Franklin BSP Realty Trust, Inc. (NYSE:FBRT) Q3 2023 Earnings Call Transcript

Michael Comparato: Hey, Jade. Good morning. It’s Mike. Thanks for the question. Spot on, so address the markets and the issue perfectly. We are definitely seeing supply as a short-term issue. And I think the markets you identified, specifically Phoenix, I would say specifically Suburban Austin and specifically Downtown Nashville, probably are the three softest markets that we are seeing today. And again, your question was spot on. It is a lot of the newly delivered stuff where developers are offering two months of concession to just get people in the door, and it is affecting kind of everyone, everywhere. So I think it is definitely going to have a short-term impact. I do not think that, that phenomenon is strong enough to impact a credit on a macro basis.

Obviously, it is going to affect NOIs in the short-term. But I am looking through that. And I don’t want to be overly bullish because after all I am a credit guy, right? But I am looking through that, and banks are gone. While we’re providing construction lending and filling a void in some capacity and there is some competitors like us out there that are filling that void as well, it is nowhere even remotely close to the total amount of capital or credit that’s left the construction loan space. And I say that because what’s important is supply falls off a cliff in 2025 and looking forward. So I think as you have this period of high supply today, it is going to be offset by muted supply, 18 months out. And I couple that with the fact that it is 8% to get a mortgage to buy a house.

I think we are going to have millions of forced renters for the foreseeable future, and I actually think you could have somewhat of a perfect storm in multi in ’25, ’26, ’27, where there is actually meaningful rent growth again because of the lack of supply and the amount of people that can’t afford a home and are have-to-be renters.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Lindsey Crabbe for any closing remarks.

Lindsey Crabbe: We appreciate you joining us today. If you have any further questions, please reach out to me or our team. Thank you.

Richard Byrne: Thanks, everyone.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.