power and book value creation. Looking at long-term performance, FBRT has delivered economic returns defined as change in book value plus dividends paid of 6.6% and 11.9% over the past 12 months and 24 months, respectively. This places us at the very top of our peer group.

Since the new Point, acquisition closed on July 1st, I'll speak to our liquidity position. Excluding the cash that was paid at closing. Um, liquidity then was or now is 501 million including 77 million in unrestricted. Cash.

With significant capacity remaining on our warehouse lines and through clo reinvestment.

Comparing new point is a significant milestone for us.

It, expands our platform within our core competency multifamily Lending.

The transaction brings significant synergies to fbrt including scaled origination and servicing capabilities which will significantly increase our addressable Market.

It also adds a fully integrated mortgage servicing platform which enhances income stability and provides an immediate Avenue for recurring book, value per share growth.

We are confident.

New point will be a long-term driver of both earnings power and Book value creation.

Richard Byrne: We believe these results reflect our disciplined credit decisions and very thoughtful capital management. Before handing it over to Jerry and Mike, I want to briefly address our stock valuation. Our stock continues to trade at a steep discount to book value. We suspect the market is focused on three key concerns: our current dividend coverage, the quality of the assets in our legacy portfolio, and our recent acquisition of New Point. We have provided additional details in our earnings supplement deck to address each of these areas with greater transparency. In addition, Mike and Jerry will also cover these topics in their remarks, which you'll hear right now. With that, Jerry, I'll pass things over to you.

Looking at long-term performance, fbrt has delivered economic returns defined as change. In Book Value Plus dividends paid of 6.6% and 11.9% over the past 12 months and 24 months respectively. This places us at the very top of our peer group

We believe these results, reflect our discipline, credit decisions and very thoughtful Capital Management.

Before handing it over to Jerry. And Mike I want to briefly address our stock valuation.

Our stock continues to trade at a steep discount to Book value.

We suspect the market is focused on 3 key concerns.

Our current dividend coverage, the quality of the Assets in our Legacy portfolio.

And our recent acquisition of New Point.

We have provided additional details in our earning supplement deck to address each of these areas with greater transparency in addition. Mike will Mike and Jerry will also cover these topics in their remarks, which you'll hear right now.

With that Jerry, I'll pass things over to you.

Jerome Baglien: Great. Thanks, Rich. I appreciate everyone being on the call today. I'm going to walk through our second quarter financial results, and that's going to begin on slide seven. FBRT reported GAAP earnings of 24.4 million or 21 cents per fully converted common share. Distributable earnings for the quarter was 29 million or 27 cents per fully converted share. Our board determined it was appropriate to maintain the second quarter dividend at the current level of 35 and a half cents. We believe there are three key drivers to get us to dividend coverage. First, we plan to call several CLOs that are now past their reinvestment periods and are no longer providing optimal leverage. We believe this will generate approximately 4 to 6 cents per share quarterly by creating liquidity and freeing up equity in those CLOs for us to reinvest.

Great. Thanks Rich. Uh I appreciate everyone being on the call today. I'm going to walk through our second quarter Financial results and that's going to begin on slide 7.

Fbrt reported Gap, earnings of 24.4 million, or 21 cents per fully converted comment. Share,

Distribute a what earnings for the quarter was 29. Million or 27 cents per fully converted share.

Our board determined, it was appropriate to maintain the second quarter dividend at the current level of 35 and a half cents.

We believe there are 3 key drivers to get us to Dividend coverage.

First, we plan to call several Coos that are now past their reinvestment periods and are no longer providing optimal Leverage.

We believe this will generate approximately 4 to 6 cents per share quarterly by creating liquidity and freeing up equity in those cos for us to reinvest.

Jerome Baglien: Second, we expect to reinvest the equity currently allocated to our REO portfolio and REO financings. As we continue to sell assets and recycle that capital into new originations, we estimate this could contribute approximately 8 to 12 cents per share per quarter to distributable earnings. Third, and lastly, we expect the contribution from New Point to grow meaningfully over time. Once it begins to reach scale on origination volume, BSP loan servicing is integrated, and we realize the cost savings from the platform synergies, we believe New Point can deliver an 8% ROE or better, and that would generate approximately 8 cents per share in quarterly earnings contribution. Over a longer period of time, we estimate New Point can generate low teens ROE. That is just the direct impact from New Point.

Second, we expect to reinvest the equity currently allocated to our REO portfolio and REO financing.

As we continue to sell assets and recycle that Capital into new originations, we estimate. This could contribute approximately 8 to 12 cents per share per quarter to distributable earnings.

Third. And lastly we expect the contribution from new point to grow meaningfully over time.

Once it begins to reach scale on origination volume.

Bsp Loan Servicing is integrated and we realize the cost savings from the platform synergies. We Believe newpoint can deliver an 8% Roe or better and that would generate approximately 8 cents per share in quarterly earnings contribution.

Over a longer period of time. We estimate new Point can generate low teams Roe.

Jerome Baglien: There are many other intangible benefits, including increased deal flow for balance sheet loans and enhanced customer relationships, potential deal flow in our CMBS business, and a much larger real estate team that we can leverage both operationally and strategically to manage our business. Now, while the exact timing of these contributions is a little difficult to pinpoint, through these three paths, there are collective incremental distributable earnings of 16 cents to 26 cents per share per quarter. Our book value ended the quarter at $14.82 per fully converted share. I'm going to move on now to slide 11. You can see our average cost of debt on our core portfolio is so far plus 2.3%. 77% of our financing continues to come from CLOs, with reinvestment capacity available in one of those transactions.

Potential deal flow in our cmbs business in a much larger real estate team that we can leverage both operationally and strategically to manage our business.

Now, while the exact timing of these contributions is a little difficult to pinpoint.

Through these 3 paths. There are collective incremental distributable earnings of 16 cents to 26 cents per share per quarter.

Our book value ended the quarter at 14, dollars in 82 cents per fully converted share.

I'm going to move on now to slide 11.

You can see our average cost of debt on our core portfolio is LIBOR plus 2.3%.

77% of our financing continues to come from cos with reinvestment capacity available in 1 of those transactions.

Jerome Baglien: As I mentioned before, several of our CLOs are now past their reinvestment periods, and advance rates are no longer optimized because of loan repayments. Assuming market conditions remain favorable, we plan to call these CLOs and re-leverage these assets to unlock that liquidity, likely through a combination of bank debt and new CLO issuance. This will allow us to ramp up originations and grow our loan look. Our net leverage position was lower this quarter at 2.2 times, with recourse leverage standing at 0.3 times. Finally, I want to reiterate our excitement around the closing of the New Point acquisition. We've already begun integration work, and we filed historical financials yesterday evening. Pro forma financials will be filed shortly. A few things I'd like to highlight about New Point are, in 2025, we expect $4 to $5 billion in agency FHA volume.

As I mentioned before, several of our cos are now past their reinvestment periods. In advanced rates are no longer optimized because of loan repayments.

Assuming market conditions remain favorable, we plan to call these companies and relever these assets to unlock that liquidity, likely through a combination of bank debt and new COO issuance. This will allow us to ramp up originations and grow our loan book.

Our net leverage position was lower this quarter at 2.2 times with recourse leverage standing at 0.3 times.

Finally, I want to reiterate our excitement around the closing of the new Point acquisition. We've already begun integration work and we filed historical financials yesterday evening.

Both formal financials will be filed shortly.

a few things I'd like to highlight about newpoint are

Jerome Baglien: Year to date, New Point has already closed $1.9 billion in agency and FHA volume, and we are expecting solid volume in Q3. We expect GAAP net income to be between $23 and $27 million, and distributable earnings to be between $13 and $17 million for all of 2025. We included estimates for 2026 in our supplemental deck. New Point's earnings contribution to FBRT should grow meaningfully over time if their income is directly correlated to the cumulative agency and FHA origination volume and the servicing portfolio. As of June 30th, New Point's MSR portfolio was valued at approximately $217 million, with an implied life of 6.8 years. Migration of the servicing of BSP loans started in the third quarter. We expect to be fully migrated by the first quarter of 2026.

in 2025, we expect 4 to 5 billion in agency FHA volume.

Year to date. New point is already closed 1.9 billion in agency, and FHA volume, and we are expecting solid volume of Q3

We expect gaap net, income to be between 23 and 27, million, and distribute, our RNs to be between 13 and 17 million for all of 2025.

Included estimates for 2026 and our supplemental tax.

New points. Earnings contribution to fbrt should grow meaningfully over time. If their income is directly correlated to the cumulative agency and FHA origination volume and the service and portfolio.

As of June 30th new points MSL portfolio was valued at approximately 217 million with an implied life of 6.8 years.

Jerome Baglien: The full migration of FBRT's loan servicing book represents several million dollars of savings coupled with several million in additional and incremental float on the balances that we will hold. We expect New Point to be accretive from a GAAP earnings and book value per share standpoint in the first half of 2026 and accretive to distributable earnings in the second half of 2026. With that, I'll turn it over to Mike to give you an update on our portfolio.

Migration of the servicing of bsp loans started in the third quarter. We expect to be fully migrated by the first quarter of 2026.

The full migration fbrt Loan Servicing book represents several million dollars of savings coupled with several million in additional and incremental float on the on the balances that we will hold.

We expect new points to be accreted from a gap earnings and book value per share standpoint in the first half of 2026, and a credit to distributable earnings in the second half of 2026.

With that, I'll turn it over to Mike to give you an update on our portfolio.

Michael Comparato: Thanks, Jerry, and good morning, everyone. I'm going to start on slide 16. Our core portfolio ended the quarter at $4.5 billion across 145 loans, with multifamily making up 74%. In today's market, generating strong credit returns takes more than capital to take the broad product offering. While spreads have compressed, we still see attractive opportunities. BSP continues to stand out as a flexible and consistent lender in the market, with the ability to structure loans that meet our risk return profile while staying primarily in the senior portion of the capital stack. Before turning to our asset performance, I wanted to spend a little time on the broader CRE market. For the last few years, borrowers and lenders have tried to wait out market dislocation, hoping rate cuts and better days would arrive. To date, they haven't. What's next is likely a period of acceptance.

Thanks Jerry and good morning everyone. I'm going to start on slide 16.

our core portfolio ended the quarter at 4.5 billion across 145 loans, with multi family, making up 74%

In today's market, generating strong credit returns takes more than Capital. It takes a broad product offering

while spreads of compressed, we still see attractive opportunities bsp continues to stand out as a flexible and consistent lender in the market with the ability to structure loans that meet our risk return profile while staying primarily in the senior portion of the capital stack,

Before turning to our asset performance, I wanted to spend a little time on the broader CRA market for the last few years. Borrowers and lenders have tried to wait out Market dislocations, hoping rate cuts, and better days would arise to date. They happen.

Michael Comparato: Debt funds, mortgage REITs, banks, and life companies will need to mark loans appropriately and move capital. That reset is what brings healthy market functionality back, and we welcome it. We're also watching long-term rates settle into a higher range. Treasury issuance isn't slowing, and we still expect Fed cuts later this year. If we do see a more dovish Fed share in 2026, we should see a steepening yield curve resulting in more demand for shorter duration credit. The 10-year US Treasury has always been the benchmark of the CRE credit space, and it's been the benchmark for decades. Unless there is a three-handle on the 10-year, expect five-year and shorter duration loans to dominate the sector. Additionally, there is no shortage of capital in the market today.

What's next is likely a period of excess debt funds, mortgage rates Banks, and life companies will need to Mark loans appropriately and move capital.

That reset is what brings healthy Market functionality back and we welcome it.

We're watching long-term rates, settle into a higher range.

Treasury issuance isn't slowing and we still expect fed Cuts later this year.

If we do see, a more dubious guide share in 2026. We should see a steepening yield curve resulting in more demand for shortages.

The 10-year U.S. Treasury has always been the benchmark of the Sierra credit space, and it's been the benchmark for decades.

Unless there are unless there is a 3 handle on the 10 year, expect 5 year and shorter duration, loans to dominate the sector.

Michael Comparato: Credit markets are flush with liquidity, and there's a tremendous amount of equity on the sidelines ready to step in once assets start to clear. On the property side, multifamily fundamentals are improving. New supply is slowing and slowing meaningfully. Concessions are burning off, and in certain markets, rent growth is reemerging, especially in newer, higher-quality assets. Legacy 1970s and 1980s vintage stock will lag in a recovery, but strong assets and strong markets are beginning to see positive momentum. We're also seeing healthy pricing signals. Cap rate tiering is back, with real differentiation based on asset quality and market strength. That has been painful for buyers that closed acquisitions in late 2021, early 2022, but it's ultimately the correct dynamic, one that supports more rational equity investing and lending. Moving on to FBRT's portfolio, let's look at slide 18.

Additionally, there's no shortage of capital in the market today.

Credit markets are flush with liquidity and there's a tremendous amount of equity on the sidelines. Ready to step in once assets start to clear.

On the property, side, multi family fundamentals are improving.

And in certain markets, rent growth is reemerging especially in newer higher quality assets.

Legacy 1970 and 1980s vintage stock will lag in a recovery, but strong assets and strong markets are beginning to see positive momentum.

We're also seeing healthy pricing signals.

Cap rates hearing is back with real differentiation based on asset quality and markets trends.

That is been painful for buyers that close Acquisitions in late 2021 or early 2022, but it's also the correct Dynamic 1 that supports more rational Equity investing and lending.

Michael Comparato: Today, we are down to 44% of our loan commitments, consisting of loans originated before the interest rate hikes. The majority of this collateral is multifamily, representing $1.7 billion or 79%, followed by hospitality and $196 million or 9%. 89% of these legacy loans are risk rated at two or three, with a vast majority scheduled to mature by the end of 2026. We've addressed the positions currently requiring attention, and those are reflected on our watch list. Notably, total office exposure, when adjusting for our net lease headquarter asset and prior quarter write-downs, is only $105 million, 2.2% of total assets, not just legacy assets. That exposure is spread across four loans with an average loan size just under $18 million, a weighted average of $56 per square foot, and two REO assets, one of which is currently under contract. Slide 20 summarizes our watch list.

Moving on to fb's portfolio. Let's look at slide 18.

Today we are down to 44% of our loan commitments, consisting of loans originated before the interest rate hikes.

The majority of this collateral is multi family representing 1.7 billion or 79% followed by hospitality and 196 million or 9%.

89% of these Legacy loans are risk. Rated at 2 or 3 with a vast majority scheduled to mature at the End by the end of 2026.

We've addressed the positions, currently, requiring attention and those are reflected on our watch list.

Notably total office exposure when adjusting for our net. Lease, headquarter asset and prior quarter. Write Downs is only 105 million.

2.2% of total assets, not just Legacy assets.

That exposure is spread across 4 loans with an average loan size just under 18 million, a weighted average of 56 dollars per square foot and 2 REO assets 1 of which is currently under contract

Michael Comparato: Our watch list includes eight positions. We continue to actively manage each, and borrower engagement remains high. Within our positions, one is a Georgia office building that was extended in January with a principal paydown and has remained current on payments. The borrower on the 307 unit student housing property in Norfolk, Virginia, is looking to liquidate the asset within the next three to six months. We added a Phoenix office building with a $13.5 million loan this quarter following the government lease termination. The borrower is currently marketing that asset for sale. The other watch list loans are multifamily deals from 2021 and 2022 that are behind on business plan. We're in active dialogue with those borrowers, and one of the loans is under contract to be sold at par with a meaningful non-refundable deposit, and we expect that sale to close imminently.

July 20 Summers is our watch list. Our watch list includes 8 positions. We continue to actively manage each and borrower engagement remains High

Within our positions, 1 is a Georgia office building. That was extended in January with a principal pay down and has remained current on payments.

The borrower on the 3007 units student housing property in Norfolk Virginia is looking to liquidate the asset within the next 3 to 6 months.

we added the Phoenix office building with a 13 and a half million dollar loan in this quarter, following the government lease termination

The borrower is currently marketing that asset for sale.

The other watch list loans are multifamily deals from 2021 and 2022 that are behind on the business plan.

Michael Comparato: While the watch list count ticked up slightly, requests for modifications continue to slow, which is another sign that FBRT is in the later earnings of this cycle, specifically because we've been proactively addressing underperforming assets for years. Slide 21 covers our foreclosure REO portfolio. Over the past two years, we've taken 19 properties into REO, totaling roughly $560 million in UPB. Ten of those have been sold for $270 million in the aggregate above our principal balance at the time of foreclosure, including $56 million of sales this quarter. Our remaining nine foreclosure REO positions are 82% multifamily assets and at various stages of stabilization. Most importantly, our largest REO asset, a 472-unit multifamily asset in Raleigh, North Carolina, just achieved 90% occupancy. As with past sales, we'll rely on our asset management team to drive value before bringing them to market.

We're an active dialogue with those borrowers. And 1 of the loans is under contract to be sold at par with a meaningful non-refundable deposit deposit and we expect that sale to close imminently

While the watch list count picked up slightly requests for modifications continue to slow which which is another sign that FDR is in the later earnings of this cycle. Specifically, because we've been proactively addressing underperforming assets for years.

July 21 covers our full closure REO portfolio.

Over the past two years, we've taken 19 properties into Aro, totaling roughly $560 million in UPB.

10 of those have been sold for 270 million in the aggregate above our principal balance, at the time of foreclosure, including 56 million of sales, this quarter.

Our remaining 94 closure, ARA positions are 82% multi Family Assets and at various stages of stabilization.

Most importantly, our largest REO asset of 472-unit multifamily assets in Raleigh, North Carolina, just achieved 90% occupancy.

Michael Comparato: Currently, two REO assets are under contract with another two under letter of intent, and more properties are going to market for sale in Q3. Jerry already provided some quantitative feedback on New Point. I would add that after 30 days post-closing, my confidence and conviction in the acquisition has only grown. The team is incredibly strong, and early collaboration, especially around cross-selling products, has been excellent. We now have more than 300 professionals across 34 states, making us one of the largest middle-market platforms in the country. The strategic fit between FBRT and New Point is clear. Finally, as Rich noted, our stock continues to trade at a meaningful discount to book value. The market seems to be pricing in substantial unrealized losses in our legacy or pre-rate hike portfolio.

As with past sales, we'll rely on our asset management team to drive value before bringing them to market.

Currently 2. REO assets are under contract with another 200 letter of intent and more properties are going to market for sale in Q3

Jerry already provided some quantitative feedback on new points.

I would add that after 30 days post-closing, my confidence and conviction in the acquisition has only grown.

The team is incredibly strong and early collaboration, especially around cross-selling products has been excellent.

We now have more than 300 professionals across 34 states, making us 1 of the largest Middle Market Platforms in the country.

The Strategic fit between fbrt and new point is clear.

Finally, as Rich noted, our stock continues to trade at a meaningful discount to Book value.

Michael Comparato: To put that into context, for our book value to match the current stock price, we would need to recognize approximately $450 million in additional loan losses. $450 million. In current market conditions, that scenario is simply not realistic. In fact, we feel very good about our legacy book. It's 79% multifamily or $1.7 billion. Over the past eight quarters, we have received $1.5 billion in payoffs at par or better on 2021 and 2022 originated multifamily loans, including a $43 million payoff last week. Our multifamily REO sales in the aggregate have been sold above our principal balance at the time of foreclosure, and those liquidations occurred in a tougher market environment than what we face today. We have 196 million of legacy hotel loans, with the vast majority performing well and risk rated at two, with none on watch list.

The market seems to be pricing in substantial unrealized losses and our Legacy or pre- rate hike portfolio.

To put that into context.

For our book value to match the current stock price, we would need to recognize approximately $450 million in additional loan losses.

450 million.

Current market conditions that scenario is simply not realistic.

In fact, we feel very good about our Legacy book.

It's 79% multi family or 1.7 billion.

Over the past 8 quarters, we have received $1.5 billion in payoffs at par or better on 2021 and 2022 originated multifamily loans, including a $43 million payoff last week.

Our multi family, REO sales in the aggregate have been sold above our principal balance at the time of foreclosure and those liquidations occurred in the tougher Market environment than what we face today.

Michael Comparato: Lastly, as I already mentioned, we only have 105 million of legacy office exposure. We re-underwrite every loan in this portfolio quarterly, and based on current market conditions and recent outcomes on loan payoffs and REO sales, I can say with absolute conviction that losses anywhere near the implied $450 million level are highly, highly unlikely. Losses of that magnitude would suggest that every legacy loan in our portfolio is valued at less than $0.80 on the dollar. Yet in the aggregate, we haven't realized any losses on our legacy multifamily loans or liquidated multifamily REO, and we've received $1.5 billion in payoffs from peak vintage multifamily originations. It is very, very difficult to connect these dots. In short, we believe the current stock price is meaningfully undervalued. With that, I would like to turn it back to the operator and begin the Q&A session.

We have 196 million of Legacy Hotel loans with the vast majority performing, well and risk rated A 2 with none on watch list.

lastly, as I already mentioned, we only have 105 million of Legacy office exposure

We re underwrite every loan in this portfolio quarterly.

And based on current market, conditions and recent outcomes on loan payoffs and REO sales, I can say with absolute conviction that losses, anywhere near the implied. 450 million level are highly highly unlikely.

Losses of that magnitude would suggest that every Legacy Loan in our portfolio is valued at less than 80 cents on the dollar.

Yet in the aggregate we haven't receive realize any losses on our Legacy multi family loans or liquidated multi, family aerio.

and we've received 1.5 billion in payoffs from Peak vintage, multi family, originations

It is very, very difficult to connect these dots.

In short, we believe the current stock price is meaningfully undervalued.

With that. I would like to turn it back to the operator and begin the Q&A session.

Speaker 8: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are 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 will pause momentarily to assemble our roster. The first question is from Matthew Erdner with Jones Trading. Please go ahead.

We will now begin the question and answer session.

To ask a question. You may press star then 1 on your telephone keypad. If you are using a speaker-phone please pick up your handset before pressing the keys.

To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster.

The first question is from Matthew ner with Jones trading, please go ahead.

Matthew Erdner: Hey, good morning, guys. Thanks for the question and the comments earlier. You know, so when it comes to the core portfolio, you know, have you guys resumed originations and kind of at what pace, you know, since the closing of New Point? And then ideally, kind of once these CLOs are collapsed and you can start to get capital recycled, what's the ideal portfolio size to kind of get back to dividend coverage? Thanks.

Hey, good morning guys. Thanks for the the question, um, in the comments earlier. Um, you know, so when it comes to the core portfolio, um, you know, have you guys resumed originations and kind of at what pace, um, you know, since the closing of new Point, um, and then ideally kind of once the COS are collapsed and you can start to get Capital recycled, um, what's the ideal portfolio size to kind of get back to Dividend coverage. Thanks.

Michael Comparato: Hey, Mike. Good morning. It's Mike. Thank you for the question. We have turned the treadmill back on. It's going to start a little bit slow to get the machine running again, but we definitely are going to be picking up originations again. I think you'll see that grow probably quarter over quarter here, as you suggested, in conjunction with the calling of the CLOs. But yes, we're back originating and actively looking to deploy that capital. In terms of portfolio size, Jerry, why don't you step in and just talk about a minute what we typically target in terms of portfolio size to maximize dividend coverage?

Hey there, good morning. It's Mike. Uh, thank you for the question. Uh, we we have turned the, the treadmill back on. Uh, it's, it's going to start a little bit slow to get the machine running again. Uh, but we definitely are going to be picking up originations. Uh, again, I think you'll see that grow, uh, probably quarter over quarter here as you suggested, uh, in conjunction with the calling of the CLS. Um, but yes, we're we're back, uh, originating and and actively looking to deploy that Capital. Uh, in terms of, uh, you know, portfolio size Jerry, you know, why don't you step in? And, you know, just talk about a minute, what we typically,

You know, Target in terms of portfolio size to maximize dividend coverage.

Jerome Baglien: Yeah, and this is kind of what I talked about in terms of calling the CLO and getting that contribution from some of that locked-up equity, if you will, back into productive loan assets. And I see that as, you know, a half a billion plus of additional originations that we could put, net originations that we could put on the balance sheet. That puts you at about $5 billion or so on the core portfolio. I think a range around there, obviously, depends on the mix of specific assets and the yields on those assets. But generally, that range is more in line with where I think we'd like to be on a long-term basis.

Yeah, and this is kind of what I talked about in terms of calling the co and, and getting that contribution from some of that locked up Equity, if you will back back into productive loan assets and I see that as, you know, a half a billion plus of additional originations that we could put net originations that we could put on the balance sheet that puts you at about.

5 billion or so on the core portfolio. I I think a range around there obviously depends on the mix of specific assets, um, and and you know, the yields on those assets. But generally that, that range is more in line with where I think we'd like to be on a long-term basis.

Michael Comparato: Got it. That's helpful. And then, you know, with these originations, what are you guys seeing in terms of spreads compared to, you know, historical, say, a year ago?

Got it, that's helpful. And then you know, with these originations what are you guys seeing in terms of spreads compared to, you know, historical say a year ago

Jerome Baglien: A year ago, meaningfully tighter. I would say, you know, tighter just than 60 days ago. We have seen an absolute deluge of liquidity come into the space. I think not just commercial real estate, kind of all credit sectors. The spread tightening has been very, very aggressive. So I would say, you know, to directly answer the question, Matt, we're probably 100 to 125 tighter on just a fairway multifamily loan versus about a year ago. And I would say you're probably 25 to 50 tighter than just 60 to 90 days ago.

Not just commercial real estate kind of all credit sectors. Uh, the spread tightening has been has been very, very aggressive. Um, so I would say, you know, to directly answer the question, Matt, uh, we're probably

100 to 125 tighter on just a fairway multi family loan versus about a year ago and I would say you're you're probably 25 to 50 tighter uh than just 60 to 90 days ago.

Michael Comparato: Got it. Great. Thanks. I'll step back.

Got it. You're right. Thanks, I'll step back.

Speaker 8: The next question is from Randy Benner with B. Riley FBR. Please go ahead.

Question is from Randy? Benner with B Riley FBR? Please go ahead.

Jerome Baglien: Hey, thanks. Yeah, this is all super helpful to kind of get to pull the model, get a model update. So just on the CLOs, I guess to the extent that those are called, do those need to be replaced with other debt in the model? Can you just walk us through that piece of it real quick?

Hey thanks. Um yeah this is all super helpful to kind of get the pull the model um get a model update. So just on the COS I I

I guess the, um,

To the extent that those are called. Did those need to be replaced with with other debt in the model? Can you can you just walk walk us through that piece of it real quick?

Michael Comparato: Yeah, this is Jerry. Yeah, that's the theory. It's really levering those back up. Right? If you look at the specific leverage levels of our, you know, FL6, FL7, FL9, you can see those have factored down quite a bit from the original issuance. You know, I think on a normal pool of loans, you know, the CLOs start at 75 to 80% advances. You know, you're a decent amount under that if you just look at the collective of all those at this point. So I think you'd want to reset that back up to, you know, around some range in that starting point, probably not the higher end in this market, but, you know, 75% advance, give or take a little bit, at least as far as multi goes, that'd sort of be the target I think you'd want to re-level those assets up to.

Yeah, this is it. This is Jerry. Um, yeah that's the theory. It's really Levering those back up, right? If you look at uh the specific leverage levels of our, you know, fl6 level 7, fl9 you can see those. In fact, factored down quite a bit from the original issuance, you know, I think on a normal pool of loans, you know, the CLS start at 75 to 80% advances, you know, you're

Michael Comparato: That obviously then frees up cash to kind of originate more, which was what I was getting at with my other remarks. So yes, you should assume that you're going to add a little bit of leverage. And if you look at our net leverage, right, we're down to 2.2 times, I think 2.5 to 2.3 quarter times. If you think of that as your additional leverage, that's going to flow through and solve the kind of that core portfolio target that I just mentioned.

Jerome Baglien: All right, that makes sense. So that's helpful. And then going forward, just two slides, and then I'll go back into Q. But on slide 14, you talked about the Newport, I'm sorry, the New Point guidelines. And I guess the pro forma numbers you're going to have out, like is that today or like next week? And just trying to understand, you know, kind of initially how to think of that is, you know, will those performers effectively follow the same guidance here with like a volume, you know, kind of volume and then us just, you know, determining kind of a margin off of that? Could you just like expand maybe a little bit on how the performers are going to look relative to this slide 14?

A decent amount under that if you just look at the collective of all those at this point. So I think you'd want to reset that back up to, you know, around some range in that starting point, probably not the higher end in this market, but, you know, 75%, Advanced, give or take a little bit. At least as far as multi goes, that sort of be the target, I think you'd want to railay those assets up to that. Obviously, on freeze up cash to kind of originated more with was uh, was what I was getting out with my other remarks. So, yes, you should assume that you're going to add a little bit of Leverage. And if you look at our net leverage, right, we're down to 2.2 times. I think 2 and a half to 2 and 3/4 times. If you think of that as your additional leverage, that's going to flow through and solve to kind of that that core portfolio Target that I just mentioned

All right, that makes sense. So that's helpful and then going forward.

Just 2 slides and then I'll go back in the queue. But, um,

We on slide 14 and just need to talk about the the Newport. I'm sorry. The new point, the guidelines. And um I guess the the proforma numbers you're going to have out like is that today or like next week it just and just trying to understand um

You know, kind of initially how to think of that as, you know what? What those performers effectively follow the same guidance here with like a volume.

You know, kind of volume and then us just, you know, determining kind of a margin off of that. Could you just could you just like expand, maybe a little bit on on how the performers are going to look relative to this slide 14.

Michael Comparato: Performers should be out in the next 24 hours. In terms of how they'll look to this, I think this should actually be more helpful in terms of what the performer is showing. I mean, those are just, the performers would be helpful in that they will show you the the format and the future layout of how our financials are going to look, but you're not running them in through 2026. So the reason we put in this additional disclosure is to be helpful from a modeling perspective to think about what kind of volume numbers you should run, where kind of we expect that range of end results to possibly be. And this is very much a volume-driven business.

Um, performers should be out in the next 24 hours. Um,

Michael Comparato: So I think, you know, how much you originate translates into the growth of the MSR book, you know, the mortgage servicing right book, the the yield that you get on that, plus the gain on sale that you have. So I think I would use the pro forma as sort of a guidepost in terms of thinking about how you structure the forward-looking combined business. I think it'll be very helpful for that. In terms of translating, you know, what you see there through the first part of the year into what you expect for the balance of, you know, this year and next year, these numbers should be helpful in putting those two pieces together.

in terms of how they look to this, I think this should actually be more helpful in terms of what the the performers showing. I mean, those are just the performance would be helpful in in that, they will show you the, the format in the future layout of how our financials are going to are going to look, but you're not running them in through 2026. So, the reason we put in this additional disclosure is to be helpful from a modeling perspective to think about what kind of volume numbers you should run where kind of, we expect that range of end results to possibly be. And, and this is very much, a volume driven business. So I I think, you know how much you originated translates into the growth of the MSR book, you know, the, the mortgage servicing rate book, The the yield that you get on that plus the gain on sale that you have. So, I, I think I would use the proforma as sort of a, a guidepost in terms of thinking about how you structure the forward-looking combined business. I think it'll be very helpful for that in terms of translating, you know what, you see there through the first part of the year into what you expect for the best.

Of, you know, this year. And next year, these numbers should be helpful in putting those 2 pieces together.

Jerome Baglien: Okay. And just one related follow-up here. In any GSE privatization scenario or change in how those are operated, I mean, is there is there any, I mean, it seems like volumes are strong in this channel right now. Is there anything, is there any scenario where it would throw it off or could it actually help? I mean, do you have any thoughts about that?

Okay, just 1 related. Follow-up here the the in any

Uh, GST, privatization scenario or change and and how those are operated. I mean, is there, is there any? I mean, it seems like volumes are strong in this Channel right now. Um, is there anything is there any scenario where we would throw it off? Or could it actually helped give me? Do you have any thoughts about that?

Michael Comparato: Yeah, Randy, this is Mike. I think the important thing, you know, there's a few important things. We talked about this previously is, you know, one, they weren't government-sponsored previously. They were publicly traded. I don't think it has any impact overall. I do think that, you know, almost every administration since they were, you know, became GSEs has talked about, you know, taking them private and/or publicly traded again. It's a very, very complicated web to untangle. So I just, I don't know if it does happen or not, obviously, but I don't think that it has, you know, an overall impact on the business overall. The reality is, you know, this is housing. The federal government is keenly wanting to keep liquidity in the housing sector, and it is always going to be the lowest cost of capital anywhere in the commercial real estate sector.

Yeah, Randy. This is Mike. Um,

Michael Comparato: So it always has a spot. It should always be the cheapest capital out there, and as a result, it's always going to have demand.

They were, you know, became gscs, has talked about, you know, taking them private or and or publicly traded again. Uh, it's a very very complicated web, uh, to untangle. So I I just, I don't know if it does happen or not, obviously, uh, but I don't think that it has, you know, an overall impact on the business. Overall, the reality is, uh, you know, this is housing. Uh, the federal government is keenly, uh, wanting to keep liquidity in the housing sector and it is always going to be the lowest cost of capital anywhere in the commercial real estate sector. So it always has a spot. Uh, it should always be uh, the cheapest Capital out there. And as a result, it's always going to have demand.

Jerome Baglien: All right. Appreciate it. Thank you.

All right, appreciate it. Thank you.

Speaker 8: The next question is from Steve Delaney with Citizens JMP. Please go ahead.

The next question is from Steve Delaney with citizens, jmpp. Please go ahead.

Matthew Erdner: Yes. Good morning, Rich, Mike, Jerry. Nice to be on with you today.

Michael Comparato: Hey, Steve.

Matthew Erdner: Wait, hey, a lot of good color on, you know, your introductory comments. You know, it's getting, I'm using a lot more paper on my legal pad now that you've got all these businesses. You know, but the nice thing is it gives you some optionality on allocating capital. So always been a solid story. I think it's going to be pretty exciting over the next year. So we look forward to it. Mike, you were talking about, for starters, let's just talk about the bridge business. I think that was the segment you were referring to, a deluge of liquidity. Am I right?

Yes, uh, good morning Rich. Mike Jerry. Nice to be on with you today. Hey, Steve wait lot. Hey a lot of good caller on, you know your introductory comments um you know it's it's it's getting I'm I'm I'm using a lot more paper on my legal pad now that you've got all these businesses you know, you. But the nice thing is it gives you some optionality on allocating Capital? So, uh, always been a solid story. I think it's going to be pretty exciting over the next year so we look forward to it. Um, Mike, you were talking about for starters, let's just talk with the about the bridge.

Business. I think that was the segment. You were referring to a Dell's huge of liquidity. Am I right?

Michael Comparato: Steve, it's really everywhere. I think, you know, you've seen, yeah, it's in the bridge business, of course, but you've seen spreads just tighten kind of everywhere and capital flowing everywhere. I would say most notably, you know, in the securitized products market, anything in the CRE/CLO space, anything in the SASB space on a floating rate basis is just oversubscribed, you know, multiple times at every single tranche. So there is more liquidity in the system today than I think we've seen almost at any point post-COVID.

Steve it's it's really everywhere. I think you know you've seen. Yeah, it's in the bridge business of course. But you've seen spreads just tighten kind of everywhere and and capital flowing ever. I would say most notably, you know in the securitized products Market anything in the CRA cllo space, anything in the sazby space on a floating rate, places is just over, subscribe, you know, multiple times at every single tranche. So there is there is more liquidity in the system today, uh, than I think we've seen almost at any point postco.

Matthew Erdner: Wow. Wow. Okay. Well, I guess people have just been sitting on a lot of cash and they've decided it's time to put money to work and build for their investors. You know, this is institutional money, I assume we're talking about primarily. Looking for some yield.

Wow. Wow. Okay. Well, I guess people just been sitting on a lot of cash and they've decided it's time to put money to work and and build put their investors, you know, this institutional money uh assume we're talking about primarily

Michael Comparato: Yeah. Yeah. I mean, look, I think the reality is that, you know, I don't want to call a bottom. You know, that's a pretty dangerous game. But I think most people are looking at the market for CRE, saying the damage was done over the past two, two and a half years. If we aren't at the bottom, we're pretty darn close.

looking for deals.

Yeah, I mean, look, I I I think the

Matthew Erdner: Close.

Michael Comparato: And so it's a pretty comfortable time to be stepping into kind of credit positions.

I think the reality is that, you know, I I don't want to call a bottom, uh, you know, that's that's a pretty dangerous game. But I think most people are looking at the market for CRA saying, the damage was done over the past 2, 2 and a half years. If we aren't at the bottom, we're pretty darn close close. Uh and so it's it's pretty comfortable time.

To be stepping in to kind of credit positions.

Matthew Erdner: Do you think, I mean, the nice thing you have this flexibility of wherever the market shows you opportunities, you can move your focus without ever stepping completely away. But on the bridge business today, when you look at the quality of what you're seeing and the loans that you're committing to, and you roll that back to 2021, 2022, do you think that broadly, whether it's the quality of sponsors, you know, the quality of appraisals, what is it a better, stronger, more rational market today than the origination bennages that have created all the problems people are living with now?

Do you think? I mean, the nice thing you have this flexibility of of, of wherever the market shows you opportunities. You can, you can move your focus, um, without ever stepping completely away. But on the bridge business today, when you look at the quality of what you're seeing, and the loans that you're committing to and you roll that back to 2021 2022, it do you think that broadly? Whether it's the quality of sponsors you know quality of appraisals? What is it? A better stronger more rational market today than the the origination bandages that have created all the problems. People are living with now.

Michael Comparato: Well, I'm only going to speak to the FBRT book, right, because that's obviously the book I invest in and don't want to speak to people's. But you know, when we talk to investors, this has been a focal point. I mean, if you rewind to 2021, you know, what was the vast majority of loans that were going on people's balance sheets, or at least on our balance sheets? You know, it was a lot of 1980s vintage, some 1990s, occasionally some 1970s vintage stuff. So we're talking 30, 40, 50-year-old assets. And there was a business plan, right? These business plans were, we're going to come in, we're going to put in $10,000, $12,000 a unit. We're going to put in new appliances, a new countertop, new kitchens, new flooring, a coat of paint.

well, I'm only going to

speak to to the fbrt book, right? Because that's obviously the book best and and and don't want to speak people. But you know, when we talk to investors, this has been a focal point. I mean, if you rewind to 2021, you know, what was the vast majority of loans that were going on people's balance, or at least on our balance sheet, you know, it was a lot of 1980s, vintage some 1990s, occasionally, some 1970s vintage stuff. So we're talking 30, 40, 50 year old assets and there was a business plan, right? These business plans were, were going to come in, we're going to put in 10,000 12,000 dollars, a unit. We're going to put a new appliances, a new countertop, a new car.

Michael Comparato: We're going to push rents 200 bucks, and we're going to sell the thing two or three years later. If you look at what we're putting on our balance sheet today, in large part, it's all high quality, like very new vintage multifamily. I mean, if you just look at the asset level, we're talking, you know, brand new assets, five-year-old assets. There is no business plan. There's no swinging hammers. This is more about a bridge of time than a bridge of adding value at the asset level. It's new construction loans that are getting paid off and just need time to fill. It's borrowers. I mean, the stabilized multifamily loans that we're writing is, I mean, we never saw that stuff four or five years ago, where people are saying, you know, I'm 94% lease. I don't want to sell in the current market.

Kitchens and flooring a code of paint. We're going to push rents 200 bucks, and we're going to sell the Thing 2 or 3 years later.

Michael Comparato: I also don't want to lock in 10-year fixed-rate debt with a bunch of call protection in the current market. So I'm going to bridge this 12, 24, 36 months to what I hope are greener pastures. So I would say overall asset quality is head and shoulders better than what asset quality was four or five years ago. And overall credit metrics, just from a debt yield, LTV, that standpoint is also markedly better than it was, you know, three, four, five years ago.

There is no business plan, there's no swinging hammers. It's this is more about a break of time than a bridge of, you know, adding value at the asset level. It's new construction loans that are getting paid off and just need time to fill its borrowers. I mean, the amount of stabilized multifamily loans that we're riding is. I mean, we never saw that stuff 4 or 5 years ago, um, where people are saying I'm you know, I'm 94% least, I don't want to sell in the current market. I also don't want to lock in 10 years, fixed rates that with a bunch of call Protection in the fair market. So I'm going to bridge this 122 2436 months to what I hope for greener pastures. So I would say, overall asset quality is uh,

Matthew Erdner: That's great color. So we're not going to hear the word heavy transitional very much, as much as just a bridge loan being really what a bridge is supposed to be, right, from a temporary to lease up and then get into a permanent financing.

Head and Shoulders better than what asset quality was 4 or 5 years ago and overall credit metrics just from a debt yield LTV. Uh, the that standpoint is is also marketed better than it was uh, you know, 3 4 5 years ago.

Michael Comparato: That has been the most popular loan that we've been writing for probably the past two years.

Matthew Erdner: Great. Well, thank you for everything and congrats on New Point and the progress you're making.

Great. Well, thank you for everything and congrats on, uh, on new point and the progress you're making

Speaker 8: The next question is from Tom Catherwood with BTIG. Please go ahead.

Tom Catherwood: Thanks, and good morning, everybody. Maybe starting with New Point, it seems to be on a similar origination pace as 24. What does the platform need to ramp origination activity? Is it more capital, a larger sourcing network, more infrastructure? Kind of how are you approaching that growth?

The next question is from Tom catherwood with btig. Please go ahead.

Thanks and good morning everybody. Maybe starting with new point, it seems to be on a similar. Origination pace is 24. What does the platform need to ramp origination activity? Is it more Capital larger sourcing Network more infrastructure? Kind of how are you approaching that growth?

Michael Comparato: So it's definitely not more capital. I would say that's one of the top reasons to be in that business is it is incredibly capital-light. I do think, as Jerry said in our prepared remarks, we're going to have a very big third quarter at the New Point level, which is fantastic. I think that, you know, getting a larger net spread across the country is really what we need to do. You know, we have a very large multifamily book already, 8 billion roughly of loans on balance sheet across all of our products. We have our own origination staff at FBRT and BSP that are going to be originating into agency.

Uh, so it's definitely not more capital. Um, I would say that's one of the, you know, top reasons to be in that business is it is incredibly capital-intensive. Like, uh, I do think, as Jerry said in our prepared remarks, um,

Michael Comparato: And then the amount of incoming calls that we've had from originators, right, that are looking at the platform saying, "Wow, you guys have everything." You know, you can do construction loans, bridge loans, mez loans, CMBF, now agency. There are going to be a lot of people that want to jump on the platform, and I think that that's the primary driver is just expanding that net, adding people, and that should be what drives volume. Obviously, it's going to be tied to interest rates as well, but we don't have any control over that.

We're going to have a very big third quarter uh at the new Point level which is fantastic. Um, I think that, you know, getting a, a larger net spread across the country is really what we need to do. Um, you know, we have a very large multi family book, already 8, 8 8 billion, roughly of loans on on, on balance sheet across all of our products. Uh we have our own origination staff at fbrt and bsp that are going to be originating into agency and then the amount of incoming calls that we've had from origin.

Ators right? That are looking at the platform saying, wow, you guys have everything, you know, you can do construction loans, Bridge, loans, mes loans cmbs. Now agency, there are going to be a lot of people, uh, that want to jump on the platform, and I think that that's the primary driver is just expanding that net adding people. Um, and that should and that should be what drives volume obviously. It's going to be tied to interest rates as well, uh, but we, we don't have any control over that.

Tom Catherwood: Got it. And then maybe sticking with the interest rate comment, because that might tie into the next question here. You know, Mike, you talked about transaction markets rebounding as owners seek liquidity and lenders show less willingness to maybe extend and pretend, but that's also been the hope since, you know, early, middle '24. What do you think finally sparks a sustained recovery in investment sales?

Got it and then maybe sticking with the interest rate comment because that might tie into the next question. Here, you know, my kid talked about transaction markets, rebounding as owners seek liquidity in lenders show less willingness to maybe extend and pretend but that's also been the Hope since you know, early middle 24. What do you think? Finally Sparks a sustained recovery in investment sales?

Michael Comparato: I mean, as we've talked about for several quarters, we're pretty anti-pretend and extend, and we get this question a lot in private conversations. The answer is I don't think there's going to be a specific catalyst. We're not going to wake up one day and just something's going to happen and everybody says, "Oh, you know, my office building loan in downtown Chicago at $225 bucks a foot, you know, when the building across the street just sold for $60,000 is now impaired." You know, they know it. Everybody knows it. We're just not marking them. And I think it's just going to be exhaustion. Right? I said in the prepared remarks, like we're just going to come to the acceptance phase.

Uh, I mean we as as we've talked about for several quarters, we're we're pretty anti- pretend and extend uh and we get this question a lot. Uh, in private conversations. The answer is, I don't think there's going to be a specific Catalyst. There's not going to, we're not going to wake up 1 day and just something's going to happen. And everybody says, oh, you know, my office building Loan in downtown Chicago, at 225 bucks, a foot, you know, when the building cross the street just sold for 60 is now impaired. Uh,

Michael Comparato: I just think there's a point where investors and regulators, if we're talking about the banks, obviously the regulators, but investors are going to say, "Guys, like enough is enough. You originated this loan seven years ago. It's not this. It's not that." Like there's just a point at which pretend and extend doesn't work anymore. You can only pretend so long, I guess, is the short answer. So it just feels like we're coming up, the shock clock is running low on pretend and extend. I'm not sure there's going to be an aha moment where we wake up one morning and it happens, but I do think once it starts to happen, the wave undoubtedly goes across, you know, all of the banks, the mortgage rates, the debt funds, et cetera, and everybody just says it's time to move on.

You know, they know it, everybody knows it. We're just not marking them. Um and I think it's just going to be exhaustion, right? I said in the prepared remarks like we're just going to come to the acceptance phase.

I just think there's a point where investors and Regulators. If we're talking about the banks, obviously The Regulators. But investors are going to say, guys, like enough is enough. You originated this loan 7 years ago. It's not this. It's not that like they there's just a point at which pretend that extends

10 so long I guess is is the short answer, so it just feels like we're coming up the, the shock clock is running low on pretend and extend I'm not sure there's going to be an aha moment where we wake up, 1 morning and it happens. But I do think once it starts to happen, the wave, uh, undoubtedly goes across, you know, all of the, the banks, the mortgage rates, the debt funds, Etc. And, and everybody just says, it's, it's time to move on.

Tom Catherwood: Appreciate that, Mike. And then one last one for me. Jerry, you mentioned migrating FBRT's loans over to New Point's servicer. Is there a savings related to that over time, and are there any loans at parent benefit streets, balance sheet level that are also migrating over to the servicer?

Appreciate that, Mike and then 1 last 1 for me. Jerry, you mentioned, migrating fbts loans over to new points. Serer, is there a savings related to that over time? And are there any loans at

Parent benefit streets, balance sheet level that are also migrating over to the serer.

Um,

Jerome Baglien: Not parent as in Franklin Templeton, but migrating the book means migrating all the loans that we manage at BSP, which is more than just FBRT. That's the number that Mike was just talking about, 10 billion or so of loans, give or take a little bit. That's what would migrate in. And yes, there's definitely savings. You're cutting out, you know, obviously all the markup that you pay today and picking up all of the entirety of the benefit on the float of all the cash reserves that you hold. So it's really a twofold benefit directly to FBRT in addition to the additional servicing revenue and float from everything else you would move over. So, you know, that's why I said it will be a meaningful increase as we roll that in over the next few quarters.

Not not parent as in Franklin Templeton but migrating the book means, migrating, all the loans that we manage at DSP which is more than just fbrt. Um, that that's the number that Michael was just talking about, you know, 10 10 billion or so of of loans give or take a little bit.

That's what would migrate in and and yes there's there's definitely savings you're cutting out. You know, obviously all the markup that you pay today and picking up all of the the entirety of the benefit on the float of all the the cash reserves that you hold. So it's really a 2-fold benefit directly to fbrt. In addition to the additional servicing revenue and Float from everything else, you would move over. So you know that that's why I said it it it will be a meaningful increase as we roll that in over the next few quarters.

Tom Catherwood: And I assume that's baked into that 8 cents, you know, per quarter that was mentioned at the asset. Okay.

Jerome Baglien: It is, yeah. That was fully contemplated when we considered the whole transaction as the benefit of adding that infrastructure and being able to roll our own products directly into it.

And I assume that's baked into that 8 cents, you know, per quarter, that was mentioned at the end. Okay, it is, yeah, that that was fully contemplated. When we consider the whole transaction is the benefit of adding that infrastructure and being able to roll our own products directly into it.

Tom Catherwood: Got it. Got it. That's it for me. Thanks, everyone.

Got it, got it. That's it for me. Thanks everyone.

Jerome Baglien: Thanks.

Thanks.

Speaker 8: The next question is from Jason Stewart with Janie Montgomery Scott. Please go ahead.

Michael Comparato: Hey, good morning. Thanks. Jerry, thanks for all these numbers. It sounds like you and the team have been busy. Just looking at your ROE disclosure on New Point, could you give us a sense of how you break that down between the origination and the servicing business in terms of ROE?

The next question is from Jason Stewart with Janie Montgomery. Scott. Please go ahead.

Hey good morning, thanks. Uh Jerry thanks for all these numbers. It sounds like you and the team have been busy. Um just looking at your Roe disclosure on new Point. Could you give us a sense of how you break that down between the origination and the servicing business in terms of Roe?

Jerome Baglien: I don't think we have a disclosed breakout of that split anywhere. So I don't know that I can provide the exact specifics between the two. I don't know that we have that detail even. You can see a little bit in the pro forma once we put that out. You can get a sense of where the income is being driven. But in terms of what we published so far, I don't have that info out there.

I don't think we have a disclosed breakout of that of, that split anywhere. Um, so I don't know that I can provide the exact specifics between the 2, um,

I don't know. I don't know that we have that detail even

You can see a little bit in the pro-forma. Once we put that out, you can get a sense of where the income is being driven, but in terms of what we publish so far I don't I don't have that info out there.

Michael Comparato: Okay. Fair enough. And then on ROE, you know, Mike, you know, when we look at incremental originations and where CLO execution is today, because just assuming you stopped the line on the stand, originated everything in one day, and securitized it, what's the marginal ROE on a new CLO gross?

Okay, fair enough. Uh, and then on Roe, you know? Um, my, you know, when we look at incremental originations and where Co execution is today, it was assuming you stopped the Line in the Sand, originated. Everything in 1 day, and securitized it. What's the marginal? Roe on a new C, gross.

Jerome Baglien: We're still probably achieving a low teens ROE on all new origination. So it's, you know, the line I've been using speaking with investors is the returns are still excellent on a nominal basis. They're outstanding on a risk-adjusted basis when compared to equity returns. They just aren't euphoric, which they've been for the past two years, right? Everything we originated for the past two years has, you know, probably been the best returning credits that we've seen. You know, I also think something that, you know, we didn't touch on in the prepared remarks, but very, very different than probably the balance of the industry is we would get a net benefit from decline in SOFR just because of the amount of origination we did over the past two years and having very high SOFR floors on those loans.

uh,

still probably achieve.

A low teams, uh, Roe on on all new origination. So it's, uh,

You know, the the line I've been using speaking with investors is the returns are still excellent, uh, on a, on a nominal basis, they're outstanding on a risk adjusted basis. When compared to equity returns, they just aren't euphoric, uh, which they've been for the past 2 years, right? Everything we originated, uh, for the past few years is, you know, probably been the best returning credits, uh, that we've seen, you know. I also think something that, you know, we didn't touch on on the prepared remarks but

Jerome Baglien: So, you know, for the most part, everybody else stopped originating, exited the market, has been waiting. You know, we put on a few billion dollars of new loans with SOFR floors, you know, that aren't achievable today. So, you know, while I'm not inviting or, you know, I'm not predicting what happens next, we're kind of in a very, very unique spot where even if SOFR does come in, it doesn't hurt us where it would hurt others. It actually benefits us.

Very, very different than probably the balance of the industry is, we would get a net benefit from Decline. And so, for just because of the amount of origination we did over the past 2 years and having very high. So, for floors on those loans, so you know, for the most part everybody else stopped originating exited, the market has been waiting uh you know, we put on a few billion dollars of new loans with so for floors, you know, that aren't achievable today. So you know, while I'm I'm not inviting or, you know, not predicting, what happens next we're we're kind of in a very very unique spot where even if so for does come in, it doesn't hurt us where it would hurt others. It actually benefits us

Michael Comparato: Yeah, that's a good point. You slide at minus 100 is plus three tonnes. Thanks for that. And then just to follow up on the asset level and multi, you know, given the product transition, do you have a sense for where, you know, real-time renewal rates are in multifamily?We've

Operator: seen some of the equity rates come out, and they're still fairly strong, but that's a, you know, pretty high-quality product mix. I mean, do you have a sense of where on the margin we are in terms of renewal rates and multi, in your book?

For where, you know, real time renewal rates are in multi family. I mean, we've seen some of the equity REITs come out and they're still fairly strong, but that's a, you know, pretty high quality product. Mix. I mean, do you have a sense of where on the margin we are in terms of renewal rates and multi in your book?

Speaker 2: I couldn't answer it directly, Jason, on our book. It's obviously going to fluctuate market to market. We're seeing certain markets much stronger than others, obviously, but I couldn't give you detail within our book on retention.

Operator: Okay. All right. Cool. Thanks. Appreciate taking the questions.

Uh, I, I, I couldn't answer it directly, Jason, on our book. Um, it's obviously going to fluctuate market to market. We're seeing certain markets much stronger than others, obviously. Um, but I, I couldn't give you detail within our book on retention.

Okay. All right, cool. Thanks. Appreciate taking the questions.

Speaker 3: This concludes our question and answer session. I would like to turn the conference back over to Lindsey Crabbe for any closing remarks.

This concludes our question and answer session, I would like to turn the conference back over to Lindsay crab for any closing remarks.

Lindsey Crabb: We appreciate you joining us today. Please reach out if you have any further questions. Thank you and have a great day.

We appreciate you joining us today. Please reach out if you have any further questions. Thank you and have a great day.

Speaker 3: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect