Franklin BSP Realty Trust (NYSE:FBRT) used its fourth-quarter 2025 earnings call to outline leadership changes, a shift in capital allocation priorities, and a reset of its quarterly dividend as management aims to better align payouts with near-term earnings and protect book value.
Leadership changes and strategy emphasis
Chairman Richard Byrne opened the call by announcing that Michael Comparato has been appointed chief executive officer effective immediately. Comparato previously led the commercial real estate practice at Benefit Street Partners. In connection with the change, Brian Buffone was named president. Byrne said he will remain actively engaged as chairman, focusing on strategic oversight and supporting the leadership transition.
Dividend reset to $0.20 per share
Comparato said management and the board approved a reset of the quarterly dividend to $0.20 per common share beginning in the first quarter of 2026. He noted the company has “earnings power to support a meaningfully higher dividend” over time, but said management no longer believes it is prudent to “sacrifice book value” to maintain the prior payout level. The stated priorities going forward are sustainable dividend coverage, book value growth, and building more consistent earnings.
Management attributed the dividend decision to several factors discussed on the call:
- Recent declines in SOFR, along with the timing of originations and repayments and the overall size of the loan portfolio, weighing on short-term returns.
- Spreads at “multi-decade tights,” with lower returns on new loans versus loans paying off.
- REO liquidations taking longer than anticipated, leaving equity “locked in underperforming investments,” even as management said it is making progress.
- The NewPoint acquisition, which management said trades some higher near-term credit returns for steadier recurring servicing and fee revenue that typically supports a lower dividend yield but greater earnings stability and book value growth.
In the Q&A session, Comparato said he does not view current earnings as a steady state. He reiterated a path to returning to an earnings level of roughly $0.35 to $0.36 per share, but said it is taking longer than expected to get there. He also said the company wanted to avoid continuing to shrink the balance sheet through what he described as over-distributing.
Quarterly results, financing actions, and share repurchases
Chief Financial Officer and Chief Operating Officer Jerome Baglien reported GAAP net income of $18.4 million, or $0.13 per fully converted common share, for the quarter. Distributable earnings were $17.9 million, or $0.12 per fully converted share, and included $9.8 million of realized losses. Baglien said $7.7 million of those losses were related to debt extinguishments, with the remaining portion tied to REO sales. Excluding those items, he said distributable earnings would have been $0.22 per fully converted share, nearly flat compared with the prior quarter, with timing cited as the primary driver of quarter-over-quarter changes.
Baglien said FBRT completed a $1 billion CLO (FL12) early in the quarter, increasing non-recourse financing capacity. The company called several older CLOs past their reinvestment periods, which produced a debt extinguishment charge of $0.07 per share. He said the new CLO should lower financing costs in 2026 and add origination capacity.
Book value per share ended the quarter at $14.15, which Baglien said reflected the dividend outpacing earnings. The company continued share repurchases, buying back $14.4 million of common stock in the quarter, which he said contributed $0.05 to book value. After quarter end, the board reauthorized the repurchase program, providing $50 million available for future buybacks through December 31, 2026.
Net leverage ended the quarter at 2.5x, with recourse leverage at 0.81x. Baglien said the company has ample financing capacity and liquidity, including reinvestment availability on two CLOs, and expects earnings to benefit in 2026 as the core portfolio grows and NewPoint’s contribution stabilizes.
NewPoint contribution and 2026 expectations
Baglien said NewPoint’s contribution in the quarter was modest, which he attributed to a lower origination cadence and higher tax reserves at the TRS that reduced reported earnings. He said FBRT expects NewPoint’s distributable earnings contribution to run at approximately $25 million to $33 million per year.
For the quarter, NewPoint originated $1.1 billion of new agency loans. Management expects $4.5 billion to $5.5 billion of agency volumes in 2026. At quarter end, the MSR portfolio was valued at approximately $220 million and generated $8.8 million of income in the quarter, reflecting an average MSR rate of about 82 basis points and an implied portfolio life of 6.4 years. NewPoint’s servicing portfolio totaled $47.8 billion at quarter end.
Baglien also said integration work is progressing, including migrating BSP’s loans and servicing book onto NewPoint, with completion expected by the middle of the first quarter. The addition of BSP loans is expected to increase NewPoint’s servicing book by about $10 billion, which management said should help drive earnings power in 2026.
Portfolio composition, credit trends, and REO resolution
Buffone said the core portfolio ended the quarter at roughly $4.4 billion, with about 77% of loans backed by multifamily assets and “very limited” office exposure. During the quarter, FBRT originated 37 loans at a weighted average spread of 284 basis points, with multifamily representing 76% of new originations.
Office exposure declined to $57 million across three loans, down from $130 million in the prior quarter due to two office payoffs. Buffone said overall credit quality remained stable, with an average risk rating of 2.4 at quarter end. He noted two loans were removed from the watch list during the quarter—one repaid in full and one taken as REO and subsequently sold—while two new multifamily assets were added. A Georgia office loan on the watch list was extended 18 months in exchange for a 5% principal paydown; the loan balance was reduced from $27.5 million to $21.1 million and remains on nonaccrual, with the borrower continuing to make monthly debt service payments.
On REO, Buffone said the foreclosure REO balance declined to seven positions from nine in the prior quarter. The company sold three REO assets during the quarter at its adjusted debt basis, with remaining reserves charged to distributable earnings and contributing to realized losses. FBRT added a Texas multifamily asset to REO in the quarter, which Buffone said is already under a letter of intent and expected to be resolved in the first half of the year.
In response to questions, management said origination activity remains a focus, though it is reluctant to “chase” the tightest spreads on commodity multifamily loans. Comparato said the company had a $1.7 billion under-application pipeline and is seeking to shift origination mix into areas with more attractive returns. He also said the company’s goal is to grow the core book to $4.8 billion to $5.0 billion by year end.
About Franklin BSP Realty Trust (NYSE:FBRT)
Franklin BSP Realty Trust, Inc (NYSE: FBRT) is a publicly traded real estate investment trust sponsored by an affiliate of Franklin Square Capital Partners. The company focuses on acquiring, owning and managing single-tenant net leased commercial properties across the United States. Its portfolio spans retail, office, industrial and other property types, with leases structured to shift most property‐level responsibilities—such as maintenance, property taxes and insurance—to the tenants.
By concentrating on net lease investments, Franklin BSP Realty Trust aims to generate stable and predictable rental income streams.
