BTIG Starts Franklin BSP Realty Trust (FBRT) at Buy

BTIG analyst Sarah Barcomb initiates coverage on Franklin BSP Realty Trust (NYSE: FBRT) with a Buy rating and a price target of $13.50.

The analyst comments "We are initiating coverage of Franklin BSP Realty Trust with a Buy rating and $13.50 PT, representing a 20% potential TR including the 11.4% dividend yield. We believe FBRT provides investors with access to a more stable book of senior floating-rate loans relative to peers given its higher concentration to newervintage Multifamily assets (76% of portfolio). We recognize the potential for nearterm Sunbelt Multifamily supply headwinds, as well as the risk associated with the higher LTV lending that occurred during the rapid rent growth era of 2021-2022. However, we believe that the continuous strength in Sunbelt demographic trends should continue to support the high-quality properties securing FBRT loans. We think Franklin's basis is well-protected at a 66% average LTV, and that the $34M avg. loan balance should be easier to manage in the event of severe disruption. As we head into Q1 earnings with watchful eyes on watchlist migration and resolutions, we especially like to see Franklin's successful execution on a previously risk-rated '4' hotel asset in Williamsburg, Brooklyn. Last week, FBRT announced that it sold the asset for $20M above its carrying value, which frees up capital to deploy into higher-quality investments and creates further support for BV/sh. FBRT has also effectively completed its strategic transformation into a commercially-dedicated mREIT, and covered its dividend with normalized earnings in Q4 as a result. We estimate 110% dividend coverage in 2023 and 118% coverage in 2024 even while modeling for higher CECL and realized losses. We believe the current 11.5% dividend yield coupled with BV/sh stability presents an attractive TR for investors, and we initiate coverage with a Buy."

For an analyst ratings summary and ratings history on Franklin BSP Realty Trust click here. For more ratings news on Franklin BSP Realty Trust click here.

Shares of Franklin BSP Realty Trust closed at $12.45 yesterday.

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