What changed in this filing

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Item 1A. Risk Factors

2025-02-26 compared with 2024-02-26 · 104 added, 76 removed, 391 unchanged (32% of the section changed)

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• hindering our ability to adjust to changing market, industry or economic conditions;

• limiting our ability to access the capital markets to raise additional equity or refinance maturing debt on favorable terms or to fund acquisitions;

• limiting our ability to access the capital markets to raise additional equity or refinance maturing debt on favorable terms or fund acquisitions;

• limiting the amount of cash flow available for future operations, acquisitions, dividends, stock repurchases or other uses;

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Our ability to arrange additional financing will depend on, among other factors, our financial position and performance, as well as prevailing market conditions and other factors beyond our control.

If we are unable to obtain additional financing, our credit ratings could be further adversely affected, which could further raise our borrowing costs and further limit our future access to capital and our ability to satisfy our obligations under our indebtedness.

If we are unable to obtain additional financing, our credit ratings could be adversely affected, which could further raise our borrowing costs and further limit our future access to capital and our ability to satisfy our obligations under our indebtedness.

We may not be able to earn returns on loans we make in excess of the interest we pay on our borrowings.

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Our ability to execute this strategy depends on various conditions in the financing markets that are beyond our control, including liquidity, fluctuations in prevailing interest rates and credit spreads.

Interest rate and credit spread fluctuations resulting in our interest and related expense exceeding interest and related income would result in operating losses

Interest rate and credit spread fluctuations resulting in our interest and related expense exceeding interest and related income would result in operating losses for us.

Changes in the level of interest rates and credit spreads also may affect our ability to make new loans or investments and may decrease the value of our existing loans and investments.

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An inability to successfully access the capital markets could limit our ability to grow our business and fully execute our business strategy and could decrease our earnings and liquidity.

Additional equity issuances in the capital markets on unfavorable terms could also be dilutive to our

existing stockholders.

Additional equity issuances in the capital markets on unfavorable terms could also be dilutive to our existing stockholders.

In addition, any dislocation or weakness in the capital and credit markets could adversely affect our lenders and could cause one or more of our lenders to be unwilling or unable to provide us with financing or to increase the costs of that financing.

In addition, as regulatory capital requirements imposed on our lenders are increased, they may be required to limit, or increase the cost of, financing they provide to us.

Further, as regulatory capital requirements imposed on our lenders are increased, they may be required to limit, or increase the cost of, financing they provide to us.

In general, this could potentially increase our financing costs and reduce our liquidity or require us to sell assets at an inopportune time or price.

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As a result, we may not be able to leverage our assets as fully as we would like, which could reduce our return on assets.

In the event that we are unable to meet these collateral obligations, our financial condition could deteriorate rapidly.

If we are unable to meet these collateral obligations, our financial condition could deteriorate rapidly.

Risks Related to Our Investments

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In this manner, reduced real estate values could impact the values of our debt and security investments, making them subject to the risks typically associated with real estate ownership.

Our operating results may be adversely affected by a number of risks generally incident to holding real estate debt, including, without limitation:

Our operating results may be adversely affected by a number of risks generally incident to holding real estate and real estate debt, including, without limitation:

• natural disasters, such as hurricanes, earthquakes and floods, which we expect to increase in strength and frequency due to climate change;

• acts of war or terrorism, or criminal violence, including the consequences of terrorist attacks;

• acts of war or terrorism, or criminal violence, including the consequences of terrorist attacks and other such acts;

• adverse changes in national and local economic and real estate conditions;

• adverse changes in economic and market conditions related to pandemics and health crises, such as COVID-19;

• an oversupply of (or a reduction in demand for) space in the areas where particular properties securing our loans are located and the attractiveness of particular properties to prospective tenants;

• changes in interest rates and availability of permanent mortgage funds that my render the sale of property difficult or unattractive;

• an oversupply of (or a reduction in demand for) space in the areas where properties securing our loans are located and the attractiveness of particular properties to prospective tenants;

• changes in interest rates and availability of permanent mortgage funds that may render the sale of property difficult or unattractive;

• changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance therewith and the potential for liability under applicable laws;

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These factors may have a material adverse effect on the ability of our borrowers to pay their loans and the ability of the borrowers on the underlying loans securing our securities to pay their loans, as well as on the value and the return that we can realize from assets we acquire and originate.

Loans on properties in transition will involve a greater risk of loss than conventional mortgage loans.

We primarily invest in transitional loans to borrowers who are typically seeking short-term capital to be used in an

acquisition or rehabilitation of a property.

If the borrower’s plans or projections with respect to the property are not achieved,

some of which, including renovations or expansions, carry heightened risks, the borrower may not receive a sufficient return on the asset to satisfy our transitional loan, and we bear the risk that we may not recover some or all of our investment.

In addition, borrowers usually use the proceeds of a conventional mortgage to repay a transitional loan.

Transitional loans therefore are subject to risks of a borrower’s inability to obtain such permanent financing, including due to the broader availability of conventional mortgages at amenable rates.

Our success depends on the availability of attractive investment opportunities.

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Our operating results are dependent upon our ability to identify, structure, consummate, leverage, manage and realize attractive returns on, new loans and other investments.

In general, the availability of attractive investment opportunities and, consequently, our operating results, will be affected by the level and volatility of interest rates, conditions in the financial markets, general economic conditions, the demand for investment opportunities in our target assets and the supply of capital for such investment opportunities.

In general, the availability of attractive investment opportunities and, consequently, our operating results, is affected by the level and volatility of interest rates, conditions in the financial markets, general economic conditions, the demand for investment opportunities in our target assets and the supply of capital for such investment opportunities.

We cannot assure you that we will be successful in identifying and consummating attractive investments or that such investments, once made, will perform as anticipated.

Delays in liquidating defaulted commercial real estate debt investments could reduce our investment returns.

If we originate or acquire commercial real estate debt investments and there are defaults under those debt investments, we may not be able to repossess and sell the properties securing the commercial real estate debt investment quickly.

Foreclosure of a loan can be an expensive and lengthy process that could have a negative effect on our return on the foreclosed loan.

When we originate or acquire commercial real estate debt investments and there are defaults under those debt investments, we may not be able to repossess and sell the properties securing the commercial real estate debt investment quickly.

Foreclosure of a loan can be an expensive and lengthy process that can have a negative effect on our return on the foreclosed loan.

Borrowers often resist foreclosure actions by asserting numerous claims, counterclaims and defenses, including but not limited to lender liability claims, in an effort to prolong the foreclosure action.

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The size of our real estate owned portfolio acquired through foreclosure has increased in recent years.

We have in the past and we may in the future be forced to operate any foreclosed properties for a substantial period of time, which can be a distraction for our management team and may require us to pay significant costs associated with such property.

We have in the past and we may in the future be forced to operate foreclosed properties for a substantial period, which can be a distraction for our management team and may require us to pay significant costs associated with such properties.

Owning and operating real property involves risks that are different (and in many ways more significant) than the risks faced in owning a loan secured by that property.

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We may also be subject to environmental liabilities arising from such properties acquired in the foreclosure process.

In addition, at such time that we elect to sell such property, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our cost basis, resulting in a loss to us.

In addition, at such time that we elect to sell such foreclosed property, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our cost basis, resulting in a loss to us.

Furthermore, any costs or delays involved in the maintenance or liquidation of the underlying property will further reduce the net proceeds and, thus, increase the loss.

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We acquire and originate subordinate commercial real estate debt, including subordinate mortgage and mezzanine loans and participations in such loans.

These types of investments may involve a higher degree of risk than the type of assets that will constitute the majority of our commercial real estate debt investments, namely first mortgage loans secured by real property.

In the event a borrower declares bankruptcy, we may not be able to fully realize on the assets of the borrower, or the assets of the borrower may not be sufficient to fully satisfy both the first mortgage loan and our subordinate debt investment.

These types of investments may involve a higher degree of risk than the type of assets that constitute the majority of our commercial real estate debt investments, first mortgage loans secured by real property.

In the event a borrower declares bankruptcy, we may not be able to fully realize on the assets of the borrower, or the assets of that borrower may not be sufficient to fully satisfy both the first mortgage loan and our subordinate debt investment.

If a borrower defaults on our subordinate debt or on debt senior to ours, or in the event of a borrower bankruptcy, our subordinate debt will be satisfied only after the senior debt is paid in full.

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The primary risks to us of construction loans are the potential for cost overruns, the developer’s failing to meet a project delivery schedule and the inability of a developer to sell or refinance the project at completion in accordance with its business plan and repay our commercial real estate loan due to declining real estate values.

These risks could cause us to have to fund more money than we originally anticipated in order to complete the project.

These risks could cause us to have to fund more money than we originally anticipated to complete the project.

We may also suffer losses on our commercial real estate debt if the developer is unable to sell the project or refinance our commercial real estate debt investment.

Jurisdictions with one action or security first rules or anti-deficiency legislation may limit the ability to foreclose on the property or to realize the obligation secured by the property by obtaining a deficiency judgment.

Jurisdictions with one action or security first rules or anti-deficiency legislation may limit the ability to foreclose on a property or to realize the obligation secured by the property by obtaining a deficiency judgment.

In the event of any default under our commercial real estate debt investments and in the loans underlying our real estate securities, we bear the risk of loss of principal and nonpayment of interest and fees to the extent of any deficiency between the value of the collateral and the principal amount of the loan.

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However, there are certain types of losses, generally of a catastrophic nature, such as earthquakes, floods and hurricanes that may be uninsurable or not economically insurable.

Climate change may exacerbate the frequency and severity of these types of events.

Climate change is likely to exacerbate the frequency and severity of these types of events.

We may not require borrowers to obtain certain types of insurance if it is deemed commercially unreasonable.

Inflation, changes in building codes and ordinances, environmental considerations and other factors also might result in insurance proceeds being inadequate to replace a property if it is damaged or destroyed.

Under such circumstances, the insurance proceeds, if any, might not be adequate to restore the economic value of the property, which might impair our security and decrease the value of the property.

We invest in CMBS and CRE CLO Bonds, which may include subordinate securities, which entails certain risks.

We invest in a variety of CMBS and CRE CLO Bonds, which may include subordinate securities that are subject to the first risk of loss if any losses are realized on the underlying mortgage loans.

CMBS and CRE CLO Bonds entitle the holders thereof to receive payments that depend primarily on the cash flow from a specified pool of commercial or multifamily mortgage loans.

Consequently, CMBS and CRE CLO Bonds may be adversely affected by payment defaults, delinquencies and losses on the underlying commercial real estate loans.

Furthermore, if the rental and leasing markets deteriorate, it could reduce cash flow from the loan pools underlying our CMBS and CRE CLO Bonds investments.

The CMBS and CRE CLO Bonds market is dependent upon liquidity for refinancing and could be negatively impacted by a slowdown in the new issue CMBS and CRE CLO Bonds market.

In addition, the value of CMBS and CRE CLO Bonds may change due to shifts in the market’s perception of issuers and regulatory or tax changes adversely affecting the mortgage securities market as a whole.

Additionally, CMBS and CRE CLO Bonds are subject to particular risks, including lack of standardized terms and payment of all or substantially all of the principal only at maturity rather than regular amortization of principal.

Under such circumstances, the insurance proceeds, if any, might not be adequate to restore the economic value of the property, which might impair our security interest and decrease the value of the property.

We invest in CMBS and CMBS bonds, which may include subordinate securities, which entails certain risks.

We invest in a variety of CMBS and CMBS bonds, which may include subordinate securities that are subject to the first risk of loss if any losses are realized on the underlying mortgage loans.

CMBS and CMBS bonds entitle the holders thereof to receive payments that depend primarily on the cash flow from a specified pool of commercial or multifamily mortgage loans.

Consequently, CMBS and CMBS bonds may be adversely affected by payment defaults, delinquencies and losses on the underlying commercial real estate loans.

Furthermore, if the rental and leasing markets deteriorate, it could reduce cash flow from the loan pools underlying our CMBS and CMBS bonds investments.

The CMBS and CMBS bonds market is dependent upon liquidity for refinancing and could be negatively impacted by a slowdown in the new issue CMBS and CMBS bonds market.

In addition, the value of CMBS and CMBS bonds may change due to shifts in the market’s perception of issuers and regulatory or tax changes adversely affecting the mortgage securities market as a whole.

Additionally, CMBS and CMBS bonds are subject to particular risks, including lack of standardized terms and payment of all or substantially all of the principal only at maturity rather than regular amortization of principal.

Additional risks may be presented by the type and use of a particular commercial property.

For example, special risks are presented by hospitals, nursing homes, hospitality properties and certain other property types.

For example, special risks are presented by hospitals, nursing

homes, hospitality properties and certain other property types.

Commercial property values and net operating income are subject to volatility, which may result in net operating income becoming insufficient to cover debt service on the related commercial real estate loan, particularly if the current economic environment deteriorates.

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Furthermore, the net operating income from and value of any commercial property are subject to various risks.

The exercise of remedies and successful realization of liquidation proceeds relating to CMBS and CRE CLO Bonds may be highly dependent upon the performance of the servicer or special servicer.

The exercise of remedies and successful realization of liquidation proceeds relating to CMBS and CMBS bonds may be highly dependent upon the performance of the servicer or special servicer.

Expenses of enforcing the underlying commercial real estate loans (including litigation expenses) and expenses of protecting the properties securing the commercial real estate loans may be substantial.

Consequently, in the event of a default or loss on one or more commercial real estate loans contained in a securitization, we may not recover a portion or all of our investment.

We may not control the special servicing of the mortgage loans underlying the CMBS and CRE CLO Bonds in which we invest and, in such cases, the special servicer may take actions that could adversely affect our interests.

Overall control over the special servicing of the underlying mortgage loans of the CMBS and CRE CLO Bonds may be held by a directing certificate holder, which is appointed by the holders of the most subordinate class of such CMBS and CRE CLO Bonds.

We may not control the special servicing of the mortgage loans underlying the CMBS and CMBS bonds in which we invest and, in such cases, the special servicer may take actions that could adversely affect our interests.

Overall control over the special servicing of the underlying mortgage loans of the CMBS and CMBS bonds may be held by a directing certificate holder, which is appointed by the holders of the most subordinate class of such CMBS and CMBS bonds.

We ordinarily do not have the right to appoint the directing certificate holder.

In connection with the servicing of the specially serviced mortgage loans, the related special servicer may, at the direction of the directing certificate holder, take actions that could adversely affect our interests.

We invest in collateralized debt obligations ("CDOs") and such investments involve significant risks.

We invest in CDOs and such investments involve significant risks.

We invest in CDOs, which are multiple class securities secured by pools of assets, such as CMBS, subordinate mortgage and mezzanine loans and REIT debt.

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Competition with third parties for originating and acquiring investments may reduce our profitability.

We have significant competition with respect to our origination and acquisition of assets with many other companies, including other REITs, insurance companies, commercial banks, private investment funds, hedge funds, specialty finance companies and other investors, many of which have greater resources than us, and may not be able to compete successfully for investments.

We have significant competition with respect to our origination and acquisition of assets with many other companies, including other REITs, insurance companies, commercial banks, private investment funds, hedge funds, specialty finance companies and other investors, many of which have greater resources than we, and may not be able to compete successfully for investments.

In addition, the number of entities and the amount of funds competing for suitable investments may increase.

Many of our competitors are not subject to the operating constraints associated with REIT rule compliance or maintenance of an exclusion from registration under the Investment Company Act.

Many of our competitors are not subject to the operating constraints associated with REIT rule compliance or maintenance of an

exclusion from registration under the Investment Company Act.

In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of loans and investments, offer more attractive pricing or other terms and establish more relationships than us.

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In making the assessment and otherwise conducting customary due diligence, we rely on the resources available to us and, in some cases, an investigation by third parties.

This process is particularly important with respect to newly organized or private entities because there may be

little or no information publicly available about the entity.

This process is particularly important with respect to newly organized or private entities because there may be little or no information publicly available about the entity.

However, even if we conduct extensive due diligence on a particular investment, there can be no assurance that this diligence will uncover all material issues relating to such investment, that the information provided by the borrower is truthful or accurate, or that factors outside of our control will not later arise.

If our due diligence fails to identify material issues, we have in the past and may in the future have to write-down or write-off assets, restructure our investment or incur impairment or other charges that could result in our reporting losses.

Charges of this nature could contribute to negative market perceptions about us or our shares of common stock (refer to “Part I, Item 3.

Legal Proceedings” for a summary of the Company’s legal proceedings).

If our due diligence fails to identify material issues, we have had to in the past and may in the future have to write-down or write-off assets, restructure our investment or incur impairment or other charges that could result in our reporting losses.

Charges of this nature could contribute to negative market perceptions about us or our shares of common stock.

We may be unable to restructure loans in a manner that we believe maximizes value, particularly if we are one of multiple creditors in large capital structures.

In the current environment, in order to maximize value we may be more likely to extend and work out a loan, rather than pursue foreclosure.

In order to maximize value in the current environment, we may be more likely to extend and work out a loan, rather than pursue foreclosure.

However, in situations where there are multiple creditors in large capital structures, it can be particularly difficult to assess the most likely course of action that a lender group or the borrower may take and it may also be difficult to achieve consensus among the lender group as to major decisions.

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Our commercial real estate debt portfolio may include loans that require us to advance future funds.

Future funding obligations subject us to significant risks that the property may have declined in value, projects to be completed with the additional funds may have cost overruns and the borrower may be unable to generate enough cash flow, or sell or refinance the property, in order to repay our commercial real estate loan due.

We could determine that we need to fund more money than we originally anticipated in order to maximize the value of our investment even though there is no assurance that such determination would, in fact, be the best course of action.

We could determine that we need to fund more money than we originally anticipated to maximize the value of our investment even though there is no assurance that such determination would, in fact, be the best course of action.

We may not be successful in our attempts to align the maturities of our liabilities with the maturities on our assets, which could harm our operating results and financial condition.

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Accordingly, the adoption of the CECL model has materially affected how we determine our credit loss provision and required us to significantly increase our allowance and recognize provisions for credit losses earlier in the lending cycle.

Moreover, the CECL model created more volatility in the

level of our credit loss provisions.

Moreover, the CECL model created more volatility in the level of our credit loss provisions.

If we are required to materially increase our future level of credit loss allowances for any reason, such increase could adversely affect our business, results of operations, liquidity and financial conditions.

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Any credit ratings on our investments are subject to ongoing evaluation by credit rating agencies, and we cannot assure you that any such ratings will not be downgraded or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant.

If rating agencies assign a lower-than-expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, their ratings of FBRT’s investments in the future, the value and liquidity of those investments could significantly decline, which would adversely affect the value of our investment portfolio.

If rating agencies assign a lower-than-expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, their ratings of our investments in the future, the value and liquidity of those investments could significantly decline, which would adversely affect the value of our investment portfolio.

When we acquire companies, we face risks related to integrating the acquired company in a manner that allows us to achieve the synergies and other benefits of the acquisition or do so within the anticipated time frame.

From time to time, we may acquire other companies, such as our 2021 acquisition of Capstead Mortgage Corp.

Our acquisition of companies can create significant risks, including:

• issues related to the acquired business that were not identified in our diligence review prior to acquisition;

• the significant management attention and resources we would need to devote to integrating the acquired business, including any employees of the acquired company;

• costs associated with retaining key employees of the acquired business;

• legal and regulatory burdens associated with the acquired business;

• potential stockholder dilution as a result of the consideration paid.

Risks Related to the Conduit Segment of the Business

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No assurance can be given that we will be able to obtain additional warehouse facilities on favorable terms, or at all.

We directly or indirectly utilize non‑recourse securitizations, and such structures expose us to risks that could result in losses to us.

We directly and indirectly utilize non‑recourse securitizations, and such structures expose us to risks that could result in losses to us.

We utilize non‑recourse securitizations of our investments in mortgage loans to the extent consistent with the maintenance of our REIT qualification and exemption from the Investment Company Act in order to generate cash for funding new investments and/or to leverage existing assets.

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In some sale transactions, we also retain a subordinated interest in the loans sold.

The securitization of our portfolio investments might magnify our exposure to losses on those portfolio investments because the subordinated interest we retain in the loans sold would be subordinate to the senior interest in the loans sold, and we would, therefore, absorb all of the losses sustained with respect to a loan sold before the owners of the senior interest experience any losses.

Moreover, we cannot be assured that we will be able to access the securitization market in the future, or be able to do so at favorable rates.

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The amount due would be equal to the unrealized loss of the open swap positions with the respective counterparty and could also include other fees and charges.

These economic

losses will be reflected in our results of operations, and our ability to fund these obligations will depend on the liquidity of our assets and access to capital at the time, and the need to fund these obligations could adversely impact our financial condition.

These economic losses will be reflected in our results of operations, and our ability to fund these obligations will depend on the liquidity of our assets and access to capital at the time, and the need to fund these obligations could adversely impact our financial condition.

Hedging against interest rate exposure may adversely affect our income, limit our gains or result in losses, which could adversely affect cash available for distribution to our stockholders.

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The Advisor faces conflicts of interest relating to purchasing commercial real estate-related investments, and such conflicts may not be resolved in our favor, which could adversely affect our investment opportunities.

We rely on the Advisor and the executive officers and other key real estate professionals at our Advisor to identify suitable investment opportunities for us.

Although there are restrictions in the Advisory Agreement we have entered into with the Advisor with respect to the Advisor’s ability to manage another REIT that competes with us, or to provide any services related to fixed-rate conduit lending to another person, the Advisor and its employees are not otherwise restricted from engaging in investment and investment management activities unrelated to us and do engage in these activities.

Some investment opportunities that are suitable for us may also be suitable for other investment vehicles managed by the Advisor or its affiliates.

Thus, the executive officers and real estate professionals of the Advisor could direct attractive investment opportunities to other entities or investors.

In addition, we may in the future engage in transactions with our Advisor or affiliates of our Advisor, including co-investment transactions, and these transactions may not be on terms as favorable as transactions with third parties.

We rely on the Advisor and the executive officers and other key real estate professionals employed by our Advisor to identify suitable investment opportunities for us.

The Advisor and its employees are subject to very limited restrictions on engaging in investment and investment management activities that are unrelated to us and compete with us.

The Advisor currently manages other investment programs that share similar investment objectives with us and target similar investments as us, including Franklin BSP Real Estate Debt, Inc.

(a non-traded REIT) and two private funds, and may in the future advise additional competing investment programs (together, the “Other Funds”).

Some investment opportunities that are suitable for the Other Funds.

Thus, the executive officers and real estate professionals of the Advisor could direct attractive investment

opportunities to other entities or investors, including the Other Funds.

In addition, we have in the past and expect in the future to engage in transactions with the Other Funds, including co-investment transactions, and these transactions may not be on terms as favorable as transactions with unaffiliated third parties.

Such events could result in us investing in assets that provide less attractive returns, which may reduce our ability to make distributions.

In addition, the fees paid to the Advisor by the Other Funds differ from the fees we pay pursuant to the Advisory Agreement, and these differences could create incentives for the Advisor to favor the Other Funds.

The Advisor and its employees face competing demands relating to their time, and this may cause our operating results to suffer.

The Advisor and its employees are engaged in investment and investment management activities unrelated to us.

The Advisor and its employees are engaged in investment and investment management activities unrelated to us, including with respect to the Other Funds.

We cannot provide any assurances regarding the amount of time our Advisor and its employees will dedicate to the management of our business.

Each of our officers is also an employee of our Advisor, who has now or may be expected to have significant responsibilities for other investment vehicles currently managed by the Advisor and its affiliates.

Each of our officers is also an employee of our Advisor, who has now or may be expected to have significant responsibilities for the Other Funds.

Consequently, we may not receive the level of support and assistance that we otherwise might receive if we were internally managed.

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Our Advisor maintains a contractual as opposed to a fiduciary relationship with us.

Our Advisor’s liability is limited under our Advisor Agreement, and we have agreed to indemnify our Advisor against certain liabilities.

Our Advisor’s liability is limited under our Advisory Agreement, and we have agreed to indemnify our Advisor against certain liabilities.

Pursuant to our Advisory Agreement, our Advisor assumes no responsibility to us other than to render the services called for thereunder in good faith and will not be responsible for any action of our board of directors in following or declining to follow its advice or recommendations, including as set forth in our investment guidelines.

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Termination of our Advisory Agreement would be difficult and costly.

The circumstances under which we can terminate our contract with the Advisor for cause are limited and do not include performance.

The circumstances under which we can terminate our Advisory Agreement for cause are limited and do not include performance.

Termination of our Advisory Agreement without cause would be difficult and costly.

The Advisory Agreement may be terminated each year without cause upon the affirmative vote of at least two-thirds of our independent directors, based upon a determination that (i) our Advisor’s performance is unsatisfactory and materially detrimental to us or (ii) the base management fee and annual incentive fee payable to our Advisory are not fair (provided that in this instance, our Advisor will be afforded the opportunity to renegotiate the management fee and incentive fees prior to termination).

The Advisory Agreement

may be terminated each year without cause upon the affirmative vote of at least two-thirds of our independent directors, based upon a determination that (i) our Advisor’s performance is unsatisfactory and materially detrimental to us or (ii) the base management fee and annual incentive fee payable to our Advisor are not fair (provided that in this instance, our Advisor will be afforded the opportunity to renegotiate the management fee and incentive fees prior to termination).

We are required to provide our Advisor with 180 days prior notice of any such termination.

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federal income tax purposes commencing with our taxable year ended December 31, 2013.

We intend to continue to meet the requirements for qualification and taxation as a REIT, but we cannot assure stockholders that we qualify as a REIT.

We intend to continue to meet the requirements for qualification and taxation as a REIT, but we

cannot assure stockholders that we qualify as a REIT.

Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which only a limited number of judicial and administrative interpretations exist.

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Under the Internal Revenue Code, if the terms of a loan are modified in a manner constituting a “significant modification,” such modification triggers a deemed exchange of the original loan for the modified loan.

In general, under applicable Treasury Regulations if a loan is secured by real property and other property and the highest principal amount

of the loan outstanding during a taxable year exceeds the fair market value of the real property securing the loan determined as of the date we agreed to acquire the loan or the date we significantly modified the loan, a portion of the interest income from such loan will not be qualifying income for purposes of the REIT 75% gross income test, but will be qualifying income for purposes of the REIT 95% gross income test.

In general, under applicable Treasury Regulations if a loan is secured by real property and other property and the highest principal amount of the loan outstanding during a taxable year exceeds the fair market value of the real property securing the loan determined as of the date we agreed to acquire the loan or the date we significantly modified the loan, a portion of the interest income from such loan will not be qualifying income for purposes of the REIT 75% gross income test, but will be qualifying income for purposes of the REIT 95% gross income test.

Although the law is not entirely clear, a portion of the loan will likely be a non-qualifying asset for purposes of the REIT 75% asset test.

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Unless we qualified for relief under certain Internal Revenue Code cure provisions, such failures could cause us to fail to continue to qualify as a REIT.

Changes to the U.S.

federal income tax laws, including the enactment of certain tax reform measures, could have a material and adverse effect on us.

federal income tax laws governing REITs and other corporations and the administrative interpretations of those laws may be amended at any time, potentially with retroactive effect.

Changes to the U.S.

federal income tax laws, including the possibility of major tax legislation, could have a material and adverse effect on us or our stockholders.

We cannot predict whether, when, to what extent or with what effective dates new U.S.

federal tax laws, regulations, interpretations or rulings will be issued.

Prospective investors are urged to consult their tax advisors regarding the effect of potential changes to the U.S.

federal tax laws on an investment in our stock.

Risks Related to an Investment in Franklin BSP Realty Trust, Inc.

Public health crises have, and may in the future, adversely impact our business and the business of many of our borrowers.

Public health crises could have repercussions across domestic and global economies and financial markets.

For example, the COVID-19 pandemic resulted in many governmental authorities imposing significant restrictions on businesses and individuals that triggered economic consequences, including high unemployment, later, then high inflation, that resulted in challenging operating conditions for many businesses, particularly in the retail (including restaurants), office and hospitality sectors.

These actions directly and indirectly adversely effected the financing markets as well and resulted in margin calls from our lenders, which we satisfied.

The extent to which pandemics and similar health crises impact our or our borrowers’ operations will depend on future developments which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the events, treatment developments and government responses to the events.

Public health crises have adversely impacted, and may in the future adversely impact, our business and the business of many of our borrowers.

Public health crises can have repercussions across domestic and global economies and financial markets.

For example, the COVID-19 pandemic resulted in many governmental authorities imposing significant restrictions on businesses and individuals that triggered economic consequences, including high unemployment, then high inflation, that resulted in challenging operating conditions for many businesses, particularly in the retail (including restaurants), office and hospitality sectors.

These actions directly and indirectly adversely affected the financing markets and resulted in margin calls from our lenders, which we satisfied.

The extent to which pandemics and similar health crises impact our or our borrowers’ operations will depend on future developments which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the crises, treatment developments and government responses to the events.

The inability of our borrowers to meet their loan obligations and/or borrowers filing for bankruptcy protection as a result of these events would reduce our cash flows, which would impact our ability to pay dividends to our stockholders.

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In certain prior periods, quarterly distributions have been in excess of our quarterly earnings.

Distributions in excess of earnings will decrease the book value per share of common stock.

Distributions in excess of earnings decrease the book value per share of common stock.

The Company cannot give any assurance that returns from the investments will be sufficient to maintain or increase cash available for distributions to stockholders.

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Any system failure or accident that causes interruptions in our operations could result in a material disruption to our business.

As reliance on technology in our industry has increased, so have the risks posed to the systems of our Advisor and other parties that provide us with services essential to our operations, both internal and outsourced.

In addition, the risk of a cyber-

incident, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

As reliance on technology in our industry has increased, so have the risks posed to the systems of our Advisor and other parties that provide us or the Advisor with services essential to our operations, both internal and outsourced.

In addition, the risk of a cyber-incident, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted attacks and intrusions evolve and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected.

The remediation costs and lost revenues experienced by a victim of a cyber-incident may be significant and significant resources may be required to repair system damage, protect against the threat of future security breaches or to alleviate problems, including reputational harm, loss of revenues and litigation, caused by any breaches.

Although the Advisor and other parties that provide us with services essential to our operations intend to continue to implement industry-standard security measures, there can be no assurance that those measures will be sufficient, and any material adverse effect experienced by the Advisor and other parties that provide us with services essential to our operations could, in turn, have an adverse impact on us.

We and the Advisor continue to face ongoing and increasing cybersecurity risks which may materially affect us in the future and there can be no assurance that our or the Advisor’s cybersecurity efforts and measures will be effective or that attempted cybersecurity incidents or disruptions would not be successful or damaging.

Any material adverse effect experienced by the Advisor and other parties that provide us with services essential to our operations could, in turn, have an adverse impact on us.

Further information relating to cybersecurity risk management is discussed in Item 1C.

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Natural disasters and severe weather such as earthquakes, tornadoes, hurricanes or floods may result in significant damage to the properties securing our loans or in which we invest.

In addition, our investments may be exposed to new or increased risks and liabilities associated with global climate change, such as increased frequency or intensity of adverse weather and natural disasters, which could negatively impact our and our borrowers’ businesses and the value of the properties securing our loans or in which we invest.

In addition, our investments may be exposed to new or

increased risks and liabilities associated with global climate change, such as increased frequency or intensity of adverse weather and natural disasters, which could negatively impact our and our borrowers’ businesses and the value of the properties securing our loans or in which we invest.

The extent of our or our borrowers' casualty losses and loss in operating income in connection with such events is a function of the severity of the event and the total amount of exposure in the affected area.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors