Franklin BSP Realty Trust Inc

Previous wording

The Company invests in commercial real estate debt investments, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans. The Company also originates conduit loans which the Company intends to sell through its TRS into commercial mortgage-backed securities ("CMBS") securitization transactions. Historically this business has focused primarily on CMBS, commercial real estate collateralized loan obligation bonds ("CRE CLO bonds"), collateralized debt obligations ("CDOs") and other securities. The Company also owns real estate that was either acquired by the Company through foreclosure or deed in lieu of foreclosure, or that was purchased for investment, primarily subject to triple net leases.

Current wording

The Company invests in commercial real estate debt investments, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans. The Company also originates conduit loans which the Company intends to sell through its TRS into commercial mortgage-backed securities ("CMBS") securitization transactions. Historically this business has focused primarily on CMBS, commercial real estate collateralized loan obligation bonds and single asset single borrower bonds (collectively "CMBS bonds"), collateralized debt obligations ("CDOs") and other securities. The Company also owns real estate that was either acquired by the Company through foreclosure or deed in lieu of foreclosure, or that was purchased for investment, primarily subject to triple net leases.

Previous wording

Book value as of June 30, 2024 and December 31, 2023 excluding the impact for accumulated depreciation and amortization of real property of $11.5 million and $9.4 million, respectively, was $15.40 and $15.88.

Current wording

Book value per share as of September 30, 2024 and December 31, 2023, excluding the impact for accumulated depreciation and amortization of real property of $12.6 million and $9.4 million, respectively, was $15.38 and $15.88.

Previous wording

During the six months ended June 30, 2024, there were no material changes to our critical accounting estimates as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

During the nine months ended September 30, 2024, there were no material changes to our critical accounting estimates as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.

Previous wording

As of June 30, 2024 and December 31, 2023, our portfolio consisted of 153 and 144 commercial mortgage loans, held for investment, respectively. The commercial mortgage loans, held for investment, net of allowance for credit losses, as of June 30, 2024 and December 31, 2023 had a total carrying value of $5,347.4 million and $4,989.8 million, respectively. As of June 30, 2024 the contractual principal balance outstanding of commercial mortgage loans, held for sale, measured at fair value was $61.6 million, comprised of four loans, which were not in default or greater than ninety days past due. As of December 31, 2023 the Company did not hold any commercial mortgage loans, held for sale. As of June 30, 2024 and December 31, 2023, we had $215.3 million and $242.6 million, respectively, of real estate securities, available for sale, measured at fair value. As of June 30, 2024 and December 31, 2023, our real estate owned, held for investment portfolio was composed of three investments with carrying values of $114.5 million and $115.8 million, respectively. As of June 30, 2024 and December 31, 2023, we had 25 and 23 properties classified as real estate owned, held for sale with combined carrying values of $271.3 million and $103.7 million, respectively.

Current wording

As of September 30, 2024 and December 31, 2023, our portfolio consisted of 157 and 144 commercial mortgage loans, held for investment, respectively. The commercial mortgage loans, held for investment, net of allowance for credit losses, as of September 30, 2024 and December 31, 2023 had a total carrying value of $5,077.5 million and $4,989.8 million, respectively. As of September 30, 2024 and December 31, 2023 the Company did not hold any commercial mortgage loans, held for sale. As of September 30, 2024 and December 31, 2023, we had $210.7 million and $242.6 million, respectively, of real estate securities, available for sale, measured at fair value. As of September 30, 2024 and December 31, 2023, our real estate owned, held for investment portfolio was composed of three investments with carrying values of $113.8 million and $115.8 million, respectively. As of September 30, 2024 and December 31, 2023, we had 11 positions and one position classified as real estate owned, held for sale with combined carrying values of $284.4 million and $103.7 million, respectively.

Previous wording

As of June 30, 2024, we had four loans (two secured by multifamily properties and two secured by office properties) designated as non-performing status with a total amortized cost of $225.0 million. As of June 30, 2024, two loans designated as non-performing and put on cost recovery status were determined to have a combined $29.7 million specific allowance for credit losses. During the first quarter of 2024, one multifamily loan which was designated as non-performing as of December 31, 2023, was assumed by the Company through a deed-in-lieu of foreclosure, and subsequently sold (see "Note 3 - Commercial Mortgage Loans").

Current wording

As of September 30, 2024, we had three loans (one secured by a multifamily property and two secured by office properties) designated as non-performing status with a total amortized cost of $67.9 million. As of September 30, 2024, two loans designated as non-performing and put on cost recovery status were determined to have a combined $28.7 million specific allowance for credit losses. During the first quarter of 2024, one multifamily loan which was designated as non-performing as of December 31, 2023, was assumed by the Company through a deed-in-lieu of foreclosure, and subsequently sold (see "Note 3 - Commercial Mortgage Loans").

Previous wording

As of June 30, 2024 and December 31, 2023 our commercial mortgage loans, held for investment, excluding commercial mortgage loans on non-performing status, had a weighted average coupon of 9.0% and 9.2%, respectively, and a weighted average remaining contractual maturity life of 1.1 years and 0.9 years, respectively.

Current wording

As of September 30, 2024 and December 31, 2023 our commercial mortgage loans, held for investment, excluding commercial mortgage loans on non-performing status, had a weighted average coupon of 8.5% and 9.2%, respectively, and a weighted average remaining contractual maturity life of 1.0 year and 0.9 years, respectively.

Previous wording

(5)On March 5, 2021, the Financial Conduct Authority of the U.K. (the “FCA”) announced that LIBOR tenors would cease to be published or no longer be representative. The Alternative Reference Rates Committee (the “ARRC”) interpreted this announcement to constitute a benchmark transition event. The benchmark index of LIBOR interest rate will convert from LIBOR to compounded SOFR, plus a benchmark adjustment of 11.448 basis points. As of June 30, 2024, all of our commercial mortgage loans, held for investment which had been indexed at LIBOR were converted to SOFR utilizing the 11.448 basis points adjustment and the applicable spreads remain unchanged. The loans which have the SOFR adjustment are indicated with "Adj. 1M SOFR Term."

Current wording

(5)As of September 30, 2024, all of our commercial mortgage loans, held for investment which had been indexed at LIBOR have been converted from LIBOR to compounded SOFR, plus a benchmark adjustment of 11.448 basis points, and the applicable spreads remain unchanged. The loans which have the SOFR adjustment are indicated with "Adj. 1M SOFR Term."

Previous wording

•The real estate securities business focuses on investing in and asset managing real estate securities. Historically this business has focused primarily on CMBS, CRE CLO bonds, CDO notes, and other securities.

Current wording

•The real estate securities business focuses on investing in and asset managing real estate securities. Historically this business has focused primarily on CMBS, CMBS bonds, CDO notes, and other securities.

Previous wording

Interest income for the three months ended June 30, 2024 and March 31, 2024 totaled $133.6 million and $130.6 million, respectively, an increase of $3.0 million. The increase in interest income during the three months ended June 30, 2024 is due to an increase of $332.9 million in the average carrying value of our real estate debt. As of June 30, 2024, our portfolio consisted of (i) 153 commercial mortgage loans, held for investment, (ii) four commercial mortgage loans, held for sale, measured at fair value and (iii) nine real estate securities, available for sale, measured at fair value. As of March 31, 2024, our portfolio consisted of (i) 145 commercial mortgage loans, held for investment, (ii) one commercial mortgage loan, held for sale, measured at fair value and (iii) seven real estate securities, available for sale, measured at fair value.

Current wording

Interest income for the three months ended September 30, 2024 and 2023 totaled $134.1 million and $137.0 million, respectively, a decrease of $2.9 million. This decrease was primarily due to an increase in non-performing loans, which averaged $189.8 million in principal during the three months ended September 30, 2024 partially offset by an increase in the average carrying value of our real estate debt. As of September 30, 2024, our portfolio consisted of (i) 157 commercial mortgage loans, held for investment and (ii) ten real estate securities, available for sale, measured at fair value. As of September 30, 2023, our portfolio consisted of (i) 145 commercial mortgage loans, held for investment, (ii) one commercial mortgage loan, held for sale, measured at fair value and (iii) six real estate securities, available for sale, measured at fair value and (iv) ARMs (as defined below).

Previous wording

Interest expense for the three months ended June 30, 2024 and 2023 totaled $86.7 million and $75.3 million, respectively, an increase of $11.4 million. The increase was primarily due to an increase of $428.0 million in the average carrying balance of our collateralized loan obligations coupled with an increase in deferred fee amortization due to the utilization of expected duration of our CLOs compared to contractual duration.

Current wording

Interest expense for the three months ended September 30, 2024 and 2023 totaled $89.9 million and $78.0 million, respectively, an increase of $11.9 million. The increase was primarily due to an increase of $444.6 million in the average carrying balance of our collateralized loan obligations coupled with an increase in deferred fee amortization due to the utilization of expected duration of our CLOs compared to contractual duration.

Previous wording

For the three months ended June 30, 2024, general benefit for credit losses was $0.1 million compared to a general provision of $9.7 million for the three months ended June 30, 2023. General benefit for the three months ended June 30, 2024 was attributable to the portfolio turnover of older vintage loans with new originated loans. For the three months ended June 30, 2023, the increase in general reserve was attributable to a more pessimistic view of the macroeconomic scenario utilized for the CECL model compared to preceding periods.

Current wording

For the three months ended September 30, 2024, general benefit for credit losses was $0.8 million compared to a general provision of $2.8 million for the three months ended September 30, 2023. General benefit for the three months ended September 30, 2024 was attributable to the portfolio turnover of older vintage loans with new originated loans. For the three months ended September 30, 2023, the increase in general reserve was attributable to a more pessimistic view of the macroeconomic scenario utilized for the CECL model compared to preceding periods.

Previous wording

The Company did not realize a gain or loss on extinguishment of debt for the three months ended June 30, 2024. Realized gain on extinguishment of debt for the three months ended June 30, 2023 was $0.3 million related to the repurchase of the Class E notes in our BSPRT 2021-FL7 CLO.

Current wording

The Company did not realize a gain or loss on extinguishment of debt for the three months ended September 30, 2024. Realized loss on extinguishment of debt for the three months ended September 30, 2023 was $2.8 million related to the redemption of the BSPRT 2019-FL5 CLO.

Previous wording

Unrealized Gain/(Loss) on Commercial Mortgage Loans, Held for Sale, Measured at Fair Value

Current wording

Unrealized loss on commercial mortgage loans, held for sale, measured at fair value, for the three months ended September 30, 2024 was $0.6 million which is attributable to the reversal of previous unrealized gains due to sales into the CMBS securitization market. The Company did not have an unrealized gain or loss on commercial mortgage loans, held for sale, measured at fair value, for the three months ended September 30, 2023.

Previous wording

Loss on other real estate investments for the three months ended June 30, 2024 was $6.2 million primarily due to sales and write offs related to the Walgreens Portfolio coupled with the onboarding of real estate owned, held for sale multifamily properties. This is compared to a loss of $1.7 million for the three months ended June 30, 2023 related to the decreased fair value of our one real estate owned, held for sale asset.

Current wording

Loss on other real estate investments for the three months ended September 30, 2024 was $2.2 million primarily due to write offs related to the Walgreens Portfolio coupled with the onboarding of real estate owned, held for sale, multifamily properties. This is compared to a loss of $4.1 million for the three months ended September 30, 2023 that was primarily due to an impairment on the Walgreens Portfolio.

Previous wording

The Company did not hold any trading securities as of June 30, 2024. Trading loss for the three months ended June 30, 2023 of $0.9 million was attributable to principal paydowns, and changes in market values on our former portfolio of

Current wording

The Company did not hold any trading securities as of September 30, 2024. Trading loss for the three months ended September 30, 2023 of $2.6 million was attributable to principal paydowns, and changes in market values on our former portfolio of adjustable-rate mortgage pass-through securities ("ARM Agency Securities" or "ARMs") issued and guaranteed by government-sponsored enterprises or by an agency of the federal government.

Previous wording

Net result from derivative transactions for the three months ended June 30, 2024 of a $0.2 million loss was composed of a realized gain of $22.0 thousand primarily related to the termination and settlement of credit default swaps and treasury note futures offset by an unrealized loss of $0.2 million. This is compared to a net gain on our derivative portfolio of $1.0 million composed of a realized gain of $0.6 million primarily due to the termination and settlement of $69.0 million notional amount of our interest rate swap positions primarily designed to hedge the ARMs portfolio coupled with an unrealized gain of $0.4 million for three months ended June 30, 2023.

Current wording

Net result from derivative transactions for the three months ended September 30, 2024 of a $1.3 million loss was composed of a realized loss of $1.6 million primarily related to the termination and settlement of credit default swaps and treasury note futures partially offset by an unrealized gain of $0.3 million. This is compared to a net loss on our derivative portfolio of $0.1 million composed of a realized gain of $0.1 million primarily due to the termination and settlement of our interest rate swap positions offset by an unrealized loss of $0.2 million for three months ended September 30, 2023.

Previous wording

Interest income for the six months ended June 30, 2024 and 2023 totaled $264.1 million and $283.4 million, respectively, a decrease of $19.3 million. The decrease was primarily due to the loans placed on non-accrual status, which totaled $225.4 million in principal as of June 30, 2024, coupled with the recognition $20.4 million of interest income in the sale of a Brooklyn hotel asset in the second quarter of 2023. As of June 30, 2024, our portfolio consisted of (i) 153 commercial mortgage loans, held for investment, (ii) four commercial mortgage loans, held for sale, measured at fair value and (iii) nine real estate securities, available for sale, measured at fair value. As of June 30, 2023, our portfolio consisted of (i) 156 commercial mortgage loans, held for investment, (ii) one commercial mortgage loan, held for sale, measured at fair value, (iii) nine real estate securities, available for sale, measured at fair value and (iv) ARMs.

Current wording

Interest income for the nine months ended September 30, 2024 and 2023 totaled $398.3 million and $420.5 million, respectively, a decrease of $22.2 million. The decrease was primarily due to the recognition of $20.4 million of interest income in the sale of a Brooklyn hotel asset in the second quarter of 2023 coupled with loans placed on non-performing status, which averaged $231.6 million in principal during the nine months ended September 30, 2024. As of September 30, 2024, our portfolio consisted of (i) 157 commercial mortgage loans, held for investment and (ii) ten real estate securities, available for sale, measured at fair value. As of September 30, 2023, our portfolio consisted of (i) 145 commercial mortgage loans, held for investment, (ii) one commercial mortgage loan, held for sale, measured at fair value and (iii) six real estate securities, available for sale, measured at fair value.

Previous wording

Interest expense for the six months ended June 30, 2024 and 2023 was $168.1 million and $146.4 million, respectively, an increase of $21.7 million. The increase was primarily due to an increase of $455.0 million in the average carrying value of our collateralized loan obligations coupled with an increase in deferred fee amortization due to the utilization of expected duration of our CLOs compared to contractual duration.

Current wording

Interest expense for the nine months ended September 30, 2024 and 2023 was $257.9 million and $224.3 million, respectively, an increase of $33.6 million. The increase was primarily due to an increase of $451.6 million in the average carrying value of our collateralized loan obligations coupled with an increase in deferred fee amortization due to the utilization of expected duration of our CLOs compared to contractual duration.

Previous wording

For the six months ended June 30, 2024 and 2023, general provision for credit losses was $2.1 million and $13.3 million, respectively. General benefit for the six months ended June 30, 2024 was attributable to the portfolio turnover of older vintage loans with new originated loans. For the six months ended June 30, 2023, the increase in general reserve was attributable to a more pessimistic view of the macroeconomic scenario utilized for the CECL model compared to preceding periods.

Current wording

For the nine months ended September 30, 2024 and 2023, general provision for credit losses was $1.3 million and $16.0 million, respectively. General provision for the nine months ended September 30, 2024 was attributable to the portfolio turnover of older vintage loans with new originated loans. For the nine months ended September 30, 2023, the increase in general reserve was attributable to a more pessimistic view of the macroeconomic scenario utilized for the CECL model compared to preceding periods.

Previous wording

For the six months ended June 30, 2024, the primary increase in specific reserve of $33.0 million was related to multiple loans including multi-family loans and non-performing office loans. For the six months ended June 30, 2023, the increase in specific reserve of $12.7 million was primarily related to one office loan located in Oregon coupled with higher capitalization rates on the assumed fair value of the properties in the Walgreens Portfolio.

Current wording

For the nine months ended September 30, 2024, the primary increase in specific reserve of $33.5 million was related to two non-performing loans collateralized by office properties coupled with foreclosures on non-performing loans collateralized by multifamily properties located in Oklahoma and North Carolina. For the nine months ended September 30, 2023, the increase in specific reserve of $12.4 million was primarily related to one office loan located in Oregon coupled with higher capitalization rates on the assumed fair value of the properties in the Walgreens Portfolio.

Previous wording

The Company did not realize a gain or loss on extinguishment of debt for the six months ended June 30, 2024. Realized gain on extinguishment of debt for the six months ended June 30, 2023 of $5.0 million was primarily related to the redemption of $17.5 million par value unsecured debt at a price equal to 75% par coupled with the repurchase of the Class E notes in our BSPRT 2021-FL7 CLO.

Current wording

The Company did not realize a gain or loss on extinguishment of debt for the nine months ended September 30, 2024. Realized gain on extinguishment of debt for the nine months ended September 30, 2023 of $2.2 million was primarily related to the redemption of $17.5 million par value unsecured debt at a price equal to 75% par coupled with the repurchase of the Class E notes in our BSPRT 2021-FL7 CLO and $8.3 million of bonds of BSPRT 2019-FL5 partially offset by the redemption of BSPRT 2019-FL5.

Previous wording

Loss on other real estate investments for the six months ended June 30, 2024 was $6.2 million primarily due to sales and write offs related to the Walgreens properties coupled with the onboarding of real estate owned, held for sale multifamily properties. This is compared to a loss of $3.0 million for the six months ended June 30, 2023 related to a sale of one real estate owned, held for sale property resulting in a loss of $1.2 million in addition to a write-down to fair value of one property of $1.9 million.

Current wording

Loss on other real estate investments for the nine months ended September 30, 2024 was $8.4 million primarily due to sales and write offs related to the Walgreens properties coupled with the onboarding of real estate owned, held for sale multifamily properties. This is compared to a loss of $7.1 million for the nine months ended September 30, 2023 related to a sale of one real estate owned, held for sale property located in New Rochelle, NY resulting in a loss of $1.2 million in addition to impairments of our real estate owned, held for sale assets of $1.9 million related to the St. Louis, MO office property and $4.0 million related to the Walgreens Portfolio.

Previous wording

The Company did not hold any trading securities as of June 30, 2024. Trading gain for the six months ended June 30, 2023 of $2.0 million was attributable to principal paydowns, changes in market values and gains on sales of ARM Agency Securities.

Current wording

The Company did not hold any trading securities as of September 30, 2024. Trading loss for the nine months ended September 30, 2023 of $0.6 million was attributable to principal paydowns, changes in market values and gains on sales of ARM Agency Securities.

Previous wording

Net result from derivative transactions for the six months ended June 30, 2024 was composed of a realized gain of $0.3 million primarily related to the termination and settlement of credit default swaps and treasury note futures offset by an unrealized loss of $0.3 million. This is compared to a net gain on our derivative portfolio of $0.7 million composed of a realized gain of $0.6 million primarily due to the termination and settlement of $72.3 million notional amount of our interest rate swap positions primarily designed to hedge the ARMs portfolio coupled with an unrealized gain of $0.1 million for the six months ended June 30, 2023.

Current wording

Net result from derivative transactions for the nine months ended September 30, 2024 was composed of a realized loss of $1.3 million primarily related to the termination and settlement of credit default swaps and treasury note futures. This is compared to a net gain on our derivative portfolio of $0.6 million composed of a realized gain of $0.7 million primarily due to the termination and settlement of interest rate swap positions coupled with an unrealized loss of $0.1 million for the nine months ended September 30, 2023.

Previous wording

Net loss attributable to non-controlling interest in our consolidated joint ventures for the six months ended June 30, 2024 amounted to $1.7 million compared to a net income attributable to non-controlling interest of $0.1 million for the six months ended June 30, 2023.

Current wording

Net loss attributable to non-controlling interest in our consolidated joint ventures for the nine months ended September 30, 2024 amounted to $3.1 million compared to a net loss attributable to non-controlling interest of $0.7 million for the nine months ended September 30, 2023.

Previous wording

The decrease in operating expense was primarily related to (i) a decrease in incentive fees due to the provision for specific credit losses recognized during the six months ended June 30, 2023 and (ii) a decrease in administrative service expenses due to less time spent on asset workout during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 partially offset by (iii) an increase in share-based compensation due to equity awards issued under the Company's 2021 Incentive Plan during the six months ended June 30, 2024.

Current wording

The decrease in operating expense was primarily related to (i) a decrease in incentive fees due to the decrease in net income primarily related to the provision for specific credit losses recognized during the nine months ended September 30, 2024 and (ii) a decrease in administrative service expenses due to less time spent on asset workout during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 partially offset by (iii) an increase in share-based compensation due to equity awards issued under the Company's 2021 Incentive Plan during the nine months ended September 30, 2024.

Previous wording

Interest expense for the three months ended June 30, 2024 and March 31, 2024 totaled $86.7 million and $81.3 million, respectively, an increase of $5.4 million. The increase was primarily due to an increase of $332.8 million in the average carrying value of repurchase agreements - commercial mortgage loans.

Current wording

Interest expense for the three months ended September 30, 2024 and June 30, 2024 totaled $89.9 million and $86.7 million, respectively, an increase of $3.2 million. The increase was primarily due to an increase of $160.0 million in the average carrying value of repurchase agreements - commercial mortgage loans.

Previous wording

For the three months ended June 30, 2024, general benefit for credit losses was $0.1 million compared to a general provision of $2.1 million for the three months ended March 31, 2024. General benefit for the three months ended June 30, 2024 was attributable to the portfolio turnover of older vintage loans with new originated loans.

Current wording

For the three months ended September 30, 2024, general benefit for credit losses was $0.8 million compared to a general benefit for credit loss of $0.1 million for the three months ended June 30, 2024. General benefit for the three months ended September 30, 2024 was attributable to the portfolio turnover of older vintage loans with new originated loans.

Previous wording

For the three months ended June 30, 2024 and March 31, 2024, specific provision for credit losses was $32.3 million and $0.7 million, respectively. For the three months ended June 30, 2024, the increase in specific provision of $32.3 million was primarily related to a non-performing office loan secured by one property in Colorado placed on cost recovery status. For the three months ended March 31, 2024, the specific provision of $0.7 million was related to a non-performing multifamily loan secured by two properties in North Carolina placed on cost recovery status.

Current wording

For the three months ended September 30, 2024 and June 30, 2024, specific provision for credit losses was $0.5 million and $32.3 million, respectively. For the three months ended September 30, 2024, the specific provision was related to foreclosures on multifamily properties located in Oklahoma and North Carolina. For the three months ended June 30, 2024, $32.3 million was primarily related to two non-performing office loans secured by properties in Colorado and Georgia, both of which were placed on cost recovery status.

Previous wording

The Company did not realize a gain or loss on real estate securities, available for sale for the three months ended June 30, 2024. Realized gain for the three months ended March 31, 2024 of $0.1 million was related to the sale of three CRE CLO bonds.

Current wording

Realized gain on real estate securities, available for sale for the three months ended September 30, 2024 of $0.1 million was related to the sale of two CMBS bonds. The Company did not realize a gain or loss on real estate securities, available for sale for the three months ended June 30, 2024.

Previous wording

Realized gain on commercial mortgage loans, held for sale, measured at fair value for the three months ended June 30, 2024 of $1.4 million was related to the sale of $38.9 million in principal amount of commercial real estate loans into the CMBS securitization market resulting in proceeds of $40.3 million. Realized gain on commercial mortgage loans, held for sale, measured at fair value for the three months ended March 31, 2024 of $5.5 million was related to the sale of $100.7 million in principal amount of commercial real estate loans into the CMBS securitization market resulting in proceeds of $106.2 million.

Current wording

Realized gain on commercial mortgage loans, held for sale, measured at fair value for the three months ended September 30, 2024 of $6.2 million was related to the sale of $131.6 million in principal amount of commercial real estate loans into the CMBS securitization market resulting in proceeds of $137.8 million. Realized gain on commercial mortgage loans, held for sale, measured at fair value for the three months ended June 30, 2024 of $1.4 million was related to the sale of $38.9 million in principal amount of commercial real estate loans into the CMBS securitization market resulting in proceeds of $40.3 million.

Previous wording

Unrealized gain on commercial mortgage loans, held for sale, measured at fair value for the six months ended June 30, 2024 was $0.6 million compared to $44.0 thousand for the six months ended June 30, 2023. The $0.6 million increase was primarily related to the reversal of unrealized gain/loss on sales of commercial real estate loans into the CMBS securitization market.

Current wording

Unrealized loss on commercial mortgage loans, held for sale, measured at fair value, for the three months ended September 30, 2024 was $0.6 million which is attributable to the reversal of previous unrealized gains due to sales into the CMBS securitization market. Unrealized gain on commercial mortgage loans, held for sale, measured at fair value, for the three months ended June 30, 2024 was $0.2 million related to changes in market values.

Previous wording

Net result from derivative transactions for the three months ended June 30, 2024 of a $0.2 million loss was composed of a realized gain of $22.0 thousand primarily related to the termination and settlement of credit default swaps and treasury note futures offset by an unrealized loss of $0.2 million. This is compared to a net gain on our derivative portfolio of $0.2 million composed of a realized gain of $0.3 million primarily due to the termination and settlement of credit default swaps and treasury note futures partially offset by an unrealized loss of $0.1 million for the three months ended March 31, 2024.

Current wording

Net result from derivative transactions for the three months ended September 30, 2024 of a $1.3 million loss was composed of a realized loss of $1.6 million primarily related to the termination and settlement of credit default swaps and treasury note futures partially offset by an unrealized gain of $0.3 million. Net result from derivative transactions for the three months ended June 30, 2024 of a $0.2 million loss composed of a realized gain of $22.0 thousand primarily due to the termination and settlement of credit default swaps and treasury note futures offset by an unrealized loss of $0.2 million.

Previous wording

Unrealized gain on commercial mortgage loans, held for sale, measured at fair value, for the three months ended June 30, 2024 was $0.2 million compared to an unrealized loss of $0.3 million for the three months ended June 30, 2023. The $0.5 million increase was primarily the result of the change in market values of these loans.

Current wording

Provision for income tax for the three months ended September 30, 2024 was $0.2 million compared to a benefit of $0.1 million for the three months ended June 30, 2024. The difference is related to changes in taxable income/loss in our TRS segment.

Previous wording

The decrease in operating expense was primarily related to (i) a decrease in incentive fees due to the provision for specific credit losses recognized during the three months ended June 30, 2024 coupled with (ii) a decrease in administrative services expenses due to less time spent on asset workout during the three months ended June 30, 2024 compared to three months ended June 30, 2023, partially offset by (iii) an increase in professional fees due to a larger portfolio.

Current wording

The increase in operating expense was primarily related to (i) an increase in administrative service expenses due to an increase in personnel time spent on securitizations and deal workout and (ii) an increase in REO operating expenses due to the onboarding of additional properties during the three months ended September 30, 2024 compared to three months ended June 30, 2024, offset by (iii) a decrease in incentive fees due to the decrease in projected income for the remainder of 2024 as the market adjusts for rate decreases.

Previous wording

We closely monitor our liquidity position and believe that we have sufficient current liquidity and access to additional liquidity to meet our financial obligations for the next 12 months and beyond.

Current wording

We closely monitor our liquidity position and believe that we have sufficient current liquidity and access to additional liquidity to meet our financial obligations for the next twelve months and beyond.

Previous wording

(1)Represents (i) total outstanding borrowings under secured financing arrangements, including collateralized loan obligations, repurchase agreements - commercial mortgage loans, repurchase agreements - real estate securities, asset-specific financing arrangements, and unsecured debt, less cash and cash equivalents, to (ii) total equity and total redeemable convertible preferred stock, at period end. Recourse net debt-to-equity ratio was 0.6x and 0.2x as of June 30, 2024 and December 31, 2023, respectively.

Current wording

(1)Represents (i) total outstanding borrowings under secured financing arrangements, including collateralized loan obligations, repurchase agreements - commercial mortgage loans, repurchase agreements - real estate securities, asset-specific financing arrangements, and unsecured debt, less cash and cash equivalents, to (ii) total equity and total redeemable convertible preferred stock, at period end. Recourse net debt-to-equity ratio was 0.1x and 0.2x as of September 30, 2024 and December 31, 2023, respectively.

Previous wording

(2) Represents (i) total outstanding borrowings under secured financing arrangements, including collateralized loan obligations, repurchase agreements - commercial mortgage loans, repurchase agreements - real estate securities, asset-specific financing arrangements, and unsecured debt, to (ii) total equity and total redeemable convertible preferred stock, at period end. Recourse leverage ratio was 0.7x and 0.4x as of June 30, 2024 and December 31, 2023, respectively.

Current wording

(2) Represents (i) total outstanding borrowings under secured financing arrangements, including collateralized loan obligations, repurchase agreements - commercial mortgage loans, repurchase agreements - real estate securities, asset-specific financing arrangements, and unsecured debt, to (ii) total equity and total redeemable convertible preferred stock, at period end. Recourse leverage ratio was 0.3x and 0.4x as of September 30, 2024 and December 31, 2023, respectively.

Previous wording

As of June 30, 2024, the Company had $30.6 million of reinvestment capital available across all outstanding collateralized loan obligations. The following table shows the par value outstanding for each CLO and the respective reinvestment end dates (dollars in millions):

Current wording

As of September 30, 2024, the Company had $137.6 million of reinvestment capital available across all outstanding collateralized loan obligations. The following table shows the par value outstanding for each CLO and the respective reinvestment end dates (dollars in millions):

Previous wording

The following tables summarize our Repo and Revolving Credit Facilities and our master repurchase agreements ("MRAs") for the six months ended June 30, 2024, 2023, and 2022, respectively (dollars in thousands):

Current wording

The following tables summarize our Repo and Revolving Credit Facilities and our master repurchase agreements ("MRAs") for the nine months ended September 30, 2024, 2023, and 2022, respectively (dollars in thousands):