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: May 30, 2019
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 $690.7 million in aggregate principal notes issued.
Collateral Portfolio:
- Eight commercial/multifamily whole loans.
- One mezzanine loan.
- 33 fully-funded senior or pari passu participations.
- Aggregate principal balance of collateral: ~$690.7 million.
- Additional $119.3 million allocated for future asset acquisition during the ramp-up period.
Accounting Treatment: The Company accounts for the issuance as a financing on its balance sheet, retaining preferred equity of the Issuer.
Note Structure and Terms
| Note Class | Principal Amount | Interest Rate (Spread + 1-mo LIBOR) | Weighted Average Life |
|---|---|---|---|
| Class A (Senior Secured) | $407,025,000 | 1.15% | 3.37 years |
| Class A-S (Second Priority) | $76,950,000 | 1.48% | 4.65 years |
| Class B (Third Priority) | $50,000,000 | 1.40% | 4.91 years |
| Class C (Fourth Priority) | $61,374,000 | 2.00% | 4.96 years |
| Class D (Fifth Priority) | $48,600,000 | 2.40% | 4.96 years |
| Class E (Sixth Priority) | $20,250,000 | 2.85% | 4.96 years |
| Class F (Seventh Priority) | $17,212,000 | Not specified in text | Not specified in text |
| Class G (Eighth Priority) | $12,149,000 | Not specified in text | Not specified in text |
| Class H (Ninth Priority) | $21,263,000 | Not specified in text | Not specified in text |
Maturity Date: May 15, 2029 (unless redeemed earlier).
Interest Payment Start: June 17, 2019.
Material Changes and Obligations
The filing represents a significant shift in the Company's capital structure, replacing existing credit facility borrowings with a securitized debt structure. The Notes are limited recourse obligations of the Issuer, payable solely from cash flow generated by the Portfolio and other pledged assets. The Company retains the preferred equity of the Issuer, effectively keeping the assets on its balance sheet.
Guidance, Risks, and Contingencies
Servicing Fees:
- Servicer (Situs Asset Management LLC): 0.04% per annum of outstanding principal + $1,000 monthly reporting fee + late charges/investment income.
- Special Servicer (Situs Holdings, LLC): 0.25% per annum on specially serviced assets + 1.00% workout fee on collections or 1.00% liquidation fee on proceeds (not both).
- Optional Redemption: Available quarterly starting July 2027.
- Clean-up Call: Mandatory if outstanding principal drops to 10% of original issuance.
- Mandatory Redemption: Triggered if certain Indenture tests are not satisfied.
- Tax Redemption: Mandatory if the Issuer becomes subject to U.S. income taxes or withholding taxes.
- Recourse Limitation: No obligation for shareholders, officers, or directors to pay if cash flow is insufficient.
- Repurchase Obligation: If representations/warranties regarding mortgage assets are materially inaccurate, the seller (Company subsidiary) must repurchase affected assets at par plus accrued interest.
- Investment Company Act: An event of default occurs if the Issuer is required to register as an investment company.
- REIT Status: An event of default occurs if the Issuer loses its status as a qualified REIT subsidiary.
Key Facts for Investor Verification
- Verify the exact interest rate spreads for Class F, G, and H notes, as they are not explicitly detailed in the summary text.
- Confirm the specific terms of the "current credit facilities" being repaid with the $690.7 million proceeds.
- Review the full Indenture (Exhibit 10.1) for detailed definitions of the "certain tests" that trigger mandatory redemption.
- Assess the composition and credit quality of the 33 participations and the 8 whole loans comprising the initial Portfolio.
- Monitor the "ramp-up acquisition period" to ensure the $119.3 million is deployed as intended for additional mortgage assets.