Franklin BSP Realty Trust, Inc. (NYSE: FBRT) has announced the pricing of a significant $1.076 billion managed Commercial Real Estate Collateralized Loan Obligation (CRE CLO). The transaction, known as BSPRT 2025-FL12, is a key part of the company's strategy to enhance earnings and optimize its balance sheet.
The move is expected to generate approximately $250 million in cash, reduce financing costs, and support up to $1.0 billion in new loan originations. FBRT projects this will ultimately add between $0.05 and $0.07 per share to its quarterly earnings.
Key Takeaways
- Franklin BSP Realty Trust (FBRT) priced a new $1.076 billion CRE CLO transaction, designated FL12.
- The deal is part of a broader strategy that includes calling three older CLOs and securing new financing.
- These combined actions are expected to generate $250 million in cash and reduce financing costs by approximately 65 basis points.
- The company anticipates the financial restructuring will support $1.0 billion in new loan originations and boost quarterly earnings per share by $0.05 to $0.07.
Details of the FL12 Transaction
The newly priced Commercial Real Estate Collateralized Loan Obligation, BSPRT 2025-FL12, is a substantial financial instrument valued at $1.076 billion. The structure of this CLO is designed for long-term investment, featuring a 30-month reinvestment period.
Key financial metrics of the transaction include an initial advance rate of 88%. The weighted average interest cost is set at the 1-Month CME Term SOFR plus 1.61%, before accounting for transaction costs and any discounts. The settlement for this transaction is scheduled for October 15, 2025.
What is a CRE CLO?
A Commercial Real Estate Collateralized Loan Obligation (CRE CLO) is a type of security backed by a pool of commercial real estate loans. Investors buy bonds from the CLO, and their returns are paid from the interest and principal payments on the underlying property loans. This allows companies like FBRT to manage their loan portfolios and access capital.
Strategic Financial Restructuring
The pricing of FL12 is not an isolated event but a central part of a multi-faceted financial strategy. In conjunction with this new issuance, FBRT will take several other significant steps to reposition its finances for growth.
The company announced it will call three of its older CLOs that were originally issued in 2021 and 2022. This process involves paying off the existing debt from those instruments, effectively replacing older, potentially more expensive financing with the new FL12 structure.
Additionally, FBRT will finance a separate pool of assets, valued at approximately $500 million, through an arrangement with a major money center bank. This combination of issuing new debt, retiring old debt, and securing additional financing is designed to create a more efficient capital structure.
Projected Financial Outcomes
- Cash Generation: Approximately $250 million.
- Cost Reduction: Financing costs on the affected assets are expected to decrease by around 65 basis points (0.65%).
- Origination Capacity: The moves will support an estimated $1.0 billion in new loan originations.
- Earnings Impact: An incremental quarterly earnings benefit of $0.05 to $0.07 per share.
Market Response and Executive Outlook
The transaction was met with positive reception from the market, reflecting confidence in FBRT's strategy and the quality of its underlying assets. Michael Comparato, President of FBRT, highlighted the strong investor interest in the deal.
“Investor demand for the transaction was very strong, with broad participation across the capital stack. We are grateful for the continued support from leading institutional investors,” Comparato stated.
He further explained that this move aligns with a strategy previously outlined to shareholders. “On our second quarter earnings call, we outlined a three-pronged approach to growing earnings per share. One of those prongs included calling several older CLOs and issuing a new transaction. With the completion of FL12, we have made important progress toward that goal.”
This strategic execution demonstrates FBRT's focus on actively managing its liabilities to improve profitability and shareholder value. The ability to attract widespread institutional investment underscores the market's positive view of the company's management and portfolio.
Advisors and Company Profile
Several major financial institutions played key roles in structuring and managing the transaction. J.P. Morgan Securities LLC acted as the sole structuring agent for the deal. Serving as co-lead managers and joint bookrunners were Wells Fargo Securities, LLC and Barclays Capital Inc.
About Franklin BSP Realty Trust
Franklin BSP Realty Trust, Inc. is a publicly traded real estate investment trust (REIT) listed on the New York Stock Exchange. The company focuses on originating, acquiring, and managing a diversified portfolio of commercial real estate debt secured by properties across the United States. According to company data, as of June 30, 2025, FBRT held approximately $5.6 billion in assets. The trust is externally managed by Benefit Street Partners L.L.C., a wholly owned subsidiary of Franklin Resources, Inc.
FBRT's proactive approach to capital management, as demonstrated by the FL12 transaction, positions it to capitalize on new lending opportunities while improving its overall financial efficiency. The expected boost to earnings per share will be closely watched by investors in the upcoming quarters.
