Blog: FRANKLIN BSP REALTY TRUST, INC. : Results of Operations and Financial Condition, Regulation FD Disclosure, Other Events (form 8-K) – Marketscreener.com

Item 2.02. Results of Operations and Financial Condition.


On July 29, 2022, Franklin BSP Realty Trust, Inc. (the "Company") issued a press
release and supplemental slide presentation reporting the Company's financial
results for the quarter ended June 30, 2022. Copies of the press release and
supplemental slide presentation are attached hereto as Exhibit 99.1 and Exhibit
99.2, respectively, and are incorporated herein by reference.

The information in this Item 2.02 (including Exhibits 99.1 and 99.2) shall not
be deemed to be "filed" for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the
liability of that section, and shall not be incorporated by reference into any
registration statement or other document filed under the Securities Act of 1933,
as amended, or the Exchange Act, except as shall be expressly set forth by
specific reference in such filing.


Item 7.01. Regulation FD Disclosure.


On July 26, 2022, the Company (through a subsidiary) filed a lawsuit in the
District Court of Dallas County, Texas that is described in more detail in Item
8.01 below. The complaint can be accessed
https://courtsportal.dallascounty.org/DALLASPROD/DocumentViewer/Embedded/4dIKwaLUYdacs9Aq_PlQ-Jlovzpms7DlZWMIp5hItNq7HygPXg664cmib_MyxlPKaoO26tNyKFWMGeHHZPcVGg2.
The information included in the complaint is furnished hereby for informational
purposes only and is not incorporated by reference into this Current Report on
Form 8-K.


Item 8.01. Other Events.

On July 26, 2022, the Company (through a subsidiary) filed a lawsuit in the
District Court of Dallas County, Texas, against, among others, the borrower, the
individual sponsor of the borrower, and the guarantors under a first priority
mortgage loan that the Company, along with a separate fund affiliated with the
Company's external manager, originated in April 2022. On July 27, 2022, the
court issued a temporary restraining order freezing the assets of the borrower,
the borrower's sponsor and his parents, and any proceeds from our loan, pending
the next scheduled legal proceeding in August 2022. The original principal
balance of the Company's loan is $113.2 million. The loan is secured by a
portfolio of twenty-four properties that are net leased to Walgreens (the
"Collateral Properties").

As described in more detail in the complaint, in July 2022, the Company
determined that the borrower had provided the Company with approximately 100
falsified and forged documents in connection with the underwriting of the loan,
including bank statements, leases, purchase and sale agreements, closing
statements, payoff letters, subordination, non-disturbance and attornment
agreements and tenant estoppels. Such documentation significantly and
fraudulently inflated the purported value of the Collateral Properties by
misrepresenting the rent rates and maturity dates of the Walgreens leases at the
Collateral Properties, among other things.

The Company identified the fraud after the borrower attempted a similar scheme
in connection with an application for a second loan. After flagging
irregularities in the borrower-provided information for the second loan
application (which application was rejected), the Company conducted
extraordinary forensic inquiries related to borrower-provided documentation on
the first loan, which ultimately exposed the fraud. The borrower subsequently
confessed verbally and in writing to the fraudulent acts.

In accordance with GAAP, the Company has recognized, as of June 30, 2022, a
credit loss provision of $28.4 million on the loan. This amount is based on the
Company's estimate of the value of the Collateral Properties, net of estimated
sales costs.

Subsequent to identifying the fraud, the Company has taken or is taking the
following steps to mitigate the actual loss:
•the Company reconfirmed through updated title reports that the borrower has
title to the Collateral Properties and that the Company has perfected and
recorded first mortgage liens on the Collateral Properties;
•the Company obtained full recourse personal guarantees on the loan from the
individual sponsor of the borrower and his parents;
•the Company is actively working with Walgreens to redirect all future rents on
the underlying leases directly to the Company;
•the Company is initiating foreclosure proceedings on the Collateral Properties;
and
•the Company obtained a temporary freeze on the assets of the borrower, the
borrower's sponsor and his parents, and any proceeds from our loan, as noted
above.

The Company has reported the fraud to criminal authorities and will assist such
authorities with their consideration of the matter.

The Company intends to pursue all available legal remedies as set forth in the
complaint against any party determined to have been involved in, or that
improperly benefitted from, the scheme. Any amounts recovered through these
legal processes, net of expenses, will reduce the amount of the actual loss
ultimately recognized.


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Forward-Looking Statements


This Current Report on Form 8-K includes forward-looking statements. These
forward-looking statements generally can be identified by phrases such as
"will," "should," "expects," "anticipates," "foresees," "forecasts," "estimates"
or other words or phrases of similar import. Similarly, statements herein that
describe management's beliefs, intentions or goals also are forward-looking
statements. It is uncertain whether any of the events anticipated by the
forward-looking statements will transpire or occur, or if any of them do, what
impact they will have on the results of operations and financial condition of
the Company or the price of its stock. These forward-looking statements involve
certain risks and uncertainties, many of which are beyond our control, that
could cause actual results to differ materially from those indicated in such
forward-looking statements. Further, forward-looking statements speak only as of
the date they are made, and we undertake no obligation to update or revise
forward-looking statements to reflect changed assumptions, the occurrence of
unanticipated events or changes to future operating results over time, unless
required by law.

Our forward-looking statements are subject to various risks and uncertainties,
including but not limited to the risks and important factors contained and
identified in our filings with the Securities and Exchange Commission ("SEC"),
including our Annual Report on Form 10-K for the fiscal year ended December 31,
2021 and our subsequent filings with the SEC, any of which could cause actual
results to differ materially from the forward-looking statements. The
forward-looking statements included in this Current Report on Form 8-K are made
only as of the date hereof.

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