Franklin BSP Realty Trust, Inc. current report, 25 March 2021

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Business Context and Reporting Period

Company: Benefit Street Partners Realty Trust, Inc. (Franklin BSP Realty Trust, Inc.)
Filing Type: Form 8-K (Current Report)
Date of Report: March 25, 2021
Event: Entry into a Material Definitive Agreement and Creation of a Direct Financial Obligation via a commercial real estate mortgage securitization.

Key Financial Metrics

Transaction Size: Approximately $584.5 million in aggregate principal notes issued.
Portfolio Composition:

  • Existing Assets: $446.7 million (8 whole loans and 13 participations/senior notes).
  • Acquisition Reserve: $253.3 million designated for future mortgage asset acquisitions during the ramp-up period.
Note Classes Issued:
  • Class A: $367.5 million
  • Class A-S: $86.625 million
  • Class B: $33.25 million
  • Class C: $41.125 million
  • Class D: $44.625 million
  • Class E: $11.375 million
  • Class F: $26.25 million
  • Class G: $11.375 million
  • Class H: $23.625 million
Interest Rates (Initial): Floating rates based on one-month LIBOR plus spreads ranging from 1.10% (Class A) to 3.50% (Class E).
Maturity: Stated maturity date is March 15, 2036.
Weighted Average Life: Expected to be 4.14 years for Class A and 4.97 years for Classes A-S through E.
Accounting Treatment: The Company accounts for the issuance as a financing on its balance sheet.

Material Changes and Use of Proceeds

Use of Proceeds: Net proceeds will primarily be used to:

  • Repay borrowings under the Company's current credit facilities.
  • Fund future loans and investments.
  • Support general corporate purposes.
Debt Structure: The Notes represent limited recourse obligations of the Issuer, payable solely from cash flow generated by the Portfolio. They are non-recourse obligations of the Co-Issuer. No shareholders, officers, or directors have an obligation to pay further amounts if cash flow is insufficient.

Outlook, Risks, and Contingencies

Redemption Provisions:

  • Optional Redemption: Available on interest payment dates in January, April, July, or October beginning March 2029.
  • Clean-up Call: Mandatory if outstanding principal is reduced to 10% of the original aggregate amount.
  • Mandatory Redemption: Required if certain tests in the Indenture are not satisfied.
  • Tax Event Redemption: Company may require redemption if the Issuer becomes subject to U.S. income taxes or withholding taxes.
Events of Default: Includes standard defaults plus:
  • Requirement to register as an investment company under the Investment Company Act of 1940.
  • Loss of the Issuer's status as a qualified REIT subsidiary or disregarded entity.
Servicing Fees:
  • Servicer (Situs Asset Management LLC): 0.04% per annum servicing fee + $1,000 monthly reporting fee + late charges/investment income.
  • Special Servicer (BSP Special Servicer, LLC): 0.25% per annum fee + 1.00% workout fee or 1.00% liquidation fee (not both) on specially serviced assets.
Risk Factors: The weighted average life calculations assume no prepayments, defaults, or delinquencies; actual performance may vary. The Notes are not registered under the Securities Act of 1933 and are sold in a private placement.

Investor Verification Checklist

  • Verify the specific terms of the Indenture (Exhibit 10.1) regarding priority of payments and redemption triggers.
  • Confirm the composition and credit quality of the $446.7 million existing loan portfolio.
  • Monitor the utilization of the $253.3 million acquisition reserve during the ramp-up period.
  • Review the Company's current credit facility balances to assess the immediate impact of the debt repayment.
  • Assess the impact of floating interest rates (LIBOR-based) on future interest expense given current market conditions.