Franklin BSP Realty Trust, Inc. - Quarter Report: 2019 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-55188

BENEFIT STREET PARTNERS REALTY TRUST, INC.

(Exact name of registrant as specified in its charter)



Maryland		46-1406086
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

9 West 57th Street, Suite #4920 New York, New York		10019
(Address of Principal Executive Office)		(Zip Code)

(212) 588-6770

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:



Large accelerated filer o	Accelerated filer o
Non-accelerated filer x	Smaller reporting company x
	Emerging growth filer o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares of the registrant's common stock, $0.01 par value, outstanding as of October 31, 2019 was 43,337,374.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

TABLE OF CONTENTS



PART I		Page
Item 1. Consolidated Financial Statements and Notes (unaudited)		1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		41
Item 3. Quantitative and Qualitative Disclosures about Market Risk		65
Item 4. Controls and Procedures		67
PART II

Item 1. Legal Proceedings		67
Item 1A. Risk Factors		67
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		67
Item 3. Defaults Upon Senior Securities		68
Item 4. Mine Safety Disclosures		68
Item 5. Other Information		68
Item 6. Exhibits		69
Signatures		70

PART I

Item 1. Consolidated Financial Statements and Notes (unaudited)

BENEFIT STREET PARTNERS REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)



	September 30, 2019			December 31, 2018
ASSETS	(Unaudited)
Cash and cash equivalents	$	34,104		$	191,390
Restricted cash	18,627			13,029
Commercial mortgage loans, held for investment, net of allowance of $738 and $4,836	2,496,113			2,206,830
Commercial mortgage loans, held-for-sale, measured at fair value	175,073			76,863
Real estate securities, available for sale, measured at fair value	232,247			26,412
Derivative instruments, measured at fair value	740			846
Other real estate investments, measured at fair value	2,556			—
Receivable for loan repayment ⁽¹⁾	197,322			73,684
Accrued interest receivable	14,241			12,789
Prepaid expenses and other assets	5,876			4,235
Operating right of use asset	6,023			—
Real estate owned	8,110			—
Total assets	$	3,191,032		$	2,606,078
LIABILITIES AND STOCKHOLDERS' EQUITY
Collateralized loan obligations	$	1,812,448		$	1,505,279
Repurchase agreements - commercial mortgage loans	111,937			149,440
Repurchase agreements - real estate securities	244,308			44,539
Other financing and loan participation - commercial mortgage loans	—			9,902
Derivative instruments, measured at fair value	2,168			1,319
Interest payable	3,136			3,025
Distributions payable	6,456			5,834
Accounts payable and accrued expenses	9,014			4,497
Due to affiliates	4,824			3,229
Operating lease liabilities	6,096			—
Total liabilities	$	2,200,387		$	1,727,064
Commitment and contingencies (See Note 8)
Redeemable convertible preferred stock Series A, $0.01 par value, 40,000 authorized, 38,501 issued and outstanding as of September 30, 2019 and 29,249 issued and outstanding as of December 31, 2018	$	192,125		$	145,786
Equity:
Preferred stock, $0.01 par value, 50,000,000 authorized, none issued and outstanding as of September 30, 2019 and December 31, 2018	—			—
Common stock, $0.01 par value, 949,999,000 shares authorized, 43,021,064 and 39,303,710 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively	432			395
Additional paid-in capital	888,208			827,558
Accumulated other comprehensive income (loss)	(751		)	(459		)
Accumulated deficit	(89,369		)	(94,266		)
Total stockholders' equity	$	798,520		$	733,228
Total liabilities, redeemable convertible preferred stock and stockholders' equity	$	3,191,032		$	2,606,078

___________________

⁽¹⁾ Includes $196.3 million and $73.7 million of cash held by servicer related to loan payoffs pledged to the CLOs as of September 30, 2019 and December 31, 2018, respectively.

The accompanying notes are an integral part of these unaudited consolidated financial statements.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Income:
Interest income	$	50,445		$	42,943		$	145,181		$	106,478
Less: Interest expense	22,160			17,120			68,395			50,183
Net interest income	28,285			25,823			76,786			56,295
Revenue from real estate owned	1,064			—			1,064			—
Total Income	$	29,349		$	25,823		$	77,850		$	56,295

Expenses:
Asset management and subordinated performance fee	4,468			2,720			11,917			7,227
Acquisition expenses	180			173			698			289
Administrative services expenses	4,564			3,501			12,083			9,822
Professional fees	3,427			2,556			8,090			6,803
Other expenses	2,466			774			4,198			3,896
Total expenses	$	15,105		$	9,724		36,986			28,037
Other (income)/loss:
Loan loss provision/(recovery)	$	(245	)	$	1,066		2,823			3,502
Realized (gain)/loss on sale of real estate securities	—			107			—			107
Realized (gain)/loss on sale of commercial mortgage loan held-for-sale	—			20			25			48
Realized (gain)/loss on sale of commercial mortgage loan, held-for-sale, measured at fair value	(14,157		)	(3,419		)	(32,575		)	(9,765		)
Unrealized (gain)/loss on commercial mortgage loans, held-for-sale, measured at fair value	(161		)	231			(393		)	(474		)
Unrealized (gain)/loss on derivatives	(4,388		)	(1,272		)	(1,318		)	(1,162		)
Realized (gain)/loss on derivatives	5,188			41			8,272			(1,476		)
Total other (income)/loss	$	(13,763	)	$	(3,226	)	$	(23,166	)	$	(9,220	)
Income/(loss) before taxes	28,007			19,325			64,030			37,478
Provision/(benefit) for income tax	2,094			325			3,701			1,080
Net income	$	25,913		$	19,000		$	60,329		$	36,398
Net income applicable to common stock	$	20,460		$	17,294		$	48,409		$	35,127

Basic earnings per share	$	0.48		$	0.49		$	1.17		$	1.07
Diluted earnings per share	$	0.48		$	0.49		$	1.17		$	1.07
Basic weighted average shares outstanding	42,795,038			35,468,648			41,287,548			32,977,572
Diluted weighted average shares outstanding	42,807,773			35,482,857			41,300,384			32,987,579

The accompanying notes are an integral part of these unaudited consolidated financial statements.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)



	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018
Net income	$	25,913		$	19,000	$	60,329		$	36,398
Unrealized gain/(loss) on available-for-sale securities	(372		)	194		(292		)	171
Comprehensive income attributable to Benefit Street Partners Realty Trust, Inc.	$	25,541		$	19,194	$	60,037		$	36,569

The accompanying notes are an integral part of these unaudited consolidated financial statements.

BENEFIT STREET PARTNERS REALTY TRUST, INC

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(In thousands, except share data)

(Unaudited)



	Common Stock
	Number of Shares		Par Value			Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders' Equity
Balance, December 31, 2018	39,303,710		$	395		$	827,558		$	(459	)	$	(94,266	)	$	733,228
Issuance of common stock	1,161,580		11			19,398			—			—			19,409
Common stock repurchases	(387,530	)	(4		)	(7,203		)	—			—			(7,207		)
Common stock issued through distribution reinvestment plan	180,906		2			3,390			—			—			3,392
Share-based compensation	—		—			39			—			—			39
Offering costs	—		—			(382		)	—			—			(382		)
Net income	—		—			—			—			19,890			19,890
Distributions declared	—		—			—			—			(17,449		)	(17,449		)
Other comprehensive income	—		—			—			145			—			145
Balance, March 31, 2019	40,258,666		$	404		$	842,800		$	(314	)	$	(91,825	)	$	751,065
Issuance of common stock	1,267,833		$	13		$	21,175		$	—		$	—		$	21,188
Common stock repurchases	—		—			—			—			—			—
Common stock issued through distribution reinvestment plan	187,146		2			3,490			—			—			3,492
Share-based compensation	6,400		—			39			—			—			39
Offering costs	—		—			(529		)	—			—			(529		)
Net income	—		—			—			—			14,526			14,526
Distributions declared	—		—			—			—			(18,298		)	(18,298		)
Other comprehensive income	—		—			—			(65		)	—			(65		)
Balance, June 30, 2019	41,720,045		$	419		$	866,975		$	(379	)	$	(95,597	)	$	771,418
Issuance of common stock	1,466,430		14			24,471			—			—			24,485
Common stock repurchases	(354,323	)	(3		)	(6,603		)	—			—			(6,606		)
Common stock issued through distribution reinvestment plan	188,912		2			3,513			—						3,515
Share-based compensation	—		—			39			—			—			39
Offering costs	—		—			(187		)	—			—			(187		)
Net income	—		—			—			—			25,913			25,913
Distributions declared	—		—			—			—			(19,685		)	(19,685		)
Other comprehensive income	—		—			—			(372		)	—			(372		)
Balance, September 30, 2019	43,021,064		$	432		$	888,208		$	(751	)	$	(89,369	)	$	798,520

BENEFIT STREET PARTNERS REALTY TRUST, INC

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(In thousands, except share data)

(Unaudited)



	Common Stock
	Number of Shares		Par Value			Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders' Equity
Balance, December 31, 2017	31,834,072		$	320		$	704,101		$	—		$	(94,082	)	$	610,339
Issuance of common stock	—		—			—			—			—			—
Common stock repurchases	(421,809	)	(4		)	(7,826		)	—			—			(7,830		)
Common stock issued through distribution reinvestment plan	187,851		2			3,571			—			—			3,573
Share-based compensation	—		—			42			—			—			42
Net income	—		—			—			—			5,296			5,296
Distributions declared	—		—			—			—			(11,246		)	(11,246		)
Other comprehensive income	—		—			—			—			—			—
Balance, March 31, 2018	31,600,114		$	318		$	699,888		$	—		$	(100,032	)	$	600,174
Issuance of common stock	834,537		8			13,715			—			—			13,723
Common stock repurchases									—			—			—
Common stock issued through distribution reinvestment plan	186,008		2			3,534			—			—			3,536
Share-based compensation						38			—			—			38
Net income	—		—			—			—			12,102			12,102
Distributions declared	—		—			—			—			(11,427		)	(11,427		)
Other comprehensive income	—		—			—			(23		)	—			(23		)
Balance, June 30, 2018	32,620,659		$	328		$	717,175		$	(23	)	$	(99,357	)	$	618,123
Issuance of common stock	5,054,398		$	51		$	83,066		$	—		$	—		$	83,117
Common stock repurchases	(387,214	)	(4		)	(7,251		)	—			—			(7,255		)
Common stock issued through distribution reinvestment plan	183,775		1			3,486			—			—			3,487
Share-based compensation	5,775		—			38			—			—			38
Offering Cost	—		—			(236		)	—			—			(236		)
Net income	—		—			—			—			19,000			19,000
Distributions declared	—		—			—			—			(14,123		)	(14,123		)
Other comprehensive income	—		—			—			194			—			194
Balance, September 30, 2018	37,477,393		$	376		$	796,278		$	171		$	(94,480	)	$	702,345

The accompanying notes are an integral part of these unaudited consolidated financial statements.

BENEFIT STREET PARTNERS REALTY TRUST, INC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Nine Months Ended September 30,
	2019			2018
Cash flows from operating activities:
Net income	$	60,329		$	36,398
Adjustments to reconcile net income to net cash (used in)/provided by operating activities:
Premium amortization and (discount accretion), net	(4,756		)	(3,456		)
Accretion of deferred commitment fees	(2,220		)	(1,400		)
Amortization of deferred financing costs	8,406			10,788
Share-based compensation	117			118
Unrealized (gain)/loss on commercial mortgage loans held-for-sale	(393		)	(474		)
Unrealized (gain)/loss on derivative instruments	(1,318		)	(1,162		)
Loan loss (recovery)/provision	2,823			3,502
Realized (gain)/loss on sale of real estate securities	—			107
Origination of commercial mortgage loans, held-for-sale	(749,422		)	(444,496		)
Proceeds from sale of commercial mortgage loans, held-for-sale	647,089			367,546
Changes in assets and liabilities:
Accrued interest receivable	768			(2,054		)
Prepaid expenses and other assets	(3,467		)	(2,553		)
Accounts payable and accrued expenses	4,517			2,172
Due to affiliates	1,595			(3,106		)
Interest payable	111			940
Net cash (used in)/provided by operating activities	$	(35,821	)	$	(37,130	)
Cash flows from investing activities:
Origination and purchase of commercial mortgage loans, held for investment	$	(892,413	)	$	(1,278,978	)
Proceeds from sale of commercial mortgage loans, held for sale	—			2,218
Principal repayments received on commercial mortgage loans, held for investment	482,396			556,465
Purchase of other real estate investments	(2,511		)	—
Purchase of real estate securities	(206,710		)	(39,511		)
Principal repayments received on real estate securities	541			—
Purchase of derivative instruments	(3,224		)	(520		)
Proceeds from sale of real estate securities	—			12,456
Net cash (used in)/provided by investing activities	$	(621,921	)	$	(747,870	)
Cash flows from financing activities:
Proceeds from issuances of common stock	$	63,986		$	96,840
Proceeds from issuances of redeemable convertible preferred stock	46,245			96,075
Common stock repurchases	(13,814		)	(15,072		)
Reimbursements/(payments) of offering costs and fees related to stock issuances	—			(236		)
Borrowings under collateralized loan obligation	639,899			488,000
Repayments of collateralized loan obligation	(333,740		)	(331,656		)
Borrowings on repurchase agreements - commercial mortgage loans	866,582			1,566,956
Repayments of repurchase agreements - commercial mortgage loans	(904,085		)	(1,067,282		)
Borrowings on repurchase agreements - real estate securities	1,112,709			146,692
Repayments of repurchase agreements - real estate securities	(912,940		)	(163,454		)

BENEFIT STREET PARTNERS REALTY TRUST, INC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



Repayments on other financing and loan participation - commercial mortgage loans	(10,000		)	(26,182		)
Payments of deferred financing costs	(4,395		)	(6,230		)
Distributions paid	(44,393		)	(25,118		)
Net cash (used in)/provided by financing activities:	$	506,054		$	759,333
Net change in cash, cash equivalents and restricted cash	$	(151,688	)	$	(25,667	)
Cash, cash equivalents and restricted cash, beginning of period	204,419			91,708
Cash, cash equivalents and restricted cash, end of period	$	52,731		$	66,041

Supplemental disclosures of cash flow information:
Taxes paid	$	—		$	340
Interest paid	59,878			38,455
Cash paid for amounts included in the measurement of operating lease liabilities	33			—

Supplemental disclosures of non-cash flow information:
Distribution payable	$	6,456		$	5,834
Common stock issued through distribution reinvestment plan	10,393			10,597
Commercial mortgage loans transferred from held for sale to held for investment	4,472			—
Real estate owned received in lieu of foreclosure	8,110			—
Recognition of right-of-use asset and related lease liability	6,109			—

Reconciliation of cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents	$	34,104		$	55,471
Restricted cash	18,627			10,570
Cash, cash equivalents and restricted cash, end of period	$	52,731		$	66,041

The accompanying notes are an integral part of these unaudited consolidated financial statements.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

Note 1 - Organization and Business Operations

Benefit Street Partners Realty Trust, Inc. (the "Company") is a real estate finance company that primarily originates, acquires and manages a diversified portfolio of commercial real estate debt investments secured by properties located within and outside the United States. The Company was incorporated in Maryland on November 15, 2012 and commenced operations on May 14, 2013.

The Company made a tax election to be treated as a real estate investment trust (a "REIT") for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2013. The Company believes that it has qualified as a REIT and intends to continue to meet the requirements for qualification and taxation as a REIT. In addition, the Company, through a subsidiary which is treated as a taxable REIT subsidiary (a "TRS") is indirectly subject to U.S federal, state and local income taxes. The majority of the Company's business is conducted through Benefit Street Partners Realty Operating Partnership, L.P. (the “OP”), a Delaware limited partnership. The Company is the sole general partner and directly or indirectly holds all of the units of limited partner interests in the OP.

The Company has no direct employees. Benefit Street Partners L.L.C. serves as the Company's advisor (the "Advisor") pursuant to an Amended and Restated Advisory Agreement, dated January 19, 2018 (the "Advisory Agreement"). The Advisor is a wholly owned subsidiary of Franklin Resources, Inc. which, together with its various subsidiaries, operates as Franklin Templeton. Prior to February 1, 2019, the Advisor was in partnership with Providence Equity Partners L.L.C., a global private equity firm. The Advisor, an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”), is a credit-focused alternative asset management firm. Established in 2008, the Advisor's credit platform manages funds for institutions and high-net-worth investors across various credit funds and complementary strategies including high yield, levered loans, private / opportunistic debt, liquid credit, structured credit and commercial real estate debt. These strategies complement each other as they all leverage the sourcing, analytical, compliance, and operational capabilities that encompass the platform. The Advisor manages the Company's affairs on a day-to-day basis. The Advisor receives compensation and fees for services related to the investment and management of the Company's assets and the operations of the Company.

The Company invests in commercial real estate debt investments, which may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans. The Company also originates conduit loans which the Company intends to sell through its TRS into commercial mortgage-backed securities ("CMBS") at a profit. The Company also invests in commercial real estate securities. Real estate securities may include CMBS, senior unsecured debt of publicly traded REITs, debt or equity securities of other publicly traded real estate companies and collateralized debt obligations ("CDOs").

Note 2 - Summary of Significant Accounting Policies

Basis of Accounting

The Company's unaudited consolidated financial statements and related footnotes have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America ("GAAP") for interim financial statements and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X, as appropriate. Accordingly, the consolidated financial statements may not include all of the information and notes required by GAAP for annual consolidated financial statements. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the reported periods. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially. In the opinion of management, the interim data includes all adjustments, of a normal and recurring nature, necessary for a fair statement of the results for the periods presented. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the entire year or any subsequent interim periods.

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of, and for the year ended December 31, 2018, which are included in the Company's Annual Report on Form 10-K filed with the SEC on March 29, 2019. There have been no significant changes to the Company's significant accounting policies during the nine months ended September 30, 2019.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members, as well as whether the entity is a variable interest entity ("VIE") for which the Company is the primary beneficiary.

The Company has determined the OP is a VIE of which the Company is the primary beneficiary. Substantially all of the Company's assets and liabilities are held by the OP.

The Company consolidates all entities that it controls through either majority ownership or voting rights. In addition, the Company consolidates all VIEs of which the Company is considered the primary beneficiary. VIEs are entities in which equity investors (i) do not have the characteristics of a controlling financial interest and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The entity that consolidates a VIE is its primary beneficiary and is generally the entity with (i) the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE.

The accompanying consolidated financial statements include the accounts of collateralized loan obligations ("CLOs") issued and securitized by wholly owned subsidiaries of the Company. The Company has determined the CLOs are VIEs of which the Company's subsidiary is the primary beneficiary. The assets and liabilities of the CLOs are consolidated in the accompanying consolidated balance sheet in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation.

Acquisition Expenses

The Company incurs acquisition expenses payable to the Advisor. Acquisition expenses paid to the Company's Advisor in connection with the origination and acquisition of commercial mortgage loan investments and acquisition of real estate securities are evaluated based on the nature of the expense to determine if they should be expensed in the period incurred or capitalized and amortized over the life of the investment. Pursuant to the Advisory Agreement, the Advisor is entitled to reimbursement for acquisition expenses of 0.5%.

Cash and Cash Equivalents

Cash consists of amounts deposited with high quality financial institutions. These deposits are guaranteed by the Federal Deposit Insurance Company up to an insurance limit. Cash equivalents include short-term, liquid investments in money market funds with original maturities of 90 days or less when purchased.

Restricted Cash

Restricted cash primarily consists of cash pledged as margin on repurchase agreements and derivative transactions. The duration of this restricted cash generally matches the duration of the related repurchase agreements or derivative transaction.

Commercial Mortgage Loans

Held-for-Investment - Commercial mortgage loans that are held for investment purposes and are anticipated to be held until maturity, are carried at cost, net of unamortized acquisition expenses, discounts or premiums and unfunded commitments. Commercial mortgage loans, held for investment purposes, that are deemed to be impaired are carried at amortized cost less a specific allowance for loan losses. Interest income is recorded on the accrual basis and related discounts, premiums and acquisition expenses on investments are amortized over the life of the investment using the effective interest method. Amortization is reflected as an adjustment to interest income in the Company’s consolidated statements of operations. Guaranteed loan exit fees payable by the borrower upon maturity are accreted over the life of the investment using the effective interest method. The accretion of guaranteed loan exit fees is recognized in interest income in the Company's consolidated statements of operations.

Held-for-Sale - Commercial mortgage loans that are intended to be sold in the foreseeable future are reported as held-for-sale and are transferred at fair value and recorded at the lower of cost or fair value with changes recorded through the statements of operations. Unamortized loan origination costs for commercial mortgage loans held-for-sale that are carried at the lower of cost or fair value are capitalized as part of the carrying value of the loans and recognized upon the sale of such loans. Amortization of origination costs ceases upon transfer of commercial mortgage loans to held-for-sale. During the nine months ended September 30, 2019, the Company originated $5.0 million of commercial mortgage loans held-for-sale and sold these loans during the period for net proceeds of approximately $5.0 million.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

Held-for-Sale, Accounted for Under the Fair Value Option - The fair value option provides an option to elect fair value as an alternative measurement for selected financial assets, financial liabilities, and written loan commitments. The Company has elected to measure commercial mortgage loans held-for-sale in the Company's TRS under the fair value option. These commercial mortgage loans are included in the Commercial mortgage loans, held-for-sale, measured at fair value in the consolidated balance sheet. Interest income received on commercial mortgage loans held-for-sale is recorded on the accrual basis of accounting and is included in interest income in the consolidated statements of operations. Acquisition expenses on originating these investments are expensed when incurred.

Real estate owned

Real estate owned (“REO”) represents real estate acquired by the Company through foreclosure, deed in lieu of foreclosure, or purchase. REO assets are carried at their estimated fair value at acquisition and are presented net of accumulated depreciation and impairment charges. The Company allocates the purchase price of acquired real estate assets based on the fair value of the acquired land, building, furniture, fixtures and equipment.

Real estate assets are depreciated using the straight-line method over estimated useful lives of up to 40 years for buildings and improvements and up to 15 years for furniture, fixtures and equipment. Renovations and/or replacements that improve or extend the life of the real estate asset are capitalized and depreciated over their estimated useful lives.

Leases

In February 2016, the FASB issued Accounting Standard Update ("ASU") 2016-02 ("ASC 842"), Leases, which replaced Topic 840, Leases, and requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements ("ASU 2016-02"). ASC 842 was subsequently amended by ASU 2018-01, “Land Easement Practical Expedient for Transition to ASC 842” ("ASU 2018-01"); ASU 2018-10, Codification Improvements to ASC 842, Leases” ("ASU 2018-10"); and ASU 2018-11, “Targeted Improvements” ("ASU 2018-11"). The new standard establishes a right-of-use ("ROU") model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. ROU assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at commencement date based on the present value of fixed lease payments over the lease term. Leases will be classified as either a finance or operating lease, with such classification affecting the pattern and classification of expense recognition in the income statement.

The Company adopted ASC 842, and subsequent amendments, on January 1, 2019. For leases greater than 12 months, the Company determines, at the inception of the contract, if the arrangement meets the classification criteria for an operating or finance lease. For leases that have extension options, which can be exercised at the Company's discretion, management uses judgment to determine if it is reasonably certain that such extension options will be elected. If the extension options are reasonably certain to occur, the Company includes the extended term's lease payments in the calculation of the respective lease liability. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The incremental borrowing rate used to discount the lease liability is determined at commencement of the lease, or upon modification of the lease, as the interest rate a lessee would have to pay to borrow on a fully collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The Company's incremental borrowing rate considers information at both the corporate and property level and analysis of current market conditions for obtaining new financings.

Operating fixed lease expense is recognized on a straight-line basis over the lease term (see Note 8). All leases as of September 30, 2019 were operating leases.

Allowance for Loan Losses

The allowance for loan losses reflects management's estimate of loan losses inherent in the loan portfolio as of the balance sheet date. The reserve is increased or decreased through the loan loss provision or (recovery) on the Company's consolidated statements of operations and is decreased by charge-offs when losses are confirmed through the receipt of assets, such as cash in a pre-foreclosure sale or upon ownership control of the underlying collateral in full satisfaction of the loan upon foreclosure or when significant collection efforts have ceased. The Company uses a uniform process for determining its allowance for loan losses. The allowance for loan losses includes a general, formula-based component and an asset-specific component.

General reserves are recorded when (i) available information as of each balance sheet date indicates that it is probable a loss has occurred in the portfolio and (ii) the amount of the loss can be reasonably estimated. The Company estimates loss rates based on historical realized losses experienced in the industry, given the fact the Company has not experienced significant losses, and takes into account current collateral and economic conditions affecting the probability and severity of losses when establishing the allowance for loan losses. The Company performs a comprehensive analysis of its loan portfolio and assigns

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

risk ratings to loans that incorporate management's current judgments about their credit quality based on all known and relevant internal and external factors that may affect collectability. The Company considers, among other things, payment status, lien position, borrower financial resources and investment in collateral, collateral type, project economics and geographic location as well as national and regional economic factors. This methodology results in loans being segmented by risk classification into risk rating categories that are associated with estimated probabilities of default and principal loss. Ratings range from "1" to "5" with "1" representing the lowest risk of loss and "5" representing the highest risk of loss.

The asset-specific reserve component relates to reserves for losses on individual impaired loans. The Company considers a loan to be impaired when, based upon current information and events, it believes that it is probable that the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. This assessment is made on an individual loan basis each quarter based on such factors as payment status, lien position, borrower financial resources and investment in collateral, collateral type, project economics and geographical location as well as national and regional economic factors. A reserve is established for an impaired loan when the present value of payments expected to be received, observable market prices or the estimated fair value of the collateral (for loans that are dependent on the collateral for repayment) is lower than the carrying value of that loan.

For collateral dependent impaired loans, impairment is measured using the estimated fair value of collateral less the estimated cost to sell. Valuations are performed or obtained at the time a loan is determined to be impaired and designated non-performing, and are updated if circumstances indicate that a significant change in value has occurred. The Advisor generally will use either the income approach through internally developed valuation models to estimate the fair value of the collateral for such loans or obtain external "as is" appraisals for loan collateral.

A loan is also considered impaired if its terms are modified in a troubled debt restructuring ("TDR"). A TDR occurs when a concession is granted and the debtor is experiencing financial difficulties. Impairments on TDR loans are generally measured based on the present value of expected future cash flows discounted at the effective interest rate of the original loans.

The Company generally designates non-performing loans at such time as (i) loan payments become 90-days past due; (ii) the loan has a maturity default; or (iii) in the opinion of the Company, it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan. Income recognition will generally be suspended when a loan is designated non-performing unless the loan is well secured, and resumed only when the suspended loan becomes contractually current and performance is demonstrated to have resumed. A loan will be written off when it is no longer realizable and legally discharged.

Income Taxes

The Company has conducted its operations to qualify as a REIT for U.S. federal income tax purposes beginning with its taxable year ended December 31, 2013. As a REIT, if the Company meets certain organizational and operational requirements and distributes at least 90% of its "REIT taxable income" (determined before the deduction of dividends paid and excluding net capital gains) to its stockholders in a year, it will not be subject to U.S. federal income tax to the extent of the income that it distributes. However, even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on income in addition to U.S. federal income and excise taxes on its undistributed income. The Company, through its TRS, is indirectly subject to U.S. federal, state and local income taxes. The Company’s TRS is not consolidated for U.S. federal income tax purposes, but is instead taxed as a C corporation. For financial reporting purposes, the TRS is consolidated and a provision for current and deferred taxes is established for the portion of earnings recognized by the Company with respect to its interest in its TRS. Total income tax expense for the three months ended September 30, 2019 and September 30, 2018 were $2.1 million and $0.3 million, respectively. Total income tax expense for the nine months ended September 30, 2019 and September 30, 2018 were $3.7 million and $1.1 million, respectively.

The Company uses a more-likely-than-not threshold for recognition and derecognition of tax positions taken or to be taken in a tax return. The Company has assessed its tax positions for all open tax years beginning with December 31, 2015 and concluded that there were no uncertainties to be recognized. The Company’s accounting policy with respect to interest and penalties related to tax uncertainties is to classify these amounts as provision for income taxes.

The Company utilizes the TRS to reduce the impact of the prohibited transaction tax and to avoid penalty for the holding of assets not qualifying as real estate assets for purposes of the REIT asset tests. Any income associated with a TRS is fully taxable because the TRS is subject to federal and state income taxes as a domestic C corporation based upon its net income.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

Derivatives and Hedging Activities

In the normal course of business, the Company is exposed to the effect of interest rate changes and may undertake a strategy to limit these risks through the use of derivatives. The Company uses derivatives primarily to economically hedge against interest rates, CMBS spreads and macro market risk in order to minimize volatility. The Company may use a variety of derivative instruments that are considered conventional, including but not limited to: Treasury note futures and credit derivatives on various indices including CMBX and CDX.

The Company recognizes all derivatives on the consolidated balance sheets at fair value. The Company does not designate derivatives as hedges to qualify for hedge accounting for financial reporting purposes and therefore any net payments under, or fluctuations in the fair value of these derivatives have been recognized currently in unrealized gain/(loss) on derivative instruments in the accompanying consolidated statements of operations. The Company records derivative asset and liability positions on a gross basis with any collateral posted with or received from counterparties recorded separately within Restricted cash on the Company’s consolidated balance sheets. Certain derivatives that the Company has entered into are subject to master netting agreements with its counterparties, allowing for netting of the same transaction, in the same currency, on the same date.

Earnings per Share

The Company’s Series A redeemable convertible preferred stock (the "Series A Preferred Stock") is considered a participating security. As such, the Company is required to include the Series A Preferred Stock in the calculation of basic earnings per share and calculate basic earnings per share using the two-class method. The Company calculates basic earnings per share by dividing net income applicable to common stock for the period by the weighted-average number of shares of common stock outstanding for that period. The Company’s dilutive earnings per share calculation is computed using the more dilutive result of the treasury stock method, assuming the participating security is a potential common share, or the two-class method, assuming the participating security is not converted. Diluted earnings per share reflects the potential dilution that could occur from shares outstanding if potential shares of common stock with a dilutive effect have been issued in connection with the restricted stock plan or upon conversion of the outstanding shares of the Company’s Series A Preferred Stock, except when doing so would be anti-dilutive.

Reportable Segments

The Company has determined that it has three reportable segments based on how the chief operating decision maker reviews and manages the business. The three reporting segments are as follows:


•	The real estate debt business which is focused on originating, acquiring and asset managing commercial real estate debt investments, including first mortgage loans, subordinate mortgages, mezzanine loans and participations in such loans.


•	The real estate securities business which is focused on investing in and asset managing commercial real estate securities primarily consisting of CMBS and may include unsecured REIT debt, CDO notes and other securities.


•	The commercial conduit business in the Company's TRS, which is focused on originating and subsequently selling fixed-rate commercial real estate loans into the CMBS securitization market.

See Note 13 - Segment Reporting for further information regarding the Company's segments.

Redeemable Convertible Preferred Stock

The Company’s Series A Preferred Stock is classified outside of permanent equity in the consolidated balance sheets. Subject to certain conditions, the Series A Preferred Stock is redeemable at the option of the holder of Series A Preferred Stock, outside of the control of the Company. As set forth in the Articles Supplementary Series A Convertible Preferred Stock (the “Articles Supplementary”) to the Company’s Articles of Amendment and Restatement, the Series A Preferred Stock is redeemable for shares of the Company's common stock, $0.01 par value per share (the "Common Stock") at the option of the shareholder upon a change of control (as defined in the Articles Supplementary) or after the sixth anniversary of the date of issuance. A change in control of the Company occurs if any person acquires more than 50% of the total economic interests or voting power of all securities of the Company, other than in a liquidity event.

Shares of Series A Preferred Stock rank senior to shares of Common Stock with respect to rights to receive dividends and to participate in distributions or payments upon any voluntary or involuntary liquidation, dissolution or winding up of the Company. Dividends payable on each share of Series A Preferred Stock will be equal to the greater of (i) an amount equal to $16.67 per share and (ii) the monthly dividend that would have been paid had such share of Series A Preferred Stock been converted to a share of Common Stock, subject to proration in the event that such share of Series A Preferred Stock was not outstanding for the full month.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

Immediately prior to a “Liquidity Event,” each outstanding share of Series A Preferred Stock shall convert (the “Mandatory Conversion”) into 299.2 shares of Common Stock, subject to anti-dilution adjustments (the “Conversion Rate”). A “Liquidity Event” is defined as (i) the listing of the Common Stock on a national securities exchange or quotation on an electronic inter-dealer quotation system; (ii) a merger or business combination involving the Company pursuant to which outstanding shares of Common Stock are exchanged for securities of another company which are listed on a national securities exchange or quoted on an electronic inter-dealer quotation system; or (iii) any other transaction or series of transaction that results in all shares of Common Stock being transferred or exchanged for cash or securities which are listed on a national securities exchange or quoted on an electronic inter-dealer quotation system. If there has not been a Liquidity Event within six years from the initial issuance of the Series A Preferred Stock, each holder of Series A Preferred Stock shall have the right to convert all, but not less than all, of the Series A Preferred Stock held by such holder into Common Stock at the Conversion Rate. Each holder also has the option to convert its shares of Series A Preferred Stock into Common Stock upon a change in control (as defined in the Articles Supplementary) of the Company. In addition, neither the Company nor a holder of shares of Series A Preferred Stock may redeem shares of the Series A Preferred Stock until six years from the initial issuance of the Series A Preferred Stock, except in cases of a change in control (as defined in the Articles Supplementary).

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

Holders of the Series A Preferred Stock are entitled to vote on each matter submitted to a vote of the stockholders of the Company upon which the holders of Common Stock are entitled to vote, upon which the holders of the Series A Preferred Stock and holders of the Common Stock shall vote together as a single class. The number of votes applicable to a share of Series A Preferred Stock will be equal to the number of shares of Common Stock a share of Series A Preferred Stock could have been converted into as of the record date set for purposes of such stockholder vote (rounded down to the nearest whole number of shares of Common Stock). In addition, the affirmative vote of the holders of two-thirds of the outstanding shares of Series A Preferred Stock is required to approve the issuance of any equity securities senior to the Series A Preferred Stock and to take certain actions materially adverse to the holders of the Series A Preferred Stock.

On September 11 2019, the Company’s board of directors approved the Company’s entry into a $5.0 million binding purchase commitment with an institutional investor for a new series of Series C convertible preferred stock, $0.01 par value (the “Series C Preferred Stock” and together with the Series A Preferred Stock, the “Preferred Stock”). The Articles Supplementary for the Series C Preferred Stock was not filed with the Maryland State Department of Assessments and Taxation until the closing of the commitment on October 18, 2019.

The terms of the Series C Preferred Stock are substantially similar to the terms of the Series A Preferred Stock. The primary difference between the terms of the two instruments is that the Mandatory Conversion of the Series C Preferred Stock will not occur until the one-year anniversary of a Liquidity Event (rather than immediately prior to such Liquidity Event). From and after a Liquidity Event, the Company has the right to accelerate the Mandatory Conversion of the Series C Preferred Stock to a date no earlier than six months after the Liquidity Event, upon at least ten days prior notice to the holders of the Series C Preferred Stock. Holders of Series C Preferred Stock will also be contractually restricted from transferring their shares of common stock issued upon conversion of the Series C Preferred Stock until the one-year anniversary a Liquidity Event. Other differences between the Series C Preferred Stock and Series A Preferred Stock include, among other things, that there is no adjustment to the Conversion Rate of the Series C Preferred Stock for issuances of equity securities of the Company at prices below the Company’s GAAP book value per share, and that the Company or a holder of shares of Series C Preferred Stock may redeem such shares of Series C Preferred Stock in the event of a change in control of the Company that is also a Liquidity Event.

Holders of the Series C Preferred Stock are entitled to vote on each matter submitted to a vote of the stockholders of the Company upon which the holders of Common Stock are entitled to vote, upon which the holders of the Preferred Stock and holders of the Common Stock shall vote together as a single class. The number of votes applicable to a share of Series C Preferred Stock will be equal to the number of shares of Common Stock a share of Series C Preferred Stock could have been converted into as of the record date set for purposes of such stockholder vote (rounded down to the nearest whole number of shares of Common Stock). In addition, the affirmative vote of the holders of two-thirds of the outstanding shares of Series C Preferred Stock and any other outstanding series of the Company’s preferred stock (other than the Series A Preferred Stock) is required to approve the issuance of any equity securities senior to the Series C Preferred Stock and to take certain actions materially adverse to the holders of the Series C Preferred Stock.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments (Topic 326),” ("ASU 2016-13"). ASU 2016-13 changes how entities measure credit losses for financial assets carried at amortized cost. The update eliminates the requirement that a credit loss must be probable before it can be recognized and instead requires an entity to recognize the current estimate of all expected credit losses. Additionally, the update requires credit losses on available-for-sale debt securities to be carried as an allowance rather than as a direct write-down of the asset. The amendments become effective for reporting periods beginning after December 15, 2019. The amendments may be adopted early for reporting periods beginning after December 15, 2018. While the Company is currently evaluating the impact ASU 2016-13 will have on the Company's consolidated financial statements, the Company expects that the adoption will result in an increased amount of provisions for potential loan losses as well as the recognition of such provisions earlier in the lending cycle. The ultimate impact will depend on the Company’s portfolio, the macroeconomic conditions and forecast and other management assumptions as of the date of adoption. ASU 2016-13 is to be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.

In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"). The guidance provides amendments to the fair value measurement disclosure requirements of ASC 820. ASU 2018-13 is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. The Company is currently evaluating the impact of this new guidance. The Company does not expect the adoption of ASU 2018-13 to have a material impact on its financial statements and related discourses.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

Note 3 - Commercial Mortgage Loans

The following table is a summary of the Company's commercial mortgage loans, held-for-investment, carrying values by class (dollars in thousands):



	September 30, 2019		December 31, 2018
Senior loans	$	2,460,813	$	2,198,555
Mezzanine loans	36,038		13,111
Total gross carrying value of loans	2,496,851		2,211,666
Less: Allowance for loan losses ⁽¹⁾	738		4,836
Total commercial mortgage loans, held-for-investment, net	$	2,496,113	$	2,206,830

⁽¹⁾Includes $0.0 million and $4.1 million of loan loss provision specifically reserved on 1 loan in non-performing status as of September 30, 2019 and December 31, 2018, respectively.

The following table presents the activity in the Company's allowance for loan losses (dollars in thousands):



	Nine Months Ended September 30,			Year Ended December 31,
	2019			2018
Beginning of period	$	4,836		$	1,466
Loan loss provision/(recovery)	2,823			3,370
Charge-offs	(6,921		)	—
Ending allowance for loan losses	$	738		$	4,836

As of September 30, 2019 and December 31, 2018, the Company's total commercial mortgage loan portfolio, excluding commercial mortgage loans accounted for under the fair value option, was comprised of 109 and 100 loans, respectively.

The following table represents the composition by loan type of the Company's commercial mortgage loans portfolio, excluding commercial mortgage loans, held-for-sale, measured at fair value (dollars in thousands):



	September 30, 2019				December 31, 2018
Loan Type	Par Value		Percentage		Par Value		Percentage
Multifamily	$	1,402,230	55.9	%	$	1,001,540	45.2	%
Office	373,447		14.9	%	357,819		16.1	%
Retail	116,893		4.7	%	262,622		11.8	%
Hospitality	411,278		16.4	%	347,080		15.6	%
Industrial	45,013		1.8	%	65,871		3.0	%
Mixed-Use	39,189		1.6	%	120,647		5.4	%
Self-Storage	67,671		2.7	%	49,957		2.2	%
Land	16,400		0.7	%	16,400		0.7	%
Manufactured Housing	32,456		1.3	%	—		—	%
Total	$	2,504,577	100.0	%	$	2,221,936	100.0	%

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

As of September 30, 2019 and December 31, 2018, the Company's total commercial mortgage loans, held-for-sale, measured at fair value comprised of 17 and 7 loans, respectively. As of September 30, 2019 and December 31, 2018, the contractual principal outstanding of commercial mortgage loans, held-for-sale, measured at fair value was $175.0 million and $77.1 million, respectively. As of September 30, 2019 and December 31, 2018, none of the Company's commercial mortgage loans, held-for-sale, measured at fair value were in default or greater than ninety days past due.

The following table represents the composition by loan type of the Company's commercial mortgage loans, held-for-sale, measured at fair value (dollars in thousands):



	September 30, 2019				December 31, 2018
Loan Type	Par Value		Percentage		Par Value		Percentage
Multifamily	$	75,838	43.3	%	$	34,000	44.1	%
Hospitality	5,000		2.9	%	27,800		36.1	%
Office	5,075		2.9	%	15,300		19.8	%
Mixed-Use	27,600		15.8	%	—		—	%
Retail	61,450		35.1	%	—		—	%
Total	$	174,963	100.0	%	$	77,100	100.0	%

Credit Characteristics

As part of the Company's process for monitoring the credit quality of its commercial mortgage loans, excluding those held-for-sale, measured at fair value, it performs a quarterly loan portfolio assessment and assigns risk ratings to each of its loans. The loans are scored on a scale of 1 to 5 as follows:



Investment Rating		Summary Description
1		Investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since time of investment are favorable.
2		Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable.
3		Performing investments requiring closer monitoring. Trends and risk factors show some deterioration.
4		Underperforming investment with the potential of some interest loss but still expecting a positive return on investment. Trends and risk factors are negative.
5		Underperforming investment with expected loss of interest and some principal.

All commercial mortgage loans, excluding loans classified as commercial mortgage loans, held-for-sale, measured at fair value within the consolidated balance sheets, are assigned an initial risk rating of 2.0. As of September 30, 2019 and December 31, 2018, the weighted average risk rating of the loans was 2.1 and 2.1, respectively.

The following table represents the allocation by risk rating for the Company's commercial mortgage loans, excluding loans classified as commercial mortgage loans, held-for-sale, measured at fair value:



September 30, 2019				December 31, 2018
Risk Rating	Number of Loans	Par Value		Risk Rating	Number of Loans	Par Value
1	—	$	—	1	2	$	23,250
2	100	2,259,802		2	87	1,965,186
3	7	185,490		3	9	202,400
4	2	59,285		4	1	14,300
5	—	—		5	1	16,800
	109	$	2,504,577		100	$	2,221,936

As of September 30, 2019, the Company had 1 loan with unpaid contractual principal balance and carrying value of $57.1 million that had interest past due for greater than 90 days.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

As of December 31, 2018, the Company had 1 loan with unpaid contractual principal balance and carrying value of $14.3 million that had interest past due for greater than 90 days.

For the nine months ended September 30, 2019 and year ended December 31, 2018, the activity in the Company's commercial mortgage loans, held-for-investment portfolio was as follows (dollars in thousands):



	Nine Months Ended September 30,			Year Ended December 31,
	2019			2018
Balance at Beginning of Year	$	2,206,830		$	1,402,046
Acquisitions and originations	900,121			1,608,512
Principal repayments	(606,034		)	(778,520		)
Discount accretion and premium amortization	4,799			4,648
Loans transferred from/(to) commercial real estate loans, held-for-sale	4,472			(16,750		)
Net fees capitalized into carrying value of loans	(3,236		)	(9,736		)
Loan loss recovery/(provision)	(2,823		)	(3,370		)
Charge-off from allowance	6,921			—
Transfer on deed in lieu of foreclosure to real estate owned	(14,937		)	—
Balance at End of Period	$	2,496,113		$	2,206,830

As of September 30, 2019, the Company wrote off a commercial mortgage loan, held for investment, with a carrying value $14.9 million in exchange for the possession of a REO investment at a fair value of $8.1 million at the time of the transfer. The $8.1 million REO investment is comprised of $8.1 million of real property (building and improvements) and $0.0 million of personal property (furniture, fixture, and equipment). The transfer occurred when the Company took possession of the property by completing a deed-in-lieu of foreclosure transaction which resulted in a charge-off of $6.4 million that was taken through the loan loss provision in prior periods as well as $0.5 million of additional loan loss provision at the time of transfer. The Company accounted for the REO acquired during the three and nine months ended September 30, 2019 as an asset acquisition. The results of operations of the REO have been included in the Company’s consolidated statements of income and comprehensive income since the acquisition date.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

Note 4 - Real Estate Securities

The following is a summary of the Company's real estate securities, CMBS (dollars in thousands):



September 30, 2019
Type	Interest Rate	Maturity	Par Value	Fair Value
CMBS 1	5.0%	5/15/2022	$13,250	$13,265
CMBS 2	4.1%	6/26/2025	12,959	12,986
CMBS 3	4.4%	2/15/2036	40,000	40,217
CMBS 4	3.7%	5/15/2036	18,500	18,516
CMBS 5	3.4%	5/15/2036	15,000	15,019
CMBS 6	3.5%	5/15/2037	13,500	13,516
CMBS 7	3.7%	5/15/2037	15,000	15,023
CMBS 8	3.5%	6/15/2037	7,000	7,017
CMBS 9	3.9%	2/15/2036	9,600	9,645
CMBS 10	3.8%	8/15/2036	10,000	10,007
CMBS 11	3.9%	6/15/2037	8,000	8,021
CMBS 12	3.6%	7/15/2038	13,000	13,015
CMBS 13	3.6%	9/15/2037	32,000	32,000
CMBS 14	4.0%	9/15/2037	24,000	24,000

December 31, 2018
Type	Interest Rate	Maturity	Par Value	Fair Value
CMBS 1	5.4%	5/15/2022	$13,250	$13,164
CMBS 2	4.6%	6/26/2025	13,500	13,248

The Company classified its CMBS investments as available-for-sale as of September 30, 2019 and December 31, 2018. These investments are reported at fair value in the consolidated balance sheet with changes in fair value recorded in accumulated other comprehensive income (loss).

The following table shows the amortized cost, unrealized gain/(loss) and fair value of the Company's CMBS investments (dollars in thousands):



	Amortized Cost		Unrealized Gain		Unrealized Loss			Fair Value
September 30, 2019	$	232,998	$	28	$	(779	)	$	232,247
December 31, 2018	$	26,871	$	—	$	(459	)	$	26,412

As of September 30, 2019 the Company held 14 CMBS positions with an aggregate carrying value of $233.0 million and an unrealized loss of $0.8 million, of which no position had an unrealized loss for a period greater than twelve months. As of December 31, 2018, the Company held 2 CMBS positions with an aggregate carrying value of $26.9 million and an unrealized loss of $0.5 million, of which no position had an unrealized loss for a period greater than twelve months.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

The following table provides information on the amounts of gain/(loss) on the Company's real estate securities, CMBS, available-for-sale (dollars in thousands):



	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018
Unrealized gain/(loss) available-for-sale securities	$	(372	)	$	194	$	(292	)	$	171
Reclassification of net (gain)/loss on available-for-sale securities included in net income (loss)	—			—		—			—
Unrealized gain/(loss) available-for-sale securities, net of reclassification adjustment	$	(372	)	$	194	$	(292	)	$	171

The amounts reclassified for net (gain)/loss on available-for-sale securities are included in the realized (gain)/loss on sale of real estate securities in the Company's consolidated statements of operations. The Company's unrealized gain/(loss) on available-for-sale securities is net of tax. Due to the Company's designation as a REIT, there was no tax impact on unrealized gain/(loss) on available-for-sale securities.

Note 5 - Debt

Repurchase Agreements - Commercial Mortgage Loans

The Company has entered into repurchase facilities with JPMorgan Chase Bank, National Association (the "JPM Repo Facility"), U.S Bank National Association (the "USB Repo Facility"), Barclays Bank PLC (the "Barclays Revolver Facility" and the "Barclays Repo Facility"), Wells Fargo Bank, National Association (the "WF Repo Facility"), and Credit Suisse AG (the "CS Repo Facility" and together with JPM Repo Facility, USB Repo Facility, WF Repo Facility, Barclays Revolver Facility and Barclays Repo Facility, the "Repo Facilities").

The Repo Facilities are financing sources through which the Company may pledge one or more mortgage loans to the financing entity in exchange for funds typically at an advance rate of between 65% to 80% of the principal amount of the mortgage loan being pledged.

The details of the Company's Repo Facilities at September 30, 2019 and December 31, 2018 are as follows (dollars in thousands):



As of September 30, 2019
Repurchase Facility	Committed Financing		Amount Outstanding		Interest Expense⁽¹⁾		Ending Weighted Average Interest Rate		Maturity
JPM Repo Facility ⁽²⁾	$	300,000	$	96,912	$	5,536	4.67	%	1/30/2021
USB Repo Facility ⁽³⁾	100,000		—		518		4.43	%	6/15/2020
CS Repo Facility ⁽⁴⁾	300,000		—		4,690		4.64	%	3/27/2020
WF Repo Facility ⁽⁵⁾	175,000		—		1,019		4.53	%	11/21/2020
Barclays Revolver Facility ⁽⁶⁾	100,000		10,000		764		7.16	%	9/20/2021
Barclays Repo Facility ⁽⁷⁾	300,000		5,025		711		4.36	%	3/15/2022
Total	$	1,275,000	$	111,937	$	13,238

__________________________

⁽¹⁾ For the nine months ended September 30, 2019. Includes amortization of deferred financing costs.

⁽²⁾On September 3, 2019, the committed financing amount was downsized from $520 million to $300 million and the maturity date was amended to January 30, 2021.

⁽³⁾ Includes two one-year extensions at the option of an indirect wholly-owned subsidiary of the Company, which may be exercised upon the satisfaction of certain conditions.

⁽⁴⁾ On March 26, 2019, the Company exercised the extension option upon the satisfaction of certain conditions, and extended the term maturity to March 27, 2020.

⁽⁵⁾ Includes three one-year extensions at the Company’s option, which may be exercised upon the satisfaction of certain conditions.

⁽⁶⁾ On September 13, 2019, the Company exercised the extension option, and extended the term maturity to September 20, 2021. There is one more one-year extension option available at the Company's discretion.

⁽⁷⁾ Includes two one-year extensions at the Company's option.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)



As of December 31, 2018
Repurchase Facility	Committed Financing		Amount Outstanding		Interest Expense⁽¹⁾		Ending Weighted Average Interest Rate		Maturity
JPM Repo Facility ⁽²⁾	$	520,000	$	72,906	$	6,601	4.55	%	1/30/2020
GS Repo Facility ⁽³⁾	—		—		415		N/A		12/27/2018
USB Repo Facility ⁽⁴⁾	100,000		—		502		4.71	%	6/15/2020
CS Repo Facility ⁽⁵⁾	300,000		76,534		5,301		4.69	%	6/19/2019
WF Repo Facility ⁽⁶⁾	175,000		—		—		4.71	%	11/21/2020
Barclays Revolver Facility ⁽⁷⁾	100,000		—		1,145		6.24	%	9/19/2019
Total	$	1,195,000	$	149,440	$	13,964

_______________________

⁽¹⁾ For the nine months ended September 30, 2018. Includes amortization of deferred financing costs.

⁽²⁾On January 30, 2018 the committed financing amount was upsized from $300 million to $520 million and the maturity date was amended to January 30, 2020. Includes a one-year extension at the Company's option.

⁽³⁾ Matured on December 27, 2018. Committed balance was $250 million prior to maturity.

⁽⁴⁾ Includes two one-year extensions at the option of an indirect wholly-owned subsidiary of the Company, which may be exercised upon the satisfaction of certain conditions.

⁽⁵⁾ On July 19, 2018, the committed financing amount was upsized from $250 million to $300 million. On June 20, 2018, the Company exercised the extension option upon the satisfaction of certain conditions, and extended the term maturity to June 19, 2019.

⁽⁶⁾ Includes three one-year extensions at the Company’s option, which may be exercised upon the satisfaction of certain conditions.

⁽⁷⁾ On July 30, 2018, the committed financing amount was upsized from $75 million to $100 million. Includes a one-year extension at the Company's option.

The Company expects to use the advances from the Repo Facilities to finance the acquisition or origination of eligible loans, including first mortgage loans, subordinated mortgage loans, mezzanine loans and participation interests therein.

The Repo Facilities generally provide that in the event of a decrease in the value of the Company's collateral, the lenders can demand additional collateral. As of September 30, 2019 and December 31, 2018, the Company is in compliance with all debt covenants.

Other financing and loan participation - Commercial Mortgage Loans

On December 11, 2018, the Company transferred $10.0 million of its interest in a term loan to City National Bank ("City National Financing") via a participation agreement. The Company incurred $0.0 million and $0.2 million of interest expense on the City National Financing for the three months and nine months ended September 30, 2019. On April 10, 2019, the Company terminated the participation agreement with City National Bank and paid off the $10.0 million under the participation agreement.

Repurchase Agreements - Real Estate Securities

The Company has entered into various Master Repurchase Agreements (the "MRAs") that allow the Company to sell real estate securities while providing a fixed repurchase price for the same real estate securities in the future. The repurchase contracts on each security under an MRA generally mature in 30-90 days and terms are adjusted for current market rates as necessary.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

Below is a summary of the Company's MRAs as of September 30, 2019 and December 31, 2018 (dollars in thousands):



							Weighted Average
Counterparty	Amount Outstanding		Accrued Interest		Collateral Pledged ⁽¹⁾		Interest Rate		Days to Maturity
As of September 30, 2019
JP Morgan Securities LLC	$	39,232	$	19	$	43,500	2.91	%	23
Wells Fargo Securities LLC	182,666		282		214,873		3.36	%	11
Barclays Capital Inc	11,395		3		13,000		3.42	%	26
Citigroup Global Markets Inc	11,015		4		12,959		3.46	%	57
Total/Weighted Average	$	244,308	$	308	$	284,332	3.30	%	16

As of December 31, 2018
JP Morgan Securities LLC	$	21,961	$	27	$	26,750	3.67	%	18
Wells Fargo Securities, LLC	22,578		47		28,223		3.93	%	11
Total/Weighted Average	$	44,539	$	74	$	54,973	3.80	%	15

________________________

¹ Includes $24.3 million and $28.2 million of CLO notes, held by the Company, which are eliminated within the real estate securities, at fair value line in the consolidated balance sheets as of September 30, 2019 and December 31, 2018, respectively.

Collateralized Loan Obligations

On April 15, 2019, the Company called all of the outstanding notes issued by BSPRT 2017-FL1 Issuer, Ltd., a wholly owned indirect subsidiary of the Company. The outstanding principal of the notes on the date of the call was $45.6 million. The Company recognized all the remaining unamortized deferred financing costs of $4.5 million recorded within the Interest expense line of the consolidated statements of operations, which was a non-cash charge.

As of September 30, 2019 and December 31, 2018 the notes issued by BSPRT 2017-FL2 Issuer, Ltd., a wholly owned indirect subsidiary of the Company, are collateralized by interests in a pool of 6 and 12 mortgage assets having a total principal balance of $110.3 million and $244.6 million, respectively (the “2017-FL2 Mortgage Assets”). The sale of the 2017-FL2 Mortgage Assets to BSPRT 2017-FL2 Issuer is governed by a Mortgage Asset Purchase Agreement dated as of November 29, 2017, between the Company and BSPRT 2017-FL2 Issuer, Ltd.

As of September 30, 2019 and December 31, 2018 the notes issued by BSPRT 2018-FL3 Issuer, Ltd. and BSPRT 2018-FL3 Co-Issuer, LLC, wholly owned indirect subsidiaries of the Company, are collateralized by interests in a pool of 40 and 41 mortgage assets having a principal balance of $610.0 million and $609.3 million, respectively (the "2018-FL3 Mortgage Assets"). The sale of the 2018-FL3 Mortgage Assets to BSPRT 2018-FL3 Issuer, Ltd. is governed by a Mortgage Asset Purchase Agreement dated as of April 5, 2018, between the Company and BSPRT 2018-FL3 Issuer, Ltd.

As of September 30, 2019 and December 31, 2018 the notes issued by BSPRT 2018-FL4 Issuer, Ltd. and BSPRT 2018-FL4 Co-Issuer, LLC, each wholly owned indirect subsidiaries of the Company, are collateralized by interests in a pool of 47 and 41 mortgage assets having a principal balance of $868.4 million and $859.3 million, respectively (the "2018-FL4 Mortgage Assets"). The sale of the 2018-FL4 Mortgage Assets to BSPRT 2018-FL4 Issuer is governed by a Mortgage Asset Purchase Agreement dated as of October 12, 2018, between the Company and BSPRT 2018-FL4 Issuer.

As of September 30, 2019, the notes issued by BSPRT 2019-FL5 Issuer, Ltd. and BSPRT 2019-FL5 Co-Issuer, LLC, each wholly owned indirect subsidiaries of the Company, are collateralized by interests in a pool of 51 mortgage assets having a principal balance of $810.0 million respectively (the "2019-FL5 Mortgage Assets"). The sale of the 2019-FL5 Mortgage Assets to BSPRT 2019-FL5 Issuer is governed by a Mortgage Asset Purchase Agreement dated as of May 30, 2019, between the Company and BSPRT 2019-FL5 Issuer.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

The Company, through its wholly-owned subsidiaries, holds the preferred equity tranches of the above CLOs of approximately $305.4 million and $288.8 million as of September 30, 2019 and December 31, 2018, respectively. The following table represents the terms of the notes issued by the 2017-FL2 Issuer, 2018-FL3 Issuer, 2018-FL4 Issuer and 2019-FL5 Issuer (the "CLOs), respectively, as of September 30, 2019 (dollars in thousands):

CLO Facility

Tranche

Par Value Issued

Par Value Outstanding ⁽¹⁾

Interest Rate

Maturity Date

2017-FL2 Issuer

Tranche A

237,970

—

1M LIBOR + 82

10/15/2034

2017-FL2 Issuer

Tranche A-S

36,357

—

1M LIBOR + 110

10/15/2034

2017-FL2 Issuer

Tranche B

26,441

—

1M LIBOR + 140

10/15/2034

2017-FL2 Issuer

Tranche C

25,339

—

1M LIBOR + 215

10/15/2034

2017-FL2 Issuer

Tranche D

35,255

30,895

1M LIBOR + 345

10/15/2034

2018-FL3 Issuer

Tranche A

286,700

1M LIBOR + 105

10/15/2034

2018-FL3 Issuer

Tranche A-S

77,775

1M LIBOR + 135

10/15/2034

2018-FL3 Issuer

Tranche B

41,175

1M LIBOR + 165

10/15/2034

2018-FL3 Issuer

Tranche C

39,650

1M LIBOR + 255

10/15/2034

2018-FL3 Issuer

Tranche D

42,700

1M LIBOR + 345

10/15/2034

2018-FL4 Issuer

Tranche A

416,827

1M LIBOR + 105

9/15/2035

2018-FL4 Issuer

Tranche A-S

73,813

1M LIBOR + 130

9/15/2035

2018-FL4 Issuer

Tranche B

56,446

1M LIBOR + 160

9/15/2035

2018-FL4 Issuer

Tranche C

68,385

1M LIBOR + 210

9/15/2035

2018-FL4 Issuer

Tranche D

57,531

1M LIBOR + 275

9/15/2035

2019-FL5 Issuer

Tranche A

407,025

1M LIBOR + 115

5/15/2029

2019-FL5 Issuer

Tranche A-S

76,950

1M LIBOR + 148

5/15/2029

2019-FL5 Issuer

Tranche B

50,000

1M LIBOR + 140

5/15/2029

2019-FL5 Issuer

Tranche C

61,374

1M LIBOR + 200

5/15/2029

2019-FL5 Issuer

Tranche D

48,600

24,300

1M LIBOR + 240

5/15/2029

2019-FL5 Issuer

Tranche E

20,250

1M LIBOR + 285

5/15/2029

2,186,563

1,831,796

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

The following table represents the terms of the notes issued by the 2017-FL1 Issuer, 2017-FL2 Issuer, 2018-FL3 Issuer and 2018-FL4 Issuer, as of December 31, 2018 (dollars in thousands):

CLO Facility

Tranche

Par Value Issued

Par Value Outstanding ⁽¹⁾

Interest Rate

Maturity Date

2017-FL1 Issuer

Tranche A

223,600

48,557

1M LIBOR + 135

6/15/2027

2017-FL1 Issuer

Tranche B

48,000

1M LIBOR + 240

6/15/2027

2017-FL1 Issuer

Tranche C

67,900

1M LIBOR + 425

6/15/2027

2017-FL2 Issuer

Tranche A

237,970

76,785

1M LIBOR + 82

10/15/2034

2017-FL2 Issuer

Tranche A-S

36,357

1M LIBOR + 110

10/15/2034

2017-FL2 Issuer

Tranche B

26,441

1M LIBOR + 140

10/15/2034

2017-FL2 Issuer

Tranche C

25,339

1M LIBOR + 215

10/15/2034

2017-FL2 Issuer

Tranche D

35,255

1M LIBOR + 345

10/15/2034

2018-FL3 Issuer

Tranche A

286,700

1M LIBOR + 105

3/15/2028

2018-FL3 Issuer

Tranche A-S

77,775

1M LIBOR + 135

3/15/2028

2018-FL3 Issuer

Tranche B

41,175

1M LIBOR + 165

3/15/2028

2018-FL3 Issuer

Tranche C

39,650

1M LIBOR + 255

3/15/2028

2018-FL3 Issuer

Tranche D

42,700

1M LIBOR + 345

3/15/2028

2018-FL4 Issuer

Tranche A

416,827

1M LIBOR + 105

9/15/2035

2018-FL4 Issuer

Tranche A-S

73,813

1M LIBOR + 130

9/15/2035

2018-FL4 Issuer

Tranche B

56,446

1M LIBOR + 160

9/15/2035

2018-FL4 Issuer

Tranche C

68,385

1M LIBOR + 210

9/15/2035

2018-FL4 Issuer

Tranche D

57,531

1M LIBOR + 275

9/15/2035

1,861,864

1,525,636

⁽¹⁾ Excludes $261.4 million and $186.5 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligation line of the consolidated balance sheets as of September 30, 2019 and December 31, 2018.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

The below table reflects the total assets and liabilities of the Company's four CLOs. The CLOs are considered VIEs and are consolidated into the Company's consolidated financial statements as of September 30, 2019 and December 31, 2018 as the Company is the primary beneficiary of the VIE. The Company is the primary beneficiary of the CLOs because (i) the Company has the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the right to receive benefits from the VIEs or the obligation to absorb losses of the VIEs that could be significant to the VIE.



Assets (dollars in thousands)	September 30, 2019		December 31, 2018
Cash ⁽¹⁾	$	196,951	$	74,157
Commercial mortgage loans, held for investment, net ⁽²⁾	2,197,504		1,921,428
Accrued interest receivable	5,902		6,353
Total Assets	$	2,400,357	$	2,001,938

Liabilities
Notes payable ⁽³⁾⁽⁴⁾	$	2,073,864	$	1,712,129
Accrued interest payable	2,646		3,163
Total Liabilities	$	2,076,510	$	1,715,292

_______________________

⁽¹⁾ Includes $196.3 million and $73.7 million of cash held by the servicer related to CLO loan payoffs as of September 30, 2019 and December 31, 2018, respectively.

⁽²⁾ The balance is presented net of allowance for loan loss of $0.5 million and $0.6 million as of September 30, 2019 and December 31, 2018, respectively.

⁽³⁾ Includes $261.4 million and $186.5 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligation line of the consolidated balance sheets as of September 30, 2019 and December 31, 2018, respectively.

⁽⁴⁾ The balance is presented net of deferred financing cost and discount of $19.3 million and $20.4 million as of September 30, 2019 and December 31, 2018, respectively.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

Note 6 - Earnings Per Share

The Company uses the two-class method in calculating basic and diluted earnings per share. Net income is allocated between our common stock and other participating securities based on their participation rights. Diluted net income per share has been computed using the weighted average number of shares of common stock outstanding and other dilutive securities. The following table presents a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations and the calculation of basic and diluted earnings per share (in thousands, except share and per share data):



	Three Months Ended September 30,				Nine Months Ended September 30,
Numerator	2019		2018		2019		2018
Net income	$	25,913	$	19,000	$	60,329	$	36,398
Less: Preferred stock dividends	4,147		1,255		10,957		1,271
Less: Undistributed earnings allocated to preferred stock	1,306		451		963		—
Net income attributable to common shareholders (for basic and diluted earnings per share)	20,460		17,294		48,409		35,127

Denominator
Weighted-average common shares outstanding for basic earnings per share	42,795,038		35,468,648		41,287,548		32,977,572
Effect of dilutive shares:
Unvested restricted shares	12,735		14,209		12,836		10,007
Weighted-average common shares outstanding for diluted earnings per share	42,807,773		35,482,857		41,300,384		32,987,579

Basic earnings per share	$	0.48	$	0.49	$	1.17	$	1.07
Diluted earnings per share	$	0.48	$	0.49	$	1.17	$	1.07

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

Note 7 - Stock Transactions

As of September 30, 2019 and December 31, 2018, the Company had 43,021,064 and 39,303,710 shares of common stock outstanding, respectively, including shares issued pursuant to the Company's distribution reinvestment plan (the "DRIP"), share repurchases and unvested restricted shares. As of September 30, 2019, the Company had $3.8 million outstanding of binding purchase commitments for common stock. As of December 31, 2018, the Company did not have any outstanding binding purchase commitments for common stock.

As of September 30, 2019 and December 31, 2018, the Company had 38,501 and 29,249 shares of Series A Preferred Stock outstanding, respectively. As of September 30, 2019, the Company did not have any outstanding of binding purchase commitments for Series A Preferred Stock. As of September 30, 2019, the Company had a $5.0 million binding purchase commitment with an institutional investor for the Company’s Series C Preferred Stock, a new series of convertible preferred stock authorized by the Company’s Board of Directors. The Articles Supplementary for the Series C Preferred Stock was not filed with the Maryland State Department of Assessments and Taxation until the closing of the commitment on October 18, 2019. As of December 31, 2018, the Company did not have any outstanding binding purchase commitments for Preferred Stock.

The following tables present the activity in the Company's Preferred Stock for the periods ended September 30, 2019 and September 30, 2018, respectively (dollars in thousands, except share amounts):



	Shares	Amount
Beginning Balance, December 31, 2018	29,249	$	145,786
Issuance of Preferred Stock, net of offering cost	9,249	46,245
Dividends paid in Preferred Stock	3	18
Amortization of offering costs	—	76
Ending Balance, September 30, 2019	38,501	$	192,125

	Shares	Amount
Beginning Balance, December 31, 2017	—	$	—
Issuance of Preferred Stock, net of offering cost	19,215	95,736
Dividends paid in Preferred Stock	—	—
Amortization of offering costs	—	—
Ending Balance, September 30, 2018	19,215	$	95,736

Distributions

In order to maintain its election to qualify as a REIT, the Company must currently distribute, at a minimum, an amount equal to 90% of its taxable income, without regard to the deduction for distributions paid and excluding net capital gains. The Company must distribute 100% of its taxable income (including net capital gains) to avoid paying corporate U.S. federal income taxes. The Company's distributions are payable by the fifth day following each month end to stockholders of record at the close of business each day during the prior month. Distribution payments are dependent on the availability of funds. The Company's board of directors may reduce the amount of distributions paid or suspend distribution payments at any time, and therefore, distributions payments are not assured.

For the nine months ended September 30, 2019 and September 30, 2018, the Company declared daily common stock distributions equivalent to $1.44 per annum per share. For the nine months ended September 30, 2019 and September 30, 2018, the Company declared monthly Preferred Stock dividends per share equivalent to the amount of common stock distributions that would be paid on a conversion of Preferred Stock into common stock.

As of September 30, 2019 and December 31, 2018, the Company had declared but unpaid common stock distributions of $5.1 million and $4.7 million, respectively. Additionally, as of September 30, 2019 and December 31, 2018, the Company had declared but unpaid Preferred Stock distributions of $1.4 million and $1.1 million, respectively. These amounts are included in Distributions payable on the Company’s consolidated balance sheets.

The Company distributed $44.1 million during the nine months ended September 30, 2019, comprised of $33.7 million in cash and $10.4 million in shares of common stock issued under the DRIP. The Company distributed $35.0 million during the

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

nine months ended September 30, 2018, comprised of $24.4 million in cash and $10.6 million in shares of common stock issued under the DRIP.

Share Repurchase Program

The Company's board of directors unanimously approved an amended and restated share repurchase program (the “SRP”), which became effective on February 28, 2016. The SRP enables stockholders to sell their shares to the Company. Subject to certain conditions, stockholders that purchased shares of the Company's common stock or received their shares from us (directly or indirectly) through one or more non-cash transactions and have held their shares for a period of at least one year may request that the Company repurchase their shares of common stock so long as the repurchase otherwise complies with the provisions of Maryland law. Repurchase requests made following the death or qualifying disability of a stockholder will not be subject to any minimum holding period.

On August 10, 2017, the Company's board of directors amended the SRP to provide that the repurchase price per share for requests will be equal to the lesser of (i) the Company’s most recent estimated per-share net asset value ("NAV"), as approved by the Company’s board of directors from time to time, and (ii) the Company’s book value per share, computed in accordance with GAAP, multiplied by a percentage equal to (i) 92.5%, if the person seeking repurchase has held his or her shares for a period greater than one year and less than two years; (ii) 95%, if the person seeking repurchase has held his or her shares for a period greater than two years and less than three years; (iii) 97.5%, if the person seeking repurchase has held his or her shares for a period greater than three years and less than four years; or (iv) 100%, if the person seeking repurchase has held his or her shares for a period greater than four years or in the case of requests for death or disability.

The Company’s most recent estimated per-share NAV is $18.57, as determined by the board of directors, as of September 30, 2019. The Company’s GAAP book value per share as of September 30, 2019 is $18.56.

Repurchase requests related to death or a qualifying disability must satisfy certain conditions, each of which are assessed by and at the sole discretion of the Company, including the following conditions. In the case of death, the shareholder must be a natural person (or a revocable grantor trust) and the Company must receive a written notice from the estate of the shareholder, the recipient of the shares through bequest or inheritance, or the trustee in the case of a revocable grantor trust. In the case of a “qualifying disability”, the shareholder must be a natural person (or a revocable grantor trust) and the Company must receive a written notice from the shareholder, or the trustee in the case of a revocable grantor trust, that the condition was not pre-existing on the date the shares were acquired. In order for a disability to be considered a “qualifying disability”, the shareholder must receive and provide evidence (the shareholder application and the notice of final determination) of disability based upon a physical or mental condition or impairment made by a government agency responsible for reviewing and determining disability retirement benefits (e.g. the Social Security Administration).

Repurchases pursuant to the SRP, when requested, generally will be made semiannually (each six-month period ending June 30 or December 31, a “fiscal semester”). Repurchases for any fiscal semester will be limited to a maximum of 2.5% of the weighted average number of shares of common stock outstanding during the previous fiscal year, with a maximum for any fiscal year of 5.0% of the weighted average number of shares of common stock outstanding during the previous fiscal year. Funding for repurchases pursuant to the SRP for any given fiscal semester will be limited to proceeds received during that same fiscal semester through the issuance of common stock pursuant to any DRIP in effect from time to time, provided that the Company's board of directors has the power, in its sole discretion, to determine the amount of shares repurchased during any fiscal semester as well as the amount of funds to be used for that purpose. Any repurchase requests received during such fiscal semester will be paid at the price, computed as described above on the last day of such fiscal semester. Due to these limitations, the Company cannot guarantee that the Company will be able to accommodate all repurchase requests made during any fiscal semester or fiscal year. However, a stockholder may withdraw its request at any time or ask that the Company honors the request when funds are available. Pending repurchase requests will be honored on a pro rata basis. The Company will generally pay repurchase proceeds, less any applicable tax or other withholding required by law, by the 31st day following the end of the fiscal semester during which the repurchase request was made.

When a stockholder requests redemption and the redemption is approved, the Company will reclassify such obligation from equity to a liability based on the settlement value of the obligation. Shares repurchased under the SRP will have the status of authorized but unissued shares.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

The following table reflects the number of shares repurchased under the SRP cumulatively through September 30, 2019:



	Number of Requests	Number of Shares Repurchased	Average Price per Share
Cumulative as of December 31, 2018	3,845	2,800,414	$	20.65
January 1 - January 31, 2019⁽¹⁾	845	387,530	18.60
February 1 - February 28, 2019	—	—	N/A
March 1 - March 31, 2019	—	—	N/A
April 1 - April 30, 2019	—	—	N/A
May 1 - May 31, 2019	—	—	N/A
June 1 - June 30, 2019	—	—	N/A
July 1 - July 31, 2019⁽²⁾	1,188	354,323	18.65
August 1 - August 31, 2019	—	—	N/A
September 1 - September 30, 2019	—	—	N/A
Cumulative as of September 30, 2019	5,878	3,542,267	$	20.23

_______________________

⁽¹⁾ Reflects shares repurchased in January 2019 pursuant to repurchase requests submitted for the fiscal semester ended December 31, 2018.

⁽²⁾ Reflects shares repurchased in July 2019 pursuant to repurchase requests submitted for the fiscal semester ended June 30, 2019. Pursuant to the terms of the SRP, the Board only authorized repurchases up to the amount of proceeds reinvested through our DRIP. As a result, redemption requests for this semester in the amount of 1,934,369 shares were not fulfilled.

Note 8 - Commitments and Contingencies

Unfunded Commitments Under Commercial Mortgage Loans

As of September 30, 2019 and December 31, 2018, the Company had the below unfunded commitments to the Company's borrowers (dollars in thousands):



Funding Expiration	September 30, 2019		December 31, 2018
2019	$	12,000	$	34,667
2020	105,091		176,760
2021	103,440		106,940
2022	40,412		—
2023 and beyond	—		—
	$	260,943	$	318,367

The borrowers are required to meet or maintain certain metrics in order to qualify for the unfunded commitment amounts.

Litigation and Regulatory Matters

In the ordinary course of business, the Company may become subject to litigation, claims and regulatory matters. The Company has no knowledge of material legal or regulatory proceedings pending or known to be contemplated against the Company at this time.

Operating Lease

On August 19, 2019, the Company wrote off a commercial mortgage loan, held for investment, with a carrying value $14.9 million in exchange for the possession of a REO investment at a fair value of $8.1 million at the time of the transfer. The transfer occurred when the Company took possession of the property by completing a deed-in-lieu of foreclosure transaction (see Note 3). In conjunction with the deed-in-lieu of foreclosure transaction, the Company assumed a non-cancelable ground lease for the land on which the property is located and classified the lease as an operating lease. The ground lease requires monthly rental payments with annual increases of 3%. The initial term of the lease expires in 2067 and can be renewed for a sixty-year period. Rent expense for this operating lease for the nine months ended September 30, 2019 totaled $71,865.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

A schedule of minimum future lease payments for the following three and twelve-month periods is as follows (in thousands):



Maturities of lease liabilities for operating lease	September 30, 2019
2019	$	98
2020	398
2021	410
2022	422
2023	435
2024	448
2025 and beyond	39,438
Total undiscounted lease payments	41,649
Less: Amount representing interest	(35,553		)
Present value of lease liability	$	6,096

The discount rate used to calculate the lease liability is 9% and the remaining lease term is 48.25 years.

Note 9 - Related Party Transactions and Arrangements

Advisory Agreement Fees and Reimbursements

Pursuant to the Advisory Agreement, the Company makes or was required to make the following payments and reimbursements to the Advisor:

•The Company reimburses the Advisor’s costs of providing services pursuant to the Advisory Agreement, except the salaries and benefits paid by the Advisor to the Company’s executive officers.

•The Company pays the Advisor, or its affiliates, a monthly asset management fee equal to one-twelfth of 1.5% of stockholder’s equity as calculated pursuant to the Advisory Agreement.

•The Company will pay the Advisor an annual subordinated performance fee calculated on the basis of total return to stockholders, payable monthly in arrears, such that for any year in which total return on stockholders’ capital exceeds 6.0% per annum, our Advisor will be entitled to 15.0% of the excess total return; provided that in no event will the annual subordinated performance fee payable to our Advisor exceed 10.0% of the aggregate total return for such year.

•The Company reimburses the Advisor for expenses incurred by the Advisor on the Company‘s behalf related to selecting, evaluating, originating and acquiring investments in an amount up to 0.5% of the principal amount funded by the Company to originate or acquire commercial mortgage loans and up to 0.5% of the anticipated net equity funded by the Company to acquire real estate securities investments.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

The table below shows the costs incurred due to arrangements with our Advisor and its affiliates during the three and nine months ended September 30, 2019 and September 30, 2018 and the associated payable as of September 30, 2019 and December 31, 2018 (dollars in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,				Payable as of
	2019		2018		2019		2018		September 30, 2019		December 31, 2018
Acquisition expenses ⁽¹⁾	$	180	$	173	$	698	$	289	$	1	$	1
Administrative services expenses	4,564		3,501		12,083		9,822		1,922		1,224
Asset management and subordinated performance fee	4,468		2,720		11,917		7,227		2,671		1,072
Other related party expenses⁽²⁾	590		315		1,225		785		230		932
Total related party fees and reimbursements	$	9,802	$	6,709	$	25,923	$	18,123	$	4,824	$	3,229

________________________

⁽¹⁾ Total acquisition expenses paid during the three and nine months ended September 30, 2019 were $1.6 million and $5.4 million respectively, of which $1.4 million and $4.7 million were capitalized within the commercial mortgage loans, held for investment and real estate securities, available for sale, at fair value lines of the consolidated balance sheets. For three and nine months ended September 30, 2018 total acquisition expenses paid were $2.4 million and $6.6 million respectively, of which $2.2 million and $6.3 million were capitalized within the commercial mortgage loans, held for investment and real estate securities, available for sale, at fair value, lines of the consolidated balance sheets.

⁽²⁾ These are primarily related to reimbursable costs incurred related to loan origination activities. These amounts are included in Other expenses in the Company's consolidated statements of operations.

The payables as of September 30, 2019 and December 31, 2018 in the table above are included in Due to affiliates on the Company's consolidated balance sheets.

Purchases of Common Stock and Preferred Stock

Refer to Note 7 - Stock Transactions for a description of the Company’s private placements. Officers of the Company and other employees of the Advisor and its affiliates (“Manager Investors”), as well as members of our board of directors, have acquired common stock and Series A Preferred Stock in these private placements on substantially the same terms applying to purchases by third party accredited investors unaffiliated with the Company or the Advisor. The Manager Investors acquired an aggregate of $2.4 million of common stock and Series A Preferred Stock in these private placements during the three and nine months ended September 30, 2019. During the nine months ended September 30, 2019, each independent member of our board of directors acquired 5,984 shares of our common stock in these private placements for an aggregate purchase price of $0.4 million.

Other Transactions

On February 22, 2018, the Company purchased commercial mortgage loans, held-for-sale from an entity that is an affiliate of our Advisor, for an aggregate purchase price of $27.8 million. The purchase of the commercial mortgage loans and the $27.8 million purchase price were approved by the Company’s board of directors. On April 18, 2018, the Company sold $23.3 million of these commercial mortgage loans into a CMBS securitization. The remaining $4.5 million of these commercial mortgage loans are recorded in commercial mortgage loans, held for investment, on the consolidated balance sheet as of September 30, 2019.

Note 10 - Fair Value of Financial Instruments

GAAP establishes a hierarchy of valuation techniques based on the observability of inputs used in measuring financial instruments at fair values. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are described below:


•	Level I - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.


•	Level II - Inputs (other than quoted prices included in Level I) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)


•	Level III - Unobservable inputs that reflect the entity's own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the above hierarchy requires significant judgment and factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter.

The Company has implemented valuation control processes to validate the fair value of the Company's financial instruments measured at fair value including those derived from pricing models. These control processes are designed to assure that the values used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, the control processes are designed to assure that the valuation approach utilized is appropriate and consistently applied and the assumptions are reasonable.

Financial Instruments Measured at Fair Value on a Recurring Basis

CMBS, recorded in real estate securities, held-for-sale, measured at fair value on the consolidated balance sheet are valued utilizing both observable and unobservable market inputs. These factors include projected future cash flows, ratings, subordination levels, vintage, remaining lives, credit issues, and recent trades of similar real estate securities. Depending upon the significance of the fair value inputs used in determining these fair values, these real estate securities are classified in either Level II or Level III of the fair value hierarchy. As of September 30, 2019 and December 31, 2018 the Company engaged the services of a third party independent valuation firm to determine fair value of CMBS investment. The Company has classified the CMBS as Level III.

Commercial mortgage loans held-for-sale, measured at fair value in the Company's TRS are initially recorded at transaction proceeds, which are considered to be the best initial estimate of fair value. The Company engaged the services of a third party independent valuation firm to determine fair value of certain investments held by the Company. Fair value is determined using a discounted cash flow model that primarily considers changes in interest rates and credit spreads, weighted average life and current performance of the underlying collateral. The Company classified the commercial mortgage loans held-for-sale, measured at fair value as Level III.

Other real estate investments, measured at fair value on the consolidated balance sheet are valued using unobservable inputs. The Company engaged the services of a third party independent valuation firm to determine fair value of certain investments, including preferred equity investments, held by the Company. Fair value is determined using a discounted cash flow model that primarily considers changes in interest rates and credit spreads, weighted average life and current performance of the underlying collateral. The Company classified the other real estate investments, measured at fair value as Level III.

The fair value for Treasury note futures is derived using market prices. Treasury note futures trade on the Chicago Mercantile Exchange (“CME”). The instruments are a variety of recently issued 10-year U.S. Treasury notes. The future contracts are liquid and are centrally cleared through the CME. Treasury note futures are generally categorized in Level I of the fair value hierarchy.

The fair value for credit default swaps and interest rate swaps contracts are derived using pricing models that are widely accepted by marketplace participants. Credit default swaps and interest rate swaps are traded in the OTC market. The pricing models take into account multiple inputs including specific contract terms, interest rate yield curves, interest rates, credit curves, recovery rates, and/or current credit spreads obtained from swap counterparties and other market participants. Most inputs into the models are not subjective as they are observable in the marketplace or set per the contract. Valuation is primarily determined by the difference between the contract spread and the current market spread. The contract spread (or rate) is generally fixed and the market spread is determined by the credit risk of the underlying debt or reference entity. If the underlying indices are liquid and the OTC market for the current spread is active, credit default swaps and interest rate swaps are categorized in Level II of the fair value hierarchy. If the underlying indices are illiquid and the OTC market for the current spread is not active, credit default swaps are categorized in Level III of the fair value hierarchy. The credit default swaps and interest rate swaps are generally categorized in Level II of the fair value hierarchy.

A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets or liabilities. The Company's policy with respect to transfers between levels of the fair value hierarchy is to recognize transfers into and out of each level as of the beginning of the reporting period. There were no material transfers between levels within fair value hierarchy during the quarter ended September 30, 2019.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

The following table presents the Company's financial instruments carried at fair value on a recurring basis in the consolidated balance sheets by its level in the fair value hierarchy as of September 30, 2019 and December 31, 2018 (dollars in thousands):



	Total		Level I		Level II		Level III
September 30, 2019
Real estate securities, measured at fair value	$	232,247	$	—	$	—	$	232,247
Commercial mortgage loans, held-for-sale, measured at fair value	175,073		—		—		175,073
Other real estate investments, measured at fair value	2,556		—		—		2,556
Credit default swaps	235		—		235		—
Interest rate swaps	505		—		505		—
Total assets, at fair value	$	410,616	$	—	$	740	$	409,876

Liabilities, at fair value
Credit default swaps	$	1,998	$	—	$	1,998	$	—
Interest rate swaps	14		—		14		—
Treasury note futures	156		156		—		$	—
Total liabilities, at fair value	$	2,168	$	156	$	2,012	$	—

December 31, 2018
Real estate securities, measured at fair value	$	26,412	$	—	$	—	$	26,412
Commercial mortgage loans, held-for-sale, measured at fair value	76,863		—		—		76,863
Credit default swaps	640		—		640		—
Interest rate swaps	206		—		206		—
Total assets, at fair value	$	104,121	$	—	$	846	$	103,275

Liabilities, at fair value
Interest rate swaps	$	256	$	—	$	256	$	—
Treasury note futures	1,063		1,063		—		—
Total liabilities, at fair value	$	1,319	$	1,063	$	256	$	—

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level III category. As a result, the unrealized gains and losses for assets and liabilities within the Level III category may include changes in fair value that were attributable to both observable and unobservable inputs. The following table summarizes the valuation method and significant unobservable inputs used for the Company’s financial instruments that are categorized within Level III of the fair value hierarchy as of September 30, 2019 and December 31, 2018 (dollars in thousands):



Asset Category	Fair Value	Valuation Methodologies	Unobservable Inputs ⁽¹⁾	Weighted Average ⁽²⁾	Range
September 30, 2019
Commercial mortgage loans, held-for-sale, measured at fair value	$175,073	Discounted Cash Flow	Yield	6.1%	1.7% - 11.1%
Real estate securities, available-for-sale, measured at fair value	232,247	Discounted Cash Flow	Discount Margin	1.9%	1.3% - 3.0%
Other real estate investments, measured at fair value	2,556	Discounted Cash Flow	Yield	12.4%	11.4% - 13.4%

December 31, 2018
Commercial mortgage loans, held-for-sale, measured at fair value	$76,863	Discounted Cash Flow	Yield	6.3%	4.7% - 11.3%
Real estate securities, available-for-sale, measured at fair value	26,412	Discounted Cash Flow	Yield	5.5%	4.0% - 6.0%

________________________

⁽¹⁾ In determining certain of these inputs, the Company evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company specific developments including exit strategies and realization opportunities. The Company has determined that market participants would take these inputs into account when valuing the investments.

⁽²⁾ Inputs were weighted based on the fair value of the investments included in the range.

Increases or decreases in any of the above unobservable inputs in isolation would result in a lower or higher fair value measurement for such assets.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

The following table presents additional information about the Company’s financial instruments which are measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018 for which the Company has used Level III inputs to determine fair value (dollars in thousands):



	September 30, 2019
	Commercial Mortgage Loans, held-for-sale, measured at fair value			Real Estate Securities, available for sale, measured at fair value			Other Real Estate Investments, measured at fair value
Beginning balance, January 1, 2019	$	76,863		$	26,412		$	—
Transfers into Level III	—			—			—
Total realized and unrealized gain (loss) included in earnings:
Realized gain (loss) on sale of commercial mortgage loans held-for-sale	32,575			—			—
Realized gain (loss) on sale of real estate securities	—			—			—
Unrealized gain (loss) on commercial mortgage loans held-for-sale and other real estate investments	348			—			45
Net accretion	—			(42		)	—
Unrealized gain (loss) included in OCI ⁽¹⁾	—			(292		)	—
Purchases	744,397			206,710			2,511
Sales / paydowns	(674,639		)	(541		)	—
Cash repayments/receipts	—			—			—
Transfers out of Level III	(4,471		)	—			—
Ending Balance, September 30, 2019	$	175,073		$	232,247		$	2,556

	December 31, 2018
	Commercial Mortgage Loans, held-for-sale, measured at fair value			Real Estate Securities, available for sale, measured at fair value			Other Real Estate Investments, measured at fair value
Beginning balance, January 1, 2018	$	28,531		$	—		$	—
Transfers into Level III	—			—			—
Total realized and unrealized gain (loss) included in earnings:
Realized gain (loss) on sale of real estate securities	—			(107		)	—
Realized gain (loss) on sale of commercial mortgage loan held-for-sale	11,288			—			—
Unrealized gain (loss) on commercial mortgage loans held-for-sale	(237		)	—			—
Net accretion	—			(76		)	—
Unrealized gain (loss) included in OCI ⁽¹⁾	—			(459		)	—
Purchases	617,916			39,510			—
Sales / paydown	(580,635		)	(12,456		)	—
Cash repayments/receipts	—			—			—
Transfers out of Level III	—			—			—
Ending Balance, December 31, 2018	$	76,863		$	26,412		$	—

________________________

⁽¹⁾ Unrealized gains included in Other comprehensive income ("OCI") are attributable to assets held at September 30, 2019 and December 31, 2018.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

The fair value of cash and cash equivalents and restricted cash are measured using observable quoted market prices, or Level I inputs and their carrying value approximates their fair value. The fair value of borrowings under repurchase agreements approximate their carrying value on the consolidated balance sheets due to their short-term nature, and are measured using Level II inputs.

Financial Instruments Not Measured at Fair Value

The fair values of the Company's commercial mortgage loans, held-for-investment and collateralized loan obligations, which are not reported at fair value on the consolidated balance sheets are reported below as of September 30, 2019 and December 31, 2018 (dollars in thousands):



		Level	Carrying Amount		Fair Value
September 30, 2019
Commercial mortgage loans, held-for-investment ⁽¹⁾	Asset	III	$	2,496,851	$	2,496,783
Collateralized loan obligation	Liability	III	1,812,448		1,832,145
December 31, 2018
Commercial mortgage loans, held-for-investment ⁽¹⁾	Asset	III	$	2,211,666	$	2,213,650
Collateralized loan obligation	Liability	III	1,505,279		1,518,127
Other financing and loan participation - commercial mortgage loans	Liability	III	9,902		9,902

________________________

⁽¹⁾ The carrying value is gross of $0.7 million and $4.8 million of allowance for loan losses as of September 30, 2019 and December 31, 2018, respectively.

The fair value of the commercial mortgage loans, held-for-investment is estimated using a discounted cash flow analysis, based on the Advisor's experience with similar types of investments. The Company estimates the fair value of the collateralized loan obligations using external broker quotes. The fair value of the other financing and loan participation-commercial mortgage loans is generally estimated using a discounted cash flow analysis.

Note 11 - Derivative Instruments

The Company uses derivative instruments primarily to manage the fair value variability of fixed rate assets caused by interest rate fluctuations and overall portfolio market risk.

As of September 30, 2019, the net premiums received on derivative instrument assets were $3.2 million.

The following derivative instruments were outstanding as of September 30, 2019 and December 31, 2018 (dollars in thousands):



			Fair Value
Contract type	Notional		Assets		Liabilities
September 30, 2019
Credit default swaps	$	156,300	$	235	$	1,998
Interest rate swaps	67,803		505		14
Treasury note futures	117,000		—		156
Total	$	341,103	$	740	$	2,168

December 31, 2018
Credit default swaps	$	45,000	$	640	$	—
Interest rate swaps	37,965		206		256
Treasury note futures	49,000		—		1,063
Total	$	131,965	$	846	$	1,319

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

The following table indicates the net realized and unrealized losses on derivatives, by primary underlying risk exposure, as included in loss on derivative instruments in the consolidated statements of operations for the three and nine months ended September 30, 2019 and September 30, 2018:



	Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019
Contract type	Unrealized (Gain)/Loss			Realized (Gain)/Loss			Unrealized (Gain)/Loss			Realized (Gain)/Loss
Credit default swaps	$	(172	)	$	159		$	132		$	1,537
Interest rate swaps	(1,608		)	1,248			(543		)	1,477
Treasury note futures	(2,608		)	3,669			(907		)	4,909
Options	—			112			—			349
Total	$	(4,388	)	$	5,188		$	(1,318	)	$	8,272

	Three Months Ended September 30, 2018						Nine Months Ended September 30, 2018
Contract type	Unrealized (Gain)/Loss			Realized (Gain)/Loss			Unrealized (Gain)/Loss			Realized (Gain)/Loss
Credit default swaps	$	316		$	64		$	106		$	(29	)
Interest rate swaps	(84		)	(195		)	(74		)	(709		)
Treasury note futures	(1,504		)	172			(1,194		)	(738		)
Options	—			—			—			—
Total	$	(1,272	)	$	41		$	(1,162	)	$	(1,476	)

Note 12 - Offsetting Assets and Liabilities

The Company's consolidated balance sheets used a gross presentation of repurchase agreements and collateral pledged. The table below provides a gross presentation, the effects of offsetting and a net presentation of the Company's derivative instruments and repurchase agreements within the scope of ASC 210-20, Balance Sheet—Offsetting, as of September 30, 2019 and December 31, 2018 (dollars in thousands):



							Gross Amounts Not Offset on the Balance Sheet
Assets	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Balance Sheet		Net Amount of Assets Presented on the Balance Sheet			Financial Instruments		Cash Collateral⁽¹⁾		Net Amount
September 30, 2019
Derivative instruments, at fair value	$	740	$	—	$	740		$	—	$	2,170	$	—
December 31, 2018
Derivative instruments, at fair value	$	846	$	—	$	846		$	—	$	—	$	846

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)



							Gross Amounts Not Offset on the Balance Sheet
Liabilities	Gross Amounts of Recognized Liabilities		Gross Amounts Offset on the Balance Sheet		Net Amount of Liabilities Presented on the Balance Sheet		Financial Instruments		Cash Collateral⁽¹⁾		Net Amount
September 30, 2019
Repurchase agreements, commercial mortgage loans	$	111,937	$	—	$	111,937	$	169,245	$	5,011	$	—
Repurchase agreements, real estate securities	$	244,308	$	—	$	244,308	$	284,332	$	357	$	—
Derivative instruments, at fair value	$	2,168	$	—	$	2,168	$	—	$	10,455	$	—
December 31, 2018
Repurchase agreements, commercial mortgage loans	$	149,440	$	—	$	149,440	$	203,846	$	5,010	$	—
Repurchase agreements, real estate securities	$	44,539	$	—	$	44,539	$	54,973	$	305	$	—
Derivative instruments, at fair value	$	1,319	$	—	$	1,319	$	—	$	7,232	$	—

_______________________

⁽¹⁾ These cash collateral amounts are recorded within the Restricted cash balance on the consolidated balance sheets.

Note 13 - Segment Reporting

The Company conducts its business through the following reporting segments:


•	The real estate debt, real estate owned and other real estate investments business focuses on originating, acquiring and asset managing commercial real estate debt and equity investments, including first mortgage loans, subordinate mortgages, mezzanine loans and participations in such loans and other real estate investments.


•	The real estate securities business focuses on investing in and asset managing commercial real estate securities primarily consisting of CMBS and may include unsecured REIT debt, CDO notes and other securities.


•	The commercial real estate conduit business operated through the Company's TRS, which is focused on generating risk-adjusted returns by originating and subsequently selling fixed-rate commercial real estate loans into the CMBS securitization market at a profit.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

The following table represents the Company's operations by segment for the three and nine months ended September 30, 2019 and September 30, 2018 (dollars in thousands):



Three Months Ended September 30, 2019	Total		Real Estate Debt and Other Real Estate Investments		Real Estate Securities			TRS
Interest income	$	50,445	$	47,068	$	1,791		$	1,586
Interest expense	22,160		20,108		1,466			586
Net income	25,913		17,734		325			7,854
Total assets as of September 30, 2019	3,191,032		2,999,124		1,029			190,879
Three Months Ended September 30, 2018
Interest income	42,943		41,046		270			1,627
Interest expense	17,120		15,694		192			1,234
Net income	19,000		17,275		(29		)	1,754
Total assets as of December 31, 2018	2,606,078		2,492,440		26,474			87,164

Nine Months Ended September 30, 2019	Total		Real Estate Debt and Other Real Estate Investments		Real Estate Securities			TRS
Interest income	$	145,181	$	136,451	$	3,332		$	5,398
Interest expense	68,395		63,411		2,714			2,270
Net income	60,329		44,963		618			14,748
Total assets as of September 30, 2019	3,191,032		2,999,124		1,029			190,879
Nine Months Ended September 30, 2018
Interest income	106,478		101,073		317			5,088
Interest expense	50,183		46,813		378			2,992
Net income	36,398		30,997		(168		)	5,569
Total assets as of December 31, 2018	2,606,078		2,492,440		26,474			87,164

For the purposes of the table above, any expenses not associated with a specific segment have been allocated to the business segments using a percentage derived by using the sum of commercial mortgage loans originated during the year as the denominator and commercial mortgage loans, held for investment, net of allowance and commercial mortgage loans, held-for-sale, measured at fair value as numerator.

Note 14 - Subsequent Events

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q.

Determination of Net Asset Value per Share

On November 12, 2019, the Company’s board of directors unanimously determined an estimated NAV per share of the Company’s common stock of $18.57 as of September 30, 2019. The estimated NAV per share is based upon the estimated value of the Company’s assets less the Company’s liabilities as of September 30, 2019. An independent third-party valuation firm was engaged to value the Company’s investment portfolio. The Advisor calculated the estimated NAV per share based in part on this valuation and recommended to the board of directors the estimated NAV per share calculated by the Advisor. The valuation was performed in accordance with the provisions of Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Investment Program Association in April 2013.

As a result of the approval by the board of directors of the estimated NAV per share as of September 30, 2019, and pursuant to the terms of the DRIP and SRP, the Company (i) will offer shares pursuant to the DRIP at a purchase price of $18.56, representing the lower of the company’s GAAP book value per share of common stock and the estimated per share NAV, beginning with November 2019 distributions which are reinvested in December 2019; and (ii) will also repurchase shares pursuant to the SRP at a repurchase price of $18.56, subject to discounts in certain circumstances and subject to the terms and conditions of the SRP. These prices are subject to change upon future changes to the Company’s estimated NAV per share and GAAP book value per share in accordance with the terms of the DRIP and SRP.

Issuance of Series C Preferred Stock

On October 18, 2019, the Company filed Articles Supplementary to the Company’s Articles of Amendment and Restatement with the Maryland State Department of Assessments and Taxation, pursuant to which the Company has classified and designated 20,000 shares of Series C Preferred Stock. The Articles Supplementary became effective upon filing. As of October 18, 2019, there were 1,000 shares of Series C Preferred Stock issued and outstanding.

Private Placements

Subsequent to September 30, 2019, the Company issued $8.2 million of common stock at $16.71 per share and $5.0 million of Series C Preferred Stock at $5,000.00 per share.

BENEFIT STREET PARTNERS REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying financial statements of Benefit Street Partners Realty Trust, Inc. the notes thereto and other financial information included elsewhere in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K the fiscal year ended December 31, 2018 filed with the U.S. Securities and Exchange Commission (the "SEC") on March 29, 2019.

As used herein, the terms "we," "our" and "us" refer to Benefit Street Partners Realty Trust, Inc., a Maryland corporation, and, as required by context, to Benefit Street Partners Realty Operating Partnership, L.P., a Delaware limited partnership, which we refer to as the "OP," and to its subsidiaries. We are externally managed by Benefit Street Partners L.L.C. (our "Advisor").

The forward-looking statements contained in this Quarterly Report on Form 10-Q may include, but are not limited to, statements as to:


•	our business and investment strategy;


•	our ability to make investments in a timely manner or on acceptable terms;


•	current credit market conditions and our ability to obtain long-term financing for our investments in a timely manner and on terms that are consistent with what we project when we invest;


•	the effect of general market, real estate market, economic and political conditions, including the recent economic slowdown and dislocation in the global credit markets;


•	our ability to make scheduled payments on our debt obligations;


•	our ability to generate sufficient cash flows to make distributions to our stockholders;


•	our ability to generate sufficient debt and equity capital to fund additional investments


•	our ability to refinance our existing financing arrangements;


•	the degree and nature of our competition;


•	the availability of qualified personnel;


•	we may be deemed to be an investment company under the Investment Company Act of 1940, as amended (the "Investment Company Act"), and thus subject to regulation under the Investment Company Act; and


•	our ability to maintain our qualification as a real estate investment trust ("REIT"); and


•	other factors set forth under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2018.

In addition, words such as "anticipate," "believe," "expect" and "intend" indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this Quarterly Report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason.

Our investors should not place undue reliance on these forward-looking statements. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.

Overview

We were incorporated in Maryland on November 15, 2012 and have conducted our operations to qualify as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2013. The Company, through a subsidiary which is treated as a TRS, is indirectly subject to U.S. federal, state and local income taxes. We commenced in May 2013. We primarily originate, acquire and manage a diversified portfolio of commercial real estate debt investments secured by properties located within and outside of the United States. Commercial real estate debt investments may include first mortgage loans, subordinated mortgage loans, mezzanine loans and participations in such loans. Substantially all of our business is conducted through the OP, a Delaware limited partnership. We are the sole general partner and directly or indirectly hold all of the units of limited partner interests in the OP.

The Company has no direct employees. We are managed by our Advisor pursuant to an Amended and Restated Advisory Agreement, dated January 19, 2018 (the "Advisory Agreement"). Our Advisor manages our affairs on a day-to-day basis. The Advisor receives compensation and fees for services related to the investment and management of our assets and our operations.

The Advisor, an SEC-registered investment adviser, is a credit-focused alternative asset management firm. The Advisor manages funds for institutions and high-net-worth investors across various credit funds and complementary strategies including high yield, levered loans, private / opportunistic debt, liquid credit, structured credit and commercial real estate debt. These

strategies complement each other as they all leverage the sourcing, analytical, compliance, and operational capabilities that encompass the Advisor’s robust platform. On February 1, 2019, Franklin Resources, Inc. and Templeton International, Inc. (collectively, “Franklin Templeton”) acquired the Advisor . The acquisition did not impact the terms of the Advisory Agreement or result in any changes to the executive officers of the Company.

The Company may also invest in commercial real estate securities. Real estate securities may include CMBS, senior unsecured debt of publicly traded REITs, debt or equity securities of other publicly traded real estate companies and CDOs.

Estimated Per Share NAV

On November 12, 2019, our board of directors, upon the recommendation of the Advisor, unanimously approved and established an estimated net asset value ("NAV") per share of the Company’s common stock of $18.57. The estimated per share NAV is based upon the estimated value of the Company’s assets less the Company’s liabilities as of September 30, 2019 (the “Valuation Date”). This valuation was performed in accordance with the provisions of Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Investment Program Association in April 2013, including the use of an independent third-party valuation firm to estimate the fair value of our commercial real estate debt investments and commercial mortgage backed securities.

With the unanimous approval of our board of directors, we engaged an independent third-party valuation firm to estimate the fair value of our loans. The valuation firm estimated the value of our loan portfolio by applying a discounted cash flow analysis to each loan to determine a range of estimated valuations. To estimate the Company’s NAV, the Advisor adjusted the loan portfolio valuation prepared by the valuation advisor by adding the amounts of cash and other tangible assets reflected on our balance sheet (as computed in accordance with GAAP) and subtracting our liabilities as reflected on our balance sheet (computed in accordance with GAAP). Based in part on these valuation ranges, the Advisor estimated that the Company’s NAV as of September 30, 2019 is $18.57 which falls within the valuation range of $18.07 to $19.15.

The Advisor recommended our board of directors approve the estimated per share NAV of $18.57. As with any methodology used to estimate value, the methodologies employed to estimate the NAV were based upon a number of estimates and assumptions that may not be accurate or complete. If different judgments, assumptions or opinions were used, a different estimate would likely result.

We believe that the method used to determine the estimated per share NAV of the Company’s common stock is the methodology most commonly used by public, non-listed REITs to estimate per share NAV. The estimated per share NAV does not represent the per share amount a third party would pay to acquire us, or the price at which our common stock would trade in the event we were listed on a national securities exchange. For example, the estimated per share NAV of the Company’s common stock does not reflect a liquidity discount for the fact that the shares are not currently traded on a national securities exchange and other costs that may be incurred in connection with a liquidity event. Our estimated per share NAV does not reflect the conversion of any Series A redeemable convertible preferred stock.

The estimated per share NAV was determined at a moment in time and as of the Valuation Date and the values of our assets and liabilities will change over time as a result of changes relating to the individual loans in our portfolio as well as changes and developments in the real estate and capital markets generally, including changes in interest rates. Stockholders should not rely on the estimated per share NAV in making a decision to buy or sell shares of our common stock.

Significant Accounting Policies and Use of Estimates

A summary of our significant accounting policies is set forth in Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included in this Quarterly Report on Form 10-Q. A full disclosure of our significant accounting polices is disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018.

Portfolio

As of September 30, 2019 and December 31, 2018, our portfolio consisted of 109 and 100 commercial mortgage loans, held for investment with a total carrying value, net of allowance for loan losses, of $2,496.1 million and $2,206.8 million, respectively. As of September 30, 2019 and December 31, 2018, our total commercial mortgage loans, held for sale, measured at fair value comprised of 17 loans with total fair value of $175.1 million and 7 loans with total fair value of $76.9 million, respectively. As of September 30, 2019 and December 31, 2018, our real estate securities, available for sale, at fair value comprised of 14 CMBS investments with total fair value of $232.2 million and 2 CMBS investments with total fair value of $26.4 million, respectively. As of September 30, 2019, our other real estate investments, measured at fair value, comprised 1 investment with a total fair value of $2.6 million. As of December 31, 2018, we did not have any other real estate investments,

measured at fair value. As of September 30, 2019, our real estate owned comprised 1 investment with a carrying value of $8.1 million. As of December 31, 2018, we did not have any real estate owned.

For our commercial mortgage loans, excluding commercial mortgage loans accounted for under the fair value option, we currently estimate loss rates based on historical realized losses experienced in the industry and take into account current collateral and economic conditions affecting the probability or severity of losses when establishing the allowance for loan losses. We recorded allowance for loan loss as of September 30, 2019 and December 31, 2018 in the amount of $0.7 million and $4.8 million, respectively.

As of September 30, 2019, we wrote off a commercial mortgage loan, held for investment, with a carrying value $14.9 million in exchange for the possession of a REO investment at a fair value of $8.1 million at the time of the transfer. The transfer occurred when we took possession of the property by completing a deed-in-lieu of foreclosure transaction which resulted in a charge-off of $6.4 million that was taken through the loan loss provision in prior periods as well as $0.5 million of additional loan loss provision at the time of transfer.

As of September 30, 2019, we had 1 loan with unpaid contractual principal balance and carrying value of $57.1 million. We did not take any asset specific reserve for this loan. As of December 31, 2018, we had 1 loan with unpaid contractual principal balance and carrying value of $14.3 million that had interest past due for greater than 90 days.

As of September 30, 2019 and December 31, 2018, our commercial mortgage loans, excluding commercial mortgage loans accounted for under the fair value option, had a weighted average coupon of 6.0% and 6.7%, and a weighted average remaining life of 1.3 years and 1.5 years, respectively. As of September 30, 2019 and December 31, 2018, our CMBS investments had a weighted average coupon of 3.9% and 5.0% and a remaining life of 15.8 years and 4.9 years, respectively.

The following charts summarize our commercial mortgage loans, held for investment, by the collateral type, geographical region and coupon rate type as of September 30, 2019 and December 31, 2018:

An investments region classification is defined according to the below map based on the location of investments secured property.

The following charts show the par value by contractual maturity year for the commercial mortgage loans, held for investments in our portfolio as of September 30, 2019 and December 31, 2018:

The following table shows selected data from our commercial mortgage loans, held for investment in our portfolio as of September 30, 2019 (dollars in thousands):



Type	Property Type	Par Value	Interest Rate ⁽¹⁾	Effective Yield	Loan to Value ⁽²⁾
Senior Debt 1	Retail	$9,449	1 month LIBOR + 4.50%	6.5%	69.2%
Senior Debt 2	Office	38,385	1 month LIBOR + 5.25%	7.3%	72.1%
Senior Debt 3	Office	10,700	1 month LIBOR + 4.65%	6.7%	70.8%
Senior Debt 4	Industrial	33,655	1 month LIBOR + 4.00%	6.0%	65.0%
Senior Debt 5	Retail	12,953	1 month LIBOR + 5.00%	7.0%	73.3%
Senior Debt 6	Office	14,080	1 month LIBOR + 4.45%	6.5%	64.2%
Senior Debt 7	Office	11,050	1 month LIBOR + 6.00%	8.0%	74.0%
Senior Debt 8	Multifamily	39,310	1 month LIBOR + 5.50%	7.5%	76.0%
Senior Debt 9	Hospitality	8,875	1 month LIBOR + 6.20%	8.2%	67.7%
Senior Debt 10	Office	27,720	1 month LIBOR + 4.15%	6.2%	69.5%
Senior Debt 11	Multifamily	34,875	1 month LIBOR + 3.75%	5.8%	71.2%
Senior Debt 12	Hospitality	10,600	1 month LIBOR + 5.00%	7.0%	61.6%
Senior Debt 13	Hospitality	7,642	1 month LIBOR + 5.75%	7.8%	77.0%
Senior Debt 14	Multifamily	18,985	1 month LIBOR + 3.62%	5.6%	69.5%
Senior Debt 15	Hospitality	57,075	1 month LIBOR + 5.19%	7.2%	51.8%
Senior Debt 16	Multifamily	12,982	1 month LIBOR + 5.50%	7.5%	68.4%
Senior Debt 17	Multifamily	55,825	1 month LIBOR + 4.50%	6.5%	22.4%
Senior Debt 18	Hospitality	10,250	1 month LIBOR + 5.25%	7.3%	60.7%
Senior Debt 19	Hospitality	23,000	1 month LIBOR + 4.41%	6.4%	48.1%
Senior Debt 20	Multifamily	19,171	1 month LIBOR + 3.60%	5.6%	80.5%
Senior Debt 21	Multifamily	12,155	1 month LIBOR + 3.30%	5.3%	70.9%
Senior Debt 22	Multifamily	27,573	1 month LIBOR + 3.50%	5.5%	75.0%
Senior Debt 23	Office	24,426	1 month LIBOR + 4.65%	6.7%	56.4%
Senior Debt 24	Hospitality	21,000	1 month LIBOR + 4.00%	6.0%	54.8%
Senior Debt 25	Office	20,340	1 month LIBOR + 3.70%	5.7%	58.9%
Senior Debt 26	Multifamily	20,741	1 month LIBOR + 4.25%	6.3%	75.0%
Senior Debt 27	Multifamily	15,684	1 month LIBOR + 3.65%	5.7%	77.0%
Senior Debt 28	Multifamily	42,000	1 month LIBOR + 3.70%	5.7%	63.7%
Senior Debt 29	Hospitality	19,975	1 month LIBOR + 4.95%	7.0%	52.6%
Senior Debt 30	Hospitality	27,541	1 month LIBOR + 4.00%	6.0%	68.0%
Senior Debt 31	Hospitality	20,806	1 month LIBOR + 4.40%	6.4%	72.7%
Senior Debt 32	Multifamily	32,657	1 month LIBOR + 3.60%	5.6%	83.6%
Senior Debt 33	Self Storage	4,120	1 month LIBOR + 4.05%	6.1%	45.5%
Senior Debt 34	Self Storage	6,496	1 month LIBOR + 4.05%	6.1%	55.8%
Senior Debt 35	Multifamily	7,725	1 month LIBOR + 4.25%	6.3%	80.6%
Senior Debt 36	Self Storage	7,510	1 month LIBOR + 5.05%	7.1%	57.6%
Senior Debt 37	Multifamily	90,499	1 month LIBOR + 3.50%	5.5%	71.8%
Senior Debt 38	Multifamily	40,000	1 month LIBOR + 3.75%	5.8%	70.4%
Senior Debt 39	Self Storage	2,400	1 month LIBOR + 4.05%	6.1%	37.6%
Senior Debt 40	Self Storage	6,310	1 month LIBOR + 5.05%	7.1%	59.1%
Senior Debt 41	Multifamily	22,690	1 month LIBOR + 3.15%	5.2%	79.7%
Senior Debt 42	Multifamily	11,590	1 month LIBOR + 3.75%	5.8%	85.9%
Senior Debt 43	Multifamily	66,000	1 month LIBOR + 3.75%	5.8%	76.8%
Senior Debt 44	Multifamily	17,250	1 month LIBOR + 3.95%	6.0%	70.0%
Senior Debt 45	Hospitality	22,355	1 month LIBOR + 4.00%	6.0%	68.8%
Senior Debt 46	Hospitality	34,000	1 month LIBOR + 4.50%	6.5%	36.2%
Senior Debt 47	Mixed Use	39,189	1 month LIBOR + 4.87%	6.9%	49.0%
Senior Debt 48	Multifamily	11,736	1 month LIBOR + 3.50%	5.5%	74.6%
Senior Debt 49	Multifamily	18,000	1 month LIBOR + 3.30%	5.3%	83.1%
Senior Debt 50	Office	20,900	1 month LIBOR + 3.75%	5.8%	70.0%
Senior Debt 51	Office	50,000	1 month LIBOR + 4.23%	6.3%	59.6%
Senior Debt 52	Self Storage	6,600	1 month LIBOR + 6.00%	8.0%	58.9%
Senior Debt 53	Multifamily	7,250	1 month LIBOR + 4.00%	6.0%	75.6%



Type	Property Type	Par Value	Interest Rate ⁽¹⁾	Effective Yield	Loan to Value ⁽²⁾
Senior Debt 54	Multifamily	112,275	1 month LIBOR + 3.10%	5.1%	79.1%
Senior Debt 55	Office	12,815	1 month LIBOR + 3.40%	5.4%	67.5%
Senior Debt 56	Retail	29,500	6.25%	6.3%	68.5%
Senior Debt 57	Multifamily	25,500	1 month LIBOR + 3.50%	5.5%	73.3%
Senior Debt 58	Self Storage	12,125	1 month LIBOR + 5.50%	7.5%	68.1%
Senior Debt 59	Office	37,211	1 month LIBOR + 3.73%	5.8%	62.4%
Senior Debt 60	Multifamily	14,866	1 month LIBOR + 3.15%	5.2%	80.3%
Senior Debt 61	Multifamily	20,824	1 month LIBOR + 3.40%	5.4%	80.5%
Senior Debt 62	Multifamily	29,900	1 month LIBOR + 3.35%	5.4%	73.0%
Senior Debt 63	Multifamily	38,424	1 month LIBOR + 3.10%	5.1%	75.5%
Senior Debt 64	Self Storage	17,400	1 month LIBOR + 4.00%	6.0%	69.5%
Senior Debt 65	Multifamily	10,020	1 month LIBOR + 3.45%	5.5%	76.8%
Senior Debt 66	Multifamily	73,620	1 month LIBOR + 3.45%	5.5%	76.3%
Senior Debt 67	Land	16,400	1 month LIBOR + 6.00%	8.0%	45.7%
Senior Debt 68	Hospitality	8,661	1 month LIBOR + 4.80%	6.8%	62.5%
Senior Debt 69	Retail	14,500	1 month LIBOR + 4.75%	6.8%	53.5%
Senior Debt 70	Industrial	11,358	1 month LIBOR + 3.95%	6.0%	66.4%
Senior Debt 71	Multifamily	87,700	1 month LIBOR + 2.99%	5.0%	46.0%
Senior Debt 72	Multifamily	48,500	1 month LIBOR + 3.75%	5.8%	69.5%
Senior Debt 73	Multifamily	31,906	1 month LIBOR + 3.25%	5.3%	73.8%
Senior Debt 74	Multifamily	46,031	1 month LIBOR + 5.20%	7.2%	70.7%
Senior Debt 75	Office	7,200	1 month LIBOR + 3.90%	5.9%	67.6%
Senior Debt 76	Hospitality	10,000	1 month LIBOR + 4.95%	7.0%	69.0%
Senior Debt 77	Manufactured Housing	8,356	1 month LIBOR + 3.90%	5.9%	60.3%
Senior Debt 78	Self Storage	4,710	1 month LIBOR + 5.00%	7.0%	66.7%
Senior Debt 79	Hospitality	7,620	1 month LIBOR + 3.44%	5.5%	44.8%
Senior Debt 80	Retail	14,250	1 month LIBOR + 3.95%	6.0%	61.2%
Senior Debt 81	Hospitality	21,000	1 month LIBOR + 4.14%	6.2%	56.0%
Senior Debt 82	Office	21,850	1 month LIBOR + 4.25%	6.3%	62.3%
Senior Debt 83	Multifamily	23,750	1 month LIBOR + 3.10%	5.1%	73.1%
Senior Debt 84	Multifamily	36,250	1 month LIBOR + 3.10%	5.1%	73.4%
Senior Debt 85	Retail	13,400	1 month LIBOR + 4.00%	6.0%	84.0%
Senior Debt 86	Office	40,870	1 month LIBOR + 3.50%	5.5%	71.0%
Senior Debt 87	Retail	8,500	1 month LIBOR + 5.00%	7.0%	51.6%
Senior Debt 88	Hospitality	8,180	1 month LIBOR + 4.50%	6.5%	68.7%
Senior Debt 89	Multifamily	16,736	1 month LIBOR + 3.40%	5.4%	76.4%
Senior Debt 90	Multifamily	25,169	1 month LIBOR + 3.40%	5.4%	77.2%
Senior Debt 91	Hospitality	19,900	1 month LIBOR + 3.48%	5.5%	61.8%
Senior Debt 92	Multifamily	18,400	1 month LIBOR + 3.10%	5.1%	67.4%
Senior Debt 93	Office	25,900	1 month LIBOR + 3.77%	5.8%	68.2%
Senior Debt 94	Hospitality	13,770	1 month LIBOR + 3.75%	5.8%	62.6%
Senior Debt 95	Hospitality	15,500	1 month LIBOR + 4.00%	6.0%	56.4%
Senior Debt 96	Hospitality	5,250	1 month LIBOR + 4.25%	6.3%	47.7%
Senior Debt 97	Hospitality	11,475	1 month LIBOR + 4.45%	6.5%	62.9%
Senior Debt 98	Multifamily	20,900	1 month LIBOR + 3.50%	5.5%	77.6%
Senior Debt 99	Retail	4,940	1 month LIBOR + 3.80%	5.8%	70.2%
Senior Debt 100	Hospitality	9,000	1 month LIBOR + 4.50%	6.5%	64.0%
Senior Debt 101	Multifamily	42,900	1 month LIBOR + 2.80%	4.8%	44.1%
Senior Debt 102	Retail	9,400	1 month LIBOR + 4.20%	6.2%	77.1%
Senior Debt 103	Manufactured Housing	24,100	1 month LIBOR + 3.65%	5.7%	53.8%
Senior Debt 104	Multifamily	4,467	5.53%	5.5%	66.0%
Senior Debt 105	Multifamily	23,115	1 month LIBOR + 2.65%	4.7%	75.8%
Senior Debt 106	Hospitality	17,803	5.75%	5.8%	52.9%
Mezzanine Loan 1	Multifamily	3,480	9.50%	9.5%	84.3%
Mezzanine Loan 2	Office	10,000	10.00%	10.0%	78.7%



Type	Property Type	Par Value	Interest Rate ⁽¹⁾	Effective Yield	Loan to Value ⁽²⁾
Mezzanine Loan 3	Multifamily	22,800	1 month LIBOR + 8.01%	10.0%	57.9%
		$2,504,577		6.0%	66.1%

________________________

⁽¹⁾ Our floating rate loan agreements contain the contractual obligation for the borrower to maintain an interest rate cap to protect against rising interest rates. In a simple interest rate cap, the borrower pays a premium for a notional principal amount based on a capped interest rate (the “cap rate”). When the floating rate exceeds the cap rate, the borrower receives a payment from the cap counterparty equal to the difference between the floating rate and the cap rate on the same notional principal amount for a specified period of time. When interest rates rise, the value of an interest rate cap will increase, thereby reducing the borrower's exposure to rising interest rates.

⁽²⁾ Loan to value percentage is from metrics at origination.

The following table shows selected data from our commercial mortgage loans, held-for-sale, measured at fair value (dollars in thousands):



Loan Type	Property Type	Par Value	Interest Rate	Effective Yield	Loan to Value ⁽¹⁾
TRS Senior Debt 1	Multifamily	$6,700	2.90%	2.9%	16.2%
TRS Senior Debt 2	Retail	2,550	4.55%	4.6%	70.8%
TRS Senior Debt 3	Retail	31,800	4.45%	4.5%	62.7%
TRS Senior Debt 4	Retail	13,600	4.06%	4.1%	68.0%
TRS Senior Debt 5	Retail	10,000	3.94%	3.9%	74.4%
TRS Senior Debt 6	Hospitality	5,000	4.25%	4.3%	58.8%
TRS Senior Debt 7	Multifamily	18,550	4.09%	4.1%	72.2%
TRS Senior Debt 8	Multifamily	9,700	4.06%	4.1%	71.9%
TRS Senior Debt 9	Mixed Use	27,600	3.79%	3.8%	69.7%
TRS Senior Debt 10	Multifamily	2,288	4.55%	4.6%	72.2%
TRS Senior Debt 11	Office	5,075	4.05%	4.1%	69.5%
TRS Senior Debt 12	Multifamily	24,000	4.28%	4.3%	64.7%
TRS Mezzanine Loan 1	Multifamily	8,500	10.50%	10.5%	79.5%
TRS Mezzanine Loan 2	Retail	3,500	10.00%	10.0%	59.7%
TRS Mezzanine Loan 3	Multifamily	1,100	11.01%	11.0%	68.4%
TRS Mezzanine Loan 4	Multifamily	1,000	11.00%	11.0%	68.9%
TRS Mezzanine Loan 5	Multifamily	4,000	10.00%	10.0%	75.5%
		$174,963		4.7%	66.3%

________________________

⁽¹⁾ Loan to value percentage is from metrics at origination.

The following table shows selected data from our real estate securities, available-for-sale, measured at fair value (dollars in thousands):



Type	Par Value	Interest Rate	Effective Yield
CMBS 1	$13,250	1 month LIBOR + 2.95%	5.0%
CMBS 2	12,959	1 month LIBOR + 2.10%	4.1%
CMBS 3	40,000	1 month LIBOR + 2.35%	4.4%
CMBS 4	18,500	1 month LIBOR + 1.70%	3.7%
CMBS 5	15,000	1 month LIBOR + 1.37%	3.4%
CMBS 6	13,500	1 month LIBOR + 1.50%	3.5%
CMBS 7	15,000	1 month LIBOR + 1.70%	3.7%
CMBS 8	7,000	1 month LIBOR + 1.50%	3.5%
CMBS 9	9,600	1 month LIBOR + 1.90%	3.9%
CMBS 10	10,000	1 month LIBOR + 1.75%	3.8%
CMBS 11	8,000	1 month LIBOR + 1.85%	3.9%
CMBS 12	13,000	1 month LIBOR + 1.60%	3.6%
CMBS 13	32,000	1 month LIBOR + 1.60%	3.6%
CMBS 14	24,000	1 month LIBOR + 2.00%	4.0%
	$231,809		3.9%

The following table shows selected data from our other real estate investments, measured at fair value (dollars in thousands):



Type	Property Type	Par Value	Preferred Return
Preferred Equity 1	Retail	$2,500	12.50%
		$2,500

The following table shows selected data from our real estate owned (dollars in thousands):



Type	Property Type	Carrying Value
Real Estate Owned 1	Hospitality	$8,110
		$8,110

Results of Operations

Comparison of the Three Months Ended September 30, 2019 to the Three Months Ended September 30, 2018

We conduct our business through the following segments:


•	The real estate debt, real estate owned and other real estate investments business focuses on originating, acquiring and asset managing commercial real estate debt and equity investments, including first mortgage loans, subordinate mortgages, mezzanine loans and participations in such loans and other real estate investments.


•	The real estate securities business focuses on investing in and asset managing commercial real estate securities primarily consisting of CMBS and may include unsecured REIT debt, CDO notes and other securities.


•	The commercial real estate conduit business operated through the Company's TRS, which is focused on generating risk-adjusted returns by originating and subsequently selling fixed-rate commercial real estate loans into the CMBS securitization market at a profit.

Net Interest Income

Net interest income is generated on our interest-earning assets less related interest-bearing liabilities and is recorded as part of our real estate debt and real estate securities segments.

The following table presents the average balance of interest-earning assets less related interest-bearing liabilities, associated interest income and expense and corresponding yield earned and incurred for the three months ended September 30, 2019 and September 30, 2018 (dollars in thousands):



	Three Months Ended September 30,
	2019				2018
	Average Carrying Value⁽¹⁾		Interest Income/Expense⁽²⁾	WA Yield/Financing Cost⁽³⁾⁽⁴⁾	Average Carrying Value⁽¹⁾		Interest Income/Expense⁽²⁾	WA Yield/Financing Cost⁽³⁾⁽⁴⁾
Interest-earning assets:
Real estate debt	$2,546,713		$47,068	7.4%	$2,006,833		$41,046	8.2%
Real estate conduit	122,576		1,586	5.2%	118,375		1,627	5.5%
Real estate securities	169,281		1,791	4.2%	29,561		270	3.7%
Total	$2,838,570		$50,445	7.1%	$2,154,769		$42,943	8.0%
Interest-bearing liabilities:
Repurchase Agreements - commercial mortgage loans	$132,126		$2,726	8.3%	$456,636		$6,194	5.4%
Repurchase Agreements - real estate securities	181,198		1,467	3.2%	23,056		192	3.3%
Collateralized loan obligations	1,861,036		17,967	3.9%	1,086,901		10,592	3.9%
Derivative instruments	—		—	N/A	—		142	N/A
Total	$2,174,360		$22,160	4.1%	$1,566,593		$17,120	4.4%
Net interest income/spread			$28,285	3.0%			$25,823	3.6%
Average leverage %⁽⁵⁾	76.6	%			72.7	%
Weighted average levered yield⁽⁶⁾				17.0%				17.6%

________________________

(1) Based on amortized cost for real estate debt and real estate securities and principal amount for repurchase agreements. Amounts are calculated based on daily averages for the three months ended September 30, 2019 and September 30, 2018, respectively.

(2) Includes the effect of amortization of premium or accretion of discount and deferred fees.

(3) Calculated as interest income or expense divided by average carrying value.

(4) Annualized.

(5) Calculated by dividing total average interest-bearing liabilities by total average interest-earning assets.

(6) Calculated by dividing net interest income/spread by difference between the average interest-earning assets and the average interest-bearing liabilities.

Interest income

Interest income for the three months ended September 30, 2019 and September 30, 2018 totaled $50.4 million and $42.9 million, respectively. As of September 30, 2019, our portfolio consisted of 109 commercial mortgage loans, 17 commercial mortgage loans, held-for-sale, measured at fair value, 14 investments in CMBS and one other real estate investment, measured at fair value. The main driver in the increase in interest income was an increase of $683.8 million in the average carrying value of our interest-earning assets.

Interest expense

Interest expense for the three months ended September 30, 2019 increased to $22.2 million compared to interest expense for three months ended September 30, 2018 of $17.1 million. The increase in interest expense was due to an increase of $607.8 million in the average carrying value of our interest-bearing liabilities.

Expenses from operations

Expenses from operations for the three months ended September 30, 2019 and September 30, 2018 were made up of the following (dollars in thousands):



	Three Months Ended September 30,
	2019		2018
Asset management and subordinated performance fee	$	4,468	$	2,720
Administrative services expenses	4,564		3,501
Acquisition expenses	180		173
Professional fees	3,427		2,556
Other expenses	2,466		774
Total expenses from operations	$	15,105	$	9,724

The increase in our expenses from operations was primarily related to asset management and subordinated performance fees and other expenses. During the three months ended September 30, 2019 and September 30, 2018, we incurred asset management and subordinated performance fees of $4.5 million and $2.7 million, respectively. The increase in asset management and subordinated performance fee was primarily driven by the larger stockholders’ equity and preferred stock in the three months ended September 30, 2019, compared to the three months ended September 30, 2018. In addition to a higher equity base, we accrued approximately $0.8 million of subordinated performance fee during the three months ended September 30, 2019 compared to $0.0 million during the three months ended September 30, 2018. For the three months ended September 30, 2019 and 2018, we incurred approximately $2.5 million and $0.8 million other expenses, respectively, an increase of approximately $1.7 million primarily due to the real estate owned property we acquired during the three months ended September 30, 2019. For the three months ended September 30, 2019, we incurred approximately $4.6 million of administrative service expenses related to general and administrative expense reimbursement, of the full of which amount was attributable to our Advisor; compared to $3.5 million of administrative services expense for the three months ended September 30, 2018, an increase of approximately $1.1 million due to a larger portfolio.

Realized Gain/Loss on Commercial Mortgage Loans Held for Sale

Realized gain on commercial mortgage loans held-for-sale, measured at fair value at the TRS for the three months ended September 30, 2019 was $14.2 million compared to a realized gain of $3.4 million for the three months ended September 30, 2018. The $10.7 million increase in realized gain was due to higher profit margin from the sale of fixed-rate commercial real estate loans into the CMBS securitization market during the three months ended September 30, 2019 compared to the three months ended September 30, 2018. Total proceeds were $360.8 million for the three months ended September 30, 2019 compared to $126.4 million for the three months ended September 30, 2018.

Comparison of the Nine Months Ended September 30, 2019 to the Nine Months Ended September 30, 2018

Net Interest Income

Net interest income is generated on our interest-earning assets less related interest-bearing liabilities and is recorded as part of our real estate debt and real estate securities segments.

The following table presents the average balance of interest-earning assets less related interest-bearing liabilities, associated interest income and expense and corresponding yield earned and incurred for the nine months ended September 30, 2019 and September 30, 2018 (dollars in thousands):



	Nine Months Ended September 30,
	2019			2018
	Average Carrying Value⁽¹⁾	Interest Income/Expense⁽²⁾	WA Yield/Financing Cost⁽³⁾⁽⁴⁾	Average Carrying Value⁽¹⁾	Interest Income/Expense⁽²⁾	WA Yield/Financing Cost⁽³⁾⁽⁴⁾
Interest-earning assets:
Real estate debt	$2,444,681	$136,451	7.4%	$1,759,578	$101,073	7.7%
Real estate conduit	117,427	5,398	6.1%	106,951	5,088	6.3%
Real estate securities	100,048	3,332	4.4%	11,218	317	3.8%
Total	$2,662,156	$145,181	7.3%	$1,877,747	$106,478	7.6%
Interest-bearing liabilities:
Repurchase Agreements - commercial mortgage loans	$275,155	$13,238	6.4%	$320,814	$13,964	5.8%
Other financing and loan participation - commercial mortgage loans⁽⁷⁾	3,592	225	8.4%	11,867	1,215	13.7%
Repurchase Agreements - real estate securities	106,500	2,714	3.4%	15,222	378	3.3%
Collateralized loan obligations	1,581,313	52,218	4.4%	977,477	34,342	4.7%
Derivative instruments	—	—	N/A	—	284	N/A
Total	$1,966,560	$68,395	4.6%	$1,325,380	$50,183	5.0%
Net interest income/spread		$76,786	2.6%		$56,295	2.5%
Average leverage %⁽⁵⁾	73.9%			70.6%
Weighted average levered yield⁽⁶⁾			14.7%			13.6%

________________________

(1) Based on amortized cost for real estate debt and real estate securities and principal amount for repurchase agreements. Amounts are calculated based on daily averages for the nine months ended September 30, 2019 and September 30, 2018, respectively.

(2) Includes the effect of amortization of premium or accretion of discount and deferred fees.

(3) Calculated as interest income or expense divided by average carrying value.

(4) Annualized.

(5) Calculated by dividing total average interest-bearing liabilities by total average interest-earning assets.

(6) Calculated by dividing net interest income/spread by difference between the average interest-earning assets and the average interest-bearing liabilities.

(7) High financing cost for the nine months ended September 30, 2019 due to deferred financing cost recognized at payoff of liability.

Interest income

Interest income for the nine months ended September 30, 2019 and September 30, 2018 totaled $145.2 million and $106.5 million, respectively. As of September 30, 2019, our portfolio consisted of 109 commercial mortgage loans, 17 commercial mortgage loans, held-for-sale, measured at fair value, 14 investments in CMBS and 1 other real estate investment, measured at fair value. The main drivers in the increase in interest income was an increase of $784.4 million in the average carrying value of our interest-earning assets.

Interest expense

Interest expense for the nine months ended September 30, 2019 increased to $68.4 million compared to interest expense for nine months ended September 30, 2018 of $50.2 million. The increase in interest expense was due to an increase of $641.2 million in the average carrying value of our interest-bearing liabilities.

Expenses from operations

Expenses from operations for the nine months ended September 30, 2019 and September 30, 2018 were made up of the following (dollars in thousands):



	Nine Months Ended September 30,
	2019		2018
Asset management and subordinated performance fee	$	11,917	$	7,227
Administrative services expenses	12,083		9,822
Acquisition expenses	698		289
Professional fees	8,090		6,803
Other expenses	4,198		3,896
Total expenses from operations	$	36,986	$	28,037

The increase in our expenses from operations was primarily related to asset management and subordinated performance fees and administrative services expenses. During the nine months ended September 30, 2019 and September 30, 2018, we incurred asset management and subordinated performance fees of $11.9 million and $7.2 million, respectively. The increase in asset management and subordinated performance fee was primarily driven by the larger stockholders’ equity and preferred stock in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. In addition to a higher equity base, we accrued approximately $1.5 million of subordinated performance fee during the nine months ended September 30, 2019 compared to $0.0 million during the nine months ended September 30, 2018. For the nine months ended September 30, 2019, we incurred approximately $12.1 million of administrative service expenses related to general and administrative expense reimbursement, of which the full amount was attributable to our Advisor; compared to $9.8 million of administrative services expense for the nine months ended September 30, 2018, an increase of approximately $2.3 million due to a larger portfolio. Additionally, during the nine months ended September 30, 2019 and September 30, 2018, we incurred $0.7 million and $0.3 million of acquisition expenses, respectively, an increase of approximately $0.4 million. The increases in administrative expense reimbursement and acquisition expenses are due to increases in overall Company growth and origination activities.

Realized Gain/Loss on Commercial Mortgage Loans Held-for-Sale

Realized loss on commercial mortgage loans held-for-sale for the nine months ended September 30, 2019 was $25.0 thousand on the sale of one commercial mortgage loan held-for-sale for proceeds of $5.0 million compared to $48.0 thousand for the nine months ended September 30, 2018 on the sale of one commercial mortgage loan held-for-sale.

Realized gain on commercial mortgage loans held-for-sale, measured at fair value at the TRS for the nine months ended September 30, 2019 was $32.6 million compared to a realized gain of $9.8 million for the nine months ended September 30, 2018. The $22.8 million increase in realized gain was due to a combination of higher sale volume and higher profit margin from the sale of fixed-rate commercial real estate loans into the CMBS securitization market during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. Total proceeds were $671.6 million for the nine months ended September 30, 2019 compared to $363.3 million for the nine months ended September 30, 2018.

Liquidity and Capital Resources

Our principal demands for cash will be funding our loan investments, continuing debt service obligations, distributions to our stockholders and the payment of our operating and administrative expenses.

We expect to use additional debt and equity financing as a source of capital. Our board of directors currently intends to operate at a leverage level of between one to three times book value of equity. However, our board of directors may change this target without shareholder approval. In addition, for the nine months ended September 30, 2019, we raised an additional $111.4 million through sales of common and preferred equity to institutional and individual investors, and we expect to continue to raise capital in private placements in 2019. We anticipate that our debt and equity financing sources and our anticipated cash generated from operations will be adequate to fund our anticipated uses of capital.

In addition to our current mix of financing sources, we may also access additional forms of financings, including credit facilities, securitizations, public and private, secured and unsecured debt issuances by us or our subsidiaries, or through capital recycling initiatives whereby we sell certain assets in our portfolio and reinvest the proceeds in assets with more attractive risk-adjusted returns.

Collateralized Loan Obligations

As of September 30, 2019 and December 31, 2018 the notes issued by BSPRT 2017-FL2 Issuer, Ltd., a wholly owned indirect subsidiary of the Company, are collateralized by interests in a pool of 6 and 12 mortgage assets having a total principal balance of $110.3 million and $244.6 million, respectively (the “2017-FL2 Mortgage Assets”). The sale of the 2017-FL2 Mortgage Assets to BSPRT 2017-FL2 Issuer was governed by a Mortgage Asset Purchase Agreement dated as of November 29, 2017, between the Company and BSPRT 2017-FL2 Issuer.

As of September 30, 2019 and December 31, 2018 the notes issued by BSPRT 2018-FL3 Issuer, Ltd. and BSPRT 2018-FL3 Co-Issuer, LLC, each wholly owned indirect subsidiaries of the Company, are collateralized by interests in a pool of 40 and 41 mortgage assets having a principal balance of $610.0 million and $609.3 million, respectively (the "2018-FL3 Mortgage Assets"). The sale of the 2018-FL3 Mortgage Assets to BSPRT 2018-FL3 Issuer is governed by a Mortgage Asset Purchase Agreement dated as of April 5, 2018, between the Company and BSPRT 2018-FL3 Issuer, Ltd.

As of September 30, 2019 and December 31, 2018 the notes issued by BSPRT 2018-FL4 Issuer, Ltd. and BSPRT 2018-FL4 Co-Issuer, LLC, each wholly owned indirect subsidiaries of the Company, collateralized by interests in a pool of 47 and 41 mortgage assets having a principal balance of $868.4 million and $859.3 million, respectively (the "2018-FL4 Mortgage Assets"). The sale of the 2018-FL4 Mortgage Assets to BSPRT 2018-FL4 Issuer is governed by a Mortgage Asset Purchase Agreement dated as of October12, 2018, between the Company and BSPRT 2018-FL4 Issuer,Ltd.

As of September 30, 2019, the notes issued by BSPRT 2019-FL5 Issuer, Ltd. and BSPRT 2019-FL5 Co-Issuer, LLC, each wholly owned indirect subsidiaries of the Company, are collateralized by interests in a pool of 51 mortgage assets having a principal balance of $810.0 million respectively (the "2018-FL5 Mortgage Assets"). The sale of the 2019-FL5 Mortgage Assets to BSPRT 2019-FL5 Issuer is governed by a Mortgage Asset Purchase Agreement dated as of May 30, 2019, between the Company and BSPRT 2019-FL5 Issuer.

Repurchase Agreements, Commercial Mortgage Loans

As of September 30, 2019, we have repurchase facilities with JPMorgan Chase Bank, National Association (the "JPM Repo Facility"), U.S Bank National Association (the "USB Repo Facility"), Barclays Bank PLC (the "Barclays Revolver Facility" and the "Barclays Repo Facility"), Wells Fargo Bank, National Association (the "WF Repo Facility"), and Credit Suisse AG (the "CS Repo Facility" and together with JPM Repo Facility, USB Repo Facility, WF Repo Facility, Barclays Revolver Facility and Barclays Repo Facility, the "Repo Facilities").

We expect to use the advances from these Repo Facilities to finance the acquisition or origination of eligible loans, including first mortgage loans, subordinated mortgage loans, mezzanine loans and participation interests therein.

The Repo Facilities generally provide that in the event of a decrease in the value of our collateral, the lenders can demand additional collateral. Should the value of our collateral decrease as a result of deteriorating credit quality, resulting margin calls may cause an adverse change in our liquidity position.

The details of our Repo Facilities at September 30, 2019 and December 31, 2018 are as follows (dollars in thousands):



As of September 30, 2019
Repurchase Facility	Committed Financing		Amount Outstanding		Interest Expense⁽¹⁾		Ending Weighted Average Interest Rate		Maturity
JPM Repo Facility ⁽²⁾	$	300,000	$	96,912	$	5,536	4.67	%	1/30/2021
USB Repo Facility ⁽³⁾	100,000		—		518		4.43	%	6/15/2020
CS Repo Facility ⁽⁴⁾	300,000		—		4,690		4.64	%	3/27/2020
WF Repo Facility ⁽⁵⁾	175,000		—		1,019		4.53	%	11/21/2020
Barclays Revolver Facility ⁽⁶⁾	100,000		10,000		764		7.16	%	9/20/2021
Barclays Repo Facility ⁽⁷⁾	300,000		5,025		711		4.36	%	3/15/2022
Total	$	1,275,000	$	111,937	$	13,238

__________________________

⁽¹⁾ For the nine months ended September 30, 2019. Includes amortization of deferred financing costs.

⁽²⁾On September 3, 2019, the committed financing amount was downsized from $520 million to $300 million and the maturity date was amended to January 30, 2021.

⁽³⁾ Includes two one-year extensions at the option of an indirect wholly-owned subsidiary of the Company, which may be exercised upon the satisfaction of certain conditions.

⁽⁴⁾ On March 26, 2019, the Company exercised the extension option upon the satisfaction of certain conditions, and extended the term maturity to March 27, 2020.

⁽⁵⁾ Includes three one-year extensions at the Company’s option, which may be exercised upon the satisfaction of certain conditions.

⁽⁶⁾ On September 13, 2019, the Company exercised the extension option, and extended the term maturity to September 20, 2021. There is one more one-year extension option of available at the Company’s discretion.

⁽⁷⁾ Includes two one-year extensions at the Company's option.



As of December 31, 2018
Repurchase Facility	Committed Financing		Amount Outstanding		Interest Expense⁽¹⁾		Ending Weighted Average Interest Rate		Maturity
JPM Repo Facility ⁽²⁾	$	520,000	$	72,906	$	6,601	4.55	%	1/30/2020
GS Repo Facility ⁽³⁾	—		—		415		N/A		12/27/2018
USB Repo Facility ⁽⁴⁾	100,000		—		502		4.71	%	6/15/2020
CS Repo Facility ⁽⁵⁾	300,000		76,534		5,301		4.69	%	6/19/2019
WF Repo Facility ⁽⁶⁾	175,000		—		—		4.71	%	11/21/2020
Barclays Revolver Facility ⁽⁷⁾	100,000		—		1,145		6.24	%	9/19/2019
Total	$	1,195,000	$	149,440	$	13,964

_______________________

⁽¹⁾ For the nine months ended September 30, 2018. Includes amortization of deferred financing costs.

²⁾On January 30, 2018 the committed financing amount was upsized from $300 million to $520 million and the maturity date was amended to January 30, 2020. Includes a one-year extension at the Company's option.

⁽³⁾ Matured on December 27, 2018. Committed balance was $250 million prior to maturity.

⁽⁴⁾ Includes two one-year extensions at the option of an indirect wholly-owned subsidiary of the Company, which may be exercised upon the satisfaction of certain conditions.

⁽⁶⁾ Includes three one-year extensions at the Company’s option, which may be exercised upon the satisfaction of certain conditions.

⁽⁷⁾ On July 30, 2018, the committed financing amount was upsized from $75 million to $100 million. Includes a one-year extension at the Company's option.

Other financing and loan participation - Commercial Mortgage Loans

On December 11, 2018, the Company transferred $10.0 million of its interest in a term loan to City National Bank ("City National Financing") via a participation agreement. The Company incurred $0 million and $0.2 million of interest expense on the City National Financing for the three months and nine months ended September 30, 2019. On April 10, 2019, the Company terminated the participation agreement with City National Bank and paid off the $ 10.0 million under the participation agreement.

CMBS Master Repurchase Agreements

We have entered into various CMBS Master Repurchase Agreements (“MRAs”) that allow us to sell real estate securities while providing a fixed repurchase price for the same real estate securities in the future. The repurchase contracts on each security under an MRA generally mature in 30 to 90 days and terms are adjusted for current market rates as necessary. As of September 30, 2019 and December 31, 2018, we were party to six MRAs, of which two were used for each respective periods presented, described below (dollars in thousands):



							Weighted Average
Counterparty	Amount Outstanding		Accrued Interest		Collateral Pledged⁽¹⁾		Interest Rate		Days to Maturity
As of September 30, 2019
JP Morgan Securities LLC	$	39,232	$	19	$	43,500	2.91	%	23
Wells Fargo Securities LLC	182,666		282		214,873		3.36	%	11
Barclays Capital Inc	11,395		3		13,000		3.42	%	26
Citigroup Global Markets Inc	11,015		4		12,959		3.46	%	57
Total/Weighted Average	$	244,308	$	308	$	284,332	3.30	%	16

As of December 31, 2018
JP Morgan Securities LLC	$	21,961	$	27	$	26,750	3.67	%	18
Wells Fargo Securities, LLC	22,578		47		28,223		3.93	%	11
Total/Weighted Average	$	44,539	$	74	$	54,973	3.80	%	15

________________________

⁽¹⁾Collateral includes 24.3 million and $28.2 million of CLO notes, held by the Company, which eliminates within the real estate securities, at fair value line of the consolidated balance sheets as of September 30, 2019 and December 31, 2018, respectively.

The following tables summarize our Repurchase Agreements, Commercial Mortgage Loans and our MRAs for the nine months ended September 30, 2019, 2018 and 2017, respectively:



	As of September 30, 2019
	Amount Outstanding						Average Outstanding Balance
	Q1		Q2		Q3		Q1		Q2		Q3
Repurchase Agreements, Commercial Mortgage Loans	$	370,889	$	132,870	$	111,937	$	357,850	$	337,970	$	132,126
Repurchase Agreements, Real Estate Securities	$	22,078	$	85,022	$	244,308	$	52,711	$	84,179	$	181,198

	As of September 30, 2018
	Amount Outstanding						Average Outstanding Balance
	Q1		Q2		Q3		Q1		Q2		Q3
Repurchase Agreements, Commercial Mortgage Loans	$	501,310	$	304,975	$	565,329	$	313,509	$	222,339	$	456,636
Repurchase Agreements, Real Estate Securities	$	—	$	10,600	$	22,272	$	19,542	$	3,029	$	23,056

	As of September 30, 2017
	Amount Outstanding						Average Outstanding Balance
	Q1		Q2		Q3		Q1		Q2		Q3
Repurchase Agreements, Commercial Mortgage Loans	$	340,948	$	177,495	$	319,386	$	280,468	$	387,988	$	237,017
Repurchase Agreements, Real Estate Securities	$	52,174	$	49,071	$	39,035	$	63,611	$	66,996	$	47,477

The use of our warehouse lines is dependent upon a number of factors including but not limited to: origination volume, loan repayments and prepayments, our use of other financing sources such as collateralized loan obligations, our liquidity needs and types of loan assets and underlying collateral that we hold.

During the nine months ended September 30, 2019, the maximum average outstanding balance was $565.1 million, at the end of May 30, 2019, of which $483.2 million was related to repurchase agreements on our commercial mortgage loans and $81.9 million for repurchase agreements on our real estate securities.

During the nine months ended September 30, 2018, the maximum average outstanding balance was $560.6 million, at the end of September 30, 2018, of which $534.8 million, all of which was related to repurchase agreements on our commercial mortgage loans.

During the nine months ended September 30, 2017, the maximum average outstanding balance was $483.4 million, at the end of June 30, 2017, of which $434.4 million was related to repurchase agreements on our commercial mortgage loans and $49.1 million for repurchase agreements on our real estate securities.

Private Placements

Since February 2018, we have been conducting offerings of our common stock and Series A preferred stock in offerings exempt from the registration requirements of the Securities Act. The following table summarizes the issuance of common stock in these offerings (dollars in thousands, except share amounts):



	Total
	Shares Issued	Proceeds
Balance, December 31, 2018	7,534,358	$	124,335
January 2019	139,138	2,325
February 2019	655,296	10,950
March 2019	367,145	6,135
April 2019	557,309	9,314
May 2019	662,492	11,070
June 2019	48,033	803
July 2019	1,225,426	20,461
August 2019	80,790	1,350
September 2019	160,213	2,675
Balance, September 30, 2019	11,430,200	189,418

As of September 30, 2019, we had $3.8 million outstanding of binding purchase commitments for common stock.

The following table summarizes the sales of Preferred Stock in these offerings (dollars in thousands, except share amounts):



	Total
	Shares Issued	Proceeds
Balance, December 31, 2018	29,249	$	146,245
January 2019	—	—
February 2019	2,996	14,979
March 2019	—	—
April 2019	—	—
May 2019	—	—
June 2019	—	—
July 2019	6,253	31,325
August 2019	—	—
September 2019	—	—
Balance, September 30, 2019	38,498	$	192,549

As of September 30, 2019, we had $0.0 million outstanding of binding purchase commitments for Preferred Stock. However, at September 30, 2019, the Company had a $5.0 million binding purchase commitment with an institutional investor for the Company’s Series C convertible preferred stock, $0.01 par value (the “Series C Preferred Stock”), a new series of convertible preferred stock authorized by the Company’s Board of Directors, in an offering exempt from the registration requirements of the Securities Act. The Articles Supplementary for the Series C Preferred Stock was not filed with the Maryland State Department of Assessments and Taxation until the closing of the commitment on October 18, 2019.

The following tables present the activity in our Preferred Stock for the periods ended September 30, 2019 and September 30, 2018, respectively (dollars in thousands, except share amounts):



	Shares	Amount
Balance, December 31, 2018	29,249	$	145,786
Issuance of Preferred Stock, net of offering cost	9,249	46,245
Dividends paid in Preferred Stock	3	18
Amortization of offering costs	—	76
Ending Balance, September 30, 2019	38,501	$	192,125

	Shares	Amount
Balance, December 31, 2017	—	$	—
Issuance of Preferred Stock	19,215	95,736
Dividends paid in Preferred Stock	—	—
Amortization of offering costs	—	—
Ending Balance, September 30, 2018	19,215	$	95,736

Distributions

In August 2017, our board of directors authorized and declared ongoing monthly distributions with respect to our common stock at a rate equivalent to $1.44 per annum, per share. Dividends payable on each share of Series A Preferred Stock are generally equal to the monthly dividend that would have been paid had such share of Series A Preferred Stock been converted to a share of common stock, except to the extent common stock dividends have been reduced below certain specified levels.

The Company's distributions are payable by the fifth day following each month end to stockholders of record at the close of business each day during the prior month. Distribution payments are dependent on the availability of funds. The Company's

board of directors may reduce the amount of distributions paid or suspend distribution payments at any time, and therefore, distributions payments are not assured.

The below table shows the distributions paid on shares outstanding of common stock during the nine months ended September 30, 2019 and September 30, 2018 (dollars in thousands):



Nine Months Ended September 30, 2019 Payment Date	Amount Paid in Cash		Amount Issued under DRIP
January 4, 2019	$	3,576	$	1,171
February 1, 2019	3,657		1,168
March 1, 2019	3,333		1,053
April 1, 2019	3,749		1,167
May 1, 2019	3,678		1,143
June 3, 2019	3,870		1,182
July 2, 2019	3,796		1,141
August 1, 2019	4,033		1,181
September 2, 2019	4,051		1,181
Total	$	33,743	$	10,387



Nine Months Ended September 30, 2018 Payment Date	Amount Paid in Cash		Amount Issued under DRIP
January 2, 2018	$	2,649	$	1,242
February 1, 2018	2,665		1,233
March 1, 2018	2,386		1,098
April 1, 2018	2,664		1,200
May 1, 2018	2,593		1,152
June 1, 2018	2,718		1,184
July 2, 2018	2,637		1,143
August 1, 2018	2,939		1,179
September 2, 2018	3,156		1,166
Total	$	24,407	$	10,597

The following table shows the sources for the payment of distributions to common stockholders for the periods presented (dollars in thousands):



	Three Months Ended September 30,								Nine Months Ended September 30,
	2019				2018				2019				2018
Distributions:
Cash distributions paid	$	11,880			$	8,732			$	33,743			$	24,407
Distributions reinvested	3,503				3,487				10,387				10,597
Total distributions	$	15,383			$	12,219			$	44,130			$	35,004
Source of distribution coverage:
Net Income/(Loss)	$	11,880	77.2	%	$	8,732	71.5	%	$	33,743	76.5	%	$	24,407	69.7	%
Available cash on hand	—		—	%	—		—	%	—		—	%	—		—	%
Common stock issued under DRIP	3,503		22.8	%	3,487		28.5	%	10,387		23.5	%	10,597		30.3	%
Total sources of distributions	$	15,383	100.0	%	$	12,219	100.0	%	$	44,130	100.0	%	$	35,004	100.0	%
Net income applicable to common stock (GAAP)	$	20,460			$	17,294			$	48,409			$	35,127

Cash Flows

Cash Flows for the Nine Months Ended September 30, 2019

Net cash used in operating activities for the nine months ended September 30, 2019 was $35.8 million. Cash inflows were primarily driven by an increase in net income to $60.3 million, offset by net cash outflows of $102.3 million related to originations of and proceeds from sales of commercial mortgage loans, measured at fair value.

Net cash used in investing activities for the nine months ended September 30, 2019 was $621.9 million. Cash outflows were primarily driven by the origination and acquisition of $892.4 million of commercial mortgage loans and purchase of real estate securities of $206.7 million. Outflows were offset by proceeds from principal repayments of $482.4 million received on commercial mortgage loans.

Net cash provided by financing activities for the nine months ended September 30, 2019 was $506.1 million. Cash inflows were primarily driven by proceeds from the borrowings under collateralized loan obligations of $639.9 million and proceeds from net borrowing on our CMBS MRAs of $199.8 million. Inflows were partially offset by the payment of $44.4 million in cash distributions to stockholders and $13.8 million of stock repurchases and repayments on CLOs of $333.7 million.

Cash Flows for the Nine Months Ended September 30, 2018

Net cash used in operating activities for the nine months ended September 30, 2018 was $37.1 million. Cash outflows were primarily driven by cash outflows of $444.5 million from origination of commercial mortgage loans, held for sale, measured at fair value, partially offset by $367.5 million of proceeds from the sale of commercial mortgage loans, held for sale.

Net cash used in investing activities for the nine months ended September 30, 2018 was $747.9 million. Cash outflows of $1,279.0 million was due to new originations and purchases of commercial mortgage loans, held for investment. This was partially offset by $556.5 million of proceeds from principal repayments received on commercial mortgage loans, held for investment.

Net cash provided by financing activities for the nine months ended September 30, 2018 was $759.3 million. Cash inflows were primarily driven by $499.7 million from net borrowings on the Repo Facilities repurchase agreements and net proceeds of $156.3 million on collateralized loan obligations and partially offset by cash out flow $16.8 million on net payment for repurchase agreement - real estate securities.

Election as a REIT

We elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with the taxable year ended December 31, 2013. As a REIT, if we meet certain organizational and operational requirements and distribute at least 90% of our "REIT taxable income" (determined before the deduction of dividends paid and excluding net capital gains) to our stockholders in a year, we will not be subject to U.S. federal income tax to the extent of the income that we distribute. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, and U.S. federal income and excise taxes on our undistributed income.

Contractual Obligations and Commitments

Our contractual obligations, excluding interest obligations (as amounts are not fixed or determinable), as of September 30, 2019 are summarized as follows (dollars in thousands):



	Less than 1 year	1 to 3 years	3 to 5 years	More than 5 years	Total
Unfunded loan commitments ⁽¹⁾	$117,091	$143,852	$—	$—	$260,943
Maturities of lease liabilities for operating lease	496	41,153	—	—	41,649
Repurchase agreements - commercial mortgage loans	—	111,937	—	—	111,937
CLOs ⁽²⁾	—	—	—	1,831,796	1,831,796
Repurchase agreements - real estate securities	244,308	—	—	—	244,308
Total	$361,895	$296,942	$—	$1,831,796	$2,490,633

________________________

⁽¹⁾ The allocation of our unfunded loan commitments is based on the earlier of the commitment expiration date or the loan maturity date.

⁽²⁾ Excludes $261.4 million and $186.5 million of CLO notes, held by the Company, which are eliminated within the collateralized loan obligation line of the consolidated balance sheets as of September 30, 2019 and December 31, 2018.

In addition, we have contractual obligations under our agreements with the Advisor as described below.

Related Party Arrangements

Benefit Street Partners L.L.C.

Amended Advisory Agreement

Refer to “Note 9 - Related Party Transactions and Arrangements” for a summary of the Company’s Advisory Agreement with the Advisor and amounts paid to the Advisor pursuant to the Advisory Agreement for the three and nine months ended September 30, 2019 and 2018.

Investment in Common and Preferred Stock

Refer to “Note 7 - Stock Transactions” for a description of the Company’s private placements. Since February 2018, officers of the Company and other employees of the Advisor and its affiliates (“Manager Investors”), as well as members of our board of directors, have acquired common stock and Series A Preferred Stock in these private placements on substantially the same terms as purchases by third party institutional investors unaffiliated with the Company or the Advisor. As of September 30, 2019, The Manager Investors acquired an aggregate of $2.4 million of common stock and Series A Preferred Stock in these private placements during the three and nine months ended September 30, 2019. During the nine months ended September 30, 2019, each independent member of our board of directors acquired 5,984 shares of our common stock in these private placements for an aggregate purchase price of $0.4 million.

The Manager Investors and board members have agreed with the Advisor not to sell or otherwise transfer the securities purchased in the private placements without the consent of the Advisor, prior to 180 days after a listing of the Company’s common stock on a national securities exchange. In addition, the Manager Investors will not be eligible to participate in the SRP for at least three years.

The board of directors and the Nominating and Corporate Governance Committee of the board of directors each reviewed and unanimously approved the Company’s issuance of shares to the Manager Investors and the terms of the offering.

Loan Acquisitions

On February 22, 2018, the Company purchased commercial mortgage loans from an entity that is an affiliate of our Advisor, for an aggregate purchase price of $27.8 million. The purchase of the commercial mortgage loans and the $27.8 million purchase price were approved by the Company’s board of directors. These loans are expected to be sold into a securitization vehicle through our TRS segment. On April 18, 2018, we sold $23.3 million of these commercial mortgage loans into a CMBS securitization. The remaining $4.5 million of these commercial mortgage loans are recorded in commercial mortgage loans, held for investment, on the consolidated balance sheet as of September 30, 2019.

Off Balance Sheet Arrangements

We currently have no off balance sheet arrangements as of September 30, 2019 and through the date of the filing of this Form 10-Q.

Non-GAAP Financial Measures

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts ("NAREIT") and the Investment Program Association ("IPA") industry trade groups, have each promulgated measures respectively known as funds from operations ("FFO") and modified funds from operations ("MFFO"), which we believe to be appropriate supplemental measures to reflect the operating performance of a REIT. The use of FFO and MFFO is recommended by the REIT industry as supplemental performance measures. However, FFO and MFFO are not substitutes to generally accepted accounting principles ("GAAP") net income or loss. We believe our presentations of FFO and MFFO assist investors in analyzing and comparing our operating and financial performance between reporting periods

We define FFO, a non-GAAP measure, consistent with the standards established by NAREIT defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of depreciable property, property and asset impairment write-downs, real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures on the same basis. Our business plan is to operate as a mortgage REIT with our portfolio consisting of commercial mortgage loan investments and investments in real estate securities. We will typically have no FFO adjustments to our net income or loss computed in accordance with GAAP as a result of operating as a mortgage REIT.

We define MFFO, a non-GAAP measure, consistent with the IPA's Guideline 2010 - 01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations (the "Practice Guideline") issued by the IPA in November 2010. We define MFFO as FFO further adjusted for the following items, as applicable: acquisition fees; accretion of discounts and amortization of premiums and other loan expenses on debt investments; fair value adjustments on real estate related investments such as commercial real estate securities or derivative investments included in net income; impairments of real estate related investments, gains or losses included in net income from the extinguishment or sale of debt,

hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses from fair value adjustments on real estate securities, including commercial mortgage backed securities and other securities, interest rate swaps and other derivatives not deemed to be hedges and foreign exchanges holdings; unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums and other loan expenses on debt investments, gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. Inasmuch as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude such gains and losses in calculating MFFO, as such gains and losses are not reflective of our core operations.

Our MFFO calculation excludes impairments of real estate related investments, including loans. We assess the credit quality of our investments and adequacy of loan loss reserves on a quarterly basis, or more frequently as necessary. For loans classified as held-for-investment, we establish and maintain a general allowance for loan losses inherent in our portfolio at the reporting date and, where appropriate, a specific allowance for loan losses for loans we have determined to be impaired at the reporting date. An individual loan is considered impaired when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan. Real estate related securities are evaluated for other-than-temporary impairment when the fair value of a security falls below its net amortized cost. Significant judgment is required in this analysis. We consider the estimated net recoverable value of the loan or security as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the prospects for the borrower and the competitive situation of the region where the borrower does business. Fair value is typically estimated based upon discounting the expected future cash flows of the underlying collateral taking into consideration the discount rate, capitalization rate, occupancy, creditworthiness of major tenants and many other factors. This requires significant judgment and because it is based upon projections of future economic events, which are inherently subjective, the amounts ultimately realized may differ materially from the carrying value as of the balance sheet date. If upon completion of the assessment, the estimated fair value of the underlying collateral is less than the net carrying value of the loan, a specific allowance for loan losses is recorded. In the case of real estate securities, all or a portion of a deemed impairment may be recorded. Due to our limited life, any allowance for loan losses or impairment of real estate securities recorded may be difficult to recover.

The table below reflects the items deducted or added to net income or loss in our calculation of FFO and MFFO for the nine months ended September 30, 2019 and September 30, 2018 (dollars in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Funds From Operations:
Net income	$	25,913		$	19,000		$	60,329		$	36,398
Funds from operations	$	25,913		$	19,000		$	60,329		$	36,398
Modified Funds From Operations:
Funds from operations	$	25,913		$	19,000		$	60,329		$	36,398
Amortization of premiums, discounts and fees on investments, net	(1,571		)	(1,540		)	(4,756		)	(3,456		)
Acquisition fees and acquisition expenses	180			173			698			289
Unrealized (gain) loss on financial instruments	(4,549		)	(1,041		)	(1,711		)	(1,636		)
Loan loss (recovery)/provision	(245		)	1,066			2,823			3,502
Modified funds from operations ⁽¹⁾	$	19,728		$	17,658		$	57,383		$	35,097

__________________________

⁽¹⁾ Modified funds from operations for nine months ended September 30, 2019 includes a non-cash charge of $4.5 million related to the call of BSPRT 2017 - FL1 CLO on April 15, 2019. Excluding the non-cash charge modified funds from operations would be $19.7 million and $61.9 million for three months and nine months ended September 30, 2019. For three months ended September 30, 2019, there was no such non-cash adjustment. Modified funds from operations for nine months ended September 30, 2018 of $35.1 million includes a non-cash charge of $6.4 million related to the call of RFT 2015-FL1 CLO on February 15, 2018. Excluding this non-cash charge, modified funds from operations would have been $41.5 million. For three months ended September 30, 2018, there was no such non-cash adjustment.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Credit Risk

Our investments are subject to a high degree of credit risk. Credit risk is the exposure to loss from loan defaults. Default rates are subject to a wide variety of factors, including, but not limited to, borrower financial condition, property performance, property management, supply/demand factors, construction trends, consumer behavior, regional economics, interest rates, the strength of the U.S. economy, and other factors beyond our control. All loans are subject to a certain probability of default. We manage credit risk through the underwriting process, acquiring our investments at the appropriate discount to face value, if any, and establishing loss assumptions. We also carefully monitor the performance of the loans, as well as external factors that may affect their value.

Interest Rate Risk

Our market risk arises primarily from interest rate risk relating to interest rate fluctuations. Many factors including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control contribute to interest rate risk. To meet our short and long-term liquidity requirements, we may borrow funds at fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes in earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. We do not have any foreign denominated investments, and thus, we are not exposed to foreign currency fluctuations.

As of September 30, 2019 and December 31, 2018, our portfolio included 118 and 64 variable rate investments, respectively, based on LIBOR for various terms. Borrowings under our repurchase agreements are also based on LIBOR. The following table quantifies the potential changes in interest income net of interest expense should interest rates increase by 25 or 50 basis points or decrease by 25 basis points, assuming that our current balance sheet was to remain constant and no actions were taken to alter our existing interest rate sensitivity.

For the LIBOR sensitivity range, a reduction in LIBOR results in an increase in our portfolio return. This is driven by the LIBOR floor in place for majority of our commercial mortgage loans, held for investment. In contrast, the majority of our financing instruments do not have LIBOR floors. The present of a LIBOR floor on interest-bearing assets coupled with lack of LIBOR floor on interest bearing liabilities allows the portfolio to generate a higher return for a decrease in LIBOR rate compared to increase in LIBOR rate for the LIBOR range presented:



	Estimated Percentage Change in Interest Income Net of Interest Expense
Change in Interest Rates	September 30, 2019		December 31, 2018
(-) 25 Basis Points	1.37	%	(1.38	)%
Base Interest Rate	—	%	—	%
(+) 50 Basis Points	0.68	%	2.75	%
(+) 100 Basis Points	3.23	%	5.50	%

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded, as of the end of such period, that our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in our reports that we file or submit under the Exchange Act.

Changes in Internal Control Over Financial Reporting

During the quarter ended September 30, 2019, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1. Legal Proceedings.

The Company has no knowledge of material pending legal proceedings, other than ordinary routine litigation incidental to the business, or material pending or threatened regulatory proceedings, against the Company at this time.

Item 1A. Risk Factors.

Our potential risks and uncertainties are presented in the section entitled "Risk Factors" contained in the Annual Report on Form 10-K for the year ended December 31, 2018. There have been no material changes from these risk factors.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

Refer to "Note 7 - Stock Transactions" to our consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of the common stock purchase agreements and preferred stock purchase agreements we entered into with certain accredited investors, certain officers of the Company, and certain owners, employees and associates of the Advisor and its affiliates pursuant to which such persons committed to buy shares of our common stock and Preferred Stock. During the nine months ended September 30, 2019, the Company has sold 3,895,842 shares of common stock for proceeds of $65.1 million, and 9,249 shares of Preferred Stock for proceeds of $46.3 million. As of September 30, 2019, the Company had $3.8 million in outstanding purchase commitments for common stock and $0.0 million for Preferred Stock. In addition, at September 30, 2019, the Company had a $5.0 million binding purchase commitment with an institutional investor for Series C Preferred Stock, a new series of convertible preferred stock authorized by the Company’s Board of Directors. The Articles Supplementary for the Series C Preferred Stock was not filed with the Maryland State Department of Assessments and Taxation until the closing of the commitment on October 18, 2019.

The offer and sale of the common stock and Preferred Stock were conducted in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.

Issuer Purchases of Equity Securities

Share repurchase activity under the SRP during nine months ended September 30, 2019 was as follows:



	Number of Requests	Average Price per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs
January 1 - January 31, 2019	845	$	18.60	387,530	(1)
February 1 - February 28, 2019	—	N/A		—	(1)
March 1 - March 31, 2019	—	N/A		—	(1)
April 1 - April 30, 2019	—	N/A		—	(1)
May 1 - May 31, 2019	—	N/A		—	(1)
June 1 - June 30, 2019	—	N/A		—	(1)
July 1 - July 31, 2019	1,188	18.65		354,323	(1)
August 1 - August 31, 2019	—	N/A		—	(1)
September 1 - September 30, 2019	—	N/A		—	(1)
Total	2,033	$	18.63	741,853

(1) The Company's board of directors unanimously approved an amended and restated share repurchase program (the “SRP”), which became effective on February 28, 2016. Repurchases pursuant to the SRP, when requested, generally will be made semiannually (each six-month period ending June 30 or December 31, a “fiscal semester”). Repurchases for any fiscal semester will be limited to a maximum of 2.5% of the weighted average number of shares of common stock outstanding during the previous fiscal year, with a maximum for any fiscal year of 5.0% of the weighted average number of shares of common stock outstanding during the previous fiscal year. Funding for repurchases pursuant to the SRP for any given fiscal semester will be limited to proceeds received during that same fiscal semester through the issuance of common stock pursuant to any DRIP in effect from time to time, provided that the Company's board of directors has the power, in its sole discretion, to determine the amount of shares repurchased during any fiscal semester as well as the amount of funds to be used for that purpose. See "Note 7 - Stock Transactions" to our consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion of our SRP.

Item 3. Defaults upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

EXHIBITS INDEX

The following exhibits are included in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 (and are numbered in accordance with Item 601 of Regulation S-K).



Exhibit No.		Description
3.1⁽¹⁾		Articles Supplementary of Benefit Street Partners Realty Trust, Inc., dated October 18, 2019, relating to Series C Convertible Preferred Stock
31.1^*		Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a - 14(a) or 15(d) - 14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2^*		Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a - 14(a) or 15(d) - 14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32^*		Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101^*		XBRL (eXtensible Business Reporting Language). The following materials from Benefit Street Partners Realty Trust, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) the Consolidated Statement of Changes in Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements.

____________________________________________

⁽¹⁾ Filed as exhibit 3.1 to our Current Report on Form 8-K filed with the SEC on October 18, 2019 and incorporated by reference herein.

*Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		Benefit Street Partners Realty Trust, Inc.
Dated:	November 13, 2019	By	/s/ Richard J. Byrne
			Name: Richard J. Byrne
			Title: Chief Executive Officer and President
			(Principal Executive Officer)

Dated:	November 13, 2019	By	/s/ Jerome S. Baglien
			Name: Jerome S. Baglien
			Title: Chief Financial Officer and Treasurer
			(Principal Financial and Accounting Officer)