Franklin BSP Completes $1.024 Billion Securitization

Franklin BSP Realty Trust secures a major $1.024 billion mortgage securitization, supporting investments in multifamily, industrial, and hospitality sectors.

October 08, 2024

Franklin BSP Realty Trust Inc. has successfully completed a $1.024 billion securitization of commercial real estate mortgage loans, bolstering its investment portfolio in an increasingly competitive real estate market. The transaction was closed on September 26, 2024, and involved issuing nearly $886 million in notes in a private placement. This move demonstrates the company’s strategic focus on maximizing liquidity and supporting future loans and investments.

The securitization was structured through BSPRT 2024-FL11 Issuer LLC, a consolidated subsidiary of Franklin BSP. The portfolio involved in the securitization includes six loans related to multifamily, industrial, and hospitality properties, as well as seventeen fully funded senior notes or senior participations. With a total principal balance of approximately $924 million on the closing date, the transaction also incorporated a ramp-up acquisition period targeting multifamily mortgage loans.

Franklin BSP intends to hold this portfolio to maturity, positioning itself to further benefit from a growing portfolio in these real estate segments. The securitization enables the company to repay borrowings under its current credit facilities and allocate capital for future corporate endeavors, a move reflective of the company’s long-term growth strategy.

As part of the securitization, the company issued nine classes of notes, which were divided into senior secured and subordinate secured floating-rate notes. The largest portion, Class A Senior Secured Notes, totaled $558.3 million and matures in 2039. Other note classes include Class A-S, Class B, Class C, and Class D, each with varied seniority levels and interest rates tied to the 1-month CME Term SOFR.

Interest payments on the notes will be disbursed monthly, with the initial payment date set for October 15, 2024, continuing through July 2039. While the weighted average life of the notes is expected to be around 5 years, Franklin BSP anticipates that the notes will be repaid before their scheduled maturity, based on the transaction's cash flow dynamics.

Asset Backing and Servicing

The notes are backed by a pool of commercial mortgage loans primarily centered on multifamily real estate. This mix of real estate sectors reflects Franklin BSP’s strategic investment approach, capitalizing on growing demand in both residential and commercial real estate markets.

The servicer for the portfolio, Situs Asset Management LLC, will receive a monthly servicing fee of 0.04% of the outstanding principal. Special servicing will be managed by BSP Special Servicer LLC, with compensation structured to include workout and liquidation fees based on asset performance.

Forward-Looking Strategy

The transaction reflects Franklin BSP’s active role in the commercial real estate debt markets, emphasizing its ability to structure and place complex real estate debt instruments. The proceeds from this securitization provide the firm with the flexibility to manage existing debt, invest in new opportunities, and support continued growth.

Additionally, Franklin BSP continues to benefit from the strong market demand for real estate-backed securities, which is driving interest from institutional investors looking for yield in a low-rate environment. As the company expands its investment footprint in key sectors, it remains positioned to capitalize on ongoing shifts in commercial real estate and the broader debt markets.

Looking ahead, the securitization provides Franklin BSP with the liquidity to support future growth, especially in the multifamily real estate space. By leveraging its portfolio of stable, income-generating properties, the firm aims to sustain long-term returns for its investors while navigating potential market challenges in a fluctuating economic landscape.