FBRT

New in FY2025

• We may use collateralized debt and loan obligation securitization markets to provide long-term financing for our loans and investments which may not be available.
• Changes in interest rates, particularly short-term interest rates, may significantly influence our net income.
• In this manner, reduced real estate values could impact the values of our debt and real estate securities investments, making them subject to the risks typically associated with real estate ownership.
• Our operating results may be adversely affected by a number of risks generally incident to holding real estate and real estate debt, including, without limitation: • natural disasters, such as hurricanes, earthquakes and floods, which we expect to increase in strength and frequency due to climate change; • acts of war or terrorism, or criminal violence, including the consequences of terrorist attacks, civil unrest and other such acts; • adverse changes in national and local economic and real estate conditions; • adverse changes in economic and market conditions related to pandemics and health crises; • an oversupply of (or a reduction in demand for) space in the areas where properties securing our loans are located and the attractiveness of particular properties to prospective tenants; • changes in interest rates and availability of permanent mortgage funds that may render the sale of property difficult or unattractive; • changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance therewith and the potential for liability under applicable laws; • costs of remediation and liabilities associated with environmental conditions affecting properties; • reduced demand for office space, including as a result of changes in work habits, including remote or hybrid work schedules, or reductions in employee headcount due to artificial intelligence technologies; • the potential for uninsured or underinsured property losses; and • periods of high interest rates and tight money supply.
• The Commercial Real Estate Financing business unit primarily invests in transitional loans to borrowers who are typically seeking short-term capital to be used in an acquisition or rehabilitation of a property.
• Our loans typically have a term of about three to ten years.
• The resulting time delay could reduce the value of the assets under the defaulted loans and delay us in reinvesting the principal associated with such investments in higher yielding assets.
• Subordinate commercial real estate debt that we originate or acquire could expose us to greater losses than primary mortgage loans do.
• We invest in CMBS and CMBS bonds, which entails certain risks, including those related to subordinate securities.
• Furthermore, the net operating income from and the value of any commercial property are each subject to various risks.
• Some of our investments are carried at estimated fair value as determined by us and, as a result, there may be uncertainty as to the value of these investments.
• Some of our investments are in the form of securities that are recorded at fair value but have limited liquidity or are not publicly-traded.
• We have significant competition with respect to our origination and acquisition of assets with many other companies, including other REITs, insurance companies, commercial banks, private investment funds, hedge funds, specialty finance companies and other investors, many of which have greater resources than us, and we may not be able to compete successfully for investments.
• If our due diligence fails to identify material issues or fraudulent inflation of asset values, we have had to in the past and may in the future have to write-down or write-off assets, restructure our investment or incur impairment or other charges that could result in our reporting losses.
• Under the Current Expected Credit Loss model (“CECL”) model for recognizing credit losses, we are required to provide allowances for credit losses on certain financial assets carried at amortized cost, such as loans held-for-investment and held-to-maturity debt securities, including related future funding commitments and accrued interest receivable.
• This measurement takes place at the time the financial asset is first added to the balance sheet and updated quarterly thereafter, which creates volatility in the level of our credit loss provisions.
• From time to time, we may acquire other companies, such as our 2021 acquisition of Capstead Mortgage Corp. and 2025 acquisition of NewPoint.
• Our acquisition of companies creates significant risks, including: • issues related to the acquired business that were not identified in our diligence review prior to acquisition; • the significant management attention and resources needed to devote to integrating the acquired business, including any employees of the acquired company; • costs associated with retaining key employees of the acquired business; • legal and regulatory burdens associated with the acquired business; and • potential stockholder dilution as a result of the consideration paid.
• In order to borrow funds to acquire assets under any additional warehouse facilities, our lenders thereunder would have the right to review the potential assets for which we are seeking financing.
• Risks Related to NewPoint and our Agency Business The acquisition of NewPoint and the operation of our Agency Business exposes us to a variety of additional risks that could materially and adversely affect our financial condition and results of operations.
• The acquisition of NewPoint and the operation of our Agency Business has and will expose us to a variety of additional risks that could materially and adversely affect our financial condition and results of operations, including the following risks: • an adverse change in our relationships with government sponsored entities (GSE’s) associated with agency mortgages (Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Government National Mortgage Association and U.S.
• Department of Housing and Urban Development) could adversely affect our ability to originate and service agency mortgage loans; • we are subject to risk sharing requirements on some agency mortgage loans and associated loan losses could materially and adversely affect us; • we are subject to liquidity requirements by the GSE’s and our failure to satisfy these requirements could materially and adversely affect our ability to operate our agency business; • our Agency Business could be adversely impacted by GSE changes in prices they are willing to pay for mortgage loans, changes in loan servicing fees or changes in other GSE arrangements with us; • terminations of servicing engagements or breaches of servicing agreements could have a material adverse effect on us; • changes in the conservatorship of Fannie Mae and Freddie Mac or in any laws and regulations affecting the relationship between Fannie Mae and Freddie Mac and the U.S. federal government, could materially and adversely affect our agency business; and • our agency business will generally be operated through one or more of our taxable REIT subsidiaries and therefore will be subject to the limitations generally imposed on taxable REIT subsidiaries and will be subject to corporate income tax.
• (a non-traded REIT) and three private funds, and the Advisor may in the future advise additional competing investment programs (together, the “Other Funds”).
• Some investment opportunities that are suitable for the Other Funds are also suitable for us.
• The executive officers and real estate professionals of the Advisor could direct attractive investment opportunities to other entities or investors, including the Other Funds.
• If the Internal Revenue Service (“IRS”) challenged our treatment of investments for purposes of the REIT asset and income tests, and if such a challenge were sustained, we could fail to qualify as a REIT. • The fact that we own direct or indirect interests in an entity that has elected to be taxed as a REIT under the U.S. federal income tax laws (a “Subsidiary REIT”), further complicates the application of the REIT requirements for us.
• If the OP fails to qualify as a partnership for U.S. federal income tax purposes, we could fail to qualify as a REIT and suffer other adverse consequences.
• We believe that our OP is organized and operated in a manner so as to be treated as a partnership and not an association or a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes.
• As an entity taxed as a partnership, our OP is not subject to U.S. federal income tax on its income.
• Instead, each of the partners is allocated its share of our OP’s income.
• No assurance can be provided, however, that the IRS will not challenge our OP’s status as a partnership for U.S. federal income tax purposes or that a court would not sustain such a challenge.
• If the IRS were successful in treating our OP as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, would cease to qualify as a REIT.
• Also, the failure of the OP to qualify as a partnership would cause it to become subject to U.S. federal corporate income tax, which would reduce significantly the amount of cash available for distribution to its partners, including us.
• Changes to the U.S. federal income tax laws could have a material and adverse effect on us or our stockholders.
• There are many factors that can affect the amount and timing of cash distributions to stockholders and our board of directors can decide to reduce or eliminate our cash distributions at any time and without prior notice to our stockholders.
• In certain prior periods, including the last ten quarters, quarterly distributions have been in excess of our quarterly GAAP net income.
• The rapid evolution and increased adoption of artificial intelligence technologies may also heighten our cybersecurity risks by making cyber-attacks more difficult to detect, contain, and mitigate.
• Our use of or failure to adopt advancements in information technology, such as artificial intelligence, may hinder or prevent us from achieving strategic objectives or otherwise harm our business.
• Our use of or inability to safely and effectively adopt and deliver new technological capabilities and enhancements in line with strategic objectives, including artificial intelligence, may put us at a competitive disadvantage, including by failure to achieve efficiencies achieved by our competitors, or by misusing such technologies in ways that result in operational disruptions, reputation damage or legal liability exposure.
• Although our Advisor has adopted policies with respect to these risks, including related to the development, deployment and monitoring of artificial intelligence tools, we cannot be certain that such policies will be effective.

and 10 more.

Gone since FY2024

• We rely on the availability of collateralized debt and loan obligation securitization markets to provide long-term financing for our loans and investments.
• During periods of rising interest rates, our interest expense increases may outpace any increases in interest we earn on our assets, and the value of our assets may decrease.
• In this manner, reduced real estate values could impact the values of our debt and security investments, making them subject to the risks typically associated with real estate ownership.
• Our operating results may be adversely affected by a number of risks generally incident to holding real estate and real estate debt, including, without limitation: • natural disasters, such as hurricanes, earthquakes and floods, which we expect to increase in strength and frequency due to climate change; • acts of war or terrorism, or criminal violence, including the consequences of terrorist attacks and other such acts; • adverse changes in national and local economic and real estate conditions; • adverse changes in economic and market conditions related to pandemics and health crises, such as COVID-19; • an oversupply of (or a reduction in demand for) space in the areas where properties securing our loans are located and the attractiveness of particular properties to prospective tenants; • changes in interest rates and availability of permanent mortgage funds that may render the sale of property difficult or unattractive; • changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance therewith and the potential for liability under applicable laws; • costs of remediation and liabilities associated with environmental conditions affecting properties; • reduced demand for office space, including as a result of changes in work habits, including remote or hybrid work schedules which allow work from remote locations other than the employer’s office premises; • the potential for uninsured or underinsured property losses; and • periods of high interest rates and tight money supply.
• We primarily invest in transitional loans to borrowers who are typically seeking short-term capital to be used in an acquisition or rehabilitation of a property.
• Our loans typically have a term of about three to five years.
• The resulting time delay could reduce the value of the assets under the defaulted loans.
• Subordinate commercial real estate debt that we originate or acquire could expose us to greater losses.
• We invest in CMBS and CMBS bonds, which may include subordinate securities, which entails certain risks.
• Furthermore, the net operating income from and value of any commercial property are subject to various risks.
• Some of our investments will be carried at estimated fair value as determined by us and, as a result, there may be uncertainty as to the value of these investments.
• Some of our investments will be in the form of securities that are recorded at fair value but have limited liquidity or are not publicly-traded.
• We have significant competition with respect to our origination and acquisition of assets with many other companies, including other REITs, insurance companies, commercial banks, private investment funds, hedge funds, specialty finance companies and other investors, many of which have greater resources than we, and may not be able to compete successfully for investments.
• If our due diligence fails to identify material issues, we have had to in the past and may in the future have to write-down or write-off assets, restructure our investment or incur impairment or other charges that could result in our reporting losses.
• Accounting Standards Update 2016-13, “Financial Instruments - Credit Losses, Measurement of Credit Losses on Financial Instruments (Topic 326),” which replaced the “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the Current Expected Credit Loss model (“CECL”) became effective for us on January 1, 2020.
• Under the CECL model, we are required to provide allowances for credit losses on certain financial assets carried at amortized cost, such as loans held-for-investment and held-to-maturity debt securities, including related future funding commitments and accrued interest receivable.
• This measurement takes place at the time the financial asset is first added to the balance sheet and updated quarterly thereafter.
• This differs significantly from the “incurred loss” model previously required under GAAP, which delayed recognition until it was probable a loss had been incurred.
• Accordingly, the adoption of the CECL model has materially affected how we determine our credit loss provision and required us to significantly increase our allowance and recognize provisions for credit losses earlier in the lending cycle.
• Moreover, the CECL model created more volatility in the level of our credit loss provisions.
• From time to time, we may acquire other companies, such as our 2021 acquisition of Capstead Mortgage Corp.
• Our acquisition of companies can create significant risks, including: • issues related to the acquired business that were not identified in our diligence review prior to acquisition; • the significant management attention and resources we would need to devote to integrating the acquired business, including any employees of the acquired company; • costs associated with retaining key employees of the acquired business; • legal and regulatory burdens associated with the acquired business; and • potential stockholder dilution as a result of the consideration paid.
• In order to borrow funds to acquire assets under any additional warehouse facilities, we expect that our lenders thereunder would have the right to review the potential assets for which we are seeking financing.
• (a non-traded REIT) and two private funds, and may in the future advise additional competing investment programs (together, the “Other Funds”).
• Some investment opportunities that are suitable for the Other Funds.
• Thus, the executive officers and real estate professionals of the Advisor could direct attractive investment opportunities to other entities or investors, including the Other Funds.
• If the Internal Revenue Service (“IRS”) challenged our treatment of investments for purposes of the REIT asset and income tests, and if such a challenge were sustained, we could fail to qualify as a REIT. • The fact that we own direct or indirect interests in an entity that will elect to be taxed as a REIT under the U.S. federal income tax laws (a “Subsidiary REIT”), further complicates the application of the REIT requirements for us.
• Changes to the U.S. federal income tax laws, including the possibility of major tax legislation, could have a material and adverse effect on us or our stockholders.
• Public health crises have adversely impacted, and may in the future adversely impact, our business and the business of many of our borrowers.
• Public health crises can have repercussions across domestic and global economies and financial markets.
• For example, the COVID-19 pandemic resulted in many governmental authorities imposing significant restrictions on businesses and individuals that triggered economic consequences, including high unemployment, then high inflation, that resulted in challenging operating conditions for many businesses, particularly in the retail (including restaurants), office and hospitality sectors.
• These actions directly and indirectly adversely affected the financing markets and resulted in margin calls from our lenders, which we satisfied.
• The extent to which pandemics and similar health crises impact our or our borrowers’ operations will depend on future developments which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the crises, treatment developments and government responses to the events.
• The inability of our borrowers to meet their loan obligations and/or borrowers filing for bankruptcy protection as a result of these events would reduce our cash flows, which would impact our ability to pay dividends to our stockholders.
• There are many factors that can affect the amount and timing of cash distributions to stockholders.
• In certain prior periods, quarterly distributions have been in excess of our quarterly earnings.
• In addition, global climate change concerns could result in additional legislation and regulatory requirements, including those associated with the transition to a low-carbon economy, which could increase expenses or otherwise adversely impact our business, results of operations and financial condition, or the business, results of operations and financial condition of our borrowers.