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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________________________
FORM 10-Q
_______________________________________________
x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
OR
¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM______TO______

COMMISSION FILE NUMBER: 000-56163
_______________________________________________
FS Credit Real Estate Income Trust, Inc.
(Exact name of registrant as specified in its charter)
________________________________________________
Maryland81-4446064
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
201 Rouse Boulevard
Philadelphia, Pennsylvania
19112
(Address of principal executive offices)(Zip Code)
(215495-1150
(Registrant's telephone number, including area code)
_____________________________________________________
Securities registered pursuant to Section 12(b) of the Exchange Act: None.
Title of each classTrading Symbol(s)Name of each exchange on which registered
N/AN/AN/A
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  T    No  ¨
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  T    No  ¨



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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¨Accelerated filer¨
Non-accelerated filerTSmaller reporting company¨
Emerging growth companyT
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 T
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨    No  T
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.
As of November 10, 2023, there were 751,255 outstanding shares of Class F common stock, 906,648 outstanding shares of Class Y common stock, 1,308,107 outstanding shares of Class T common stock, 64,686,880 outstanding shares of Class S common stock, 647,475 outstanding shares of Class D common stock, 4,896,373 outstanding shares of Class M common stock and 47,527,208 outstanding shares of Class I common stock.



TABLE OF CONTENTS
Page
PART I—FINANCIAL INFORMATION
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
PART II—OTHER INFORMATION
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.


















Table of Contents
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.
FS Credit Real Estate Income Trust, Inc.
Consolidated Balance Sheets
(in thousands, except share amounts)
September 30, 2023
(Unaudited)
December 31, 2022
Assets 
Cash and cash equivalents$166,940 $183,665 
Restricted cash47,935 17,953 
Loans receivable, held-for-investment, net of credit loss allowances of $72,270 and $0
7,665,632 7,350,315 
Mortgage-backed securities held-to-maturity, net of credit loss allowances of $71 and $0
74,543 68,559 
Mortgage-backed securities, at fair value, credit loss allowances of $9,674 and $0
225,095 159,464 
Reimbursement due from sponsor 605 
Investment in real estate, net185,176 190,549 
Receivable for investments sold and repaid46,316 922 
Interest receivable35,987 32,240 
Other assets6,155 9,281 
Mortgage loans held in securitization trusts, at fair value330,629 324,263 
Total assets(1)
$8,784,408 $8,337,816 
Liabilities
Collateralized loan obligations, net$4,306,272 $4,336,701 
Repurchase agreements payable, net239,457 756,816 
Credit facilities payable, net839,507 298,544 
Mortgage note payable, net123,480 122,568 
Due to related party116,585 107,692 
Interest payable28,722 19,379 
Payable for shares repurchased27,067 60,488 
Other liabilities40,014 27,278 
Mortgage obligations issued by securitization trusts, at fair value298,170 291,193 
Total liabilities(1)
6,019,274 6,020,659 
Commitments and contingencies (See Note 11)
Stockholders' equity
Preferred stock, $0.01 par value, 100,000,000 shares authorized, 125 and 125 issued and outstanding, respectively
  
Class F common stock, $0.01 par value, 125,000,000 shares authorized, 755,420 and 857,710 issued and outstanding, respectively
8 9 
Class Y common stock, $0.01 par value, 125,000,000 shares authorized, 906,648 and 906,648 issued and outstanding, respectively
9 9 
Class T common stock, $0.01 par value, 125,000,000 shares authorized, 1,378,393 and 1,600,878 issued and outstanding, respectively
14 16 
Class S common stock, $0.01 par value, 125,000,000 shares authorized, 64,127,317 and 54,908,336 issued and outstanding, respectively
641 549 
Class D common stock, $0.01 par value, 125,000,000 shares authorized, 675,550 and 742,999 issued and outstanding, respectively
7 7 
Class M common stock, $0.01 par value, 125,000,000 shares authorized, 4,792,423 and 4,645,072 issued and outstanding, respectively
48 46 
Class I common stock, $0.01 par value, 300,000,000 shares authorized, 46,397,317 and 34,011,164 issued and outstanding, respectively
464 340 
Additional paid-in capital
2,825,372 2,314,639 
Accumulated other comprehensive income (loss)(8,129)(11,906)
Retained earnings (accumulated deficit)(53,300)13,448 
Total stockholders' equity2,765,134 2,317,157 
Total liabilities and stockholders' equity$8,784,408 $8,337,816 
_______________________________
(1)    The September 30, 2023 and December 31, 2022 consolidated balance sheets include assets of consolidated variable interest entities, or VIEs, that can only be used to settle obligations of the VIEs, and liabilities of consolidated VIEs for which creditors do not have recourse to FS Credit Real Estate Income Trust, Inc. As of September 30, 2023 and December 31, 2022, assets of the VIEs totaled $5,892,207 and $5,896,039, respectively, and liabilities of the VIEs totaled $4,616,997 and $4,640,998, respectively. See Note 10 for further details.

See notes to unaudited consolidated financial statements.

1

Table of Contents
FS Credit Real Estate Income Trust, Inc.
Unaudited Consolidated Statements of Operations
(in thousands, except share and per share amounts)


Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Net interest income
Interest income$192,867 $111,575 $551,164 $226,436 
Less: Interest expense(110,572)(59,107)(315,461)(104,506)
Interest income on mortgage loans held in securitization trusts4,363  11,590  
Less: Interest expense on mortgage obligations issued by securitization trusts(3,425) (9,283) 
Net interest income83,233 52,468 238,010 121,930 
Other expenses
Management fee9,092 6,629 25,514 15,825 
Performance fee6,354 3,904 17,742 4,056 
General and administrative expenses10,008 5,685 30,446 14,528 
Less: Expense limitation  (148) 
Add: Expense recoupment to sponsor753 256 753 3,026 
Net other expenses26,207 16,474 74,307 37,435 
Other income (loss)
(Increase) decrease in current expected credit loss reserve101  (42,130) 
Income (loss) from rental operations, net(234)(1,068)(1,931)(1,068)
Net change in unrealized gain on interest rate cap(762)1,758 (1,370)309 
Net realized gain (loss) on extinguishment of debt265  265  
Net change in unrealized gain (loss) on mortgage-backed securities, fair value option45  325  
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net(213) (742) 
Total other income (loss)(798)690 (45,583)(759)
Net income before taxes56,228 36,684 118,120 83,736 
Income tax expense(274)(348)(2,260)(831)
Net income55,954 36,336 115,860 82,905 
Preferred stock dividends(3)(3)(11)(11)
Net income attributable to FS Credit Real Estate Income Trust, Inc.$55,951 $36,333 $115,849 $82,894 
Per share information—basic and diluted
Net income per share of common stock - basic and diluted$0.48 $0.42 $1.04 $1.18 
Weighted average common stock outstanding - basic and diluted116,419,969 86,518,645 111,391,684 70,104,149 



See notes to unaudited consolidated financial statements.

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FS Credit Real Estate Income Trust, Inc.
Unaudited Consolidated Statements of Comprehensive Income
(in thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Net income$55,954 $36,336 $115,860 $82,905 
Other comprehensive income
Net change in unrealized gain (loss) on mortgage-backed securities available-for-sale2,242 (382)3,777 (3,660)
Total other comprehensive income (loss)2,242 (382)3,777 (3,660)
Comprehensive income$58,196 $35,954 $119,637 $79,245 



See notes to unaudited consolidated financial statements.

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FS Credit Real Estate Income Trust, Inc.
Unaudited Consolidated Statements of Changes in Equity
(in thousands)


Par Value
Common Stock Class FCommon Stock Class YCommon Stock Class TCommon Stock Class SCommon Stock Class DCommon Stock Class MCommon Stock Class IAdditional Paid-In Capital
Accumulated Other Comprehensive Income (Loss)(1)
Retained Earnings (Accumulated Deficit)Total Stockholders' Equity
Three Months Ended September 30, 2023
Balance as of June 30, 2023$7 $9 $15 $617 $7 $48 $435 $2,697,971 $(10,371)$(58,235)$2,630,503 
Common stock issued— — — 35 — 2 34 171,891 — — 171,962 
Distributions declared— — — — — — — — — (51,016)(51,016)
Proceeds from distribution reinvestment plan— — — 5 — — 6 25,185 — — 25,196 
Redemptions of common stock1 — (1)(16)— (2)(11)(71,280)— — (71,309)
Stockholder servicing fees— — — — — — — (4,464)— — (4,464)
Offering costs— — — — — — — (1,297)— — (1,297)
Restricted stock units issued— — — — — — — 7,366 — — 7,366 
Net income— — — — — — — — — 55,954 55,954 
Dividends on preferred stock— — — — — — — — — (3)(3)
Other comprehensive income— — — — — — — — 2,242 — 2,242 
Adoption of ASU 2016-13, see Note 2— — — — — — — — — — — 
Balance as of September 30, 2023
$8 $9 $14 $641 $7 $48 $464 $2,825,372 $(8,129)$(53,300)$2,765,134 
Three Months Ended September 30, 2022
Balance as of June 30, 2022$9 $9 $15 $446 $7 $37 $245 $1,820,033 $(3,192)$3,621 $1,821,230 
Common stock issued— — 1 76 — 5 72 381,664 — — 381,818 
Distributions declared— — — — — — — — — (32,416)(32,416)
Proceeds from distribution reinvestment plan— — — 4 — 1 2 15,936 — — 15,943 
Redemptions of common stock— — — (10)— (1)(7)(43,155)— — (43,173)
Stockholder servicing fees— — — — — — — (15,130)— — (15,130)
Offering costs— — — — — — — (2,870)— — (2,870)
Performance contingent rights issued— — — — — — — 2,416 — — 2,416 
Net income— — — — — — — — — 36,336 36,336 
Dividends on preferred stock— — — — — — — — — (3)(3)
Other comprehensive loss— — — — — — — — (382)— (382)
Balance as of September 30, 2022
$9 $9 $16 $516 $7 $42 $312 $2,158,894 $(3,574)$7,538 $2,163,769 
__________________________
(1)    Comprised solely of unrealized gain (loss) on mortgage-backed securities, available for sale.








See notes to unaudited consolidated financial statements.
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FS Credit Real Estate Income Trust, Inc.
Unaudited Consolidated Statements of Changes in Equity
(in thousands)



Par Value
Common Stock Class FCommon Stock Class YCommon Stock Class TCommon Stock Class SCommon Stock Class DCommon Stock Class MCommon Stock Class IAdditional Paid-In Capital
Accumulated Other Comprehensive Income (Loss)(1)
Retained Earnings (Accumulated Deficit)Total Stockholders' Equity
Nine Months Ended September 30, 2023
Balance as of December 31, 2022$9 $9 $16 $549 $7 $46 $340 $2,314,639 $(11,906)$13,448 $2,317,157 
Common stock issued— — — 129 — 6 149 685,119 — — 685,403 
Distributions declared— — — — — — — — — (141,076)(141,076)
Proceeds from distribution reinvestment plan— — — 15 — 1 13 68,641 — — 68,670 
Redemptions of common stock(1)— (2)(52)— (5)(38)(240,336)— — (240,434)
Stockholder servicing fees— — — — — — — (18,214)— — (18,214)
Offering costs— — — — — — — (5,159)— — (5,159)
Restricted stock units issued— — — — — — — 20,682 — 20,682 
Net income— — — — — — — — — 115,860 115,860 
Dividends on preferred stock— — — — — — — — — (11)(11)
Other comprehensive income— — — — — — — — 3,777 — 3,777 
Adoption of ASU 2016-13, see Note 2— — — — — — — — — (41,521)(41,521)
Balance as of September 30, 2023
$8 $9 $14 $641 $7 $48 $464 $2,825,372 $(8,129)$(53,300)$2,765,134 
Nine Months Ended September 30, 2022
Balance as of December 31, 2021$9 $9 $14 $228 $6 $29 $114 $969,558 $86 $3,287 $973,340 
Common stock issued— — 2 302 1 14 208 1,311,435 — — 1,311,962 
Distributions declared— — — — — — — — — (78,643)(78,643)
Proceeds from distribution reinvestment plan— — — 9 — 1 5 37,823 — — 37,838 
Redemptions of common stock— — — (23)— (2)(15)(99,904)— — (99,944)
Stockholder servicing fees— — — — — — — (61,558)— — (61,558)
Offering costs— — — — — — — (9,869)— — (9,869)
Performance contingent rights issued— — — — — — — 11,409 — — 11,409 
Net income— — — — — — — — — 82,905 82,905 
Dividends on preferred stock— — — — — — — — — (11)(11)
Other comprehensive loss— — — — — — — — (3,660)— (3,660)
Balance as of September 30, 2022
$9 $9 $16 $516 $7 $42 $312 $2,158,894 $(3,574)$7,538 $2,163,769 
__________________________
(1)    Comprised solely of unrealized gain (loss) on mortgage-backed securities, available for sale.







See notes to unaudited consolidated financial statements.
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FS Credit Real Estate Income Trust, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)

Nine Months Ended September 30,
20232022
Cash flows from operating activities
Net income$115,860 $82,905 
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Performance contingent rights issued 11,409 
Restricted stock units20,682  
Amortization of deferred fees on loans and debt securities(11,636)(3,616)
Amortization of deferred financing costs and discount16,059 7,884 
Increase in current expected credit loss reserve42,130  
Net unrealized (gain) loss on valuation of interest rate cap1,370 (309)
Depreciation and amortization5,501 1,839 
Net unrealized (gain) loss on mortgage-backed securities, fair value option(325) 
Net unrealized (gain) loss on mortgage loans and obligations held in securitization trusts742  
Changes in assets and liabilities
Reimbursement due from (due to) sponsor605  
Interest receivable(3,747)(15,580)
Other assets1,756 (9,418)
Due to related party753 194 
Interest payable9,343 11,236 
Other liabilities2,526 9,554 
Net cash provided by (used in) operating activities201,619 96,098 
Cash flows used in investing activities
Origination and fundings of loans receivable(1,014,971)(3,731,304)
Principal collections from loans receivable, held-for-investment586,298 489,846 
Exit and extension fees received on loans receivable, held-for-investment851 472 
Purchases of mortgage-backed securities, at fair value(86,636)(150,598)
Principal repayments of mortgage-backed securities, at fair value22,387 9,169 
Purchases of mortgage-backed securities held-to-maturity (48,536)
Acquisition of real estate (193,868)
Capital improvements to real estate(128) 
Net cash provided by (used in) investing activities(492,199)(3,624,819)
Cash flows from financing activities
Issuance of common stock685,403 1,311,962 
Redemptions of common stock(273,855)(76,046)
Stockholder distributions paid(70,506)(37,959)
Stockholder servicing fees paid(10,074)(6,385)
Offering costs paid(5,159)(11,204)
Borrowing under mortgage note payable 124,700 
Borrowings under repurchase agreements122,261 1,667,021 
Repayments under repurchase agreements(640,322)(1,688,409)
Borrowings under credit facilities807,084 1,276,366 
Repayments under credit facilities(268,066)(771,451)
Proceeds from issuance of collateralized loan obligations 1,971,137 
Repayment of collateralized loan obligations(40,029)(109,631)
Payment of deferred financing costs(2,900)(33,746)
Net cash provided by (used in) financing activities303,837 3,616,355 
Total increase (decrease) in cash, cash equivalents and restricted cash13,257 87,634 
Cash, cash equivalents and restricted cash at beginning of period201,618 85,808 
Cash, cash equivalents and restricted cash at end of period$214,875 $173,442 






See notes to unaudited consolidated financial statements.

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Table of Contents
FS Credit Real Estate Income Trust, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)

Nine Months Ended September 30, 2023
20232022
Supplemental disclosure of cash flow information and non-cash financial activities
Payments of interest$290,059 $85,386 
Accrued stockholder servicing fee$8,140 $55,173 
Distributions payable$8,717 $5,789 
Reinvestment of stockholder distributions$68,670 $37,838 
Payable for shares repurchased$27,067 $28,125 
Loan principal payments held by servicer$46,316 $611 
Payable for investments purchased$6,663 $ 
Purchase of mortgage loans held in securitization trusts at fair value$(6,663)$ 
Mortgage obligations issued by securitization trusts, at fair value$298,170 $ 












See notes to unaudited consolidated financial statements.

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FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements
(in thousands, except share and per share amounts)
Note 1. Principal Business and Organization

FS Credit Real Estate Income Trust, Inc., or the Company, was incorporated under the general corporation laws of the State of Maryland on November 7, 2016 and formally commenced investment operations on September 13, 2017. The Company is currently conducting a public offering of up to $2,750,000 of its Class T, Class S, Class D, Class M and Class I shares of common stock pursuant to a registration statement on Form S-11 filed with the Securities and Exchange Commission, or SEC, consisting of up to $2,500,000 in shares in its primary offering and up to $250,000 in shares pursuant to its distribution reinvestment plan. The Company is also conducting a private offering of its Class I common stock and previously conducted private offerings of its Class F common stock and Class Y common stock. The Company is managed by FS Real Estate Advisor, LLC, or FS Real Estate Advisor, a subsidiary of the Company’s sponsor, Franklin Square Holdings, L.P., which does business as FS Investments, or FS Investments, a national sponsor of alternative investment funds designed for the individual investor. FS Real Estate Advisor has engaged Rialto Capital Management, LLC, or Rialto, to act as its sub-adviser.
The Company has elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2017. The Company intends to be an investment vehicle of indefinite duration focused on real estate debt investments and other real estate-related assets. The shares of common stock are generally intended to be sold and repurchased by the Company on a continuous basis. The Company intends to conduct its operations so that it is not required to register under the Investment Company Act of 1940, as amended, or the 1940 Act.
The Company’s primary investment objectives are to: provide current income in the form of regular, stable cash distributions to achieve an attractive dividend yield; preserve and protect invested capital; realize appreciation in net asset value, or NAV, from proactive investment management and asset management; and provide an investment alternative for stockholders seeking to allocate a portion of their long-term investment portfolios to commercial real estate debt with lower volatility than public real estate companies.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation: The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The unaudited consolidated financial statements include both the Company’s accounts and the accounts of its wholly owned subsidiaries and variable interest entities, or VIEs, of which the Company is the primary beneficiary, as of September 30, 2023. All significant intercompany transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. The Company has evaluated the impact of subsequent events through the date the unaudited consolidated financial statements were issued.
Reclassifications: Certain amounts in the unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2023 and the audited consolidated financial statements as of and for the year ended December 31, 2022 may have been reclassified to conform to the classifications used to prepare the unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2023.
Use of Estimates: The preparation of the unaudited consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation: Financial Accounting Standards Board, or FASB, Accounting Standards Codification Topic 810—Consolidation, or ASC Topic 810, provides guidance on the identification of a VIE (an entity for which control is achieved through means other than voting rights) and the determination of which business enterprise, if any, should consolidate the VIE. An entity is considered a VIE if any of the following applies: (1) the equity investors (if any) lack one or more of the essential characteristics of a controlling financial interest; (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support; or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest.
The Company consolidates VIEs in which it is considered to be the primary beneficiary. The primary beneficiary is defined as the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the VIE’s performance; and (2) the obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE. The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the VIE’s capital structure, contractual terms, nature of the VIE’s operations and purpose and the
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FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 2. Summary of Significant Accounting Policies (continued)
Company’s relative exposure to the related risks of the VIE on the date it becomes initially involved in the VIE. The Company reassesses its VIE determination with respect to an entity on an ongoing basis. For the Company's consolidated securitization VIEs, the third party ownership interests are reflected as liabilities in the Company's consolidated balance sheet because the beneficial interests payable to these third parties are legally issued in the form of debt. The Company's presentation of net income attributes earnings to controlling and non-controlling interests. Refer to Note 10 for additional discussion of the Company's VIEs.
Cash, Cash Equivalents and Restricted Cash: The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company invests its cash in overnight institutional money market funds. As of September 30, 2023 and 2022, the Company's investment in overnight institutional money market funds was $138,344 and $49,725, respectively. The Company's uninvested cash is maintained with high credit quality financial institutions, which are members of the Federal Deposit Insurance Corporation. The Company's cash is held with major financial institutions and may at times exceed federally insured limits. Restricted cash primarily represents cash held in an account to fund additional collateral interests within the Company's collateralized loan obligations.
The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Company’s unaudited consolidated balance sheets to the total amount shown in the Company’s unaudited consolidated statements of cash flows:
September 30,
20232022
Cash and cash equivalents$166,940 $147,321 
Restricted cash47,935 26,121 
Total cash, cash equivalents and restricted cash$214,875 $173,442 
Loans Receivable: The Company originates and purchases commercial real estate debt and related instruments generally to be held as long-term investments at amortized cost. Loans that the Company originates or purchases that the Company is unable to hold, or intends to sell or otherwise dispose of, in the foreseeable future are classified as held-for-sale and are carried at the lower of amortized cost or fair value. The Company's held-for-sale securities are subject to the adoption of ASU 2016-13, as discussed below.
Mortgage-backed Securities: Mortgage-backed securities are classified as held-to-maturity or available-for-sale or accounted for under the fair value option. The Company determines the appropriate classification of its securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. Mortgage-backed securities are classified as held-to-maturity when the Company intends to, and has the ability to hold until maturity. Held-to-maturity securities are stated at amortized cost on the consolidated balance sheets. The Company’s remaining mortgage-backed securities are classified as either available-for-sale or accounted for under the fair value option and are reported at fair value on the consolidated balance sheets as components of Mortgage-backed securities, at fair value. The Company elected the fair value option for all mortgage-backed securities acquired during the three and nine months ended September 30, 2023. Changes in fair value for mortgage-backed securities accounted for under the fair value option are recorded in the consolidated statements of operations as a component of Net change in unrealized gain (loss) on mortgage-backed securities, fair value option. The Company chose to elect the fair value option in order to simplify the accounting treatment for its investment securities. The fair value option provides an option to elect fair value as an alternative measurement for selected financial instruments. The fair value option may be elected only upon the occurrence of certain specified events, including when the Company enters into an eligible firm commitment, at initial recognition of the financial instrument, as well as upon a business combination or consolidation of a subsidiary. The election is irrevocable unless a new election event occurs. Prior to the three and nine months ended September 30, 2023, all mortgage-backed securities acquired that were not classified as held-to-maturity were classified as available-for-sale, stated at fair value and the changes in fair value are recorded in other comprehensive income. The Company’s held-to-maturity and available-for-sale securities are subject to the adoption of ASU 2016-13, as discussed below.
Credit Losses: ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), or ASU 2016-13, became effective for the Company on January 1, 2023. ASU 2016-13 significantly changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the previous incurred loss model with a current expected credit loss (“CECL”) model for instruments measured at amortized cost. The CECL model applies to the Company's loans receivable, held-for-investment and its mortgage-backed securities held-to-maturity which are carried at amortized cost, including future funding commitments and accrued interest receivable related to those loans and securities. However, as permitted by ASC Topic 326, the Company has elected not to measure an allowance for credit
9

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FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 2. Summary of Significant Accounting Policies (continued)
losses on accrued interest receivable (which is classified separately on its consolidated balance sheets), but rather write off in a timely manner by reversing interest income and/or cease accruing interest that would likely be uncollectible.
CECL requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the macroeconomic environment. Considering the lack of historical company data related to any realized loan losses since its inception, the Company elected to estimate its general CECL reserve by using a probability-weighted analytical model that considers the likelihood of default and loss-given-default for each individual loan. The credit loss model utilizes historical loss rates derived from a third party commercial real estate loan database with historical loan loss data beginning in 1998. The Company provides specific loan-level inputs which include loan-to-value, principal balances, property type, location, coupon, origination year, term, subordination, expected repayment dates, and property net operating income. The Company also considers qualitative and environmental factors, including, but not limited to, macroeconomic forecasts and business conditions and trends, concentration of credit and changes in the level of such concentrations. The reasonable and supportable forecast period is followed by an immediate reversion period back to historical loss rates.
The Company's loans typically include commitments to fund incremental proceeds to its borrowers over the life of the loan, which future funding commitments are also subject to the CECL model. The CECL reserve related to future loan fundings is recorded as a component of Other liabilities on its consolidated balance sheets. This CECL reserve is estimated using the same process outlined above for its outstanding loan balances, and changes in this component of the CECL reserve will similarly impact its consolidated net income.
For both the funded and unfunded portions of its loans, the Company considers its internal risk rating of each loan as the primary credit quality indicator underlying the assessment. FS Real Estate Advisor and Rialto perform a quarterly review of the Company's portfolio of loans. In connection with this review, FS Real Estate Advisor and Rialto assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, loan-to-value ratio, or LTV, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. Based on a 5-point scale, the Company's loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:
Loan Risk RatingSummary Description
1
Very Low Risk
2
Low Risk
3
Medium Risk
4
High Risk/Potential for Loss
5
Impaired/Loss Likely: A loan that has a very high risk of realizing a principal loss or has otherwise incurred a principal loss
Impairment is indicated when it is deemed probable that the Company will not be able to collect all amounts due to it pursuant to the contractual terms of the loan. If a loan is determined to be impaired, the Company records the impairment as a specific CECL reserve. For determining a specific CECL reserve, financial instruments are assessed outside of the CECL model on an individual basis. For collateral dependent loans that the Company determines foreclosure of the collateral is probable, the Company measures the expected losses based on the differences between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. For collateral dependent loans where the Company determine foreclosure is not probable, a practical expedient to estimate expected losses is applied using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan. These valuations require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed necessary by FS Real Estate Advisor and Rialto. Actual losses, if any, could ultimately differ from these estimates.
The Company adopted ASU 2016-13 using the modified-retrospective method for all financial assets measured at amortized cost. Prior to its adoption, the Company had no loan loss provisions on its consolidated balance sheets. The Company recorded a cumulative-effect adjustment to the opening retained earnings in its unaudited consolidated statement of changes in equity as of January 1, 2023. The following table details the impact of this adoption:

10

Table of Contents
FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 2. Summary of Significant Accounting Policies (continued)


Impact of ASU 2016-13 Adoption
Assets:
Loans receivable, held-for-investment
Senior loans$35,456 
Mezzanine loans3,963 
CECL reserve on Loans receivable, held-for-investment39,419 
CECL reserve on Mortgage-backed securities held-to-maturity939 
Liabilities:
Other liabilities
CECL reserve on unfunded loan commitments1,163 
Total impact of 2016-13 adoption on retained earnings$41,521 
Separate provisions of ASC Topic 326 apply to the Mortgage-backed securities available-for-sale, which are carried at fair value with unrealized gains and losses reported as a component of Accumulated other comprehensive income (loss). The Company is required to establish an initial credit loss allowance for those available-for-sale securities that are purchased with credit deterioration (“PCD”) by grossing up the amortized cost basis of each security and providing an offsetting credit loss allowance for the difference between expected cash flows and contractual cash flows, both on a present value basis. As of the January 1, 2023 effective date, no such credit loss allowance gross-up was required on available-for-sale debt securities with PCD.
The Company uses a discounted cash flow method to estimate and recognize a credit loss allowance on its available-for-sale securities. The credit loss allowance represents the difference between the security's amortized cost basis and the present value of expected cash flows. The credit loss allowance is limited to the difference between the security's fair value and its amortized cost. Changes in the credit loss allowance are recognized immediately in earnings as a component of (Increase) decrease in current expected credit loss reserve.
Real Estate: In accordance with the guidance for business combinations, the Company determines whether the acquisition of a property qualifies as a business combination, which requires that the assets acquired and liabilities assumed constitute a business. If the property acquired is not a business, the Company accounts for the transaction as an asset acquisition. The guidance for business combinations states that when substantially all the fair value of the gross assets to be acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the asset or set of assets is not a business. The one property acquisition to date was acquired in 2022 and was accounted for as an asset acquisition.
Upon the acquisition of a property, the Company assesses the fair value of acquired tangible and intangible assets (including land, buildings, tenant improvements, “above-market” and “below-market” leases, acquired in-place leases, other identified intangible assets and assumed liabilities) and allocates the purchase price to the acquired assets and assumed liabilities. The Company assesses and considers fair value based on estimated cash flow projections that utilize discount and/or capitalization rates that it deems appropriate, as well as other available market information. Estimates of future cash flows are based on several factors including the historical operating results, known and anticipated trends and market and economic conditions. The Company capitalizes acquisition-related costs associated with asset acquisitions.
The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant. The Company records acquired in-place lease values based on the Company’s evaluation of the specific characteristics of each tenant’s lease. The Company will record acquired above-market and below-market leases at their fair values which represents the present value of the difference between contractual rents of acquired leases and market rents at the time of the acquisition for the remaining lease term, discounted for tenant credit risks. The Company also considers an allocation of purchase price of other acquired intangibles, including acquired in-place leases that may have a customer relationship intangible value, including (but not limited to) the nature and extent of the existing relationship with the tenants, the tenants’ credit quality and expectations of lease renewals. Based on its acquisition to date, the Company’s allocation to customer relationship intangible assets has not been material.
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Table of Contents
FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 2. Summary of Significant Accounting Policies (continued)
Intangible assets and intangible liabilities are recorded as a component of other assets and other liabilities, respectively, on the Company’s consolidated balance sheets. The amortization of acquired above-market, below-market, and in-place leases is recorded as an adjustment to rental operations, net, on the Company’s unaudited consolidated statements of operations.
The cost of buildings and improvements includes the purchase price of the Company’s properties and any acquisition-related costs, along with any subsequent improvements to such properties. The Company’s investments in real estate are stated at cost and are generally depreciated on a straight-line basis over the estimated useful lives of the assets as follows:
DescriptionDepreciable Life
Building
30 to 42 years
Building and land improvements
2 to 20 years
Furniture, fixtures and equipment
1 to 10 years
Tenant improvementsShorter of estimated useful life or lease term
Lease intangibles Over lease term
The Company’s management reviews its real estate properties for impairment each quarter or when there is an event or change in circumstances that indicates an impaired value. Since the impairment model considers real estate properties to be “long-lived assets to be held and used,” cash flows to determine whether an asset has been impaired are undiscounted. Accordingly, the Company’s strategy of holding properties over the long term directly decreases the likelihood of recording an impairment loss. If the Company’s strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized and such loss could be material to the Company’s results. If the Company determines that an impairment has occurred, the affected assets must be reduced to their fair value. During the periods presented, no such impairment occurred.
Fair Value of Financial Instruments: Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, or ASC Topic 820, defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date.
ASC Topic 820 also establishes a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring financial instruments. Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument, and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination, as follows:
Level 1: Generally includes only unadjusted quoted prices that are available in active markets for identical financial instruments as of the reporting date.
Level 2: Pricing inputs include quoted prices in active markets for similar instruments, quoted prices in less active or inactive markets for identical or similar instruments where multiple price quotes can be obtained, and other observable inputs, such as interest rates, yield curves, credit risks, and default rates.
Level 3: Pricing inputs are unobservable for the financial instruments and include situations where there is little, if any, market activity for the financial instrument. These inputs require significant judgment or estimation by management or third parties when determining fair value and generally represent anything that does not meet the criteria of Levels 1 and 2.
The estimated value of each asset reported at fair value using Level 3 inputs is determined by an internal committee comprised of members of senior management of FS Real Estate Advisor.
Certain of the Company's assets are reported at fair value either (i) on a recurring basis, as of each quarter-end, or (ii) on a nonrecurring basis, as a result of impairment or other events. The Company generally values its assets recorded at fair value by either (i) discounting expected cash flows based on assumptions regarding the collection of principal and interest and estimated market rates, or (ii) obtaining assessments from third-party dealers. For collateral-dependent loans that are identified as impaired, the Company
12

Table of Contents
FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 2. Summary of Significant Accounting Policies (continued)
measures impairment by comparing FS Real Estate Advisor's estimation of fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. These valuations may require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed necessary by FS Real Estate Advisor and Rialto.
The Company is also required by GAAP to disclose fair value information about financial instruments that are not otherwise reported at fair value in the Company's consolidated balance sheets, to the extent it is practicable to estimate a fair value for those instruments. These disclosure requirements exclude certain financial instruments and all non-financial instruments.
The Company elected the fair value option for initial and subsequent recognition of the assets and liabilities of its consolidated securitization mortgage loans held in securitization trusts and the related CMBS investments. Interest income and interest expense associated with these loans are presented separately on the unaudited consolidated statements of operations.
The Company separately presents the assets and liabilities of its consolidated securitization loans as individual line items on its consolidated balance sheets. The liabilities of its consolidated securitization loans consist solely of obligations to the bondholders of the related trusts, and are thus presented as a single line item entitled “Mortgage obligations issued by securitization trusts.” The assets of its consolidated securitization loans consist principally of loans. These assets in the aggregate are likewise presented as a single line item entitled “Mortgage loans held in securitization trusts.” The residual difference shown on its unaudited consolidated statements of operations in the line item “Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts” represents the Company's beneficial interest in the mortgage loans.
The securitization mortgage loan assets as a whole can only be used to settle the obligations of the consolidated mortgage loans. The assets of the Company's securitization mortgage loans are not individually accessible by the bondholders, which creates inherent limitations from a valuation perspective.
The securitization mortgage loans in which the Company invests are “static”; that is, no reinvestment is permitted, and there is no active management of the underlying assets. In determining the fair value of the assets and liabilities of the securitization mortgage loans, the Company maximizes the use of observable inputs over unobservable inputs.
Liabilities of the consolidated mortgage obligations: The Company's consolidated mortgage obligations generally represent bonds that are not owned by the Company directly. The majority of these are either traded in the marketplace or can be analogized to similar securities that are traded in the marketplace. For these liabilities, pricing is considered to be Level 2, where the valuation is based upon quoted prices for similar instruments traded in active markets. The Company generally utilizes third party pricing service providers for valuing these liabilities. In order to determine whether to utilize the valuations provided by third parties, the Company conducts an ongoing evaluation of their valuation methodologies and processes, as well as a review of the individual valuations themselves. In evaluating third party pricing for reasonableness, the Company considers a variety of factors, including market transaction information for the particular bond, market transaction information for bonds within the same trust, market transaction information for similar bonds, the bond’s ratings and the bond’s subordination levels.
For the minority portion of the Company's consolidated mortgage obligations which consist of unrated or non-investment grade bonds that are not owned by the Company directly, pricing may be either Level 2 or Level 3. If independent third party pricing similar to that noted above is available, the Company considers the valuation to be Level 2. If such third party pricing is not available, the valuation is generated from model-based techniques that use significant unobservable assumptions, and the Company considers the valuation to be Level 3. For mortgage obligations classified as Level 3, valuation is determined based on discounted expected future cash flows which take into consideration expected duration and yields based on market transaction information, ratings, subordination levels, vintage and current market spread. Mortgage obligations may shift between Level 2 and Level 3 of the fair value hierarchy if the significant fair value inputs used to price the mortgage obligations become or cease to be observable.
Assets of the consolidated mortgage loans: The individual assets of a mortgage loan are inherently incapable of precise measurement given their illiquid nature and the limitations on available information related to these assets. Because the Company's methodology for valuing these assets does not value the individual assets of a mortgage loan, but rather uses the value of the mortgage obligations as an indicator of the fair value of mortgage loan assets as a whole, the Company has determined that its valuations of mortgage loan assets in their entirety should be classified in Level 3 of the fair value hierarchy.
The following methods and assumptions are used to estimate the fair value of other classes of financial instruments, for which it is practicable to estimate that value:
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Table of Contents
FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 2. Summary of Significant Accounting Policies (continued)
Cash and cash equivalents: The carrying amount of cash on deposit and in money market funds approximates fair value.
Restricted cash: The carrying amount of restricted cash approximates fair value.
Loans receivable held-for-investment, net: The fair values for these loans were estimated by FS Real Estate Advisor based on a discounted cash flow methodology taking into consideration factors, including capitalization rates, discount rates, leasing, occupancy rates, availability and cost of financing, exit plan, sponsorship, actions of other lenders, and indications of market value from other market participants.
Mortgage-backed securities, at fair value : The fair values for these investments were based on indicative deal quotes.
Mortgage-backed securities held-to-maturity: The fair values for these investments were estimated by FS Real Estate Advisor based on a discounted cash flow methodology pursuant to which a discount rate or market yield is used to discount the estimated future cash flows expected to be received from the underlying investment, which include both future principal and interest payments. Significant increases or decreases in the discount rate or market yield would result in a decrease or increase in the fair value measurement.
Collateralized loan obligations, repurchase agreements payable, credit facilities payable, and mortgage note payable: The fair values for these instruments were estimated based on the rate at which similar credit facilities would have currently been priced.
Deferred Financing Costs: Deferred financing costs include issuance and other costs related to the Company’s debt obligations. The deferred financing costs related to the Company’s collateralized loan obligations, repurchase agreements, and mortgage note payable, are recorded as a reduction in the net book value of the related liability on the Company's consolidated balance sheets. Deferred financing costs related to the Company’s revolving credit facilities and facilities that are undrawn as of the reporting date are recorded as an asset on the Company’s consolidated balance sheets. These costs are amortized as interest expense using the straight-line method over the term of the related obligation, which approximates the effective interest method.
Revenue Recognition: Security transactions are accounted for on the trade date. The Company records interest income from its loans receivable portfolio on an accrual basis to the extent that the Company expects to collect such amounts. The Company does not accrue as a receivable interest or dividends on loans and securities if there is reason to doubt the collectability of such income. Discounts or premiums associated with the investment securities are amortized or accreted into interest income as a yield adjustment on the effective interest method, based on expected cash flows through the expected maturity date of the investment. On at least a quarterly basis, the Company reviews and, if appropriate, makes adjustments to its cash flow projections. The Company records dividend income on the ex-dividend date. Any loan origination fees to which the Company is entitled, loan exit fees, original issue discount and market discount are capitalized and such amounts are amortized as interest income over the respective term of the investment. Upon the prepayment of a loan or security, any unamortized loan origination fees to which the Company is entitled are recorded as fee income. The Company records prepayment premiums on loans and securities as fee income when it receives such amounts.
Loans are considered past due when payments are not made in accordance with the contractual terms. The Company does not accrue as receivable interest on loans if it is not probable that such income will be collected. Unless the loan is both well secured and in the process of collection, loans are placed on non-accrual status when principal or interest is 120 days or more past due or when repayment of interest and principal is, in our judgment, in doubt. Interest payments received on non-accrual loans are generally recognized as interest income on a cash basis. If a full recovery of principal is doubtful, the cost recovery method is applied whereby any cash received is applied to the outstanding principal balance of the loan. Recognition of interest income on non-performing loans on an accrual basis is resumed when it is probable that the Company will be able to collect amounts due according to the contractual terms. As of September 30, 2023 and December 31, 2022, there were no loans with accrued interest past due 30 days or more, respectively.
Offering Costs: Offering costs primarily include, among other things, marketing expenses and printing, legal and due diligence fees and other costs pertaining to the Company’s continuous public offering of shares of its common stock, including the preparation of the registration statement and salaries and direct expenses of FS Real Estate Advisor’s personnel, employees of its respective affiliates and others while engaged in such activities. The Company may reimburse FS Real Estate Advisor and Rialto for any offering expenses that they incurred on the Company's behalf, up to a cap of 0.75% of gross proceeds raised after such time. During the period from November 7, 2016 (Inception) to September 30, 2023, the Company incurred offering costs of $23,659, which were paid on its behalf by FS Investments (see Note 7).
Income Taxes: The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the Code, commencing with its taxable year ended December 31, 2017. In order to maintain its status as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to
14

Table of Contents
FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 2. Summary of Significant Accounting Policies (continued)
its stockholders. As a REIT, the Company generally will not be subject to federal income tax on income that it distributes to stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions.
Uncertainty in Income Taxes: The Company evaluates each of its tax positions to determine if they meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax benefits or liabilities in the unaudited consolidated financial statements. Recognition of a tax benefit or liability with respect to an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. The Company recognizes interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in the unaudited consolidated statements of operations. During the nine months ended September 30, 2023 and 2022, the Company did not incur any interest or penalties and none are accrued at September 30, 2023.
Stockholder Servicing Fees: The Company follows the guidance in Accounting Standards Codification Topic 405, Liabilities, when accounting for stockholder servicing fees. The Company will pay stockholder servicing fees over time on its shares of Class T, Class S, Class D and Class M common stock as described in Note 7. The Company records stockholder servicing fees as a reduction to additional paid-in capital and records the related liability in an amount equal to its best estimate of the fees payable in relation to the shares of Class T, Class S, Class D and Class M common stock on the date such shares are issued. The liability will be reduced over time, as the fees are paid to the dealer manager, or adjusted if the fees are no longer payable.
Earnings Per Share: The restricted stock units grant Class I shares issued to FS Real Estate Advisor and Rialto for payment of the administrative services fee are considered to be participating securities. The impact of these restricted stock units on basic and diluted earnings per common share ("EPS") has been calculated using the two-class method whereby earnings are allocated to the restricted stock units based on dividends declared and the restricted stock units' participation rights in undistributed earnings. As of September 30, 2023 and December 31, 2022, the effects of the two-class method on basic and diluted EPS were not material to the Company's consolidated financial statements.
Derivative Instruments: The Company uses interest rate caps to manage risks from fluctuations in interest rates. The Company has not designated any of these contracts as fair value or cash flow hedges for accounting purposes. The Company records its derivatives on its consolidated balance sheets at fair value and such amounts are included in Other assets. Any changes in the fair value of these derivatives are recorded in earnings.
The valuation of the Company's interest rate caps is determined based on assumptions that management believes market participants would use in pricing, using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivative. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. However, as of September 30, 2023, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
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Table of Contents
FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 3. Loans Receivable, net

The following table details overall statistics for the Company's loans receivable portfolio as of September 30, 2023 and December 31, 2022:
September 30, 2023 (Unaudited)December 31, 2022
Number of loans143 142 
Principal balance$7,735,561 $7,350,271 
Net book value$7,665,632 $7,350,315 
Unfunded loan commitments(1)
$456,666 $574,510 
Weighted-average cash coupon(2)(3)
+3.90%+3.83 %
Weighted-average all-in yield(2)(3)
+3.97%+3.90 %
Weighted-average maximum maturity (years)(4)
3.34.0
_________________________
(1)    The Company may be required to provide funding when requested by the borrowers in accordance with the terms of the underlying agreements.
(2)    The Company's floating rate loans are expressed as a spread over the relevant benchmark rates, which include the Secured Overnight Financing Rate, or SOFR. In addition to cash coupon, all-in yield includes accretion of discount (amortization of premium) and accrual of exit fees.
(3)    As of September 30, 2023, the one-month SOFR rate was 5.32%. As of December 31, 2022, the one-month LIBOR rate was 4.39% and the one-month SOFR rate was 4.36%.
(4)    Maximum maturity assumes all extension options are exercised by the borrowers; however, loans may be repaid prior to such date.
For the nine months ended September 30, 2023 and 2022, the activity in the Company's loan portfolio, was as follows:
For the Nine Months Ended September 30,
20232022
Loans receivable at beginning of period$7,350,315 $3,841,868 
Loan fundings1,014,971 3,731,304 
Loan repayments(631,692)(483,832)
Amortization of deferred fees on loans5,159 2,973 
Exit and extension fees received on loans receivable(851)(472)
Loans receivable at end of period7,737,902 7,091,841 
CECL reserve (72,270) 
Loans receivable, net, at end of period$7,665,632 $7,091,841 
The following tables detail the property type and geographic location of the properties securing the loans in the Company's loans receivable, held-for-investment portfolio as of September 30, 2023 and December 31, 2022:
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Table of Contents
FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 3. Loans Receivable, net (continued)
September 30, 2023 (Unaudited)December 31, 2022
Property TypeNet Book ValuePercentageNet Book ValuePercentage
Multifamily$4,752,761 61 %$4,439,830 61 %
Hospitality1,025,990 13 %792,305 11 %
Office678,392 9 %755,797 10 %
Industrial573,407 7 %369,551 5 %
Retail268,112 4 %424,374 6 %
Self Storage200,490 3 %317,861 4 %
Various142,919 2 %156,031 2 %
Mixed Use95,831 1 %94,566 1 %
Loans receivable at end of period7,737,902 100 %7,350,315 100 %
CECL reserve(72,270) 
Loans receivable, net, at end of period$7,665,632 $7,350,315 
September 30, 2023 (Unaudited)December 31, 2022
Geographic Location(1)
Net Book ValuePercentageNet Book ValuePercentage
South$3,753,978 49 %$3,719,093 51 %
West1,546,279 20 %1,487,391 20 %
Northeast1,430,235 18 %1,326,408 18 %
Various688,390 9 %507,105 7 %
Midwest319,020 4 %310,318 4 %
Loans receivable at end of period7,737,902 100 %7,350,315 100 %
CECL reserve(72,270) 
Loans receivable, net, at end of period$7,665,632 $7,350,315 
__________________________
(1)    As defined by the United States Department of Commerce, Bureau of the Census.
Loan Risk Rating
As further described in Note 2, FS Real Estate Advisor and Rialto assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, loan-to-value ratio, or LTV, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. Based on a 5-point scale, the Company's loans are rated "1" through "5", from less risk to greater risk, which ratings are defined in Note 2.
The following table allocates the net book value of the Company's loans receivable, held-for-investment portfolio based on the Company's internal risk ratings:
September 30, 2023 (Unaudited)December 31, 2022
Risk RatingNumber of LoansNet Book ValuePercentageNumber of LoansNet Book ValuePercentage
1 $   $  
2      
3132 7,293,831 95 %142 7,350,315 100 %
410 407,584 5 %   
51 36,487  %   
Loans receivable at end of period143 7,737,902 100 %142 7,350,315 100 %
CECL reserve(72,270) 
Loans receivable, net, at end of period$7,665,632 $7,350,315 
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Table of Contents
FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 3. Loans Receivable, net (continued)
Current Expected Credit Loss Reserve
The CECL reserve required under GAAP reflects the Company's current estimate of potential credit losses related to the loans and debt securities included in its consolidated balance sheets. The general CECL reserve is measured on a collective basis wherever similar risk characteristics exist within a pool of similar assets. The Company has identified senior loans and mezzanine loans as pools within its loans receivable portfolio. Refer to Note 2 for further discussion of the Company's CECL reserve.
The following table provides details on the changes in CECL reserve for funded loans by investment pool:
Senior LoansMezzanine LoansTotal
CECL Reserve as of December 31, 2022$ $ $ 
CECL reserve recorded on January 1, 202335,456 3,963 39,419 
Increase (Decrease) in general CECL reserve1,224 378 1,602 
CECL reserve as of March 31, 2023$36,680 $4,341 $41,021 
Increase (Decrease) in general CECL reserve29,456 1,162 30,618 
Increase (Decrease) in specific CECL reserve2,967  2,967 
CECL reserve as of June 30, 2023$69,103 $5,503 $74,606 
Increase (Decrease) in general CECL reserve(2,291)(45)(2,336)
Increase (Decrease) in specific CECL reserve   
CECL reserve as of September 30, 2023
$66,812 $5,458 $72,270 
The Company's initial CECL reserve against its loans receivable portfolio of $39,419 recorded on January 1, 2023 is reflected as a direct charge to retained earnings on its unaudited consolidated statements of changes in equity; however subsequent changes to the CECL reserve are recognized through net income on its unaudited consolidated statements of operations. During the three and nine months ended September 30, 2023, the Company recorded a decrease of $2,336 and an increase of $32,851, respectively, in expected credit loss reserve against its loans receivable portfolio, bringing the total CECL reserve to $72,270 as of September 30, 2023.
The Company had one risk-rated 5 senior office loan located in Seattle, WA, originated in December 2021, with an outstanding principal balance of $36,500, amortized cost of $36,487, and an unfunded commitment of $9,600 as of September 30, 2023. The property experienced slower than anticipated leasing activity due to softness in the overall Seattle market office trends. During the three and nine months ended September 30, 2023, the Company recorded a $2,967 specific CECL reserve related to the loan calculated using the loan's collateral fair value, which was determined by applying a capitalization rate of 7.25% and a discount rate of 9.25%. In May 2023, this loan was placed on non-accrual status and future interest collections will be accounted for under the cost recovery method. The Company did not have any additional impaired loans, non-accrual loans, or loans in maturity default within the loans receivable, held-for-investment portfolio as of September 30, 2023.
The Company's primary credit quality indicator is its risk ratings, which are further discussed in Note 2. The following table presents the net book value of its loans receivable, held-for-investment portfolio as of September 30, 2023 by year of origination and risk rating:
Risk Rating
Net Book Value of Loans Receivable by Year of Origination
September 30, 2023 (Unaudited)
20232022202120202019PriorTotal
1$ $ $ $ $ $ $ 
2       
3639,009 3,758,801 2,704,837 84,303 65,431 41,450 7,293,831 
4 324,836 49,667 17,669 15,412  407,584 
5  36,487    36,487 
Loans receivable$639,009 $4,083,637 $2,790,991 $101,972 $80,843 $41,450 $7,737,902 
CECL reserve(72,270)
Loans receivable, net$7,665,632 
Current Expected Credit Loss Reserve for Unfunded Loan Commitments
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Table of Contents
FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 3. Loans Receivable, net (continued)
As of September 30, 2023, the Company had unfunded commitments of $456,666. The expected credit losses over the contractual period of its loans are subject to the obligation to extend credit through its unfunded loan commitments. See Note 2 for further discussion of the CECL reserve related to its unfunded loan commitments. The following table provides details on the changes in CECL reserve for unfunded loan commitments by investment pool:
Unfunded Commitments CECL Reserve
September 30, 2023 (Unaudited)
Senior LoansMezzanine LoansTotal
Unfunded Loan Commitments
CECL Reserve as of December 31, 2022$ $ $ 
CECL reserve recorded on January 1, 20231,129 34 1,163 
Increase (Decrease) in CECL reserve(33)1 (32)
CECL reserve as of March 31, 2023$1,096 $35 $1,131 
Increase (Decrease) in CECL reserve638 (3)635 
CECL reserve as of June 30, 2023$1,734 $32 $1,766 
Increase (Decrease) in CECL reserve(122)(8)(130)
CECL reserve as of September 30, 2023
$1,612 $24 $1,636 
The Company's initial CECL reserve against its unfunded loan commitments of $1,163 recorded on January 1, 2023 is reflected as a direct charge to retained earnings on its unaudited consolidated statements of changes in equity; however subsequent changes to the CECL reserve are recognized through net income on the unaudited consolidated statements of operations. During the three and nine months ended September 30, 2023, the Company recorded a decrease of $130 and an increase of $473, respectively, in expected credit loss reserve against its unfunded loan commitments, bringing the Company's total CECL reserve on its unfunded loan commitments to $1,636 as of September 30, 2023.
Note 4. Mortgage Backed Securities
Mortgage-backed securities, at fair value
Commercial mortgage-backed securities, or CMBS, classified as available-for-sale are reported at fair value on the consolidated balance sheets with changes in fair value recorded in other comprehensive income. CMBS accounted for under the fair value option are reported at fair value on the consolidated balance sheets with changes in fair value recorded in the consolidated statements of operations as a component of Net change in unrealized gain (loss) on mortgage-backed securities, fair value option.
The table below summarizes various attributes of the Company's investments in CMBS reported at fair value as of September 30, 2023 and December 31, 2022, respectively.
Gross UnrealizedWeighted Average
Outstanding Face AmountAmortized Cost BasisAllowance for Credit LossesGainsLossesFair ValueCouponRemaining Duration (years)
September 30, 2023 (Unaudited)
CMBS, available-for-sale$172,392 $169,739 $(9,674)$96 $(8,226)$151,935 
10.06%(1)
14.7
CMBS, fair value option$75,830 $72,835 $ $406 $(81)$73,160 
7.30%(1)
2.8
December 31, 2022
CMBS, available-for-sale$173,207 $171,369 $ $45 $(11,950)$159,464 
9.18%(2)
12.7
__________________________
(1)    Calculated using the one-month SOFR rate of 5.32% as of September 30, 2023.
(2)    Calculated using the one-month LIBOR rate of 4.39% and the one-month SOFR rate of 4.36% as of December 31, 2022.

As of September 30, 2023, there was one CMBS, available for sale placed on non-accrual status during the quarter with an amortized cost of $14,126. All future interest collections will be accounted for under the cost recovery method.
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FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 4. Mortgage Backed Securities (continued)

The Company uses a discounted cash flow method to estimate and recognize an allowance for its available-for sale securities. The following table provides details on the changes in allowance for credit losses for available-for sale securities:
Nine Months Ended September 30, 2023
Allowance for credit losses at beginning of period$ 
Additions on securities for which credit losses were not previously recorded 
(Increase) decrease on securities with previously recorded credit losses 
Allowance for credit losses as of March 31, 2023 
Additions on securities for which credit losses were not previously recorded(6,992)
(Increase) decrease on securities with previously recorded credit losses 
Allowance for credit losses as of June 30, 2023(6,992)
Additions on securities for which credit losses were not previously recorded 
(Increase) decrease on securities with previously recorded credit losses(2,682)
Allowance for credit losses as of September 30, 2023$(9,674)

The following table presents the gross unrealized losses and estimated fair value of any available-for-sale securities for which an allowance for credit losses has not been recorded that were in an unrealized loss position as of September 30, 2023 and December 31, 2022, respectively.
Estimated Fair ValueUnrealized Losses
Securities with a loss less than 12 monthsSecurities with a loss greater than 12 monthsSecurities with a loss less than 12 monthsSecurities with a loss greater than 12 months
September 30, 2023 (Unaudited)
CMBS, available-for-sale$175,428 $97,174 $(8,312)$(8,183)
December 31, 2022
CMBS, available-for-sale$150,230 $756 $(11,889)$(61)
As of September 30, 2023 and December 31, 2022, there were ten securities and fifteen securities, respectively, with unrealized losses reflected in the table above. After evaluating the securities and recording adjustments for credit losses, the Company concluded that the remaining unrealized losses reflected above were noncredit-related and would be recovered from the securities’ estimated future cash flows. The Company considered a number of factors in reaching this conclusion, including that it did not intend to sell the securities, it was not considered more likely than not that the Company would be forced to sell the securities prior to recovering its amortized cost, and there were no material credit events that would have caused the Company to otherwise conclude that it would not recover the cost of the securities.
Mortgage-backed securities, held-to-maturity
The table below summarizes various attributes of the Company's investments in held-to-maturity CMBS as of September 30, 2023 and December 31, 2022, respectively.
Amortized Cost BasisCredit Loss AllowanceNet Carrying AmountGross Unrecognized Holding GainsGross Unrecognized Holding LossesFair Value
September 30, 2023 (Unaudited)
CMBS, held-to-maturity$74,614 $(71)$74,543 $ $(7,340)$67,203 
December 31, 2022
CMBS, held-to-maturity$68,559 $ $68,559 $ $ $68,559 
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FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 4. Mortgage Backed Securities (continued)

The following table provides details on the changes in CECL reserve for held-to-maturity CMBS:
September 30, 2023 (Unaudited)
CMBS, held-to-maturity
CECL Reserve as of December 31, 2022$ 
CECL reserve recorded on January 1, 2023939 
Increase (Decrease) in CECL reserve(283)
CECL reserve as of March 31, 2023$656 
Increase (Decrease) in CECL reserve(268)
CECL reserve as of June 30, 2023$388 
Increase (Decrease) in CECL reserve(317)
CECL reserve as of September 30, 2023
$71 
The table below summarizes the maturities of the Company's investments in held-to-maturity CMBS as of September 30, 2023 and December 31, 2022, respectively:
TotalLess than 1 year1-3 years3-5 yearsMore than 5 years
September 30, 2023 (Unaudited)
CMBS, held-to-maturity$74,614 $ $44,492 $30,122 $ 
December 31, 2022
CMBS, held-to-maturity$68,559 $ $38,435 $30,124 $ 
Note 5. Real Estate
Investment in real estate, net, consisted of the following as of September 30, 2023 and December 31, 2022:
September 30, 2023 (Unaudited)
December 31, 2022
Building and building improvements$120,527 $120,527 
Land and land improvements39,186 39,186 
Furniture, fixtures and equipment1,064 1,064 
In-place lease intangibles33,530 33,402 
Total194,307 194,179 
Accumulated depreciation and amortization(9,131)(3,630)
Real estate, net$185,176 $190,549 

The following table details the Company's future amortization of intangible assets for each of the next five years and thereafter:

Amortization
2023 (remaining)$912 
20243,814 
20253,814 
20263,806 
20273,803 
Thereafter12,134 
Total$28,283 
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FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 5. Real Estate (continued)

The components of rental operations, net on the Company's unaudited consolidated statements of operations consisted of the following:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Rental income$5,297 $3,569 $14,985 $3,569 
Less: depreciation and amortization(1,835)(1,839)(5,501)(1,839)
Less: cost of rental operations(1)
(3,696)(2,798)(11,415)(2,798)
Rental operations, net$(234)$(1,068)$(1,931)$(1,068)
________________
(1)    Cost of rental operations during the three and nine months ended September 30, 2023, includes $2,365 and $6,718, respectively, of interest expense related to the mortgage note payable.
Note 6. Financing Arrangements
The following tables present summary information with respect to the Company's outstanding financing arrangements as of September 30, 2023 and December 31, 2022.
As of September 30, 2023 (Unaudited)
Arrangement
Weighted Average Spread(2)
Amount Outstanding(1)
Amount AvailableMaturity DateCarrying Amount of CollateralFair Value of Collateral
Collateralized Loan Obligations
2019-FL1 Notes
 +1.66%(2)
$194,223 $ December 18, 2036$292,227 $290,996 
2021-FL2 Notes
 +1.64%(2)
640,056  May 5, 2038768,945 761,177 
2021-FL3 Notes
 +1.61%(2)
928,483  November 4, 20361,102,550 1,094,349 
2022-FL4 Notes
 +2.21%(5)
837,662  January 31, 20391,080,659 1,068,520 
2022-FL5 Notes
 +2.78%(5)
560,224  June 17, 2037689,919 680,370 
2022-FL6 Notes
 +2.84%(5)
552,100  August 19, 2037749,880 742,077 
2022-FL7 Notes
 +3.18%(5)
631,042  October 17, 2039814,659 806,603 
4,343,790  5,498,839 5,444,092 
Repurchase Agreements
WF-1 Facility
 +1.88%(3)
48,870 551,130 August 30, 202462,596 61,921 
GS-1 Facility
 +2.83%(4)
18,781 431,219 January 26, 202584,448 83,981 
RBC Facility
+1.30%
29,646  N/A  
BB-1 Facility
 +1.96%(5)
11,474 688,526 February 22, 202414,801 14,690 
MS-1 Facility
 +2.65%(6)
37,537 112,463 October 13, 202589,990 88,855 
NTX-1 Facility
(3)
 250,000 November 10, 2024  
BMO-1 Facility
 +2.00%(3)
80,000  March 1, 2024276,477 276,259 
Lucid Facility
 +1.15%(3)
15,867  N/A  
242,175 2,033,338 528,312 525,706 
Revolving Credit Facility
MM-1 Facility
 +2.14%(6)(7)
850,000 150,000 September 20, 20291,148,927 1,140,393 
Barclays Facility
(8)
 310,000 August 1, 2025  
850,000 460,000 1,148,927 1,140,393 
Mortgage Loan
Natixis Loan
+2.15%(6)
124,700  July 9, 2025156,364 184,672 
Total$5,560,665 $2,493,338 $7,332,442 $7,294,863 
________________
(1)    The amount outstanding under the facilities approximates their fair value.
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FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 6. Financing Arrangements (continued)
(2)    The rates are expressed over the relevant floating benchmark rates, which include Term SOFR, and SOFR Average (compounded average of SOFR over a rolling 30-day period).
(3)    Benchmark rate is subject to a 0.00% floor. SOFR benchmark rate is selected with respect to a transaction as set forth in the related transaction confirmation for the underlying transaction.
(4)    Term SOFR is subject to a 0.00% floor. GS-1 and Goldman Sachs may mutually agree on rates outside this range or a different floor on an asset by asset basis.
(5)    Term SOFR or SOFR Average (compounded average of SOFR over a rolling 30-day period), subject to a 0.00% floor.
(6)     Term SOFR is subject to a 0.00% floor.
(7)    The rate applicable under the MM-1 Facility is subject to a credit spread adjustment of 0.11%, which was included when the benchmark transitioned from USD LIBOR to Term SOFR.
(8)    Borrowings under the Barclays Facility bear interest, at the Company's election, at either a base rate plus a spread of 1.25% per annum or one-, three- or six-month Term SOFR plus a spread of 2.25% per annum and a credit spread adjustment of 0.10% per annum.

As of December 31, 2022
Arrangement
Weighted Average Interest Rate(2)
Amount Outstanding(1)
Amount AvailableMaturity DateCarrying Amount of CollateralFair Value of Collateral
Collateralized Loan Obligations
2019-FL1 Notes
 +1.55%(3)
$196,785 $ December 18, 2036$294,751 $295,040 
2021-FL2 Notes
 +1.53%(3)
646,935  May 5, 2038782,767 783,381 
2021-FL3 Notes
 +1.51%(3)
928,483  November 4, 20361,133,769 1,135,195 
2022-FL4 Notes
 +2.21%(6)
837,662  January 31, 20391,081,159 1,080,953 
2022-FL5 Notes
 +3.05%(6)
570,112  June 17, 2037689,885 689,246 
2022-FL6 Notes
 +2.96%(6)
566,250  August 19, 2037749,837 749,502 
2022-FL7 Notes
 +3.35%(6)
637,592  October 17, 2039814,611 814,542 
4,383,819  5,546,779 5,547,859 
Repurchase Agreements
WF-1 Facility
 +2.04%(4)
375,381 224,619 August 30, 2024481,146 480,371 
GS-1 Facility
 +2.40%(5)
34,519 315,481 January 26, 202348,276 47,846 
RBC Facility
1.39%
55,934  N/A85,707 79,274 
BB-1 Facility
 +2.14%(6)
186,139 513,861 February 22, 2024236,783 236,462 
MS-1 Facility
 +2.86%(7)
108,263 41,737 October 13, 2025141,312 140,787 
NTX-1 Facility
(4)
 187,500 November 10, 2024  
760,236 1,283,198 993,224 984,740 
Revolving Credit Facilities
MM-1 Facility
 +2.14%(7)(8)
310,982 689,018 September 20, 2029439,431 439,051 
Barclays Facility
(9)
 310,000 August 1, 2025  
310,982 999,018 439,431 439,051 
Mortgage Loan
Natixis Loan
 +2.15%(7)
124,700 2,000 July 9, 2025158,963 192,039 
Total$5,579,737 $2,284,216 $7,138,397 $7,163,689 
_______________________
(1)    The amount outstanding under the facilities approximates their fair value.
(2)    The rates are expressed over the relevant floating benchmark rates, which include USD LIBOR, Term SOFR, and SOFR Average (compounded average of SOFR over a rolling 30-day period).
(3)    USD LIBOR is subject to a 0.00% floor.
(4)    Benchmark rate is subject to a 0.00% floor. LIBOR or SOFR benchmark rate is selected with respect to a transaction as set forth in the related transaction confirmation for the underlying transaction.
(5)    Term SOFR is subject to a 0.00% floor. GS-1 and Goldman Sachs may mutually agree on rates outside this range or a different floor on an asset by asset basis.
(6)    USD LIBOR, Term SOFR or SOFR Average (compounded average of SOFR over a rolling 30-day period), subject to a 0.00% floor.
(7)     Term SOFR is subject to a 0.00% floor.
(8)    The rate applicable under the MM-1 Facility is subject to a credit spread adjustment of 0.11%, which was included when the benchmark transitioned from USD LIBOR to Term SOFR.
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FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 6. Financing Arrangements (continued)
(9)    Borrowings under the Barclays Facility bear interest, at the Company's election, at either a base rate plus a spread of 1.25% per annum or one-, three- or six-month Term SOFR plus a spread of 2.25% per annum and a credit spread adjustment of 0.10% per annum.
The Company's average borrowings and weighted average interest rate, including the effect of non-usage fees, for the nine months ended September 30, 2023 were $5,674,603 and 7.12%, respectively. The Company's average borrowings and weighted average interest rate, including the effect of non-usage fees, for the year ended December 31, 2022 were $4,560,400 and 3.83%, respectively.
Under its financing arrangements, the Company has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar financing arrangements. The Company was in compliance with all covenants required by its financing arrangements as of September 30, 2023 and December 31, 2022.
Maturities
The Company generally requires the amount outstanding on debt obligations to be paid down before the financing arrangement's respective maturity date. The following table sets forth the Company's repayment schedule for secured financings outstanding as of September 30, 2023 based on the maturity date of each financing arrangement:
Collateralized Loan Obligations(1)
Repurchase AgreementsRevolving Credit FacilityMortgage LoanTotal
2023$ $ $ $ $ 
202412,597 140,344   152,941 
2025103,096 56,318  124,700 284,114 
2026556,744    556,744 
Thereafter3,671,353 45,513 850,000  4,566,866 
Total$4,343,790 $242,175 $850,000 $124,700 $5,560,665 
_______________________
(1)     The allocation of repayments under the Company's collateralized loan obligations is based on the maturity date of each agreement, or the maximum maturity date assuming all extension options are exercised by the borrower if the reinvestment period has expired.
Collateralized Loan Obligations
The Company financed certain pools of loans through collateralized loan obligations, which include 2019-FL1, 2021-FL2, 2021-FL3, 2022-FL4, 2022-FL5, 2022-FL6 and 2022-FL7, or collectively, the CLOs. The following table outlines the number of loans, including partial loans, and the principal balance of the collateralized pool of interests for each CLO.
As of September 30, 2023 (Unaudited)
Collateral AssetsTotal CountPrincipal Balance
2019-FL1 14$292,791 
2021-FL2 26769,064 
2021-FL3 301,102,723 
2022-FL4 251,080,841 
2022-FL5 25690,000 
2022-FL6 24750,000 
2022-FL7 21814,814 
Total165 $5,500,233 
Deferred financing costs and discounts related to the collateralization of the CLO notes are amortized to interest expense over the remaining life of the loans. The following table outlines the net book value of the Company's CLOs on its consolidated balance sheets.
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FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 6. Financing Arrangements (continued)
September 30,
20232022
Face value$4,343,790 $3,772,476 
Unamortized deferred financing costs(27,733)(30,649)
Unamortized discount(9,785)(7,887)
Net book value$4,306,272 $3,733,940 
Repurchase Agreements
The Company has entered into and maintains in effect eight repurchase facilities. The Company, through direct or indirect wholly owned subsidiaries, entered into repurchase agreements with Wells Fargo (the “WF-1 Facility”), Goldman Sachs (the “GS-1 Facility”), Royal Bank of Canada (the “RBC Facility”), Barclays Bank PLC (the “BB-1 Facility”), Morgan Stanley Bank, N.A. (the “MS-1 Facility”), Natixis, New York Branch (the “NTX-1 Facility”), Bank of Montreal (the "BMO-1 Facility"), and Lucid Prime Fund (the "Lucid Facility"). The Company uses repurchase facilities for multiple purposes, including, but not limited to, (i) financing the acquisition and origination of (a) real estate loans or senior controlling participation interests in such loans, (b) pari passu participation interests in mortgage loans and (c) mezzanine loans and, (ii) repurchase transactions of securities and financial instruments. Each repurchase facility is subject to certain representations, warranties, covenants, events of default and indemnities unique to each facility but customary for agreements of this type. Further, the Company has entered into guarantees with respect to each of the repurchase facilities in which the Company guarantees obligations of the facility. Each transaction under each repurchase facility has its own specific terms, such as identification of the assets subject to the transaction, sale price, repurchase price and rate.
The Company incurred deferred financing costs in connection with each repurchase facility, which costs are being amortized to interest expense over the life of that repurchase facility. The following table outlines the net book value of the Company's repurchase facilities on its consolidated balance sheets.
September 30,
20232022
Face value$242,175 $883,580 
Unamortized deferred financing costs(2,718)(2,976)
Net book value$239,457 $880,604 

WF-1 Facility
On August 24, 2023, FS CREIT Finance WF-1 LLC, an indirect wholly owned special-purpose financing subsidiary of the Company, entered into a Maturity Date and Funding Period Extension Confirmation Letter and Amendment No. 11 to Master Repurchase and Securities Contract, or Eleventh Amendment to Master Repurchase Agreement, amending Master Repurchase and Securities Contract dated as of August 30, 2017 with Wells Fargo Bank, National Association, as buyer. The Eleventh Amendment to Master Repurchase Agreement provides for, among other things, an extension of each of the Maturity Date and the Funding Expiration Date, in each case, from August 30, 2023 to August 30, 2024.
BMO-1 Facility
On August 3, 2023, the Company closed on the 1st Amendment to the Master Repurchase Agreement between Bank of Montreal and FS CREIT Finance BMO-1 LLC. The amendment provides for, among other things, (i) the addition of “component interest,” “component interest documents,” and “component interest note”, (ii) a revision to Schedule 1(b) – Re: Purchased Assets Consisting of Component Interests, and (iii) a revision to Exhibit A – Form of Transaction Request and Confirmation. There are no changes to the economic terms of the agreement.
Revolving Credit Facilities
The Company has entered into, and maintains in effect, two revolving credit facilities, the Barclays Facility and the MM-1 Facility. The Barclays Facility is utilized for purposes of financing the operating expenses and general corporate purposes of the Company and its subsidiaries. The MM-1 Facility is utilized for the purposes of financing the acquisition and origination of
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Table of Contents
FS Credit Real Estate Income Trust, Inc.

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 6. Financing Arrangements (continued)
commercial mortgage loan assets meeting specified eligibility criteria and concentration limits, pay transaction costs and fund distributions to FS CREIT Finance Holdings, LLC (and ultimately to the Company).
The Company incurred deferred financing costs in connection with each revolving credit facility, which costs are being amortized to interest expense over the life of that facility. The following table details the net book value of the Company's revolving credit facilities on its consolidated balance sheets.
September 30,
20232022
Face value$850,000 $704,105 
Unamortized deferred financing costs(10,493)(8,383)
Net book value$839,507 $695,722 

Mortgage Loan
Natixis Loan
On June 23, 2022, FS CREIT 555 Aviation LLC, an indirect wholly-owned subsidiary of the Company, entered into a mortgage loan related to its purchase of 555 Aviation (see Note 5). The Company incurred deferred financing costs, which are being amortized to interest expense over the life of the facility. The following table details the net book value of the Company's mortgage loan on its consolidated balance sheets.
September 30,
20232022
Face value$124,700 $124,700 
Unamortized deferred financing costs(1,220)(2,132)
Net book value$123,480 $122,568 
Note 7. Related Party Transactions
Compensation of FS Real Estate Advisor, Rialto and the Dealer Manager
Base Management Fee
Pursuant to the fourth amended and restated advisory agreement dated as of December 1, 2022 or the New Advisory Agreement, FS Real Estate Advisor is entitled to a base management fee equal to 1.25% of the NAV for the Company's Class T, Class S, Class D, Class M and Class I shares, payable quarterly in arrears. The payment of all or any portion of the base management fee accrued with respect to any quarter may be deferred by FS Real Estate Advisor, without interest, and may be taken in any such other quarter as FS Real Estate Advisor may determine. In calculating the Company's base management fee, the Company will use its NAV before giving effect to accruals for such fee, the performance fee, the administrative services fee, stockholder servicing fees or distributions payable on its shares. The base management fee is a class-specific expense. No base management fee is paid on the Company's Class F or Class Y shares.
Performance Fee
FS Real Estate Advisor is also entitled to the performance fee calculated and payable quarterly in arrears in an amount equal to 10.0% of the Company's Core Earnings (as defined below) for the immediately preceding quarter, subject to a hurdle rate, expressed as a rate of return on average adjusted capital, equal to 1.625% per quarter, or an annualized hurdle rate of 6.5%. As a result, FS Real Estate Advisor does not earn a performance fee for any quarter until the Company's Core Earnings for such quarter exceed the hurdle rate of 1.625%. For purposes of the performance fee, “adjusted capital” means cumulative net proceeds generated from sales of the Company's common stock other than Class F common stock (including proceeds from the Company's distribution reinvestment plan) reduced for distributions from non-liquidating dispositions of the Company's investments paid to stockholders and amounts paid for share repurchases pursuant to the Company's share repurchase plan. Once the Company's Core Earnings in any quarter exceed the
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Table of Contents
FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 7. Related Party Transactions (continued)
hurdle rate, FS Real Estate Advisor will be entitled to a “catch-up” fee equal to the amount of Core Earnings in excess of the hurdle rate, until the Company's Core Earnings for such quarter equal 1.806%, or 7.222% annually, of adjusted capital. Thereafter, FS Real Estate Advisor is entitled to receive 10.0% of the Company's Core Earnings.
For purposes of calculating the performance fee, “Core Earnings” means: the net income (loss) attributable to stockholders of Class Y, Class T, Class S, Class D, Class M and Class I shares, computed in accordance with GAAP (provided that net income (loss) attributable to Class Y stockholders shall be reduced by an amount equal to the base management fee that would have been paid if Class Y shares were subject to such fee), including realized gains (losses) not otherwise included in GAAP net income (loss) and excluding (i) non-cash equity compensation expense, (ii) the performance fee, (iii) depreciation and amortization, (iv) any unrealized gains or losses or other similar non-cash items that are included in net income for the applicable reporting period, regardless of whether such items are included in other comprehensive income or loss, or in net income, and (v) one-time events pursuant to changes in GAAP and certain material non-cash income or expense items, in each case after discussions between FS Real Estate Advisor and the Company's independent directors and approved by a majority of the Company's independent directors. The performance fee is a class-specific expense. No performance fee is paid on the Company's Class F shares.
Method of Payment
Pursuant to the advisory agreement, the base management fee and performance fee may be paid, at FS Real Estate Advisor’s election, in (i) cash, (ii) Class I shares, (iii) performance-contingent rights Class I share awards, or Class I PCRs, or (iv) any combination of cash, Class I shares or Class I PCRs.
Under the Class I PCR agreement entered into between the Company, FS Real Estate Advisor and Rialto, or the Adviser Entities, the PCR Agreement, management and performance fees may be payable to the Adviser Entities in the form of Class I PCRs to the extent that distributions paid to stockholders in the applicable fiscal quarter exceed the Company’s Adjusted Core Earnings. “Adjusted Core Earnings” means: the net income (loss) attributable to stockholders, computed in accordance with GAAP, including (i) realized gains (losses) not otherwise included in GAAP net income (loss), (ii) stockholder servicing fees, and (iii) reimbursements for organization and offering expenses, and excluding (A) non-cash equity compensation expense, (B) non-cash equity based administration fees, (C) depreciation and amortization, (D) any unrealized gains or losses or other similar non-cash items that are included in net income for the applicable reporting period, regardless of whether such items are included in other comprehensive income or loss, or in net income, and (E) one-time events pursuant to changes in GAAP and certain material non-cash income or expense items. Thereafter, Class I PCRs may become issuable in the form of Class I shares upon the achievement of the following conditions in any fiscal quarter following the initial issuance of the Class I PCRs, together, the Performance Conditions: (a) Adjusted Core Earnings for the quarter exceed distributions paid to stockholders during such quarter (such difference, the “Excess Distributable Income”) and (b) the annualized distribution yield on the Class I Shares (measured over such quarter) is at least at the yield target determined by management given then-current market conditions, the Yield Target. The initial Yield Target will be a 6.0% annualized yield on the Class I shares.
On the last day of any fiscal quarter in which the Company achieves the Performance Conditions (the “Performance Achievement Date”), the Company will issue to the Adviser Entities the number of Class I shares equal in value to the Excess Distributable Income for such quarter in respect of any outstanding Class I PCRs. The Adviser Entities, and their respective affiliates and employees, may not request repurchase by the Company of any Class I shares issued under the PCR Agreement for a period of six (6) months from the date of issuance. Thereafter, upon ten days’ written notice to the Company by the Adviser Entities, the Company must repurchase any Class I shares requested to be repurchased by the Adviser Entities at the then current transaction price per Class I share; provided that no repurchase shall be permitted that would jeopardize the Company’s qualification as a REIT or violate Maryland law. If, prior to the Performance Achievement Date, (i) the New Advisory Agreement is terminated in accordance with Section 12(b) of the New Advisory Agreement (other than Section 12(b)(iii) thereof) or (ii) the sub-advisory agreement is terminated in accordance with Section 9(b) thereof (other than Section 9(b)(v) thereof), any rights related to the Class I PCRs evidenced thereby by the terminated party as of the date of such termination shall immediately vest and the Company shall issue the number of Class I shares issuable upon such vesting. If, prior to the Performance Achievement Date, either of the Adviser Entities resigns as the adviser or sub-adviser, respectively, of the Company, then any rights related to the Class I PCRs evidenced thereby as of the date of such resignation shall remain outstanding and Class I shares issuable in respect thereof shall be issued upon achievement of the Performance Conditions.
Administrative Services Fee
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FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 7. Related Party Transactions (continued)
On December 1, 2022, the Company and FS Real Estate Advisor entered into the Fourth Amended and Restated Advisory Agreement (the “Advisory Agreement”), which amends and restates the Third Amended and Restated Advisory Agreement, dated December 15, 2021, to replace the reimbursement of administrative service expenses with an administrative services fee equal to 1.0% of the Company’s net asset value per annum attributable to all shares of common stock, before giving effect to any accruals for the base management fee, the performance fee, the administrative services fee, the stockholder servicing fee or any distributions. Under the Advisory Agreement, the administrative services fee will be payable quarterly and in arrears in the cash equivalent number of restricted stock units (“Class I RSUs”) representing the right to receive Class I shares of the Company’s common stock (“Class I shares”) based on the then-current Class I transaction price as of the last day of such quarter. Class I RSUs in payment of the administrative services fee will provide the Adviser the right to receive a number of Class I shares equivalent to the number of Class I RSUs, subject to the terms and conditions set forth in the Class I RSU Agreement.
FS Real Estate Advisor may elect, at a later date, to have the Company repurchase some or all of the Class I shares issued to the Adviser in accordance with the Advisory Agreement, including Class I shares issued pursuant to any Class I RSUs, at a per share price equal to the then-current Class I share transaction price. Such Class I shares will not be subject to the repurchase limits of the Company’s share repurchase plan or any reduction or penalty for an early repurchase, provided that the approval of the Company’s independent directors is required for any repurchase request of FS Real Estate Advisor or Rialto, for Class I shares received as payment for advisory fees that, when combined with any stockholder repurchase requests submitted through the Company’s share purchase plan, would cause the Company to exceed the monthly and quarterly repurchase limitations of its share repurchase plan. The FS Real Estate Advisor will have no registration rights with respect to such Class I shares. Any such Class I shares and Class I RSUs issued to Rialto will have the same rights and conditions as those issued to FS Real Estate Advisor.
At least annually, the Company’s board of directors reviews the amount of the administrative services expenses reimbursable to FS Real Estate Advisor and Rialto to determine whether such amounts are reasonable in relation to the services provided. The Company will not reimburse FS Real Estate Advisor or Rialto for any services for which it receives a separate fee or for any administrative expenses allocated to employees to the extent they serve as executive officers of the Company.
Class I Restricted Stock Unit Agreement
On December 1, 2022, the Company, FS Real Estate Advisor and Rialto entered into the Class I Restricted Stock Unit Agreement (the “Class I RSU Agreement”). Pursuant to the Class I RSU Agreement, and in accordance with the Advisory Agreement, the administrative services fee will be payable quarterly in arrears on the last day of each quarter in the cash equivalent number of Class I RSUs based on the then-current Class I share transaction price as of the last day of such quarter. On the last day of each quarter, the Company will issue to FS Real Estate Advisor and Rialto the cash equivalent number of Class I RSUs to which each is entitled. Class I RSUs will vest ratably on the first calendar day of the month following the one, two and three-year anniversary of the applicable grant date, provided that (i) 100% of the Adviser’s Class I RSUs will immediately vest upon the nonrenewal or termination of the Advisory Agreement pursuant to Section 12(b)(ii), Section 12(b)(iii) or Section 12(b)(iv) thereof; (ii) 100% of the Sub-Adviser’s Class I RSUs will immediately vest upon the nonrenewal or termination of the sub-advisory agreement between FS Real Estate Advisor and Rialto (the “Sub-Advisory Agreement”) pursuant to Section 9(b)(i), Section 9(b)(iii), Section 9(b)(iv), Section 9(b)(v) or Section 9(b)(vi) thereof; (iii) 100% of the Adviser’s unvested Class I RSUs will be automatically forfeited upon termination of the Advisory Agreement pursuant to Section 12(b)(i) thereof; and (iv) 100% of the Sub-Adviser’s unvested Class I RSUs will be automatically forfeited upon termination of the Sub-Advisory Agreement pursuant to Section 9(b)(ii) thereof. If FS Real Estate Advisor and Rialto resigns as the Company’s adviser or sub-adviser, respectively, then any rights related to the Class I RSUs evidenced thereby as of the date of such resignation will remain outstanding and Class I shares issuable in respect thereof will be issued upon the applicable vesting date. If the Company declares a cash distribution on the Class I shares underlying unvested Class I RSUs, then the Company will credit the account of FS Real Estate Advisor and Rialto with the applicable distribution equivalents, which will be subject to the same vesting and forfeiture restrictions as the Class I RSUs. FS Real Estate Advisor and Rialto, and their respective affiliates and employees, may not request repurchase by the Company of any Class I shares issued under the Class I RSU Agreement for a period of six months from the date of issuance. Thereafter, upon ten days’ written notice to the Company the Company must repurchase any Class I shares requested to be repurchased by FS Real Estate Advisor and Rialto at the most recently published transaction price per Class I share; provided that no repurchase will be permitted that would jeopardize the Company’s qualification as a REIT or violate Maryland law.
Origination Fees
FS Real Estate Advisor has engaged Rialto as sub-adviser to originate loans and other investments on behalf of the Company, and FS Real Estate Advisor oversees the sub-adviser’s origination activities. In connection with these activities, origination fees of up
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Table of Contents
FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 7. Related Party Transactions (continued)
to 1.0% of the loan amount for first lien, subordinated or mezzanine debt or preferred equity financing may be retained by the sub-adviser or FS Real Estate Advisor. Such origination fees will be retained only to the extent they are paid by the borrower, either directly to Rialto or FS Real Estate Advisor or indirectly through the Company. During the nine months ended September 30, 2023 and 2022, $7,418 and $33,237, respectively, in origination fees were paid directly by the borrowers to FS Real Estate Advisor or Rialto and not to the Company. During the nine months ended September 30, 2023 and 2022, $0 and $2,000, respectively, in capital market fees were paid to affiliates of the Company.
Offering Costs
FS Investments funded the Company’s offering costs in the amount of $23,902 for the period from November 7, 2016 (Inception) to September 30, 2023. These expenses include legal, accounting, printing, mailing and filing fees and expenses, due diligence expenses of participating broker-dealers supported by detailed and itemized invoices, costs in connection with preparing sales materials, design and website expenses, fees and expenses of the Company’s transfer agent, fees to attend retail seminars sponsored by participating broker-dealers and reimbursements for customary travel, lodging, and meals, but excluding selling commissions, dealer manager fees and stockholder servicing fees.
FS Real Estate Advisor may be reimbursed for any organization and offering expenses that it or Rialto has incurred on the Company's behalf, up to a cap of 0.75% of gross proceeds raised. During the nine months ended September 30, 2023, the Company paid $5,159 to FS Real Estate Advisor for offering costs previously funded. As of September 30, 2023, $4,180 of offering expenses previously funded remained subject to reimbursement to FS Real Estate Advisor and Rialto.
The following table describes the fees and expenses accrued under the advisory agreement and sub-advisory agreement during the nine months ended September 30, 2023 and 2022:
Three Months Ended September 30,Nine Months Ended September 30,
Related PartySource AgreementDescription2023202220232022
FS Real Estate AdvisorAdvisory Agreement
Base Management Fee(1)
$9,092 $6,629 $25,514 $15,825 
FS Real Estate AdvisorAdvisory Agreement
Performance Fee(2)
$6,354 $3,904 $17,742 $4,056 
FS Real Estate AdvisorAdvisory Agreement
Administrative Services Expenses(3)
$ $3,434 $ $8,658 
FS Real Estate AdvisorAdvisory Agreement
Administrative Services Fee(4)
$7,366 $ $20,682 $ 
FS Real Estate AdvisorAdvisory AgreementCapital Markets Fees$ $ $ $2,000 
Rialto Capital ManagementSub-Advisory Agreement
Valuation Services Fees(5)
$108 $106 $329 $299 
_______________________
(1)    During the nine months ended September 30, 2023, FS Real Estate Advisor received $23,949, in cash as payment for management fees. During the nine months ended September 2022, FS Real Estate Advisor received $2,007 in cash and $11,409 of performance contingent rights were issued as payment for management fees. As of September 30, 2023 and 2022, there were $9,088 and $0 base management fees payable to FS Real Estate Advisor.
(2)    During the nine months ended September 30, 2023 and 2022, $16,160 and $557, respectively, in performance fees were paid to FS Real Estate Advisor. As of September 30, 2023, there were $6,354 performance fees payable to FS Real Estate Advisor.
(3)    During the nine months ended September 30, 2022, $7,978, of the accrued administrative services expenses related to the allocation of costs of administrative personnel for services rendered to the Company by FS Real Estate Advisor and Rialto and the remainder related to other reimbursable expenses. These amounts are recorded as general and administrative expenses on the accompanying unaudited consolidated statements of operations.
(4)    On December 1, 2022, the Company's method for reimbursing administrative services expense was replaced with an administrative services fee equal to 1.0% of the Company’s net asset value per annum attributable to all shares of common stock, before giving effect to any accruals for the base management fee, the performance fee, the administrative services fee, the stockholder servicing fee or any distributions.
(5)     During the nine months ended September 30, 2023 and 2022, $214 and $193, respectively, in valuation fees were paid by the Company to Rialto.
The dealer manager for the Company’s continuous public offering is FS Investment Solutions, LLC, or FS Investment Solutions, which is an affiliate of FS Real Estate Advisor. Under the amended and restated dealer manager agreement dated as of August 17,
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FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 7. Related Party Transactions (continued)
2018, or the dealer manager agreement, FS Investment Solutions is entitled to receive upfront selling commissions of up to 3.0%, and upfront dealer manager fees of 0.5% of the transaction price of each Class T share sold in the primary offering, however such amounts may vary at certain participating broker-dealers provided that the sum will not exceed 3.5% of the transaction price (subject to reductions for certain categories of purchasers). FS Investment Solutions is entitled to receive upfront selling commissions of up to 3.5% of the transaction price per Class S share sold in the primary offering (subject to reductions for certain categories of purchasers). The dealer manager anticipates that all of the selling commissions and dealer manager fees will be re-allowed to participating broker-dealers, unless a particular broker-dealer declines to accept some portion of the dealer manager fee they are otherwise eligible to receive. Pursuant to the dealer manager agreement, the Company also reimburses FS Investment Solutions or participating broker-dealers for bona fide due diligence expenses, provided that total organization and offering expenses shall not exceed 15% of the gross proceeds in the Company's public offering.
No selling commissions or dealer manager fees are payable on the sale of Class D, Class M, Class I, Class F or Class Y shares or on shares of any class sold pursuant to the Company's distribution reinvestment plan.
Subject to the limitations described below, the Company pays FS Investment Solutions stockholder servicing fees for ongoing services rendered to stockholders by participating broker-dealers or by broker-dealers servicing stockholders’ accounts, referred to as servicing broker-dealers:
with respect to the Company's outstanding Class T shares equal to 0.85% per annum of the aggregate NAV of its outstanding Class T shares, consisting of an advisor stockholder servicing fee of 0.65% per annum and a dealer stockholder servicing fee of 0.20% per annum; however, with respect to Class T shares sold through certain participating broker-dealers, the advisor stockholder servicing fee and the dealer stockholder servicing fee may be other amounts, provided that the sum of such fees will always equal 0.85% per annum of the NAV of such shares;
with respect to the Company's outstanding Class S shares equal to 0.85% per annum of the aggregate NAV of its outstanding Class S shares;
with respect to the Company's outstanding Class D shares equal to 0.3% per annum of the aggregate NAV of its outstanding Class D shares; and
with respect to the Company's outstanding Class M shares equal to 0.3% per annum of the aggregate NAV of its outstanding Class M shares.
The Company does not pay a stockholder servicing fee with respect to its Class I, Class F or Class Y shares. The dealer manager reallows some or all of the stockholder servicing fees to participating broker-dealers, servicing broker-dealers and financial institutions (including bank trust departments) for ongoing stockholder services performed by such broker-dealers, and waives (pays back to the Company) stockholder servicing fees to the extent a broker-dealer or financial institution is not eligible or otherwise declines to receive all or a portion of such fees.
The Company will cease paying stockholder servicing fees with respect to any Class D, Class M, Class S and Class T shares held in a stockholder’s account at the end of the month in which the total underwriting compensation from the upfront selling commissions, dealer manager fees and stockholder servicing fees, as applicable, paid with respect to such account would exceed 1.25%, 7.25%, 8.75% and 8.75%, respectively (or a lower limit for shares sold by certain participating broker-dealers or financial institutions) of the gross proceeds from the sale of shares in such account. These amounts are referred to as the sales charge cap. At the end of such month that the sales charge cap is reached, each Class D, Class M, Class S or Class T share in such account will convert into a number of Class I shares (including any fractional shares) with an equivalent aggregate NAV as such share. 
In addition, the Company will cease paying stockholder servicing fees on each Class D share, Class M share, Class S share and Class T share held in a stockholder’s account and each such share will convert to Class I shares on the earlier to occur of the following: (i) a listing of Class I shares on a national securities exchange; (ii) the sale or other disposition of all or substantially all of the Company’s assets or the Company’s merger or consolidation with or into another entity in a transaction in which holders of Class D, Class M, Class S or Class T shares receive cash and/or shares of stock that are listed on a national securities exchange; or (iii) the date following the completion of the Company’s public offering on which, in the aggregate, underwriting compensation from all sources in connection with the Company’s public offering, including selling commissions, dealer manager fees, stockholder servicing fees and other underwriting compensation, is equal to 10% of the gross proceeds from its primary offering.
The Company accrues future stockholder servicing fees in an amount equal to its best estimate of fees payable to FS Investment Solutions at the time such shares are sold. As of September 30, 2023 and December 31, 2022, the Company accrued $115,832 and
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FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 7. Related Party Transactions (continued)
$107,692, respectively, of stockholder servicing fees payable to FS Investment Solutions. FS Investment Solutions has entered into agreements with selected dealers distributing the Company's shares in the public offering, which provide, among other things, for the re-allowance of the full amount of the selling commissions and dealer manager fee and all or a portion of the stockholder servicing fees received by FS Investment Solutions to such selected dealers.
FS Investment Solutions also serves or served as the placement agent for the Company’s private offerings of Class I, Class F and Class Y shares pursuant to placement agreements. FS Investment Solutions does not receive any compensation pursuant to these agreements.
Expense Limitation
The Company has entered into an amended and restated expense limitation agreement with FS Real Estate Advisor and Rialto, or the expense limitation agreement, pursuant to which FS Real Estate Advisor and Rialto have agreed to waive reimbursement of or pay, on a quarterly basis, the Company’s annualized ordinary operating expenses for such quarter to the extent such expenses exceed 1.5% per annum of its average net assets attributable to each of its classes of common stock. The Company will repay FS Real Estate Advisor or Rialto on a quarterly basis any ordinary operating expenses previously waived or paid, but only if the reimbursement would not cause the then-current expense limitation, if any, to be exceeded. In addition, the reimbursement of expenses will be made only if payable not more than three years from the end of the fiscal quarter in which the expenses were paid or waived.
To the extent that the conditions to recoupment are satisfied in a future quarter (prior to the expiration of the three-year period for reimbursement set forth in the expense limitation agreement), such expenses may be subject to conditional recoupment in accordance with the terms of the expense limitation agreement.
During the period from September 13, 2017 (Commencement of Operations) to September 30, 2023, the Company accrued $6,592 for reimbursement of expenses that FS Real Estate Advisor and Rialto paid or waived, including $148 in reimbursements for the nine months ended September 30, 2023. During the period from September 13, 2017 (Commencement of Operations) to September 30, 2023, the Company received $6,592 in cash reimbursements from FS Real Estate Advisor. As of September 30, 2023, the Company had $61 of reimbursements due from FS Real Estate Advisor and Rialto.
During the nine months ended September 30, 2023 no expense recoupments were paid to FS Real Estate Advisor and Rialto. As of September 30, 2023, no expense recoupments were payable to FS Real Estate Advisor and Rialto.
The following table reflects the amounts paid or waived by FS Real Estate Advisor and Rialto under the expense limitation agreement and the expiration date for future possible reimbursements by the Company:
For the Three Months EndedAmount of Expense ReimbursementRecoupable AmountRecoupment paid or payable to sponsorExpired AmountRecoupment eligibility expiration
September 30, 2023$ $753 $ $ September 30, 2025
June 30, 202361  61  June 30, 2025
March 31, 202387  87  March 31, 2025
December 31, 2022605  605  December 31, 2024
$753 $753 $753 $ 
Capital Contributions and Commitments
In December 2016, pursuant to a private placement, Michael C. Forman and David J. Adelman, principals of FS Investments, contributed an aggregate of $200 to purchase 8,000 Class F shares at the price of $25.00 per share. These individuals will not tender these shares of common stock for repurchase as long as FS Real Estate Advisor remains the Company's adviser. FS Investments is controlled by Mr. Forman, the Company's president and chief executive officer, and Mr. Adelman.
As of September 30, 2023, the ownership in the Company's Class F Shares by FS Real Estate Advisor and Rialto (and each of their respective affiliates and designees) was $18,583 and $402, respectively.
RIAL 2022-FL8 Transaction
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Table of Contents
FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 7. Related Party Transactions (continued)
In the second quarter of 2022 and 2023, the Company purchased $36,000 and $15,000, respectively, of mortgage-backed securities in a transaction in which an affiliate of Rialto is the issuer of the notes. These securities are accounted for as available-for-sale.
Note 8. Stockholders' Equity
Below is a summary of transactions with respect to shares of the Company's common stock during the nine months ended September 30, 2023 and 2022:
Shares
Class FClass YClass TClass SClass DClass MClass ITotal
Balance as of December 31, 2022857,710 906,648 1,600,878 54,908,336 742,999 4,645,072 34,011,164 97,672,807 
Issuance of common stock  72,725 12,869,916 131,578 734,839 14,478,091 28,287,149 
Reinvestment of distributions22,334  33,745 1,484,600 12,790 83,733 1,140,038 2,777,240 
Redemptions of common stock(114,365) (109,653)(5,080,070)(37,372)(401,787)(3,980,011)(9,723,258)
Transfers in or out(10,259) (219,302)(55,465)(174,445)(269,434)748,035 19,130 
Balance as of September 30, 2023
755,420 906,648 1,378,393 64,127,317 675,550 4,792,423 46,397,317 119,033,068 
Amount
Class FClass YClass TClass SClass DClass MClass ITotal
Balance as of December 31, 2022$21,008 $22,371 $38,473 $1,274,345 $18,417 $108,522 $832,242 $2,315,378 
Issuance of common stock  1,812 322,941 3,275 18,333 339,042 685,403 
Reinvestment of distributions559  838 37,215 318 2,088 27,652 68,670 
Redemptions of common stock(2,862) (2,723)(127,360)(929)(10,015)(96,545)(240,434)
Transfers in or out(257) (5,447)(1,390)(4,338)(6,722)18,154  
Accrued stockholder servicing fees(1)
  (49)(17,913)(16)(236) (18,214)
Balance as of September 30, 2023
$18,448 $22,371 $32,904 $1,487,838 $16,727 $111,970 $1,120,545 $2,810,803 
Shares
Class FClass YClass TClass SClass DClass MClass ITotal
Balance as of December 31, 2021902,878 906,648 1,407,377 22,823,721 642,162 2,876,736 11,366,687 40,926,209 
Issuance of common stock  188,212 30,189,475 113,587 1,605,166 20,603,163 52,699,603 
Reinvestment of distributions22,136  31,615 877,669 11,074 52,503 503,185 1,498,182 
Redemptions of common stock(74,770) (33,438)(2,268,159)(21,931)(153,213)(1,462,991)(4,014,502)
Transfers in or out  (1,729) (18,729)(142,726)167,368 4,184 
Balance as of September 30, 2022
850,244 906,648 1,592,037 51,622,706 726,163 4,238,466 31,177,412 91,113,676 
Amount
Class FClass YClass TClass SClass DClass MClass ITotal
Balance as of December 31, 2021$22,138 $22,371 $33,862 $531,150 $15,945 $66,836 $279,008 $971,310 
Issuance of common stock  4,699 760,752 2,840 40,238 503,433 1,311,962 
Reinvestment of distributions554  793 22,106 277 1,820 12,288 37,838 
Redemptions of common stock(1,870) (835)(57,119)(549)(3,840)(35,731)(99,944)
Transfers in or out  (43) (468)(3,580)4,091  
Accrued stockholder servicing fees(1)
  (192)(58,903)(32)(2,431) (61,558)
Balance as of September 30, 2022
$20,822 $22,371 $38,284 $1,197,986 $18,013 $99,043 $763,089 $2,159,608 
_______________________
(1)    Stockholder servicing fees only apply to Class T, Class S, Class D and Class M shares. Under GAAP, the Company accrues future stockholder servicing fees in an amount equal to its best estimate of fees payable to FS Investment Solutions at the time such shares are sold. For purposes of NAV, the Company recognizes the stockholder servicing fee as a reduction of NAV on a monthly basis. As a result, the estimated liability for the future stockholder servicing fees, which are accrued at the time each share is sold, will have no effect on the NAV of any class.
Share Repurchase Plan
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Table of Contents
FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 8. Stockholders' Equity (continued)

The Company has adopted an amended and restated share repurchase plan, or share repurchase plan, whereby on a monthly basis, stockholders may request that the Company repurchase all or any portion of their shares. The repurchase of shares is limited to no more than 2% of the Company's aggregate NAV per month of all classes of shares then participating in the share repurchase plan and no more than 5% of the Company's aggregate NAV per calendar quarter of all classes of shares then participating in the share repurchase plan, which means that in any 12-month period, the Company limits repurchases to approximately 20% of the total NAV of all classes of shares then participating in the share repurchase plan. The Company's board of directors may modify, suspend or terminate the share repurchase plan if it deems such action to be in the Company's best interest and the best interest of its stockholders. During the nine months ended September 30, 2023 and 2022, the Company repurchased 9,723,258 and 4,014,502, respectively, shares of common stock under its share repurchase plan representing a total of $240,434 and $99,944, respectively. The Company had no unfulfilled repurchase requests during the nine months ended September 30, 2023 or 2022, respectively.
Distribution Reinvestment Plan
Pursuant to the Company's distribution reinvestment plan, holders of shares of any class of the Company's common stock may elect to have their cash distributions reinvested in additional shares of the Company's common stock. The purchase price for shares pursuant to the distribution reinvestment plan will be equal to the transaction price for such shares at the time the distribution is payable.
Distributions
The Company generally intends to distribute substantially all of its taxable income, which does not necessarily equal net income as calculated in accordance with GAAP, to its stockholders each year to comply with the REIT provisions of the Code. Dividends are paid first to the holders of the Company's Series A preferred stock at the rate of 12.0% per annum plus all accumulated and unpaid dividends thereon, and then to the holders of the Company's common stock. All distributions will be made at the discretion of the Company's board of directors and will depend upon its taxable income, financial condition, maintenance of REIT status, applicable law, and other factors that the Company's board of directors deems relevant.
The following table reflects the cash distributions per share that the Company paid on its common stock during the nine months ended September 30, 2023:
Record DateClass FClass YClass TClass SClass DClass MClass I
January 30, 2023$0.1696 $0.1696 $0.1259 $0.1259 $0.1374 $0.1374 $0.1436 
February 27, 2023$0.1696 $0.1696 $0.1259 $0.1259 $0.1374 $0.1374 $0.1436 
March 30, 2023$0.1749 $0.1749 $0.1312 $0.1312 $0.1427 $0.1427 $0.1489 
April 27, 2023$0.1749 $0.1749 $0.1312 $0.1312 $0.1427 $0.1427 $0.1489 
May 30, 2023$0.1749 $0.1749 $0.1312 $0.1312 $0.1427 $0.1427 $0.1489 
June 29, 2023$0.1799 $0.1799 $0.1362 $0.1362 $0.1477 $0.1477 $0.1539 
July 28, 2023$0.1799 $0.1799 $0.1362 $0.1362 $0.1477 $0.1477 $0.1539 
August 30, 2023$0.1799 $0.1799 $0.1362 $0.1362 $0.1477 $0.1477 $0.1539 
September 29, 2023$0.1799 $0.1799 $0.1362 $0.1362 $0.1477 $0.1477 $0.1539 
Total$1.5835 $1.5835 $1.1902 $1.1902 $1.2937 $1.2937 $1.3495 
The following table reflects the amount of cash distributions that the Company paid on its common stock during the nine months ended September 30, 2023, and 2022:
33

Table of Contents
FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 8. Stockholders' Equity (continued)

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Distributions:
Paid or payable in cash$25,820 $16,473 $72,406 $40,805 
Reinvested in shares25,196 15,943 68,670 37,838 
Total distributions$51,016 $32,416 $141,076 $78,643 
Source of distributions:
Cash flows from operating activities$51,016 $32,416 $141,076 $78,643 
Offering proceeds    
Total sources of distributions$51,016 $32,416 $141,076 $78,643 
Net cash provided by (used in) operating activities(1)
$81,922 $47,173 $201,619 $96,098 
______________________
(1)    Cash flows from operating activities are supported by expense support payments from FS Real Estate Advisor and Rialto pursuant to the Company's expense limitation agreement. See Note 7 for additional information regarding the Company's expense limitation agreement.
The Company currently declares and pays regular cash distributions on a monthly basis. The Company’s board of directors previously authorized regular monthly cash distributions for October 2023 for each class of its outstanding common stock in the net distribution amounts per share set forth below:
Class FClass YClass TClass SClass DClass MClass I
$0.1799 $0.1799 $0.1362 $0.1362 $0.1477 $0.1477 $0.1539 
The distributions for each class of outstanding common stock have been or will be paid monthly to stockholders of record as of the monthly record dates previously determined by the Company's board of directors. These distributions have been or will be paid in cash or reinvested in shares of the Company’s common stock for stockholders participating in the Company’s distribution reinvestment plan.
Note 9. Fair Value of Financial Instruments
The following table presents the Company's financial assets and liabilities carried at fair value in the consolidated balance sheets by its level in the fair value hierarchy:
September 30, 2023 (Unaudited)December 31, 2022
TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Financial Assets
Mortgage-backed securities, at fair value$225,095 $ $225,095 $ $159,464 $ $159,464 $ 
Mortgage loans held in securitization trusts, at fair value330,629   330,629 324,263   324,263 
Interest rate cap3,246  3,246  4,616  4,616  
Total$558,970 $ $228,341 $330,629 $488,343 $ $164,080 $324,263 
Financial Liabilities
Mortgage obligations issued by securitization trusts, at fair value$298,170  $298,170  $291,193  $291,193  
The following table presents the changes in fair value of financial assets which are measured at fair value on a recurring basis using Level 3 inputs to determine fair value for the nine months ended September 30, 2023:
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FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 9. Fair Value of Financial Instruments (continued)

Mortgage loans held in securitization trusts, at fair value
Fair value at beginning of period$324,263 
Accretion of discount (amortization of premium) 
Net realized gain (loss) 
Net change in unrealized appreciation (depreciation)6,366 
Purchases 
Sales and repayments 
Issuances 
Transfer into Level 3 
Transfers out of Level 3 
Consolidation of securitization trusts 
Deconsolidation of securitization trusts 
Fair value at end of period$330,629 
Amount of unrealized gains (losses) attributable to assets still held at September 30, 2023
Included in earnings$ 
Included in other comprehensive income 
As of September 30, 2023, the Company utilized a discounted cash flow model, comparable precedent transactions and other market information to quantify Level 3 fair value measurements on a recurring basis. As of September 30, 2023, the key unobservable inputs used in the valuation of mortgage obligations issued by securitization trusts included a blended yield ranging from 12.69% to 16.82% (weighted average blended yield of 14.16%) and a life of 1 to 3.5 years (weighted average life of 2.6 years). Significant increases or decreases in any one of the inputs described above in isolation may result in significantly different fair value of the financial assets and liabilities using such Level 3 inputs.
As discussed in Note 2, GAAP requires disclosure of fair value information about financial instruments, whether or not recognized in the statement of financial position, for which it is practicable to estimate that value. The following table details the carrying amount, face amount, and fair value of the financial instruments described in Note 2:
September 30, 2023 (Unaudited)December 31, 2022
Book ValueFace AmountFair ValueBook ValueFace AmountFair Value
Financial Assets
Cash, cash equivalents and restricted cash$214,875 $214,875 $214,875 $201,618 $201,618 $201,618 
Loans receivable - held-for-investment(1)
$7,665,632 $7,735,561 $7,655,946 $7,350,315 $7,350,271 $7,339,105 
Mortgage-backed securities held-to-maturity$74,543 $80,300 $67,203 $68,559 $80,300 $68,559 
Financial Liabilities
Repurchase agreements(2)
$239,457 $242,175 $242,175 $756,816 $760,236 $760,236 
Credit facilities$839,507 $850,000 $850,000 $298,544 $310,982 $310,982 
Collateralized loan obligations(2)(3)
$4,306,272 $4,334,005 $4,334,005 $4,336,701 $4,371,684 $4,371,684 
Mortgage note payable(2)
$123,480 $124,700 $124,700 $122,568 $124,700 $124,700 
__________________
(1)    Book value of loans receivable represents the face amount, net of CECL reserve, unamortized loan fees and costs and accrual of exit fees, as applicable.
(2)    Book value represents the face amount, net of deferred financing costs and discount.
(3)    Face value represents the face amount, net of discount.
Estimates of fair value for cash, cash equivalents and restricted cash are measured using observable, quoted market prices, or Level 1 inputs. Estimates of fair value for loans receivable, mortgage-backed securities held-to-maturity, repurchase obligations, credit facility obligations and the collateralized loan and mortgage obligations are measured using unobservable inputs, or Level 3 inputs.
CMBS, Fair Value Option
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FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 9. Fair Value of Financial Instruments (continued)

As discussed in the “Fair Value of Financial Instruments” section of Note 2 herein, the Company elected the fair value option for
certain CMBS mortgage loans in an effort to eliminate an accounting mismatch resulting from consolidation of the related mortgage loans held in securitization trusts. As of September 30, 2023, the fair value and unpaid principal balance of these CMBS, excluding the notional value of interest-only securities and before consolidation of the securitization mortgage loans, were $33,230 and $36,469, respectively. As a result of the consolidation of the mortgage loans, the total fair value balance of $330,629 represents the Company's economic interest in the asset. The vast majority of this fair value (all except $33,230 at September 30, 2023) is eliminated in consolidation of the related mortgage obligations before arriving at the GAAP balance for the fair value option investment securities.
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FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 10. Variable Interest Entities
Consolidated Variable Interest Entities
The following table details the assets and liabilities of the Company's consolidated variable interest entities as of September 30, 2023 and December 31, 2022:
September 30, 2023 (Unaudited)December 31, 2022
Assets:
Restricted cash$32,477 $ 
Loans receivable, held-for-investment5,498,839 5,546,779 
Interest receivable23,228 24,144 
Other assets7,034 853 
Mortgage loans held in securitization trusts, at fair value330,629 324,263 
Total assets$5,892,207 $5,896,039 
Liabilities
Collateralized loan obligations, net$4,306,272 $4,336,701 
Interest payable12,022 12,631 
Other liabilities533 473 
Mortgage obligations issued by securitization trusts, at fair value298,170 291,193 
Total liabilities$4,616,997 $4,640,998 
The Company has financed a portion of its loans through CLOs, which are considered VIEs. The Company has a controlling financial interest in the CLOs and, therefore, consolidates them on its balance sheets because the Company has both (i) the power to direct activities of the CLOs that most significantly affect the CLOs' economic performance and (ii) the obligation to absorb losses and the right to receive benefits of the CLOs that could potentially be significant to the CLOs.
Assets held by the CLOs are restricted and can be used only to settle obligations of the CLOs. The liabilities are non-recourse to the Company and can only be satisfied from the assets of the CLOs.
Investment Securities
Mortgage loans and obligations held in securitization trusts consolidated in accordance with ASC 810 are structured as pass through entities that receive principal and interest on the underlying collateral and distribute those payments to the certificate holders. The assets and other instruments held by these securitization entities are restricted and can only be used to fulfill the obligations of the entity. Additionally, the obligations of the securitization entities do not have any recourse to the general credit of any other consolidated entities, nor to the Company as the primary beneficiary. The mortgage obligations initially represent investment securities on the balance sheet (pre-consolidation). Upon consolidation of the mortgage loans and obligations, the associated investment securities are eliminated, as is the interest income related to those securities.
The inclusion of the assets and liabilities of the mortgage loans and obligations in which the Company is deemed the primary beneficiary has no economic effect on the Company. Its exposure to the obligations of mortgage loans and obligations held in securitization is generally limited to its investment in these entities. The Company is not obligated to provide, nor has provided, any financial support for any of these consolidated structures.
Non-Consolidated Variable Interest Entities
The Company invested in subordinated positions of CMBS trusts which are considered mortgage loans and obligations held in securitization trusts. The Company is not the primary beneficiary of the mortgage loans and obligations because it does not have the power to direct the activities that most significantly affect the mortgage loans and obligations' economic performance, nor does it provide guarantees or recourse to the mortgage loans and obligations other than standard representations and warranties and, therefore, does not consolidate the mortgage loans and obligations on its balance sheets. The Company has classified its investment in the CMBS as either held-to-maturity or available-for-sale debt securities that are included on the Company's consolidated balance sheets and are
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FS Credit Real Estate Income Trust, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 10. Variable Interest Entities (continued)
part of the Company's ongoing impairment review. The Company's maximum exposure to loss of the securities are limited to its book value of $317,117 as of September 30, 2023.
The Company is not obligated to provide, nor has it provided financial support to these consolidated and non-consolidated mortgage loans and obligations.
Note 11. Commitments and Contingencies
The Company enters into contracts that contain a variety of indemnification provisions. The Company’s maximum exposure under these arrangements is unknown; however, the Company has not had prior claims or losses pursuant to these contracts. Management of FS Real Estate Advisor has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote.
The Company is not currently subject to any material legal proceedings and, to the Company’s knowledge, no material legal proceedings are threatened against the Company. From time to time, the Company may be party to certain legal proceedings in the ordinary course of business. While the outcome of any legal proceedings cannot be predicted with certainty, the Company does not expect that any such proceedings will have a material effect on its financial condition or results of operations.
See Note 7 for a discussion of the Company’s commitments to FS Real Estate Advisor and its affiliates (including FS Investments) for the reimbursement of organization and offering costs funded by FS Investments and for the reimbursement of amounts paid or waived by FS Real Estate Advisor and Rialto under the expense limitation agreement.
Note 12. Derivative Instrument
The Company has entered into an interest rate cap contract in order to limit its exposure against the variability of future interest rates on its variable interest rate borrowing. The Company has not designated this derivative as a hedge for accounting purposes. The Company has not entered into a master netting arrangement with its third-party counterparty and does not offset on its consolidated balance sheets the fair value amount recorded for its derivative instrument. The table below provides additional information regarding the Company's derivative instrument as of September 30, 2023.
Type of DerivativeNotional AmountStrikeEffective DateMaturity Date
Fair Value(1)
Interest Rate Cap$126,700 2.25 %June 21, 2022July 9, 2024$3,246 
__________________
(1)    Included in Other assets in the Company's consolidated balance sheets.
The following table details the fair value of the Company's derivative financial instrument:
Type of DerivativeRealized/Unrealized Gain (Loss)Location of Gain (Loss) Recognized in Net IncomeThree Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Interest Rate CapUnrealized LossOther income (loss)$(762)$1,758 $(1,370)$309 




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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations (in thousands, except share and per share amounts).
The information contained in this section should be read in conjunction with the unaudited consolidated financial statements and related notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. In this report, “we,” “us” and “our” refer to FS Credit Real Estate Income Trust, Inc.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), regarding, among other things, our business, including, in particular, statements about our plans, strategies and objectives. You can generally identify forward-looking statements by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue” or other similar words. These statements include our plans and objectives for future operations, including plans and objectives relating to future growth and availability of funds, and are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to these statements involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to accurately predict and many of which are beyond our control. Although we believe the assumptions underlying the forward-looking statements, and the forward-looking statements themselves, are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that these forward-looking statements will prove to be accurate and our actual results, performance and achievements may be materially different from that expressed or implied by these forward-looking statements. In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans, which we consider to be reasonable, will be achieved. We undertake no duty to update or revise forward-looking statements, except as required by law.
Introduction
We were incorporated under the general corporation laws of the State of Maryland on November 7, 2016 and formally commenced investment operations on September 13, 2017. We are currently conducting a public offering of up to $2,750,000 of our Class T, Class S, Class D, Class M and Class I shares of common stock pursuant to a registration statement on Form S-11 filed with the SEC consisting of up to $2,500,000 in shares in our primary offering and up to $250,000 in shares pursuant to our distribution reinvestment plan. We are also conducting a private offering of our Class I common stock and previously conducted private offerings of our Class F common stock and Class Y common stock. We are managed by FS Real Estate Advisor pursuant to an advisory agreement between us and FS Real Estate Advisor. FS Real Estate Advisor is a subsidiary of our sponsor, FS Investments, a national sponsor of alternative investment funds designed for the individual investor. FS Real Estate Advisor has engaged Rialto to act as its sub-adviser.
We have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2017. We intend to be an investment vehicle of indefinite duration focused on real estate debt investments and other real estate-related assets. The shares of common stock are generally intended to be sold and repurchased by us on a continuous basis. We intend to conduct our operations so that we are not required to register under the 1940 Act.
Our primary investment objectives are to: provide current income in the form of regular, stable cash distributions to achieve an attractive dividend yield; preserve and protect invested capital; realize appreciation in net asset value, or NAV, from proactive management and asset management; and provide an investment alternative for stockholders seeking to allocate a portion of their long-term investment portfolios to commercial real estate debt with lower volatility than public real estate companies.
Our investment strategy is to originate, acquire and manage a portfolio of senior loans secured by commercial real estate primarily in the United States. We are focused on senior floating-rate mortgage loans, but we may also invest in other real estate-related assets, including: (i) other commercial real estate mortgage loans, including fixed-rate loans, subordinated loans, B-Notes, mezzanine loans and participations in commercial mortgage loans; and (ii) commercial real estate securities, including commercial mortgage-backed securities, or CMBS, unsecured debt of listed and non-listed REITs, collateralized debt obligations and equity or equity-linked securities. To a lesser extent we may invest in warehouse loans secured by commercial or residential mortgages, credit loans to commercial real estate companies, residential mortgage-backed securities, or RMBS, and portfolios of single family home mortgages.
The success of our activities is affected by general economic and market conditions, including, among others, interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws, and trade barriers. These factors could affect the level and volatility of securities prices and the liquidity of our investments. Volatility or illiquidity could impair our profitability or result in losses. These factors also could adversely affect the availability or cost of our leverage, which would result in lower returns. Future market disruptions and/or illiquidity would be expected to have an adverse effect on our business, financial condition, results of operations and cash flows. Unfavorable economic conditions also would be expected to increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events have limited and could continue to limit
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our investment originations, limit our ability to grow and have a material negative impact on our operating results and the fair values of our debt and equity investments.
Portfolio Overview
Loan Portfolio Overview
The following table details activity in our loans receivable portfolio for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Loan fundings(1)
$440,443 $646,718 $1,014,971 $3,731,304 
Loan repayments(2)
(247,394)(94,796)(631,692)(483,832)
Total net fundings$193,049 $551,922 $383,279 $3,247,472 
__________________________
(1)    Includes new loan originations and additional fundings made under existing loans.
(2)     Excludes payment held by servicer during the year ended December 31, 2022.
The following table details overall statistics for our loans receivable portfolio as of September 30, 2023 and December 31, 2022:
September 30, 2023 (Unaudited)December 31, 2022
Number of loans143142 
Principal balance$7,735,561$7,350,271 
Net book value$7,665,632$7,350,315 
Unfunded loan commitments(1)
$456,666$574,510 
Weighted-average cash coupon(2)
+3.90%+3.83%
Weighted-average all-in yield(2)
+3.97%+3.90%
Weighted-average maximum maturity (years)(3)
3.34.0 
________________________
(1)    We may be required to provide funding when requested by the borrower in accordance with the terms of the underlying agreements.
(2)    Our floating rate loans are expressed as a spread over the Secured Overnight Financing Rate, or SOFR. In addition to cash coupon, all-in yield includes accretion of discount (amortization of premium) and accrual of exit fees.
(3)    Maximum maturity assumes all extension options are exercised by the borrowers; however loans may be repaid prior to such date.
The following table provides details of our loan receivable, held-for-investment portfolio, on a loan-by-loan basis, as of September 30, 2023:
Loan Type
Origination Date(1)
Total LoanPrincipal BalanceNet Book Value
Cash Coupon(2)
All-in Yield(2)
Maximum Maturity(3)
LocationProperty Type
LTV(1)
1Senior Loan3/7/2018$11,000 $11,000 $10,987 +5.75%+5.87%6/9/2024Las Vegas, NVHospitality73%
2Senior Loan6/11/20188,000 8,000 7,999 +5.25%+5.34%3/9/2024Miami, FLRetail67%
3Senior Loan7/18/201822,500 22,500 22,464 +5.36%+5.53%8/9/2025Gaithersburg, MDHospitality73%
4Senior Loan4/9/201937,000 37,000 36,933 +4.25%+4.25%4/9/2025New York City, NYMixed Use75%
5Senior Loan6/28/201928,500 28,500 28,498 +5.46%+5.57%7/9/2025Davis, CAHospitality70%
6Senior Loan10/22/201915,300 15,300 15,412 +5.00%+5.22%5/9/2025Oakland, CAMixed Use74%
7Mezz Loan2/14/202015,000 15,000 15,000 +7.61%+7.61%12/5/2026Queens, NYMultifamily75%
8Senior Loan2/19/202018,000 14,400 14,402 +3.61%+3.61%3/9/2025Los Angeles, CAMixed Use63%
9Mezz Loan2/21/202018,102 18,102 18,102 +10.00%+10.00%3/1/2030VariousIndustrial79%
10Senior Loan12/10/202022,300 17,672 17,669 +5.36%+5.37%1/9/2026Fox Hills, CAOffice81%
11Senior Loan12/18/202028,440 24,738 24,737 +4.61%+4.62%1/9/2026Rockville, MDOffice75%
12Senior Loan12/29/202011,983 11,808 12,062 +3.86%+4.03%1/9/2026Brooklyn, NYMultifamily49%
13Senior Loan1/28/202116,100 16,100 16,153 +4.61%+4.74%2/9/2026Philadelphia, PASelf Storage84%
14Senior Loan2/26/202118,590 17,706 17,703 +3.36%+3.37%3/9/2026Newark, NJIndustrial60%
15Senior Loan3/11/202132,000 30,000 29,997 +4.61%+4.70%3/9/2026Colleyville, TXRetail58%
16Senior Loan3/12/202152,250 34,251 34,246 +5.86%+5.87%3/9/2026San Francisco, CAOffice86%
17Senior Loan3/19/202112,718 12,718 12,768 +4.06%+4.24%4/9/2026Brooklyn, NYMultifamily84%
18Senior Loan3/25/202113,405 12,830 12,855 +3.36%+3.45%4/9/2026Lithonia, GAMultifamily72%
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Loan Type
Origination Date(1)
Total LoanPrincipal BalanceNet Book Value
Cash Coupon(2)
All-in Yield(2)
Maximum Maturity(3)
LocationProperty Type
LTV(1)
19Senior Loan3/29/2021$35,880 $34,397 $34,392 +3.71%+3.72%4/9/2026Arlington, TXMultifamily86%
20Senior Loan4/15/202164,460 64,171 64,164 +2.91%+2.92%5/9/2026Lawrenceville, GAMultifamily79%
21Senior Loan4/26/202168,100 66,000 65,993 +3.26%+3.27%5/9/2026North Las Vegas, NVMultifamily72%
22Senior Loan4/27/202139,050 35,562 35,558 +3.26%+3.27%5/9/2026Jamaica, NYIndustrial61%
23Senior Loan5/4/202130,000 24,466 24,463 5.66%+5.92%5/9/2026Richardson, TXOffice76%
24Senior Loan5/10/202119,200 17,892 17,886 +3.61%+3.63%5/9/2026University City, PAMultifamily71%
25Senior Loan5/12/202185,000 85,000 85,092 +3.11%+3.17%5/9/2026Detroit, MIIndustrial75%
26Senior Loan5/28/202135,785 31,085 31,078 +5.11%+5.12%6/9/2026Austin, TXOffice57%
27Senior Loan6/16/202117,500 16,956 16,952 +3.36%+3.37%7/9/2026Everett, WAMultifamily82%
28Senior Loan6/16/202115,406 15,320 15,316 +3.36%+3.37%7/9/2026Everett, WAMultifamily78%
29Senior Loan6/23/202148,944 48,155 48,147 +2.91%+2.92%7/9/2026Roswell, GAMultifamily81%
30Senior Loan6/24/202138,600 38,085 38,077 +3.86%+3.87%7/9/2026Austin, TXMultifamily82%
31Senior Loan6/25/202125,000 24,441 24,437 +3.16%+3.17%7/9/2026Austin, TXMultifamily70%
32Senior Loan7/7/202152,200 47,173 47,165 +3.11%+3.12%7/9/2026Austin, FLMultifamily78%
33Senior Loan7/13/202121,350 21,350 21,342 +3.51%+3.53%8/9/2026Grand Prairie, TXMultifamily72%
34Senior Loan7/20/202121,136 18,828 18,858 3.36%+3.46%8/9/2026Las Vegas, NVMultifamily74%
35Senior Loan7/21/202141,300 40,617 40,613 +2.91%+2.92%8/9/2026Evanston, ILMultifamily82%
36Senior Loan7/22/202162,100 60,858 60,849 +3.41%+3.42%8/9/2026Nashville, TNMultifamily76%
37Senior Loan7/28/202143,350 42,592 42,583 +3.11%+3.12%8/9/2026Sandy Springs, GAMultifamily81%
38Senior Loan7/29/202162,500 62,500 62,498 +3.21%+3.22%8/9/2026Maitland, FLMultifamily72%
39Senior Loan7/29/202147,500 47,500 47,498 +3.21%+3.22%8/9/2026Clearwater, FLMultifamily79%
40Senior Loan8/2/202160,130 58,947 58,934 +2.91%+2.92%8/9/2026Austin, TXMultifamily75%
41Senior Loan8/3/202146,500 46,500 46,501 +3.21%+3.28%8/9/2026San Antonio, TXMultifamily73%
42Senior Loan8/3/202138,500 38,500 38,499 +3.21%+3.28%8/9/2026San Antonio, TXMultifamily71%
43Senior Loan8/6/202120,000 20,000 20,045 +3.21%+3.31%8/9/2026Sandy Springs, GAMultifamily74%
44Senior Loan8/9/202153,160 51,836 51,827 +3.26%+3.27%8/9/2026Philadelphia, PAMultifamily80%
45Senior Loan8/9/202142,660 41,526 41,521 +3.16%+3.17%8/9/2026Southaven, MSMultifamily61%
46Senior Loan8/13/202129,817 26,475 26,503 +3.21%+3.30%9/9/2026VariousIndustrial76%
47Senior Loan8/19/202143,000 43,000 42,991 +3.21%+3.22%9/9/2026Omaha, NEMultifamily75%
48Senior Loan8/25/202141,395 41,043 41,034 +3.26%+3.27%9/9/2026Cypress, TXMultifamily70%
49Senior Loan8/26/202121,805 21,605 21,596 +3.21%+3.23%9/9/2026Seattle, WAMultifamily75%
50Senior Loan8/31/202137,391 37,391 37,386 +3.21%+3.31%9/9/2026Colorado Springs, COMultifamily74%
51Senior Loan9/10/202171,201 68,556 68,541 +3.01%+3.02%10/9/2026Richardson, TXMultifamily72%
52Senior Loan9/23/202116,300 15,343 15,421 +4.36%+4.61%9/9/2026VariousMultifamily82%
53Mezz Loan10/1/202153,306 53,306 52,929 +10.00%+10.60%4/1/2026VariousVarious93%
54Senior Loan10/12/2021130,747 130,747 130,747 +3.11%+3.11%6/9/2026Philadelphia, PAMultifamily67%
55Senior Loan10/28/202140,200 39,283 39,272 +3.11%+3.12%11/9/2026Dallas, TXMultifamily87%
56Senior Loan11/1/202148,906 47,675 47,665 +3.81%+3.82%11/9/2026Fort Lauderdale, FLOffice72%
57Senior Loan11/1/202142,300 41,263 41,253 +3.61%+3.62%11/9/2026Doraville, GAMultifamily85%
58Senior Loan11/4/202137,300 37,300 37,300 +3.45%+3.95%11/1/2024Boca Raton, FLMultifamily84%
59Senior Loan11/5/202155,960 52,367 52,362 +3.21%+3.22%11/9/2026Houston, TXIndustrial79%
60Senior Loan11/5/202136,325 35,840 35,825 +3.21%+3.22%11/9/2026Mesquite, TXMultifamily81%
61Senior Loan11/10/202147,162 44,712 44,773 +3.86%+4.20%11/9/2026Fayetteville, ARMultifamily71%
62Senior Loan11/18/202127,387 27,387 27,380 +3.71%+3.72%12/9/2026Brooklyn, NYSelf Storage70%
63Senior Loan11/23/202147,600 41,239 41,232 +3.05%+3.06%12/9/2026Dallas, TXMultifamily73%
64Senior Loan11/23/202132,000 27,802 27,796 +3.05%+3.06%12/9/2026Dallas, TXMultifamily74%
65Senior Loan11/30/202138,310 37,193 37,350 +4.45%+4.70%12/9/2026Memphis, TNOffice74%
66Senior Loan12/3/202134,327 34,327 34,322 +3.45%+3.45%12/9/2026VariousSelf Storage68%
67Senior Loan12/3/202118,828 18,828 18,824 +3.45%+3.46%12/9/2026VariousSelf Storage66%
68Senior Loan12/15/202185,000 81,800 81,788 +3.35%+3.35%12/9/2026Sunny Isles, FLMultifamily74%
69Senior Loan12/15/202149,000 49,000 48,988 +3.45%+3.46%12/9/2026Ladson, SCMultifamily77%
70Senior Loan12/15/202128,400 27,372 27,365 +3.30%+3.31%12/9/2026Arlington, TXMultifamily83%
71Senior Loan12/16/202133,000 31,504 31,492 +3.55%+3.56%1/9/2027Fort Worth, TXMultifamily74%
72Senior Loan12/17/202146,100 36,500 36,487 +4.30%+4.39%1/9/2027Seattle, WAOffice53%
73Senior Loan12/21/202165,450 65,450 65,440 +4.35%+4.36%1/9/2027Dallas, TXHospitality58%
74Senior Loan12/21/202193,900 87,743 87,734 +3.80%+3.80%1/9/2027Houston, TXMultifamily94%
75Senior Loan12/21/202136,000 36,000 35,988 +3.45%+3.46%1/9/2027Hackensack, NJMultifamily71%
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Loan Type
Origination Date(1)
Total LoanPrincipal BalanceNet Book Value
Cash Coupon(2)
All-in Yield(2)
Maximum Maturity(3)
LocationProperty Type
LTV(1)
76Senior Loan12/22/2021$81,500 $59,447 $59,671 +4.75%+4.92%1/9/2027Farmers Branch, TXOffice63%
77Senior Loan12/23/202183,400 74,554 74,537 +4.45%+4.46%1/9/2027Westminster, CORetail70%
78Senior Loan12/30/202195,000 95,000 94,989 +4.20%+4.20%1/9/2027San Diego, CAHospitality58%
79Senior Loan1/7/202258,000 56,898 57,065 +4.36%+4.54%11/9/2026Miami, FLHospitality52%
80Senior Loan1/7/202236,000 36,000 36,000 +3.80%+3.80%1/9/2027Jupiter, FLOffice72%
81Senior Loan1/13/2022103,600 94,636 94,616 +3.55%+3.56%1/9/2027Austin, TXMultifamily83%
82Senior Loan1/28/202224,489 24,489 24,539 +3.81%+4.01%9/9/2026Mesquite, TXMultifamily78%
83Senior Loan1/28/202243,650 36,581 36,666 +4.00%+4.13%2/9/2027Milwaukee, WIOffice65%
84Senior Loan1/28/202222,149 22,149 22,192 +3.81%+4.01%9/9/2026Dallas, TXMultifamily85%
85Senior Loan1/28/202231,229 31,229 31,292 +3.81%+4.01%9/9/2026Dallas, TXMultifamily83%
86Senior Loan2/4/202289,000 89,000 89,738 +3.85%+3.85%2/1/2025Temecula, CAMultifamily75%
87Senior Loan2/15/202258,750 56,943 56,929 +3.50%+3.51%3/9/2027Antioch, TNMultifamily80%
88Senior Loan2/17/202255,400 50,093 50,152 +4.10%+4.19%3/9/2027Indianapolis, INMultifamily87%
89Senior Loan2/18/202249,240 33,992 33,978 +3.90%+3.91%3/9/2027Atlanta, GAOffice76%
90Senior Loan2/28/202275,000 74,299 74,299 +3.85%+3.85%3/9/2027Atlanta, GAMultifamily70%
91Senior Loan3/7/202253,885 50,238 50,299 +3.50%+3.59%3/9/2027Humble, TXMultifamily79%
92Senior Loan3/9/202284,000 80,787 80,787 +3.55%+3.55%3/9/2027Temple Hills, MDMultifamily76%
93Senior Loan3/10/2022110,150 90,577 90,559 +5.00%+5.01%4/9/2027Santa Clara, CAOffice62%
94Senior Loan3/14/202242,000 40,478 40,576 +3.50%+3.67%4/9/2027Dallas, TXMultifamily77%
95Senior Loan3/22/202250,750 50,750 50,750 +3.60%+3.60%4/9/2027Humble, TXMultifamily67%
96Senior Loan3/31/2022120,470 86,552 86,539 +4.30%+4.30%4/9/2027Addison, TXOffice69%
97Senior Loan4/6/202246,500 44,462 44,447 +3.50%+3.51%4/9/2027Atlanta, GAMultifamily80%
98Mezz Loan4/6/20225,379 5,379 5,379 +11.00%+11.00%4/9/2027Atlanta, GAMultifamily90%
99Senior Loan4/13/202262,650 56,294 56,275 +3.90%+3.91%5/9/2027Houston, TXMultifamily81%
100Senior Loan4/26/202269,350 63,340 63,321 +3.72%+3.73%5/9/2027Tucson, AZMultifamily68%
101Senior Loan4/26/202249,125 45,372 45,473 +4.05%+4.38%5/9/2027Decatur, GAMultifamily73%
102Senior Loan4/27/202267,940 63,473 63,506 +4.00%+4.06%5/9/2027Indianapolis, INMultifamily87%
103Senior Loan4/27/202231,800 28,316 28,307 +4.30%+4.31%5/9/2027Morrow, GAIndustrial77%
104Senior Loan4/28/2022195,000 195,000 195,196 +4.65%+4.74%5/9/2027New York, NYHospitality70%
105Senior Loan4/29/202290,000 90,000 90,000 +3.55%+3.55%5/6/2027Reseda, CAMultifamily69%
106Senior Loan4/29/202237,136 35,349 35,383 +3.75%+3.84%5/9/2027Euless, TXMultifamily82%
107Senior Loan5/12/202258,165 56,605 56,595 +3.35%+3.36%5/9/2027Denver, COMultifamily79%
108Mezz Loan5/12/20225,785 5,785 5,785 +10.50%+10.50%5/9/2027Denver, COMultifamily87%
109Senior Loan5/13/202293,500 92,469 92,619 +4.25%+4.39%5/9/2027New York, NYMultifamily64%
110Senior Loan5/13/202289,500 86,657 86,800 +4.25%+4.39%5/9/2027New York, NYMultifamily63%
111Senior Loan5/18/2022105,000 105,000 105,000 +3.50%+3.50%6/9/2027New Rochelle, NYMultifamily61%
112Senior Loan5/20/202263,000 62,364 62,357 +4.15%+4.15%5/9/2027Montauk, NYHospitality80%
113Senior Loan5/26/2022108,500 100,349 100,450 +3.40%+3.58%6/9/2027Mesa, AZMultifamily68%
114Senior Loan6/8/2022144,160 144,160 144,627 +3.89%+4.14%6/9/2027New York, NYMultifamily73%
115Mezz Loan6/8/202215,840 15,840 15,892 +7.50%+7.75%6/9/2027New York, NYMultifamily81%
116Senior Loan6/9/2022365,610 351,276 351,245 3.30%+3.30%6/9/2027VariousMultifamily75%
117Senior Loan6/14/2022104,630 91,030 91,014 +3.80%+3.81%6/9/2027San Jose, CAIndustrial36%
118Senior Loan6/16/202252,280 49,201 49,194 +3.80%+3.80%7/9/2027Jacksonville, FLMultifamily77%
119Senior Loan6/23/202257,000 48,946 48,990 +4.75%+4.84%7/9/2027Seattle, WAMultifamily69%
120Senior Loan6/28/2022100,000 100,000 99,983 +3.15%+3.16%7/9/2027Fayetteville, NCMultifamily76%
121Senior Loan6/30/2022106,000 100,000 99,989 +4.15%+4.15%7/9/2027Lynwood, CARetail61%
122Senior Loan7/7/202257,250 55,542 55,590 +4.35%+4.44%7/9/2027Birmingham, ALRetail72%
123Senior Loan7/15/2022107,000 85,000 84,980 +3.70%+3.71%8/9/2027Middletown, DEIndustrial68%
124Senior Loan7/20/202285,690 80,962 81,028 +3.65%+3.74%8/9/2027Phoenix, AZMultifamily61%
125Senior Loan8/4/202290,000 90,000 89,990 +3.65%+3.65%8/9/2027Santa Barbara, CAVarious60%
126Senior Loan8/17/202255,600 53,404 53,437 +3.85%+3.94%9/9/2027Austin, TXMultifamily63%
127Senior Loan8/25/202245,000 45,000 45,234 +3.50%+4.00%9/9/2027McKinney, TXMultifamily53%
128Senior Loan9/8/202287,000 74,628 74,710 +4.25%+4.34%9/9/2027Washington, DC, MDHospitality53%
129Senior Loan9/22/2022103,552 103,552 103,811 +3.66%+3.79%9/1/2024VariousSelf Storage74%
130Senior Loan9/30/202240,000 34,500 34,585 +5.00%+5.27%10/9/2027New Orleans, LAHospitality64%
131Senior Loan10/3/202291,100 81,300 81,284 +4.50%+4.51%10/9/2027Miami, FLOffice48%
132Senior Loan10/13/202260,000 54,000 54,048 +4.25%+4.33%10/9/2027Pinehurst, NCMultifamily60%
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Loan Type
Origination Date(1)
Total LoanPrincipal BalanceNet Book Value
Cash Coupon(2)
All-in Yield(2)
Maximum Maturity(3)
LocationProperty Type
LTV(1)
133Mezz Loan10/20/2022$31,111 $29,084 $29,084 +6.50%+6.50%10/9/2027Philadelphia, PAMixed Use15%
134Senior Loan11/3/202273,000 51,350 51,386 +4.75%+4.85%11/9/2027Adairsville, GAHospitality45%
135Senior Loan11/15/2022146,200 146,200 146,200 +4.21%+4.21%11/9/2027Nashville, TNHospitality51%
136Senior Loan12/21/202255,000 53,451 53,467 +3.85%+3.95%12/9/2027San Bernardino, CAMultifamily67%
137Senior Loan1/13/2023100,000 100,000 100,088 +4.75%+4.87%1/13/2025New York, NYHospitality41%
138Senior Loan1/20/2023138,407 120,407 120,407 +3.70%+3.70%2/9/2028VariousIndustrial95%
139Mezz Loan1/20/202315,379 13,379 13,379 +5.20%+5.20%2/9/2028VariousIndustrial106%
140Senior Loan3/29/202348,010 48,010 46,619 +2.25%+4.19%10/9/2027VariousMultifamily57%
141Senior Loan7/14/2023156,500 156,500 156,491 +4.00%+4.05%7/9/2028VariousMultifamily69%
142Senior Loan7/18/2023128,000 120,000 120,000 +3.75%+3.75%8/9/2026Jersey City, NJMultifamily55%
143Senior Loan7/31/202382,000 82,000 82,025 +4.95%+5.12%8/9/2028Berkeley, CAHospitality58%
Total/Weighted Average$8,192,227 $7,735,561 $7,737,902 +3.90%+3.97%
CECL Reserve(72,270)
Loans receivable, net$7,665,632 
__________________________
(1)    Date loan was originated or acquired by us, and the loan-to-value, or LTV, as of such date. Dates and LTV are not updated for subsequent loan modifications or upsizes.
(2)    The weighted-average cash coupon and all-in yield are expressed as a spread over the relevant floating benchmark rates, which include SOFR. In addition to cash coupon, all-in yield include accretion of discount (amortization of premium) and accrual of exit fees.
(3)    Maximum maturity assumes all extension options are exercised by the borrower, however loans may be repaid prior to such date.
Results of Operations
The following table sets forth information regarding our unaudited consolidated results of operations for the nine months ended September 30, 2023 and 2022:
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Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Net interest income
Interest income$192,867 $111,575 $551,164 $226,436 
Less: Interest expense(110,572)(59,107)(315,461)(104,506)
Interest income on mortgage loans held in securitization trusts4,363 — 11,590 — 
Less: Interest expense on mortgage obligations issued by securitization trusts(3,425)— (9,283)— 
Net interest income83,233 52,468 238,010 121,930 
Other expenses
Management fee9,092 6,629 25,514 15,825 
Performance fee6,354 3,904 17,742 4,056 
General and administrative expenses10,008 5,685 30,446 14,528 
Less: Expense limitation— — (148)— 
Add: Expense recoupment to sponsor753 256 753 3,026 
Net other expenses26,207 16,474 74,307 37,435 
Other income (loss)
(Increase) decrease in current expected credit loss reserve101 — (42,130)— 
Income (loss) from rental operations, net(234)(1,068)(1,931)(1,068)
Net change in unrealized gain on interest rate cap(762)1,758 (1,370)309 
Net realized gain (loss) on extinguishment of debt265 — 265 — 
Net change in unrealized gain (loss) on mortgage-backed securities, fair value option45 — 325 — 
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net(213)— (742)— 
Total other income (loss)(798)690 (45,583)(759)
Net income before taxes56,228 36,684 118,120 83,736 
Income tax expense(274)(348)(2,260)(831)
Net income55,954 36,336 115,860 82,905 
Preferred stock dividends(3)(3)(11)(11)
Net income attributable to FS Credit Real Estate Income Trust, Inc.$55,951 $36,333 $115,849 $82,894 
Net Interest Income
Net interest income is generated on our interest-earning assets less related interest-bearing liabilities. The increase in interest income was attributable to debt investments acquired or originated in our portfolio and non-recurring prepayment fee income. The increase in interest expense was attributable to an increase in borrowings in order to support our investment activities. The increase in interest income on mortgage loans held in securitization trusts, and interest expense on mortgage obligations issued by securitization trusts was attributable to the consolidation of securitization vehicles.
Other Expenses
Other expenses include management and performance fees payable to FS Real Estate Advisor and general and administrative expenses. General and administrative expenses include administrative services expenses and fees, auditing and professional fees, independent director fees, transfer agent fees, loan servicing expenses and other costs associated with operating our business. The increase in other expenses can primarily be attributed to the increase of our management fee and various general and administrative expenses related to the growth of our net assets.
Expense Limitation
We have entered into an expense limitation agreement with FS Real Estate Advisor and Rialto pursuant to which FS Real Estate Advisor and Rialto have agreed to waive reimbursement of or pay, on a quarterly basis, our annualized ordinary operating expenses for such quarter to the extent such expenses exceed 1.5% per annum of our average net assets attributable to each of our classes of common stock. Ordinary operating expenses for each class of common stock consist of all ordinary expenses attributable to such class, including administration fees, transfer agent fees, fees paid to our board of directors, loan servicing expenses, administrative services expenses and fees, and related costs associated with legal, regulatory compliance and investor relations, but excluding the following: (a) management fees and performance fees paid to FS Real Estate Advisor pursuant to the Advisory Agreement, (b) interest expense and other financing costs, (c) taxes, (d) distribution or shareholder servicing fees and (e) unusual, unexpected and/or nonrecurring expenses. We will repay FS Real Estate Advisor or Rialto on a quarterly basis any ordinary operating expenses previously waived or paid, but only if the reimbursement would not cause the then-current expense limitation, if any, to be exceeded. In addition, the
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reimbursement of expenses will be made only if payable not more than three years from the end of the fiscal quarter in which the expenses were paid or waived.
FS Real Estate Advisor and Rialto each agreed to waive the recoupment of any amounts that may be subject to conditional reimbursement during the quarterly period ended September 30, 2023. To the extent that the conditions to recoupment are satisfied in a future quarter (prior to the expiration of the three-year period for reimbursement set forth in the expense limitation agreement), such expenses may be subject to conditional recoupment in accordance with the terms of the expense limitation agreement.
During the period from September 13, 2017 (Commencement of Operations) to September 30, 2023, we accrued $6,592 for reimbursement of expenses that FS Real Estate Advisor and Rialto paid or waived, including $148 in reimbursements for the nine months ended September 30, 2023. During the period from September 13, 2017 (Commencement of Operations) to September 30, 2023, we received $6,592 in cash reimbursements from FS Real Estate Advisor. As of September 30, 2023, we had $0 of reimbursements due from FS Real Estate Advisor and Rialto.
During the nine months ended September 30, 2023, no expense recoupments were paid to FS Real Estate Advisor and Rialto. As of September 30, 2023, no expense recoupments were payable to FS Real Estate Advisor and Rialto.
Changes in current expected credit loss reserve
During the three and nine months ended September 30, 2023, our expected credit loss reserve increased by $101 and $42,130, respectively. The increase reflects a specific CECL reserve on a loan in our portfolio, as well as a more adverse macroeconomic outlook.
Non-GAAP Financial Measures
Funds from Operations and Modified Funds from Operations
We use Funds from Operations, or FFO, a widely accepted non-GAAP financial metric, to evaluate our performance. FFO provides a supplemental measure to compare our performance and operations to other REITs. Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or NAREIT, has promulgated a standard known as FFO, which it believes more accurately reflects the operating performance of a REIT. As defined by NAREIT, FFO means net income computed in accordance with GAAP, excluding gains (or losses) from sales of operating property, plus depreciation and amortization and after adjustments for unconsolidated entities. In addition, NAREIT has further clarified the FFO definition to add-back impairment write-downs of depreciable real estate or of investments in unconsolidated entities that are driven by measurable decreases in the fair value of depreciable real estate and to exclude the earnings impacts of cumulative effects of accounting changes. We have adopted the NAREIT definition for computing FFO.
Due to the unique features of publicly registered, non-listed REITs, the Institute for Portfolio Alternatives, or IPA, an industry trade group, published a standardized non-GAAP financial measure known as Modified Funds from Operations, or MFFO, which the IPA has promulgated as a supplemental measure for publicly registered non-listed REITs and which may be another appropriate supplemental measure to reflect the operating performance of a non-listed REIT.
The IPA defines MFFO as FFO adjusted for acquisition fees and expenses, amounts relating to straight line rents and amortization of premiums or accretion of discounts on debt investments, non-recurring impairments of real estate-related investments, mark-to-market adjustments included in net income, non-recurring 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 resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures.
Because MFFO may be a recognized measure of operating performance within the non-listed REIT industry, MFFO and the adjustments used to calculate it may be useful in order to evaluate our performance against other non-listed REITs. Like FFO, MFFO is not equivalent to our net income or loss as determined under GAAP, as detailed in the table below, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we continue to acquire a significant amount of investments.
Our presentation of FFO and MFFO may not be comparable to other similarly titled measures presented by other REITs. We believe that the use of FFO and MFFO provides a more complete understanding of our operating performance to stockholders and to management, and when compared year over year, reflects the impact on our operations from trends in operating costs, general and administrative expenses, and interest costs. Neither FFO nor MFFO is intended to be an alternative to “net income” or to “cash flows from operating activities” as determined by GAAP as a measure of our capacity to pay distributions. Management uses FFO and MFFO to compare our operating performance to that of other REITs and to assess our operating performance.
Neither the SEC, any other regulatory body nor NAREIT has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, another regulatory body or NAREIT may decide to standardize the allowable adjustments across the non-listed REIT industry and we would have to adjust our calculation and characterization of FFO or MFFO.
Our FFO and MFFO are calculated for the three and nine months ended September 30, 2023 and 2022 as follows:
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Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Net income (GAAP)$55,954 $36,336 $115,860 $82,905 
Adjustments to arrive at funds from operations:
Real estate depreciation and amortization1,835 1,839 5,501 1,839 
Funds from operations$57,789 $38,175 $121,361 $84,744 
Adjustments to arrive at modified funds from operations:
Accretion of discount on mortgage-backed securities held-to-maturity(679)(198)(6,055)(497)
Straight-line rental income(547)(342)(2,877)(342)
Net change in unrealized (gain) loss on interest rate cap762 (1,758)1,370 (309)
Net change in current expected credit loss reserve(101)— 42,130 — 
Net change in unrealized (gain) loss on mortgage-backed securities fair value option (45)— (325)— 
Unrealized (gain) loss on mortgage loans and obligations held in securitization trusts, net213 — 742 — 
Modified funds from operations$57,392 $35,877 $156,346 $83,596 
NAV per Share
FS Real Estate Advisor calculates our NAV per share in accordance with the valuation guidelines approved by our board of directors for the purposes of establishing a price for shares sold in our public offering as well as establishing a repurchase price for shares repurchased pursuant to our share repurchase plan.
In general, our investments are valued by FS Real Estate Advisor based on market quotations, at amortized cost or at fair value determined in accordance with GAAP. In accordance with the valuation guidelines approved by our board of directors, FS Real Estate Advisor calculates our NAV per share for each class of our common stock as of the last calendar day of each month. For purposes of calculating our NAV, FS Real Estate Advisor uses the following valuation methods:
Commercial real estate debt classified as held-for-investment is valued at amortized cost, net of unamortized acquisition premiums or discounts, loan fees, and origination costs. Mortgage-backed securities are classified as held-to-maturity when we intend to and can hold such securities until maturity and are valued at amortized cost, net of unamortized acquisition premium or discount. We recorded an initial current expected credit loss (“CECL”) reserve to our loans receivable, held-for-investment and our mortgage-backed securities, held-to-maturity portfolios, as required by GAAP, upon the adoption of ASU 2016-13 on January 1, 2023. Our general CECL reserve is not considered impairment and is excluded from our NAV calculation consistent with other unrealized gains (losses) for investments expected to be held to maturity pursuant to our existing policy for calculating NAV. We recognize such potential credit losses in the NAV calculation if and when a loan is deemed impaired. Impairment is indicated when it is deemed probable that we will not be able to collect all amounts due to us pursuant to the contractual terms of the loan. If a loan is determined to be impaired, the loan is written down through a loan specific reserve. See Note 2 to our unaudited consolidated financial statements included herein for additional information regarding our accounting for impaired loans, including significant judgments and assumptions included. At least quarterly, FS Real Estate Advisor, with assistance from our sub-adviser, evaluates for impairment each loan classified as held-for-investment.
Mortgage-backed securities that we do not classify as held-to-maturity are reported at fair value. On a monthly basis, FS Real Estate Advisor values such securities using quotations obtained from an independent third-party pricing service, which provides prevailing bid and ask prices that are screened for validity by the third-party pricing service on the valuation date. For securities for which there is no readily available market quotations, FS Real Estate Advisor will value the security using current market data and a valuation provided by an independent third-party valuation firm. Each investment will be valued by FS Real Estate Advisor no less frequently than quarterly.
Investments in real estate are initially valued at cost, which is expected to represent fair value at that time. FS Real Estate Advisor, with assistance from our sub-adviser, expects to receive an appraisal performed by an independent third-party appraisal firm on each property prior to or upon acquisition. Each property will then be valued monthly by the Adviser using current market data and a valuation provided by an independent third-party valuation firm. The independent third-party valuation firm will provide a monthly valuation for each property using the discounted cash flow methodology (income approach) as a primary methodology, although other industry standard methodologies may be used, including the sales comparison and replacement cost approaches. Further, the independent third-party valuation firm will provide an annual valuation for each property, which will be consistent with its monthly valuation but will also reflect (i) property specific factors such as property income, cash flow forecasts, capital improvements and key performance indicators (e.g. occupancy rates) and (ii) market specific factors such as discount rates, capitalization rates and market sale transactions.
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Liabilities include repurchase agreements payable, credit facility payable, collateralized loan obligations, mortgage obligations, fees payable to FS Real Estate Advisor and the dealer manager, accounts payable, accrued operating expenses, any portfolio-level credit facilities, and other liabilities. All liabilities are valued at amounts payable, net of unamortized premium or discount, and net of unamortized debt issuance costs. Liabilities related to stockholder servicing fees allocable to Class T, Class S, Class D and Class M shares are only included in the NAV calculation for those classes. Liabilities related to the base management fee is a class-specific expense for Class T, Class S, Class D, Class M and Class I shares, and the performance fee is a class-specific expense for Class T, Class S, Class D, Class M, Class I and Class Y shares. Class I PCRs will not be treated as a liability unless and until Class I shares are issuable pursuant to the Advisory Agreement and Amended and Restated PCR Agreement.
Commercial real estate debt and mortgage-backed securities held-to-maturity are valued at amortized cost, consistent with how they are recorded in accordance with GAAP, as these instruments are intended to be held-to-maturity. Liabilities are valued at amortized cost as these obligations are expected to be satisfied at their carrying value. See Note 9 to our unaudited consolidated financial statements included herein for additional information including a comparison of our carrying value and an estimate of the fair value of our commercial real estate debt, mortgage-backed securities held-to-maturity, repurchase agreements payable, credit facility payable, and collateralized loan obligations.
The following table provides a breakdown of the major components of our total NAV as of September 30, 2023:
Components of NAVSeptember 30, 2023
Cash and cash equivalents$166,940 
Restricted cash47,935 
Loans receivable, net of specific CECL reserve of $2,9677,734,935 
Mortgage-backed securities held-to-maturity74,614 
Mortgage-backed securities, at fair value225,095 
Interest receivable35,987 
Investment in real estate 184,672 
Receivable for investment sold and repaid46,316 
Other assets1,819 
Mortgage loans held in securitization trusts, at fair value330,629 
Repurchase agreements payable, net of deferred financing costs(239,457)
Credit facility payable(839,507)
Collateralized loan obligations, net of deferred financing costs(4,306,272)
Mortgage note, net of deferred financing costs(123,480)
Accrued servicing fees(1)
(1,330)
Other liabilities(298,170)
Mortgage loan obligations held in securitization trusts, at fair value(95,044)
Net asset value$2,945,682 
_______________________
(1)    See Reconciliation of Stockholders' Equity to NAV below for an explanation of the differences between the stockholder servicing fees accrued for purposes of NAV and the amount accrued under GAAP.
The following table provides a breakdown of our total NAV and NAV per share by share class as of September 30, 2023:
NAV per ShareClass FClass YClass TClass SClass DClass MClass ITotal
Net asset value$19,018 $21,944 $34,260 $1,609,044 $16,824 $119,622 $1,124,970 $2,945,682 
Number of outstanding shares755,420 906,648 1,378,393 64,127,317 675,550 4,792,423 46,397,317 119,033,068 
NAV per share as of September 30, 2023$25.1754 $24.2039 $24.8547 $25.0914 $24.9043 $24.9607 $24.2464 
Discount rate and exit capitalization rate are the key assumptions used in the discounted cash flow valuation of our investment in real estate. The discount rate and exit capitalization rate assumptions used in the September 30, 2023 investment in real estate valuation were 9.75% and 6.13%, respectively. A change in these assumptions would impact the calculation of the value of our real estate investment. For example, assuming all other factors remain unchanged, the changes listed below would result in the following effects on our investment values:
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InputHypothetical ChangeInvestment in Real Estate Values
Discount Rate0.25% decrease+3.4%
0.25% increase(3.3%)
Exit Capitalization Rate0.25% decrease+9.3%
0.25% increase(8.5%)
The following table sets forth a reconciliation of our stockholders' equity to our NAV as of September 30, 2023:
Reconciliation of Stockholders' Equity to NAVSeptember 30, 2023
Total stockholders' equity under GAAP$2,765,134 
Preferred stock(125)
Total stockholders' equity, net of preferred stock, under GAAP2,765,009 
Adjustments:
Accrued stockholder servicing fees(1)
114,503 
General CECL reserve(2)
71,010 
Unrealized real estate appreciation(3)
(9,635)
Accumulated depreciation and amortization(4)
9,131 
Other adjustments(5)
(4,336)
Net asset value$2,945,682 
_______________________
(1) Stockholder servicing fees only apply to Class T, Class S, Class D and Class M shares. Under GAAP, we accrue future stockholder servicing fees in an amount equal to our best estimate of fees payable to FS Investment Solutions at the time such shares are sold. For purposes of NAV, we recognize the stockholder servicing fee as a reduction of NAV on a monthly basis. As a result, the estimated liability for the future stockholder servicing fees, which are accrued at the time each share is sold, will have no effect on the NAV of any class.
(2)    Our loans receivable and mortgage-backed securities held-for-investment balances include a general CECL reserve in our GAAP unaudited             consolidated financial statements. For purposes of calculating our NAV, our general CECL reserve is excluded. We recognize a specific CECL reserve in the NAV calculation if and when a loan is deemed impaired, as described above.
(3)    Our investment in real estate is presented at its depreciated cost basis in our GAAP unaudited consolidated financial statements. As such, any increases or decreases in the fair market value of our investment in real estate is not included in our GAAP results. For purposes of calculating our NAV, our investment in real estate is recorded at fair value.
(4)    We depreciate our investment in real estate and amortize certain other assets and liabilities in accordance with GAAP. Such depreciation and amortization is not recorded for purposes of determining our NAV.
(5)    Includes (i) straight-line rent receivables, which are recorded in accordance with GAAP but not recorded for purposes of determining our NAV, (ii) increases or decreases in the fair market value of our interest rate cap, which is recorded in accordance with GAAP but not recorded for purposes of determining our NAV. For purposes of calculating our NAV, the interest rate cap is amortized over its term, and (iii) other adjustments.
Limits on the Calculation of Our Per Share NAV
Although our primary goal in establishing our valuation guidelines is to produce a valuation that represents a fair and accurate estimate of the value of our investments, the methodologies used are based on judgments, assumptions and opinions about future events that may or may not prove to be correct, and if different judgments, assumptions or opinions were used, a different estimate would likely result. Furthermore, our published per share NAV may not fully reflect certain extraordinary events because we may not be able to immediately quantify the financial impact of such events on our portfolio. FS Real Estate Advisor monitors our portfolio between valuations to determine whether there have been any extraordinary events that may have materially changed the estimated market value of the portfolio, such as significant market events or disruptions or force majeure events. If required by applicable securities law, we will promptly disclose the occurrence of such event in a prospectus supplement and FS Real Estate Advisor will analyze the impact of such extraordinary event on our portfolio and determine, in coordination with third-party valuation services, the appropriate adjustment to be made to our NAV. We will not, however, retroactively adjust NAV. To the extent that the extraordinary events may result in a material change in value of a specific investment, FS Real Estate Advisor will order a new valuation of the investment, which will be prepared by a third-party valuation service. It is not known whether any resulting disparity will benefit stockholders whose shares are or are not being repurchased or purchasers of our common stock. In calculating the number of shares outstanding used in calculating our NAV, we include the number of estimated Class I shares, if any, issuable to the adviser and the sub-adviser pursuant to the PCR Agreement based on the achievement of the Performance Conditions (as defined in the PCR Agreement), which estimate we will true up following the issuance of such Class I shares pursuant to the PCR Agreement.
We include no discounts to our NAV for the illiquid nature of our shares, including the limitations on the ability to sell shares under our share repurchase plan and our ability to suspend or terminate our share repurchase plan at any time. Our NAV generally does not consider exit costs that would likely be incurred if our assets and liabilities were liquidated or sold. While we may use market
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pricing concepts to value individual components of our NAV, our per share NAV is not derived from the market pricing information of open-end real estate funds listed on stock exchanges.
We do not represent, warranty or guarantee that:
a stockholder would be able to realize the NAV per share for the class of shares a stockholder owns if the stockholder attempts to sell its shares;
a stockholder would ultimately realize distributions per share equal to per share NAV upon a liquidation of our assets and settlement of our liabilities or upon any other liquidity event;
shares of our common stock would trade at per share NAV on a national securities exchange;
a third party in an arm’s-length transaction would offer to purchase all or substantially all of our shares of common stock at NAV;
NAV would equate to a market price for an open-end real estate fund; and
NAV would represent the fair value of our assets less liabilities under GAAP.

Review of our Policies
Our board of directors, including our independent directors, has reviewed our policies described in this Quarterly Report on Form 10-Q and our registration statement and determined that they are in the best interests of our stockholders because: (i) they increase the likelihood that we will be able to originate, acquire and manage a diversified portfolio of senior loans secured by commercial real estate, thereby reducing risk in our portfolio; (ii) there are sufficient loan underwriting opportunities with the attributes that we seek; (iii) our executive officers, director, affiliates of our adviser and sub-adviser have expertise with the type of real estate investments we seek; and (iv) our borrowings will enable us to originate and acquire loan assets and earn revenue more quickly, thereby increasing our likelihood of generating income for our stockholders and preserving stockholder capital.
Liquidity and Capital Resources
As of September 30, 2023, we had $166,940 in cash and cash equivalents, which we and our wholly owned subsidiaries held in custodial accounts. In addition, as of September 30, 2023, we had $2,493,338 in borrowings available under our financing arrangements, subject to borrowing base and other limitations. As of September 30, 2023, we had unfunded loan commitments of $456,666. We maintain sufficient cash on hand and available borrowings to fund such unfunded commitments should the need arise.
We will obtain the funds required to purchase or originate investments and conduct our operations from the net proceeds of our public offering, the private placement of our Class I shares and any future offerings we may conduct, from secured and unsecured borrowings from banks and other lenders, and from any undistributed funds from operations. Our principal demands for funds will be for asset acquisitions/originations, the payment of operating expenses and distributions, the payment of interest on any outstanding indebtedness and repurchases of our common stock pursuant to our share repurchase plan. Generally, cash needs for items other than asset acquisitions/originations will be met from operations, and cash needs for asset acquisitions/originations will be funded by public offerings of our shares and debt financings. However, there may be a delay between the sale of our shares and our purchase/originations of assets, which could result in a delay in the benefits to our stockholders of returns generated from our investment operations. Our leverage may not exceed 300% of our total net assets (as defined in our charter) as of the date of any borrowing unless a majority of our independent directors vote to approve any borrowing in excess of this amount.
As of September 30, 2023, our ratio of leverage to total net assets was 201%. Our board of directors will continue to review our ratio of leverage to total net assets on a quarterly basis, as required by our charter.
If we are unable to continue to raise substantial funds in our public offering, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments we make and the value of an investment in us will fluctuate with the performance of the specific assets we acquire. We have certain fixed operating expenses, including certain expenses as a publicly offered REIT, regardless of whether we are able to raise substantial funds in our public offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions.
Potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders or proceeds from the sale of assets or collection of loans receivable.
In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make certain payments to FS Real Estate Advisor and FS Investment Solutions, the dealer manager for our public offering. During the offering stage of our public offering, these payments will include payments to FS Real Estate Advisor and its affiliates for reimbursement of certain organization and offering expenses. We will reimburse FS Real Estate Advisor for the organization and offering costs it or Rialto incurs on our behalf only to the extent that the reimbursement would not cause the selling commissions, dealer manager fees, accountable due diligence expenses, stockholder servicing fees and the other organization and offering expenses borne by us to exceed 15.0% of the gross offering proceeds from the primary offering as the amount of proceeds increases. FS Real
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Estate Advisor may be reimbursed for any organization and offering expenses that it or Rialto has incurred on our behalf, up to a cap of 0.75% of gross proceeds raised. FS Investments funded our offering costs in the amount of $23,902 for the period from November 7, 2016 (Inception) to September 30, 2023. Through September 30, 2023, we reimbursed $19,479 to FS Real Estate Advisor for offering expenses previously funded. As of September 30, 2023, $4,180 of offering expenses previously funded remained subject to reimbursement to FS Real Estate Advisor and Rialto.
During our acquisition and development stage, subject to the limitations in the advisory agreement and sub-advisory agreement, we expect to make payments to FS Real Estate Advisor in connection with the management of our assets and costs incurred by FS Real Estate Advisor and Rialto in providing services to us. The advisory agreement has a one-year term but may be renewed for an unlimited number of successive one-year periods upon the mutual consent of FS Real Estate Advisor and our board of directors. On August 10, 2023, our board of directors approved the renewal of the advisory agreement effective as of December 1, 2023 for an additional one-year term expiring December 1, 2024. For a discussion of the compensation to be paid to FS Real Estate Advisor and FS Investment Solutions, see Note 7 to our unaudited consolidated financial statements included herein.
Cash Flows
The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash ($ in thousands):
Nine Months Ended September 30, 2023
20232022
Cash flows from operating activities$201,619 $96,098 
Cash flows used in investing activities(492,199)(3,624,819)
Cash flows from financing activities303,837 3,616,355 
Net increase (decrease) in cash and cash equivalents and restricted cash$13,257 $87,634 
Cash flows provided by operating activities increased $105,521 during the nine months ended September 30, 2023 compared to the corresponding period in 2022 due to $32,955 increase to net income, $42,130 increase in current expected credit loss reserve, and $20,682 increase to restricted stock units issued.
Cash flows used in investing activities decreased $3,132,620 during the nine months ended September 30, 2023 compared to the corresponding period in 2022 primarily due to the net decrease of $2,716,333 in origination and fundings of loans receivables offset by a net increase in principal collections from loans receivable, held-for-investment of $96,452. Purchases of mortgage-backed securities available-for-sale decreased $63,962, and there were no purchases of mortgage-backed securities held-to-maturity during the nine months ended September 30, 2023.
Cash flows provided by financing activities decreased $3,312,518 during the nine months ended September 30, 2023 compared to the corresponding period in 2022 primarily due to a net decrease in borrowings of 2,138,742 and the decrease in issuance of common stock of $626,559. In addition, there was an increase in the redemptions of common stock of $197,809.
We utilize our credit and repurchase facilities primarily to finance our loan originations on a short-term basis prior to loan securitizations, including through CLOs. The timing, size, and frequency of our securitizations impact the balances of these borrowings, and produce some fluctuations. The following table provides additional information regarding the balances of our borrowings ($ in thousands):
Quarter EndedQuarterly Average Unpaid Principal BalanceEnd of Period Unpaid Principal BalanceMaximum Unpaid Principal Balance at Any Month-End
September 30, 2023$1,142,991 $1,092,175 $1,221,440 
June 30, 2023$1,158,316 $1,101,753 $1,158,043 
March 31, 2023$1,222,233 $1,278,135 $1,308,357 
December 31, 2022$1,413,499 $1,015,284 $1,582,899 
September 30, 2022$1,692,516 $1,528,931 $1,935,464 

Critical Accounting Estimates
Our financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Refer to the section of our Form 10-K entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” for a full discussion of our critical accounting estimates. Our critical accounting estimates have not materially changed since
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December 31, 2022, other than an update to the accounting policy for our current expected credit loss reserve. See Note 2 to our unaudited consolidated financial statements included herein for additional information regarding our accounting policy for our current expected credit loss reserve and our other significant accounting estimates.
Related Party Transactions
Compensation of FS Real Estate Advisor, Rialto and the Dealer Manager
Pursuant to the advisory agreement, FS Real Estate Advisor is entitled to an annual base management fee equal to 1.25% of the NAV for our Class T, Class S, Class D, Class M and Class I shares and a performance fee based on our performance.  We also reimburse FS Real Estate Advisor and Rialto for their actual cost incurred on providing administrative services to us, including the allocable portion of compensation and related expenses of certain personnel providing such administrative services. Further, origination fees of up to 1.0% of the loan amount for first lien, subordinated or mezzanine debt or preferred equity financing may be retained by Rialto or FS Real Estate Advisor. FS Real Estate Advisor has also received compensation for the structuring and negotiation of certain financing arrangements. Pursuant to the advisory agreement, we will reimburse FS Real Estate Advisor and its affiliates for expenses incurred relating to our organization and continuous public offering, including the allocable portion of compensation and related expenses of certain personnel of FS Investments related thereto. FS Real Estate Advisor previously agreed to advance all of our organization and offering expenses until we raised $250,000 of gross proceeds from our public offering. In April 2020, FS Real Estate Advisor and Rialto agreed to defer the recoupment of any organization and offering expenses that may be reimbursable by us under the advisory agreement with respect to gross proceeds raised in the offering in excess of $250,000 until FS Real Estate Advisor, in its sole discretion, determined that we had achieved economies of scale sufficient to ensure that we could bear a reasonable level of expenses in relation to our income. We began reimbursing FS Real Estate Advisor in September 2020 and, as such, FS Real Estate Advisor may be reimbursed for any organization and offering expenses that it or Rialto has incurred on our behalf, up to a cap of 0.75% of gross proceeds raised after such time.
The dealer manager for our continuous public offering is FS Investment Solutions, which is an affiliate of FS Real Estate Advisor. Under the dealer manager agreement, FS Investment Solutions is entitled to receive upfront selling commissions and dealer manager fees in connection with the sale of shares of common stock in our continuous public offering. FS Investment Solutions anticipates that all of the selling commissions and dealer manager fees will be reallowed to participating broker-dealers, unless a particular broker-dealer declines to accept some portion of the dealer manager fee they are otherwise eligible to receive. FS Investment Solutions is also entitled to receive stockholder servicing fees, which accrue daily and are paid on a monthly basis. FS Investment Solutions will reallow such stockholder servicing fees to participating broker-dealers, servicing broker-dealers and financial institutions (including bank trust departments) and will waive (pay back to us) stockholder servicing fees to the extent a broker-dealer or financial institution is not eligible or otherwise declines to receive all or a portion of such fees.
See Note 7 to our unaudited consolidated financial statements included herein for additional information regarding our related party transactions and relationships, including a description of the fees and amounts due to FS Real Estate Advisor, compensation of FS Investment Solutions, capital contributions by FS Investments and Rialto, our expense limitation agreement with FS Investments and our purchase of a mortgage loan from an affiliate of Rialto.
FS Investment Solutions also serves or served as the placement agent for our private offerings of Class I, Class F and Class Y shares pursuant to placement agreements. FS Investment Solutions does not receive any compensation pursuant to these agreements.
Item 3.    Quantitative and Qualitative Disclosures About Market Risk.
We are subject to financial market risks, including changes in interest rates. As of September 30, 2023, 98% of the outstanding principal of our debt investments were floating-rate investments. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to any variable rate investments we may hold and to declines in the value of any fixed rate investments we may hold. However, many of our variable rate investments provide for an interest rate floor, which may prevent our interest income from increasing until benchmark interest rates increase beyond a threshold amount. To the extent that a substantial portion of our investments may be in variable rate investments, an increase in interest rates beyond this threshold would make it easier for us to meet or exceed our performance fee hurdle rate and may result in a substantial increase in our net investment income and the amount of performance fees payable to FS Real Estate Advisor.
Pursuant to the terms of the FS Rialto 2019-FL1 Notes, 2021-FL2 Notes, 2021-FL3 Notes, 2022-FL4 Notes, 2022-FL5 Notes, 2022-FL6 Notes, 2022-FL7 Notes, the WF-1 Facility, the GS-1 Facility, the BB-1 Facility, the MS-1 Facility, the Barclays Revolving Credit Facility, the BMO-1 Facility, the Lucid Facility, the Natixis loan, and the MM-1 Facility, borrowings are at a floating-rate based on LIBOR, and the pricing rate for any specific transaction executed under the RBC Facility may be charged, pursuant to the terms agreed for that transaction, at a floating-rate based on LIBOR. To the extent that any present or future credit facilities or other financing arrangements that we or any of our subsidiaries enter into are based on a floating interest rate, we will be subject to risks relating to changes in market interest rates. In periods of rising interest rates, when we have debt outstanding, our cost of funds would increase, which could reduce our net investment income, especially to the extent we hold fixed rate investments.
We may seek to limit the impact of rising interest rates on earnings and cash flows through the use of derivative financial instruments to hedge exposures to changes in interest rates on loans secured by our assets.
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The following table shows the effect over a twelve-month period of changes in interest rates on our interest income, interest expense, and net interest income, assuming no changes in the composition of our investment portfolio, including the accrual status of our investments, and our financing arrangements in effect as of September 30, 2023:
Basis Point Changes in Interest RatesIncrease (Decrease) in Interest IncomeIncrease (Decrease) in Interest ExpenseIncrease (Decrease) in Net Interest IncomePercentage Change in Net Interest Income
Down 50 basis points(1)
$(39,375)$(26,971)$(12,404)(3.7)%
Down 25 basis points(1)
$(19,688)$(13,486)$(6,202)(1.8)%
No change— — — — 
Up 25 basis points$19,688 $13,486 $6,202 1.8 %
Up 50 basis points$39,375 $26,971 $12,404 3.7 %
__________________________
(1)    Decrease in rates assumes the applicable benchmark rate does not decrease below 0%.
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Item 4.    Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023.
Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we would meet our disclosure obligations.
Remediation of Material Weakness
To address the previously reported material weakness in internal control over financial reporting described in Part II, Item 9A of our 2022 Form 10-K, we enhanced existing controls, designed and implemented new controls, and increased dedicated personnel. Based on the actions taken, we determined that the material weakness has been remediated as of September 30, 2023.
Changes in Internal Control Over Financial Reporting
Other than as described in the immediately preceding paragraph, there were no additional changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) or 15d-15(f))that occurred during the three months ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1.        Legal Proceedings.
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of any legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material adverse effect upon our financial condition or results of operations.
Item 1A.    Risk Factors.
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors that appeared under Item 1A. "Risk Factors" in our most recent Annual Report on Form 10-K, as supplemented by our quarterly report on Form 10-Q. There are no material changes from the risk factors included within our most recent Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.
Share Repurchase Program
We have adopted a share repurchase plan, whereby on a monthly basis, stockholders may request that we repurchase all or any portion of their shares. The repurchase of shares is limited to no more than 2% of our aggregate NAV per month of all classes of shares then participating in our share repurchase plan and no more than 5% of our aggregate NAV per calendar quarter of all classes of shares then participating in our share repurchase plan, which means that in any 12-month period, we limit repurchases to approximately 20% of the total NAV of all classes of shares then participating in the share repurchase plan.
During the three months ended September 30, 2023, we repurchased shares of our common stock in the following amounts, which represented all of the share repurchase requested received for the same period:
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(1)
July 1 - July 31, 2023763,786 $24.75 763,786 — 
August 1 - August 31, 20231,039,180 $24.90 1,039,180 — 
September 1 - September 30, 20231,106,110 $24.47 1,106,110 — 
Total2,909,076 2,909,076 — 
____________________
(1) Repurchases are limited as described above.

Sale of Unregistered Securities
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On July 1, 2023, we received $66,667 relating to the sale and issuance of approximately 2,750 Class I shares to accredited investors at the per share purchase price of $24.24. On August 1, 2023, we received $100,000 relating to the sale and issuance of approximately 4,127 Class I shares to accredited investors at the per share purchase price of $24.23. In each case, the sale of securities was made pursuant to a private placement exempt from registration under Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder.
Item 3.     Defaults upon Senior Securities.
Not applicable.
Item 4.    Mine Safety Disclosures.
Not applicable.
Item 5.    Other Information.
Renewal of Advisory Agreement
We previously entered into that certain Fourth Amended and Restated Advisory Agreement dated as of December 1, 2022 (the “Advisory Agreement”) with FS Real Estate Advisor, LLC, our external advisor. On August 10, 2023, our board of directors approved the renewal of the Advisory Agreement effective as of December 1, 2023 for an additional one-year term expiring December 1, 2024. The terms of the Advisory Agreement otherwise remain unchanged.

Renewal of Expense Limitation Agreement

We previously entered into that certain Second Amended and Restated Expense Limitation Agreement dated as of December 1, 2022 (the “Expense Limitation Agreement”) with FS Real Estate Advisor, LLC, our external advisor, and Rialto Capital Management LLC, the sub-advisor to our external advisor. On August 10, 2023, our board of directors approved the renewal of the Expense Limitation Agreement effective as of December 1, 2023 for an additional one-year term expiring December 1, 2024. The terms of the Expense Limitation Agreement otherwise remain unchanged.

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Item 6.        Exhibits.
3.1
3.2
3.3
3.4
3.5
4.1
10.1
10.2
31.1*
31.2*
32.1+
101.INS*Inline XBRL Instance Document.
101.SCH*Inline XBRL Taxonomy Extension Schema Document.
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document.
104*Cover Page Interactive Data File (embedded within the Inline XBRL document)
__________________________
*    Filed herewith
+    This exhibit shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act or the Exchange Act.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized on November 13, 2023.

FS CREDIT REAL ESTATE INCOME TRUST, INC.
By:/s/ MICHAEL C. FORMAN
Michael C. Forman Chief Executive Officer (Principal Executive Officer)
By:/s/ CHRISTOPHER CONDELLES
Christopher Condelles
Chief Financial Officer
(Principal Accounting and Financial Officer)


56


Exhibit 31.1
CERTIFICATION
PURSUANT TO 17 CFR 240.13a-14
PROMULGATED UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael C. Forman, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of FS Credit Real Estate Income Trust, Inc.
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 13, 2023

/S/ MICHAEL C. FORMAN
Michael C. Forman
Chief Executive Officer
1


Exhibit 31.2
CERTIFICATION
PURSUANT TO 17 CFR 240.13a-14
PROMULGATED UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Christopher Condelles, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of FS Credit Real Estate Income Trust, Inc.
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 13, 2023
/S/ CHRISTOPHER CONDELLES
Christopher Condelles
Chief Financial Officer

1



Exhibit 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of FS Credit Real Estate Income Trust, Inc. (the “Company”) for the quarter ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), Michael C. Forman, as Chief Executive Officer of the Company, and Christopher Condelles, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:
the Form 10-Q of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 13, 2023

/S/ MICHAEL C. FORMAN
Michael C. Forman
Chief Executive Officer
/S/ CHRISTOPHER CONDELLES
Christopher Condelles
Chief Financial Officer

1

v3.23.3
Cover Page - shares
9 Months Ended
Sep. 30, 2023
Nov. 10, 2023
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2023  
Document Transition Report false  
Entity File Number 000-56163  
Entity Registrant Name FS Credit Real Estate Income Trust, Inc.  
Entity Incorporation, State or Country Code MD  
Entity Tax Identification Number 81-4446064  
Entity Address, Address Line One 201 Rouse Boulevard  
Entity Address, City or Town Philadelphia  
Entity Address, State or Province PA  
Entity Address, Postal Zip Code 19112  
City Area Code 215  
Local Phone Number 495-1150  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company true  
Entity Ex Transition Period true  
Entity Shell Company false  
Entity Central Index Key 0001690536  
Amendment Flag false  
Document Fiscal Year Focus 2023  
Document Fiscal Period Focus Q3  
Current Fiscal Year End Date --12-31  
Common Stock Class F    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   751,255
Common Stock Class Y    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   906,648
Common Stock Class T    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   1,308,107
Common Stock Class S    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   64,686,880
Common Stock Class D    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   647,475
Common Stock Class M    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   4,896,373
Common Stock Class I    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   47,527,208

v3.23.3
Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Assets    
Cash and cash equivalents $ 166,940 $ 183,665
Restricted cash 47,935 17,953
Loans receivable, held-for-investment, net of credit loss allowances of $72,270 and $0 7,665,632 7,350,315
Mortgage-backed securities held-to-maturity, net of credit loss allowances of $71 and $0 74,543 68,559
Mortgage-backed securities, at fair value, credit loss allowances of $9,674 and $0 225,095 159,464
Reimbursement due from sponsor 0 605
Investment in real estate, net 185,176 190,549
Receivable for investments sold and repaid 46,316 922
Interest receivable 35,987 32,240
Other assets 6,155 9,281
Mortgage loans held in securitization trusts, at fair value 330,629 324,263
Total assets [1] 8,784,408 8,337,816
Liabilities    
Collateralized loan obligations, net 4,306,272 4,336,701
Repurchase agreements payable, net 239,457 756,816
Credit facilities payable, net 839,507 298,544
Mortgage note payable, net 123,480 122,568
Due to related party 116,585 107,692
Interest payable 28,722 19,379
Payable for shares repurchased 27,067 60,488
Other liabilities 40,014 27,278
Mortgage obligations issued by securitization trusts, at fair value 298,170 291,193
Total liabilities [1] 6,019,274 6,020,659
Commitments and contingencies (See Note 11)
Stockholders' equity    
Preferred stock, $0.01 par value, 100,000,000 shares authorized, 125 and 125 issued and outstanding, respectively 0 0
Additional paid-in capital 2,825,372 2,314,639
Accumulated other comprehensive income (loss) (8,129) (11,906)
Retained earnings (accumulated deficit) (53,300) 13,448
Total stockholders' equity 2,765,134 2,317,157
Total liabilities and stockholders' equity 8,784,408 8,337,816
Common Stock Class F    
Stockholders' equity    
Common stock 8 9
Common Stock Class Y    
Stockholders' equity    
Common stock 9 9
Common Stock Class T    
Stockholders' equity    
Common stock 14 16
Common Stock Class S    
Stockholders' equity    
Common stock 641 549
Common Stock Class D    
Stockholders' equity    
Common stock 7 7
Common Stock Class M    
Stockholders' equity    
Common stock 48 46
Common Stock Class I    
Stockholders' equity    
Common stock $ 464 $ 340
[1] The September 30, 2023 and December 31, 2022 consolidated balance sheets include assets of consolidated variable interest entities, or VIEs, that can only be used to settle obligations of the VIEs, and liabilities of consolidated VIEs for which creditors do not have recourse to FS Credit Real Estate Income Trust, Inc. As of September 30, 2023 and December 31, 2022, assets of the VIEs totaled $5,892,207 and $5,896,039, respectively, and liabilities of the VIEs totaled $4,616,997 and $4,640,998, respectively. See Note 10 for further details.

v3.23.3
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Assets    
CECL reserve on Loans receivable, held-for-investment $ 72,270 $ 0
CECL reserve on Mortgage-backed securities held-to-maturity 71 0
Credit Loss Allowance $ 9,674 $ 0
Stockholders' equity    
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred stock, shares authorized (in shares) 100,000,000 100,000,000
Preferred stock, shares issued (in shares) 125 125
Preferred stock, shares outstanding (in shares) 125 125
Total assets [1] $ 8,784,408 $ 8,337,816
Total liabilities [1] 6,019,274 6,020,659
Variable Interest Entity, Primary Beneficiary    
Stockholders' equity    
Total assets 5,892,207 5,896,039
Total liabilities $ 4,616,997 $ 4,640,998
Common Stock Class F    
Stockholders' equity    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 125,000,000 125,000,000
Common stock, shares issued (in shares) 755,420 857,710
Common stock, shares outstanding (in shares) 755,420 857,710
Common Stock Class Y    
Stockholders' equity    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 125,000,000 125,000,000
Common stock, shares issued (in shares) 906,648 906,648
Common stock, shares outstanding (in shares) 906,648 906,648
Common Stock Class T    
Stockholders' equity    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 125,000,000 125,000,000
Common stock, shares issued (in shares) 1,378,393 1,600,878
Common stock, shares outstanding (in shares) 1,378,393 1,600,878
Common Stock Class S    
Stockholders' equity    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 125,000,000 125,000,000
Common stock, shares issued (in shares) 64,127,317 54,908,336
Common stock, shares outstanding (in shares) 64,127,317 54,908,336
Common Stock Class D    
Stockholders' equity    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 125,000,000 125,000,000
Common stock, shares issued (in shares) 675,550 742,999
Common stock, shares outstanding (in shares) 675,550 742,999
Common Stock Class M    
Stockholders' equity    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 125,000,000 125,000,000
Common stock, shares issued (in shares) 4,792,423 4,645,072
Common stock, shares outstanding (in shares) 4,792,423 4,645,072
Common Stock Class I    
Stockholders' equity    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 300,000,000 300,000,000
Common stock, shares issued (in shares) 46,397,317 34,011,164
Common stock, shares outstanding (in shares) 46,397,317 34,011,164
Mortgage-Backed Securities    
Assets    
CECL reserve on Mortgage-backed securities held-to-maturity $ 71 $ 0
Credit Loss Allowance $ 9,674 $ 0
[1] The September 30, 2023 and December 31, 2022 consolidated balance sheets include assets of consolidated variable interest entities, or VIEs, that can only be used to settle obligations of the VIEs, and liabilities of consolidated VIEs for which creditors do not have recourse to FS Credit Real Estate Income Trust, Inc. As of September 30, 2023 and December 31, 2022, assets of the VIEs totaled $5,892,207 and $5,896,039, respectively, and liabilities of the VIEs totaled $4,616,997 and $4,640,998, respectively. See Note 10 for further details.

v3.23.3
Unaudited Consolidated Statements of Operations - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Net interest income        
Interest income $ 192,867 $ 111,575 $ 551,164 $ 226,436
Less: Interest expense (110,572) (59,107) (315,461) (104,506)
Interest income on mortgage loans held in securitization trusts 4,363 0 11,590 0
Less: Interest expense on mortgage obligations issued by securitization trusts (3,425) 0 (9,283) 0
Net interest income 83,233 52,468 238,010 121,930
Other expenses        
Management fee 9,092 6,629 25,514 15,825
Performance fee 6,354 3,904 17,742 4,056
General and administrative expenses 10,008 5,685 30,446 14,528
Less: Expense limitation 0 0 (148) 0
Add: Expense recoupment to sponsor 753 256 753 3,026
Net other expenses 26,207 16,474 74,307 37,435
Other income (loss)        
(Increase) decrease in current expected credit loss reserve 101 0 (42,130) 0
Income (loss) from rental operations, net (234) (1,068) (1,931) (1,068)
Net change in unrealized gain on interest rate cap (762) 1,758 (1,370) 309
Net realized gain (loss) on extinguishment of debt 265 0 265 0
Net change in unrealized gain (loss) on mortgage-backed securities, fair value option 45 0 325 0
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net (213) 0 (742) 0
Total other income (loss) (798) 690 (45,583) (759)
Net income before taxes 56,228 36,684 118,120 83,736
Income tax expense (274) (348) (2,260) (831)
Net income 55,954 36,336 115,860 82,905
Preferred stock dividends (3) (3) (11) (11)
Net income attributable to FS Credit Real Estate Income Trust, Inc.—diluted 55,951 36,333 115,849 82,894
Net income attributable to FS Credit Real Estate Income Trust, Inc.—basic $ 55,951 $ 36,333 $ 115,849 $ 82,894
Per share information—basic and diluted        
Net income per share of common stock—basic (in dollars per share) $ 0.48 $ 0.42 $ 1.04 $ 1.18
Net income per share of common stock—diluted (in dollars per share) $ 0.48 $ 0.42 $ 1.04 $ 1.18
Weighted average common stock outstanding—basic (in shares) 116,419,969 86,518,645 111,391,684 70,104,149
Weight average common stock outstanding—diluted (in shares) 116,419,969 86,518,645 111,391,684 70,104,149

v3.23.3
Unaudited Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Statement of Comprehensive Income [Abstract]        
Net income $ 55,954 $ 36,336 $ 115,860 $ 82,905
Other comprehensive income        
Net change in unrealized gain (loss) on mortgage-backed securities available-for-sale 2,242 (382) 3,777 (3,660)
Total other comprehensive income (loss) 2,242 (382) 3,777 (3,660)
Comprehensive income $ 58,196 $ 35,954 $ 119,637 $ 79,245

v3.23.3
Unaudited Consolidated Statements of Changes in Equity - USD ($)
$ in Thousands
Total
Revision of Prior Period, Accounting Standards Update, Adjustment
Common Stock
Common Stock
Common Stock Class F
Common Stock
Common Stock Class F
Par Value
Common Stock
Common Stock Class Y
Common Stock
Common Stock Class Y
Par Value
Common Stock
Common Stock Class T
Common Stock
Common Stock Class T
Par Value
Common Stock
Common Stock Class S
Common Stock
Common Stock Class S
Par Value
Common Stock
Common Stock Class D
Common Stock
Common Stock Class D
Par Value
Common Stock
Common Stock Class M
Common Stock
Common Stock Class M
Par Value
Common Stock
Common Stock Class I
Common Stock
Common Stock Class I
Par Value
Additional Paid-In Capital
Accumulated Other Comprehensive Income (Loss)
[1]
Retained Earnings (Accumulated Deficit)
Retained Earnings (Accumulated Deficit)
Revision of Prior Period, Accounting Standards Update, Adjustment
Beginning balance at Dec. 31, 2021 $ 973,340   $ 971,310 $ 22,138 $ 9 $ 22,371 $ 9 $ 33,862 $ 14 $ 531,150 $ 228 $ 15,945 $ 6 $ 66,836 $ 29 $ 279,008 $ 114 $ 969,558 $ 86 $ 3,287  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                          
Common stock issued 1,311,962   1,311,962 0   0   4,699 2 760,752 302 2,840 1 40,238 14 503,433 208 1,311,435      
Distributions declared (78,643)                                     (78,643)  
Proceeds from distribution reinvestment plan 37,838   37,838 554   0   793   22,106 9 277   1,820 1 12,288 5 37,823      
Redemptions of common stock (99,944)   (99,944) (1,870)   0   (835)   (57,119) (23) (549)   (3,840) (2) (35,731) (15) (99,904)      
Stockholder servicing fees (61,558)                                 (61,558)      
Offering costs (9,869)                                 (9,869)      
Performance contingent rights issued 11,409                                 11,409      
Net income 82,905                                     82,905  
Dividends on preferred stock (11)                                     (11)  
Other comprehensive income (loss) (3,660)                                   (3,660)    
Ending balance at Sep. 30, 2022 $ 2,163,769   2,159,608 20,822 9 22,371 9 38,284 16 1,197,986 516 18,013 7 99,043 42 763,089 312 2,158,894 (3,574) 7,538  
Accounting Standards Update [Extensible Enumeration] Impact of ASU 2016-13 Adoption                                        
Beginning balance at Dec. 31, 2021 $ 973,340   971,310 22,138 9 22,371 9 33,862 14 531,150 228 15,945 6 66,836 29 279,008 114 969,558 86 3,287  
Ending balance at Dec. 31, 2022 2,317,157 $ (41,521) 2,315,378 21,008 9 22,371 9 38,473 16 1,274,345 549 18,417 7 108,522 46 832,242 340 2,314,639 (11,906) 13,448 $ (41,521)
Beginning balance at Jun. 30, 2022 1,821,230       9   9   15   446   7   37   245 1,820,033 (3,192) 3,621  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                          
Common stock issued 381,818               1   76       5   72 381,664      
Distributions declared (32,416)                                     (32,416)  
Proceeds from distribution reinvestment plan 15,943                   4       1   2 15,936      
Redemptions of common stock (43,173)                   (10)       (1)   (7) (43,155)      
Stockholder servicing fees (15,130)                                 (15,130)      
Offering costs (2,870)                                 (2,870)      
Performance contingent rights issued 2,416                                 2,416      
Net income 36,336                                     36,336  
Dividends on preferred stock (3)                                     (3)  
Other comprehensive income (loss) (382)                                   (382)    
Ending balance at Sep. 30, 2022 2,163,769   2,159,608 20,822 9 22,371 9 38,284 16 1,197,986 516 18,013 7 99,043 42 763,089 312 2,158,894 (3,574) 7,538  
Beginning balance at Dec. 31, 2022 2,317,157 $ (41,521) 2,315,378 21,008 9 22,371 9 38,473 16 1,274,345 549 18,417 7 108,522 46 832,242 340 2,314,639 (11,906) 13,448 $ (41,521)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                          
Common stock issued 685,403   685,403 0   0   1,812   322,941 129 3,275   18,333 6 339,042 149 685,119      
Distributions declared (141,076)                                     (141,076)  
Proceeds from distribution reinvestment plan 68,670   68,670 559   0   838   37,215 15 318   2,088 1 27,652 13 68,641      
Redemptions of common stock (240,434)   (240,434) (2,862) (1) 0   (2,723) (2) (127,360) (52) (929)   (10,015) (5) (96,545) (38) (240,336)      
Stockholder servicing fees (18,214)                                 (18,214)      
Offering costs (5,159)                                 (5,159)      
Restricted stock units issued 20,682                                 20,682      
Net income 115,860                                     115,860  
Dividends on preferred stock (11)                                     (11)  
Other comprehensive income (loss) 3,777                                   3,777    
Ending balance at Sep. 30, 2023 2,765,134   2,810,803 18,448 8 22,371 9 32,904 14 1,487,838 641 16,727 7 111,970 48 1,120,545 464 2,825,372 (8,129) (53,300)  
Beginning balance at Jun. 30, 2023 2,630,503       7   9   15   617   7   48   435 2,697,971 (10,371) (58,235)  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                                          
Common stock issued 171,962                   35       2   34 171,891      
Distributions declared (51,016)                                     (51,016)  
Proceeds from distribution reinvestment plan 25,196                   5           6 25,185      
Redemptions of common stock (71,309)       1       (1)   (16)       (2)   (11) (71,280)      
Stockholder servicing fees (4,464)                                 (4,464)      
Offering costs (1,297)                                 (1,297)      
Restricted stock units issued 7,366                                 7,366      
Net income 55,954                                     55,954  
Dividends on preferred stock (3)                                     (3)  
Other comprehensive income (loss) 2,242                                   2,242    
Ending balance at Sep. 30, 2023 $ 2,765,134   $ 2,810,803 $ 18,448 $ 8 $ 22,371 $ 9 $ 32,904 $ 14 $ 1,487,838 $ 641 $ 16,727 $ 7 $ 111,970 $ 48 $ 1,120,545 $ 464 $ 2,825,372 $ (8,129) $ (53,300)  
[1] Comprised solely of unrealized gain (loss) on mortgage-backed securities, available for sale.

v3.23.3
Unaudited Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Cash flows from operating activities    
Net income $ 115,860 $ 82,905
Adjustments to reconcile net income to net cash provided by (used in) operating activities    
Performance contingent rights issued 0 11,409
Restricted stock units 20,682 0
Amortization of deferred fees on loans and debt securities (11,636) (3,616)
Amortization of deferred financing costs and discount 16,059 7,884
Increase in current expected credit loss reserve 42,130 0
Net unrealized (gain) loss on valuation of interest rate cap 1,370 (309)
Depreciation and amortization 5,501 1,839
Net unrealized (gain) loss on mortgage-backed securities, fair value option (325) 0
Net unrealized (gain) loss on mortgage loans and obligations held in securitization trusts 742 0
Changes in assets and liabilities    
Reimbursement due from (due to) sponsor 605 0
Interest receivable (3,747) (15,580)
Other assets 1,756 (9,418)
Due to related party 753 194
Interest payable 9,343 11,236
Other liabilities 2,526 9,554
Net cash provided by (used in) operating activities 201,619 96,098
Cash flows used in investing activities    
Origination and fundings of loans receivable (1,014,971) (3,731,304)
Principal collections from loans receivable, held-for-investment 586,298 489,846
Exit and extension fees received on loans receivable, held-for-investment 851 472
Purchases of mortgage-backed securities, at fair value (86,636) (150,598)
Principal repayments of mortgage-backed securities, at fair value 22,387 9,169
Purchases of mortgage-backed securities held-to-maturity 0 (48,536)
Acquisition of real estate 0 (193,868)
Capital improvements to real estate (128) 0
Net cash provided by (used in) investing activities (492,199) (3,624,819)
Cash flows from financing activities    
Issuance of common stock 685,403 1,311,962
Redemptions of common stock (273,855) (76,046)
Stockholder distributions paid (70,506) (37,959)
Stockholder servicing fees paid (10,074) (6,385)
Offering costs paid (5,159) (11,204)
Borrowing under mortgage note payable 0 124,700
Borrowings under repurchase agreements 122,261 1,667,021
Repayments under repurchase agreements (640,322) (1,688,409)
Borrowings under credit facilities 807,084 1,276,366
Repayments under credit facilities (268,066) (771,451)
Proceeds from issuance of collateralized loan obligations 0 1,971,137
Repayment of collateralized loan obligations (40,029) (109,631)
Payment of deferred financing costs (2,900) (33,746)
Net cash provided by (used in) financing activities 303,837 3,616,355
Total increase (decrease) in cash, cash equivalents and restricted cash 13,257 87,634
Cash, cash equivalents and restricted cash at beginning of period 201,618 85,808
Cash, cash equivalents and restricted cash at end of period 214,875 173,442
Supplemental disclosure of cash flow information and non-cash financial activities    
Payments of interest 290,059 85,386
Accrued stockholder servicing fee 8,140 55,173
Distributions payable 8,717 5,789
Reinvestment of stockholder distributions 68,670 37,838
Payable for shares repurchased 27,067 28,125
Loan principal payments held by servicer 46,316 611
Payable for investments purchased 6,663 0
Purchase of mortgage loans held in securitization trusts at fair value (6,663) 0
Mortgage obligations issued by securitization trusts, at fair value $ 298,170 $ 0

v3.23.3
Principal Business and Organization
9 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Principal Business and Organization Principal Business and Organization
FS Credit Real Estate Income Trust, Inc., or the Company, was incorporated under the general corporation laws of the State of Maryland on November 7, 2016 and formally commenced investment operations on September 13, 2017. The Company is currently conducting a public offering of up to $2,750,000 of its Class T, Class S, Class D, Class M and Class I shares of common stock pursuant to a registration statement on Form S-11 filed with the Securities and Exchange Commission, or SEC, consisting of up to $2,500,000 in shares in its primary offering and up to $250,000 in shares pursuant to its distribution reinvestment plan. The Company is also conducting a private offering of its Class I common stock and previously conducted private offerings of its Class F common stock and Class Y common stock. The Company is managed by FS Real Estate Advisor, LLC, or FS Real Estate Advisor, a subsidiary of the Company’s sponsor, Franklin Square Holdings, L.P., which does business as FS Investments, or FS Investments, a national sponsor of alternative investment funds designed for the individual investor. FS Real Estate Advisor has engaged Rialto Capital Management, LLC, or Rialto, to act as its sub-adviser.
The Company has elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2017. The Company intends to be an investment vehicle of indefinite duration focused on real estate debt investments and other real estate-related assets. The shares of common stock are generally intended to be sold and repurchased by the Company on a continuous basis. The Company intends to conduct its operations so that it is not required to register under the Investment Company Act of 1940, as amended, or the 1940 Act.
The Company’s primary investment objectives are to: provide current income in the form of regular, stable cash distributions to achieve an attractive dividend yield; preserve and protect invested capital; realize appreciation in net asset value, or NAV, from proactive investment management and asset management; and provide an investment alternative for stockholders seeking to allocate a portion of their long-term investment portfolios to commercial real estate debt with lower volatility than public real estate companies.

v3.23.3
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies Summary of Significant Accounting Policies
Basis of Presentation: The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The unaudited consolidated financial statements include both the Company’s accounts and the accounts of its wholly owned subsidiaries and variable interest entities, or VIEs, of which the Company is the primary beneficiary, as of September 30, 2023. All significant intercompany transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. The Company has evaluated the impact of subsequent events through the date the unaudited consolidated financial statements were issued.
Reclassifications: Certain amounts in the unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2023 and the audited consolidated financial statements as of and for the year ended December 31, 2022 may have been reclassified to conform to the classifications used to prepare the unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2023.
Use of Estimates: The preparation of the unaudited consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation: Financial Accounting Standards Board, or FASB, Accounting Standards Codification Topic 810—Consolidation, or ASC Topic 810, provides guidance on the identification of a VIE (an entity for which control is achieved through means other than voting rights) and the determination of which business enterprise, if any, should consolidate the VIE. An entity is considered a VIE if any of the following applies: (1) the equity investors (if any) lack one or more of the essential characteristics of a controlling financial interest; (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support; or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest.
The Company consolidates VIEs in which it is considered to be the primary beneficiary. The primary beneficiary is defined as the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the VIE’s performance; and (2) the obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE. The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the VIE’s capital structure, contractual terms, nature of the VIE’s operations and purpose and the
Company’s relative exposure to the related risks of the VIE on the date it becomes initially involved in the VIE. The Company reassesses its VIE determination with respect to an entity on an ongoing basis. For the Company's consolidated securitization VIEs, the third party ownership interests are reflected as liabilities in the Company's consolidated balance sheet because the beneficial interests payable to these third parties are legally issued in the form of debt. The Company's presentation of net income attributes earnings to controlling and non-controlling interests. Refer to Note 10 for additional discussion of the Company's VIEs.
Cash, Cash Equivalents and Restricted Cash: The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company invests its cash in overnight institutional money market funds. As of September 30, 2023 and 2022, the Company's investment in overnight institutional money market funds was $138,344 and $49,725, respectively. The Company's uninvested cash is maintained with high credit quality financial institutions, which are members of the Federal Deposit Insurance Corporation. The Company's cash is held with major financial institutions and may at times exceed federally insured limits. Restricted cash primarily represents cash held in an account to fund additional collateral interests within the Company's collateralized loan obligations.
The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Company’s unaudited consolidated balance sheets to the total amount shown in the Company’s unaudited consolidated statements of cash flows:
September 30,
20232022
Cash and cash equivalents$166,940 $147,321 
Restricted cash47,935 26,121 
Total cash, cash equivalents and restricted cash$214,875 $173,442 
Loans Receivable: The Company originates and purchases commercial real estate debt and related instruments generally to be held as long-term investments at amortized cost. Loans that the Company originates or purchases that the Company is unable to hold, or intends to sell or otherwise dispose of, in the foreseeable future are classified as held-for-sale and are carried at the lower of amortized cost or fair value. The Company's held-for-sale securities are subject to the adoption of ASU 2016-13, as discussed below.
Mortgage-backed Securities: Mortgage-backed securities are classified as held-to-maturity or available-for-sale or accounted for under the fair value option. The Company determines the appropriate classification of its securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. Mortgage-backed securities are classified as held-to-maturity when the Company intends to, and has the ability to hold until maturity. Held-to-maturity securities are stated at amortized cost on the consolidated balance sheets. The Company’s remaining mortgage-backed securities are classified as either available-for-sale or accounted for under the fair value option and are reported at fair value on the consolidated balance sheets as components of Mortgage-backed securities, at fair value. The Company elected the fair value option for all mortgage-backed securities acquired during the three and nine months ended September 30, 2023. Changes in fair value for mortgage-backed securities accounted for under the fair value option are recorded in the consolidated statements of operations as a component of Net change in unrealized gain (loss) on mortgage-backed securities, fair value option. The Company chose to elect the fair value option in order to simplify the accounting treatment for its investment securities. The fair value option provides an option to elect fair value as an alternative measurement for selected financial instruments. The fair value option may be elected only upon the occurrence of certain specified events, including when the Company enters into an eligible firm commitment, at initial recognition of the financial instrument, as well as upon a business combination or consolidation of a subsidiary. The election is irrevocable unless a new election event occurs. Prior to the three and nine months ended September 30, 2023, all mortgage-backed securities acquired that were not classified as held-to-maturity were classified as available-for-sale, stated at fair value and the changes in fair value are recorded in other comprehensive income. The Company’s held-to-maturity and available-for-sale securities are subject to the adoption of ASU 2016-13, as discussed below.
Credit Losses: ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), or ASU 2016-13, became effective for the Company on January 1, 2023. ASU 2016-13 significantly changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the previous incurred loss model with a current expected credit loss (“CECL”) model for instruments measured at amortized cost. The CECL model applies to the Company's loans receivable, held-for-investment and its mortgage-backed securities held-to-maturity which are carried at amortized cost, including future funding commitments and accrued interest receivable related to those loans and securities. However, as permitted by ASC Topic 326, the Company has elected not to measure an allowance for credit
losses on accrued interest receivable (which is classified separately on its consolidated balance sheets), but rather write off in a timely manner by reversing interest income and/or cease accruing interest that would likely be uncollectible.
CECL requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the macroeconomic environment. Considering the lack of historical company data related to any realized loan losses since its inception, the Company elected to estimate its general CECL reserve by using a probability-weighted analytical model that considers the likelihood of default and loss-given-default for each individual loan. The credit loss model utilizes historical loss rates derived from a third party commercial real estate loan database with historical loan loss data beginning in 1998. The Company provides specific loan-level inputs which include loan-to-value, principal balances, property type, location, coupon, origination year, term, subordination, expected repayment dates, and property net operating income. The Company also considers qualitative and environmental factors, including, but not limited to, macroeconomic forecasts and business conditions and trends, concentration of credit and changes in the level of such concentrations. The reasonable and supportable forecast period is followed by an immediate reversion period back to historical loss rates.
The Company's loans typically include commitments to fund incremental proceeds to its borrowers over the life of the loan, which future funding commitments are also subject to the CECL model. The CECL reserve related to future loan fundings is recorded as a component of Other liabilities on its consolidated balance sheets. This CECL reserve is estimated using the same process outlined above for its outstanding loan balances, and changes in this component of the CECL reserve will similarly impact its consolidated net income.
For both the funded and unfunded portions of its loans, the Company considers its internal risk rating of each loan as the primary credit quality indicator underlying the assessment. FS Real Estate Advisor and Rialto perform a quarterly review of the Company's portfolio of loans. In connection with this review, FS Real Estate Advisor and Rialto assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, loan-to-value ratio, or LTV, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. Based on a 5-point scale, the Company's loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:
Loan Risk RatingSummary Description
1
Very Low Risk
2
Low Risk
3
Medium Risk
4
High Risk/Potential for Loss
5
Impaired/Loss Likely: A loan that has a very high risk of realizing a principal loss or has otherwise incurred a principal loss
Impairment is indicated when it is deemed probable that the Company will not be able to collect all amounts due to it pursuant to the contractual terms of the loan. If a loan is determined to be impaired, the Company records the impairment as a specific CECL reserve. For determining a specific CECL reserve, financial instruments are assessed outside of the CECL model on an individual basis. For collateral dependent loans that the Company determines foreclosure of the collateral is probable, the Company measures the expected losses based on the differences between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. For collateral dependent loans where the Company determine foreclosure is not probable, a practical expedient to estimate expected losses is applied using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan. These valuations require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed necessary by FS Real Estate Advisor and Rialto. Actual losses, if any, could ultimately differ from these estimates.
The Company adopted ASU 2016-13 using the modified-retrospective method for all financial assets measured at amortized cost. Prior to its adoption, the Company had no loan loss provisions on its consolidated balance sheets. The Company recorded a cumulative-effect adjustment to the opening retained earnings in its unaudited consolidated statement of changes in equity as of January 1, 2023. The following table details the impact of this adoption:
Impact of ASU 2016-13 Adoption
Assets:
Loans receivable, held-for-investment
Senior loans$35,456 
Mezzanine loans3,963 
CECL reserve on Loans receivable, held-for-investment39,419 
CECL reserve on Mortgage-backed securities held-to-maturity939 
Liabilities:
Other liabilities
CECL reserve on unfunded loan commitments1,163 
Total impact of 2016-13 adoption on retained earnings$41,521 
Separate provisions of ASC Topic 326 apply to the Mortgage-backed securities available-for-sale, which are carried at fair value with unrealized gains and losses reported as a component of Accumulated other comprehensive income (loss). The Company is required to establish an initial credit loss allowance for those available-for-sale securities that are purchased with credit deterioration (“PCD”) by grossing up the amortized cost basis of each security and providing an offsetting credit loss allowance for the difference between expected cash flows and contractual cash flows, both on a present value basis. As of the January 1, 2023 effective date, no such credit loss allowance gross-up was required on available-for-sale debt securities with PCD.
The Company uses a discounted cash flow method to estimate and recognize a credit loss allowance on its available-for-sale securities. The credit loss allowance represents the difference between the security's amortized cost basis and the present value of expected cash flows. The credit loss allowance is limited to the difference between the security's fair value and its amortized cost. Changes in the credit loss allowance are recognized immediately in earnings as a component of (Increase) decrease in current expected credit loss reserve.
Real Estate: In accordance with the guidance for business combinations, the Company determines whether the acquisition of a property qualifies as a business combination, which requires that the assets acquired and liabilities assumed constitute a business. If the property acquired is not a business, the Company accounts for the transaction as an asset acquisition. The guidance for business combinations states that when substantially all the fair value of the gross assets to be acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the asset or set of assets is not a business. The one property acquisition to date was acquired in 2022 and was accounted for as an asset acquisition.
Upon the acquisition of a property, the Company assesses the fair value of acquired tangible and intangible assets (including land, buildings, tenant improvements, “above-market” and “below-market” leases, acquired in-place leases, other identified intangible assets and assumed liabilities) and allocates the purchase price to the acquired assets and assumed liabilities. The Company assesses and considers fair value based on estimated cash flow projections that utilize discount and/or capitalization rates that it deems appropriate, as well as other available market information. Estimates of future cash flows are based on several factors including the historical operating results, known and anticipated trends and market and economic conditions. The Company capitalizes acquisition-related costs associated with asset acquisitions.
The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant. The Company records acquired in-place lease values based on the Company’s evaluation of the specific characteristics of each tenant’s lease. The Company will record acquired above-market and below-market leases at their fair values which represents the present value of the difference between contractual rents of acquired leases and market rents at the time of the acquisition for the remaining lease term, discounted for tenant credit risks. The Company also considers an allocation of purchase price of other acquired intangibles, including acquired in-place leases that may have a customer relationship intangible value, including (but not limited to) the nature and extent of the existing relationship with the tenants, the tenants’ credit quality and expectations of lease renewals. Based on its acquisition to date, the Company’s allocation to customer relationship intangible assets has not been material.
Intangible assets and intangible liabilities are recorded as a component of other assets and other liabilities, respectively, on the Company’s consolidated balance sheets. The amortization of acquired above-market, below-market, and in-place leases is recorded as an adjustment to rental operations, net, on the Company’s unaudited consolidated statements of operations.
The cost of buildings and improvements includes the purchase price of the Company’s properties and any acquisition-related costs, along with any subsequent improvements to such properties. The Company’s investments in real estate are stated at cost and are generally depreciated on a straight-line basis over the estimated useful lives of the assets as follows:
DescriptionDepreciable Life
Building
30 to 42 years
Building and land improvements
2 to 20 years
Furniture, fixtures and equipment
1 to 10 years
Tenant improvementsShorter of estimated useful life or lease term
Lease intangibles Over lease term
The Company’s management reviews its real estate properties for impairment each quarter or when there is an event or change in circumstances that indicates an impaired value. Since the impairment model considers real estate properties to be “long-lived assets to be held and used,” cash flows to determine whether an asset has been impaired are undiscounted. Accordingly, the Company’s strategy of holding properties over the long term directly decreases the likelihood of recording an impairment loss. If the Company’s strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized and such loss could be material to the Company’s results. If the Company determines that an impairment has occurred, the affected assets must be reduced to their fair value. During the periods presented, no such impairment occurred.
Fair Value of Financial Instruments: Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, or ASC Topic 820, defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date.
ASC Topic 820 also establishes a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring financial instruments. Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument, and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination, as follows:
Level 1: Generally includes only unadjusted quoted prices that are available in active markets for identical financial instruments as of the reporting date.
Level 2: Pricing inputs include quoted prices in active markets for similar instruments, quoted prices in less active or inactive markets for identical or similar instruments where multiple price quotes can be obtained, and other observable inputs, such as interest rates, yield curves, credit risks, and default rates.
Level 3: Pricing inputs are unobservable for the financial instruments and include situations where there is little, if any, market activity for the financial instrument. These inputs require significant judgment or estimation by management or third parties when determining fair value and generally represent anything that does not meet the criteria of Levels 1 and 2.
The estimated value of each asset reported at fair value using Level 3 inputs is determined by an internal committee comprised of members of senior management of FS Real Estate Advisor.
Certain of the Company's assets are reported at fair value either (i) on a recurring basis, as of each quarter-end, or (ii) on a nonrecurring basis, as a result of impairment or other events. The Company generally values its assets recorded at fair value by either (i) discounting expected cash flows based on assumptions regarding the collection of principal and interest and estimated market rates, or (ii) obtaining assessments from third-party dealers. For collateral-dependent loans that are identified as impaired, the Company
measures impairment by comparing FS Real Estate Advisor's estimation of fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. These valuations may require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed necessary by FS Real Estate Advisor and Rialto.
The Company is also required by GAAP to disclose fair value information about financial instruments that are not otherwise reported at fair value in the Company's consolidated balance sheets, to the extent it is practicable to estimate a fair value for those instruments. These disclosure requirements exclude certain financial instruments and all non-financial instruments.
The Company elected the fair value option for initial and subsequent recognition of the assets and liabilities of its consolidated securitization mortgage loans held in securitization trusts and the related CMBS investments. Interest income and interest expense associated with these loans are presented separately on the unaudited consolidated statements of operations.
The Company separately presents the assets and liabilities of its consolidated securitization loans as individual line items on its consolidated balance sheets. The liabilities of its consolidated securitization loans consist solely of obligations to the bondholders of the related trusts, and are thus presented as a single line item entitled “Mortgage obligations issued by securitization trusts.” The assets of its consolidated securitization loans consist principally of loans. These assets in the aggregate are likewise presented as a single line item entitled “Mortgage loans held in securitization trusts.” The residual difference shown on its unaudited consolidated statements of operations in the line item “Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts” represents the Company's beneficial interest in the mortgage loans.
The securitization mortgage loan assets as a whole can only be used to settle the obligations of the consolidated mortgage loans. The assets of the Company's securitization mortgage loans are not individually accessible by the bondholders, which creates inherent limitations from a valuation perspective.
The securitization mortgage loans in which the Company invests are “static”; that is, no reinvestment is permitted, and there is no active management of the underlying assets. In determining the fair value of the assets and liabilities of the securitization mortgage loans, the Company maximizes the use of observable inputs over unobservable inputs.
Liabilities of the consolidated mortgage obligations: The Company's consolidated mortgage obligations generally represent bonds that are not owned by the Company directly. The majority of these are either traded in the marketplace or can be analogized to similar securities that are traded in the marketplace. For these liabilities, pricing is considered to be Level 2, where the valuation is based upon quoted prices for similar instruments traded in active markets. The Company generally utilizes third party pricing service providers for valuing these liabilities. In order to determine whether to utilize the valuations provided by third parties, the Company conducts an ongoing evaluation of their valuation methodologies and processes, as well as a review of the individual valuations themselves. In evaluating third party pricing for reasonableness, the Company considers a variety of factors, including market transaction information for the particular bond, market transaction information for bonds within the same trust, market transaction information for similar bonds, the bond’s ratings and the bond’s subordination levels.
For the minority portion of the Company's consolidated mortgage obligations which consist of unrated or non-investment grade bonds that are not owned by the Company directly, pricing may be either Level 2 or Level 3. If independent third party pricing similar to that noted above is available, the Company considers the valuation to be Level 2. If such third party pricing is not available, the valuation is generated from model-based techniques that use significant unobservable assumptions, and the Company considers the valuation to be Level 3. For mortgage obligations classified as Level 3, valuation is determined based on discounted expected future cash flows which take into consideration expected duration and yields based on market transaction information, ratings, subordination levels, vintage and current market spread. Mortgage obligations may shift between Level 2 and Level 3 of the fair value hierarchy if the significant fair value inputs used to price the mortgage obligations become or cease to be observable.
Assets of the consolidated mortgage loans: The individual assets of a mortgage loan are inherently incapable of precise measurement given their illiquid nature and the limitations on available information related to these assets. Because the Company's methodology for valuing these assets does not value the individual assets of a mortgage loan, but rather uses the value of the mortgage obligations as an indicator of the fair value of mortgage loan assets as a whole, the Company has determined that its valuations of mortgage loan assets in their entirety should be classified in Level 3 of the fair value hierarchy.
The following methods and assumptions are used to estimate the fair value of other classes of financial instruments, for which it is practicable to estimate that value:
Cash and cash equivalents: The carrying amount of cash on deposit and in money market funds approximates fair value.
Restricted cash: The carrying amount of restricted cash approximates fair value.
Loans receivable held-for-investment, net: The fair values for these loans were estimated by FS Real Estate Advisor based on a discounted cash flow methodology taking into consideration factors, including capitalization rates, discount rates, leasing, occupancy rates, availability and cost of financing, exit plan, sponsorship, actions of other lenders, and indications of market value from other market participants.
Mortgage-backed securities, at fair value : The fair values for these investments were based on indicative deal quotes.
Mortgage-backed securities held-to-maturity: The fair values for these investments were estimated by FS Real Estate Advisor based on a discounted cash flow methodology pursuant to which a discount rate or market yield is used to discount the estimated future cash flows expected to be received from the underlying investment, which include both future principal and interest payments. Significant increases or decreases in the discount rate or market yield would result in a decrease or increase in the fair value measurement.
Collateralized loan obligations, repurchase agreements payable, credit facilities payable, and mortgage note payable: The fair values for these instruments were estimated based on the rate at which similar credit facilities would have currently been priced.
Deferred Financing Costs: Deferred financing costs include issuance and other costs related to the Company’s debt obligations. The deferred financing costs related to the Company’s collateralized loan obligations, repurchase agreements, and mortgage note payable, are recorded as a reduction in the net book value of the related liability on the Company's consolidated balance sheets. Deferred financing costs related to the Company’s revolving credit facilities and facilities that are undrawn as of the reporting date are recorded as an asset on the Company’s consolidated balance sheets. These costs are amortized as interest expense using the straight-line method over the term of the related obligation, which approximates the effective interest method.
Revenue Recognition: Security transactions are accounted for on the trade date. The Company records interest income from its loans receivable portfolio on an accrual basis to the extent that the Company expects to collect such amounts. The Company does not accrue as a receivable interest or dividends on loans and securities if there is reason to doubt the collectability of such income. Discounts or premiums associated with the investment securities are amortized or accreted into interest income as a yield adjustment on the effective interest method, based on expected cash flows through the expected maturity date of the investment. On at least a quarterly basis, the Company reviews and, if appropriate, makes adjustments to its cash flow projections. The Company records dividend income on the ex-dividend date. Any loan origination fees to which the Company is entitled, loan exit fees, original issue discount and market discount are capitalized and such amounts are amortized as interest income over the respective term of the investment. Upon the prepayment of a loan or security, any unamortized loan origination fees to which the Company is entitled are recorded as fee income. The Company records prepayment premiums on loans and securities as fee income when it receives such amounts.
Loans are considered past due when payments are not made in accordance with the contractual terms. The Company does not accrue as receivable interest on loans if it is not probable that such income will be collected. Unless the loan is both well secured and in the process of collection, loans are placed on non-accrual status when principal or interest is 120 days or more past due or when repayment of interest and principal is, in our judgment, in doubt. Interest payments received on non-accrual loans are generally recognized as interest income on a cash basis. If a full recovery of principal is doubtful, the cost recovery method is applied whereby any cash received is applied to the outstanding principal balance of the loan. Recognition of interest income on non-performing loans on an accrual basis is resumed when it is probable that the Company will be able to collect amounts due according to the contractual terms. As of September 30, 2023 and December 31, 2022, there were no loans with accrued interest past due 30 days or more, respectively.
Offering Costs: Offering costs primarily include, among other things, marketing expenses and printing, legal and due diligence fees and other costs pertaining to the Company’s continuous public offering of shares of its common stock, including the preparation of the registration statement and salaries and direct expenses of FS Real Estate Advisor’s personnel, employees of its respective affiliates and others while engaged in such activities. The Company may reimburse FS Real Estate Advisor and Rialto for any offering expenses that they incurred on the Company's behalf, up to a cap of 0.75% of gross proceeds raised after such time. During the period from November 7, 2016 (Inception) to September 30, 2023, the Company incurred offering costs of $23,659, which were paid on its behalf by FS Investments (see Note 7).
Income Taxes: The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the Code, commencing with its taxable year ended December 31, 2017. In order to maintain its status as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to
its stockholders. As a REIT, the Company generally will not be subject to federal income tax on income that it distributes to stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions.
Uncertainty in Income Taxes: The Company evaluates each of its tax positions to determine if they meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax benefits or liabilities in the unaudited consolidated financial statements. Recognition of a tax benefit or liability with respect to an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. The Company recognizes interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in the unaudited consolidated statements of operations. During the nine months ended September 30, 2023 and 2022, the Company did not incur any interest or penalties and none are accrued at September 30, 2023.
Stockholder Servicing Fees: The Company follows the guidance in Accounting Standards Codification Topic 405, Liabilities, when accounting for stockholder servicing fees. The Company will pay stockholder servicing fees over time on its shares of Class T, Class S, Class D and Class M common stock as described in Note 7. The Company records stockholder servicing fees as a reduction to additional paid-in capital and records the related liability in an amount equal to its best estimate of the fees payable in relation to the shares of Class T, Class S, Class D and Class M common stock on the date such shares are issued. The liability will be reduced over time, as the fees are paid to the dealer manager, or adjusted if the fees are no longer payable.
Earnings Per Share: The restricted stock units grant Class I shares issued to FS Real Estate Advisor and Rialto for payment of the administrative services fee are considered to be participating securities. The impact of these restricted stock units on basic and diluted earnings per common share ("EPS") has been calculated using the two-class method whereby earnings are allocated to the restricted stock units based on dividends declared and the restricted stock units' participation rights in undistributed earnings. As of September 30, 2023 and December 31, 2022, the effects of the two-class method on basic and diluted EPS were not material to the Company's consolidated financial statements.
Derivative Instruments: The Company uses interest rate caps to manage risks from fluctuations in interest rates. The Company has not designated any of these contracts as fair value or cash flow hedges for accounting purposes. The Company records its derivatives on its consolidated balance sheets at fair value and such amounts are included in Other assets. Any changes in the fair value of these derivatives are recorded in earnings.
The valuation of the Company's interest rate caps is determined based on assumptions that management believes market participants would use in pricing, using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivative. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. However, as of September 30, 2023, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

v3.23.3
Loans Receivable, net
9 Months Ended
Sep. 30, 2023
Receivables [Abstract]  
Loans Receivable, net Loans Receivable, net
The following table details overall statistics for the Company's loans receivable portfolio as of September 30, 2023 and December 31, 2022:
September 30, 2023 (Unaudited)December 31, 2022
Number of loans143 142 
Principal balance$7,735,561 $7,350,271 
Net book value$7,665,632 $7,350,315 
Unfunded loan commitments(1)
$456,666 $574,510 
Weighted-average cash coupon(2)(3)
+3.90%+3.83 %
Weighted-average all-in yield(2)(3)
+3.97%+3.90 %
Weighted-average maximum maturity (years)(4)
3.34.0
_________________________
(1)    The Company may be required to provide funding when requested by the borrowers in accordance with the terms of the underlying agreements.
(2)    The Company's floating rate loans are expressed as a spread over the relevant benchmark rates, which include the Secured Overnight Financing Rate, or SOFR. In addition to cash coupon, all-in yield includes accretion of discount (amortization of premium) and accrual of exit fees.
(3)    As of September 30, 2023, the one-month SOFR rate was 5.32%. As of December 31, 2022, the one-month LIBOR rate was 4.39% and the one-month SOFR rate was 4.36%.
(4)    Maximum maturity assumes all extension options are exercised by the borrowers; however, loans may be repaid prior to such date.
For the nine months ended September 30, 2023 and 2022, the activity in the Company's loan portfolio, was as follows:
For the Nine Months Ended September 30,
20232022
Loans receivable at beginning of period$7,350,315 $3,841,868 
Loan fundings1,014,971 3,731,304 
Loan repayments(631,692)(483,832)
Amortization of deferred fees on loans5,159 2,973 
Exit and extension fees received on loans receivable(851)(472)
Loans receivable at end of period7,737,902 7,091,841 
CECL reserve (72,270)— 
Loans receivable, net, at end of period$7,665,632 $7,091,841 
The following tables detail the property type and geographic location of the properties securing the loans in the Company's loans receivable, held-for-investment portfolio as of September 30, 2023 and December 31, 2022:
September 30, 2023 (Unaudited)December 31, 2022
Property TypeNet Book ValuePercentageNet Book ValuePercentage
Multifamily$4,752,761 61 %$4,439,830 61 %
Hospitality1,025,990 13 %792,305 11 %
Office678,392 %755,797 10 %
Industrial573,407 %369,551 %
Retail268,112 %424,374 %
Self Storage200,490 %317,861 %
Various142,919 %156,031 %
Mixed Use95,831 %94,566 %
Loans receivable at end of period7,737,902 100 %7,350,315 100 %
CECL reserve(72,270)— 
Loans receivable, net, at end of period$7,665,632 $7,350,315 
September 30, 2023 (Unaudited)December 31, 2022
Geographic Location(1)
Net Book ValuePercentageNet Book ValuePercentage
South$3,753,978 49 %$3,719,093 51 %
West1,546,279 20 %1,487,391 20 %
Northeast1,430,235 18 %1,326,408 18 %
Various688,390 %507,105 %
Midwest319,020 %310,318 %
Loans receivable at end of period7,737,902 100 %7,350,315 100 %
CECL reserve(72,270)— 
Loans receivable, net, at end of period$7,665,632 $7,350,315 
__________________________
(1)    As defined by the United States Department of Commerce, Bureau of the Census.
Loan Risk Rating
As further described in Note 2, FS Real Estate Advisor and Rialto assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, loan-to-value ratio, or LTV, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. Based on a 5-point scale, the Company's loans are rated "1" through "5", from less risk to greater risk, which ratings are defined in Note 2.
The following table allocates the net book value of the Company's loans receivable, held-for-investment portfolio based on the Company's internal risk ratings:
September 30, 2023 (Unaudited)December 31, 2022
Risk RatingNumber of LoansNet Book ValuePercentageNumber of LoansNet Book ValuePercentage
1— $— — — $— — 
2— — — — — — 
3132 7,293,831 95 %142 7,350,315 100 %
410 407,584 %— — — 
536,487 — %— — — 
Loans receivable at end of period143 7,737,902 100 %142 7,350,315 100 %
CECL reserve(72,270)— 
Loans receivable, net, at end of period$7,665,632 $7,350,315 
Current Expected Credit Loss Reserve
The CECL reserve required under GAAP reflects the Company's current estimate of potential credit losses related to the loans and debt securities included in its consolidated balance sheets. The general CECL reserve is measured on a collective basis wherever similar risk characteristics exist within a pool of similar assets. The Company has identified senior loans and mezzanine loans as pools within its loans receivable portfolio. Refer to Note 2 for further discussion of the Company's CECL reserve.
The following table provides details on the changes in CECL reserve for funded loans by investment pool:
Senior LoansMezzanine LoansTotal
CECL Reserve as of December 31, 2022$— $— $— 
CECL reserve recorded on January 1, 202335,456 3,963 39,419 
Increase (Decrease) in general CECL reserve1,224 378 1,602 
CECL reserve as of March 31, 2023$36,680 $4,341 $41,021 
Increase (Decrease) in general CECL reserve29,456 1,162 30,618 
Increase (Decrease) in specific CECL reserve2,967 — 2,967 
CECL reserve as of June 30, 2023$69,103 $5,503 $74,606 
Increase (Decrease) in general CECL reserve(2,291)(45)(2,336)
Increase (Decrease) in specific CECL reserve— — — 
CECL reserve as of September 30, 2023
$66,812 $5,458 $72,270 
The Company's initial CECL reserve against its loans receivable portfolio of $39,419 recorded on January 1, 2023 is reflected as a direct charge to retained earnings on its unaudited consolidated statements of changes in equity; however subsequent changes to the CECL reserve are recognized through net income on its unaudited consolidated statements of operations. During the three and nine months ended September 30, 2023, the Company recorded a decrease of $2,336 and an increase of $32,851, respectively, in expected credit loss reserve against its loans receivable portfolio, bringing the total CECL reserve to $72,270 as of September 30, 2023.
The Company had one risk-rated 5 senior office loan located in Seattle, WA, originated in December 2021, with an outstanding principal balance of $36,500, amortized cost of $36,487, and an unfunded commitment of $9,600 as of September 30, 2023. The property experienced slower than anticipated leasing activity due to softness in the overall Seattle market office trends. During the three and nine months ended September 30, 2023, the Company recorded a $2,967 specific CECL reserve related to the loan calculated using the loan's collateral fair value, which was determined by applying a capitalization rate of 7.25% and a discount rate of 9.25%. In May 2023, this loan was placed on non-accrual status and future interest collections will be accounted for under the cost recovery method. The Company did not have any additional impaired loans, non-accrual loans, or loans in maturity default within the loans receivable, held-for-investment portfolio as of September 30, 2023.
The Company's primary credit quality indicator is its risk ratings, which are further discussed in Note 2. The following table presents the net book value of its loans receivable, held-for-investment portfolio as of September 30, 2023 by year of origination and risk rating:
Risk Rating
Net Book Value of Loans Receivable by Year of Origination
September 30, 2023 (Unaudited)
20232022202120202019PriorTotal
1$— $— $— $— $— $— $— 
2— — — — — — — 
3639,009 3,758,801 2,704,837 84,303 65,431 41,450 7,293,831 
4— 324,836 49,667 17,669 15,412 — 407,584 
5— — 36,487 — — — 36,487 
Loans receivable$639,009 $4,083,637 $2,790,991 $101,972 $80,843 $41,450 $7,737,902 
CECL reserve(72,270)
Loans receivable, net$7,665,632 
Current Expected Credit Loss Reserve for Unfunded Loan Commitments
As of September 30, 2023, the Company had unfunded commitments of $456,666. The expected credit losses over the contractual period of its loans are subject to the obligation to extend credit through its unfunded loan commitments. See Note 2 for further discussion of the CECL reserve related to its unfunded loan commitments. The following table provides details on the changes in CECL reserve for unfunded loan commitments by investment pool:
Unfunded Commitments CECL Reserve
September 30, 2023 (Unaudited)
Senior LoansMezzanine LoansTotal
Unfunded Loan Commitments
CECL Reserve as of December 31, 2022$— $— $— 
CECL reserve recorded on January 1, 20231,129 34 1,163 
Increase (Decrease) in CECL reserve(33)(32)
CECL reserve as of March 31, 2023$1,096 $35 $1,131 
Increase (Decrease) in CECL reserve638 (3)635 
CECL reserve as of June 30, 2023$1,734 $32 $1,766 
Increase (Decrease) in CECL reserve(122)(8)(130)
CECL reserve as of September 30, 2023
$1,612 $24 $1,636 
The Company's initial CECL reserve against its unfunded loan commitments of $1,163 recorded on January 1, 2023 is reflected as a direct charge to retained earnings on its unaudited consolidated statements of changes in equity; however subsequent changes to the CECL reserve are recognized through net income on the unaudited consolidated statements of operations. During the three and nine months ended September 30, 2023, the Company recorded a decrease of $130 and an increase of $473, respectively, in expected credit loss reserve against its unfunded loan commitments, bringing the Company's total CECL reserve on its unfunded loan commitments to $1,636 as of September 30, 2023.

v3.23.3
Mortgage Backed Securities
9 Months Ended
Sep. 30, 2023
Investments, Debt and Equity Securities [Abstract]  
Mortgage Backed Securities Mortgage Backed Securities
Mortgage-backed securities, at fair value
Commercial mortgage-backed securities, or CMBS, classified as available-for-sale are reported at fair value on the consolidated balance sheets with changes in fair value recorded in other comprehensive income. CMBS accounted for under the fair value option are reported at fair value on the consolidated balance sheets with changes in fair value recorded in the consolidated statements of operations as a component of Net change in unrealized gain (loss) on mortgage-backed securities, fair value option.
The table below summarizes various attributes of the Company's investments in CMBS reported at fair value as of September 30, 2023 and December 31, 2022, respectively.
Gross UnrealizedWeighted Average
Outstanding Face AmountAmortized Cost BasisAllowance for Credit LossesGainsLossesFair ValueCouponRemaining Duration (years)
September 30, 2023 (Unaudited)
CMBS, available-for-sale$172,392 $169,739 $(9,674)$96 $(8,226)$151,935 
10.06%(1)
14.7
CMBS, fair value option$75,830 $72,835 $— $406 $(81)$73,160 
7.30%(1)
2.8
December 31, 2022
CMBS, available-for-sale$173,207 $171,369 $— $45 $(11,950)$159,464 
9.18%(2)
12.7
__________________________
(1)    Calculated using the one-month SOFR rate of 5.32% as of September 30, 2023.
(2)    Calculated using the one-month LIBOR rate of 4.39% and the one-month SOFR rate of 4.36% as of December 31, 2022.

As of September 30, 2023, there was one CMBS, available for sale placed on non-accrual status during the quarter with an amortized cost of $14,126. All future interest collections will be accounted for under the cost recovery method.
The Company uses a discounted cash flow method to estimate and recognize an allowance for its available-for sale securities. The following table provides details on the changes in allowance for credit losses for available-for sale securities:
Nine Months Ended September 30, 2023
Allowance for credit losses at beginning of period$— 
Additions on securities for which credit losses were not previously recorded— 
(Increase) decrease on securities with previously recorded credit losses— 
Allowance for credit losses as of March 31, 2023— 
Additions on securities for which credit losses were not previously recorded(6,992)
(Increase) decrease on securities with previously recorded credit losses— 
Allowance for credit losses as of June 30, 2023(6,992)
Additions on securities for which credit losses were not previously recorded— 
(Increase) decrease on securities with previously recorded credit losses(2,682)
Allowance for credit losses as of September 30, 2023$(9,674)

The following table presents the gross unrealized losses and estimated fair value of any available-for-sale securities for which an allowance for credit losses has not been recorded that were in an unrealized loss position as of September 30, 2023 and December 31, 2022, respectively.
Estimated Fair ValueUnrealized Losses
Securities with a loss less than 12 monthsSecurities with a loss greater than 12 monthsSecurities with a loss less than 12 monthsSecurities with a loss greater than 12 months
September 30, 2023 (Unaudited)
CMBS, available-for-sale$175,428 $97,174 $(8,312)$(8,183)
December 31, 2022
CMBS, available-for-sale$150,230 $756 $(11,889)$(61)
As of September 30, 2023 and December 31, 2022, there were ten securities and fifteen securities, respectively, with unrealized losses reflected in the table above. After evaluating the securities and recording adjustments for credit losses, the Company concluded that the remaining unrealized losses reflected above were noncredit-related and would be recovered from the securities’ estimated future cash flows. The Company considered a number of factors in reaching this conclusion, including that it did not intend to sell the securities, it was not considered more likely than not that the Company would be forced to sell the securities prior to recovering its amortized cost, and there were no material credit events that would have caused the Company to otherwise conclude that it would not recover the cost of the securities.
Mortgage-backed securities, held-to-maturity
The table below summarizes various attributes of the Company's investments in held-to-maturity CMBS as of September 30, 2023 and December 31, 2022, respectively.
Amortized Cost BasisCredit Loss AllowanceNet Carrying AmountGross Unrecognized Holding GainsGross Unrecognized Holding LossesFair Value
September 30, 2023 (Unaudited)
CMBS, held-to-maturity$74,614 $(71)$74,543 $— $(7,340)$67,203 
December 31, 2022
CMBS, held-to-maturity$68,559 $— $68,559 $— $— $68,559 
The following table provides details on the changes in CECL reserve for held-to-maturity CMBS:
September 30, 2023 (Unaudited)
CMBS, held-to-maturity
CECL Reserve as of December 31, 2022$— 
CECL reserve recorded on January 1, 2023939 
Increase (Decrease) in CECL reserve(283)
CECL reserve as of March 31, 2023$656 
Increase (Decrease) in CECL reserve(268)
CECL reserve as of June 30, 2023$388 
Increase (Decrease) in CECL reserve(317)
CECL reserve as of September 30, 2023
$71 
The table below summarizes the maturities of the Company's investments in held-to-maturity CMBS as of September 30, 2023 and December 31, 2022, respectively:
TotalLess than 1 year1-3 years3-5 yearsMore than 5 years
September 30, 2023 (Unaudited)
CMBS, held-to-maturity$74,614 $— $44,492 $30,122 $— 
December 31, 2022
CMBS, held-to-maturity$68,559 $— $38,435 $30,124 $— 

v3.23.3
Real Estate
9 Months Ended
Sep. 30, 2023
Real Estate [Abstract]  
Real Estate Real Estate
Investment in real estate, net, consisted of the following as of September 30, 2023 and December 31, 2022:
September 30, 2023 (Unaudited)
December 31, 2022
Building and building improvements$120,527 $120,527 
Land and land improvements39,186 39,186 
Furniture, fixtures and equipment1,064 1,064 
In-place lease intangibles33,530 33,402 
Total194,307 194,179 
Accumulated depreciation and amortization(9,131)(3,630)
Real estate, net$185,176 $190,549 

The following table details the Company's future amortization of intangible assets for each of the next five years and thereafter:

Amortization
2023 (remaining)$912 
20243,814 
20253,814 
20263,806 
20273,803 
Thereafter12,134 
Total$28,283 
The components of rental operations, net on the Company's unaudited consolidated statements of operations consisted of the following:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Rental income$5,297 $3,569 $14,985 $3,569 
Less: depreciation and amortization(1,835)(1,839)(5,501)(1,839)
Less: cost of rental operations(1)
(3,696)(2,798)(11,415)(2,798)
Rental operations, net$(234)$(1,068)$(1,931)$(1,068)
________________
(1)    Cost of rental operations during the three and nine months ended September 30, 2023, includes $2,365 and $6,718, respectively, of interest expense related to the mortgage note payable.

v3.23.3
Financing Arrangements
9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
Financing Arrangements Financing Arrangements
The following tables present summary information with respect to the Company's outstanding financing arrangements as of September 30, 2023 and December 31, 2022.
As of September 30, 2023 (Unaudited)
Arrangement
Weighted Average Spread(2)
Amount Outstanding(1)
Amount AvailableMaturity DateCarrying Amount of CollateralFair Value of Collateral
Collateralized Loan Obligations
2019-FL1 Notes
 +1.66%(2)
$194,223 $— December 18, 2036$292,227 $290,996 
2021-FL2 Notes
 +1.64%(2)
640,056 — May 5, 2038768,945 761,177 
2021-FL3 Notes
 +1.61%(2)
928,483 — November 4, 20361,102,550 1,094,349 
2022-FL4 Notes
 +2.21%(5)
837,662 — January 31, 20391,080,659 1,068,520 
2022-FL5 Notes
 +2.78%(5)
560,224 — June 17, 2037689,919 680,370 
2022-FL6 Notes
 +2.84%(5)
552,100 — August 19, 2037749,880 742,077 
2022-FL7 Notes
 +3.18%(5)
631,042 — October 17, 2039814,659 806,603 
4,343,790 — 5,498,839 5,444,092 
Repurchase Agreements
WF-1 Facility
 +1.88%(3)
48,870 551,130 August 30, 202462,596 61,921 
GS-1 Facility
 +2.83%(4)
18,781 431,219 January 26, 202584,448 83,981 
RBC Facility
+1.30%
29,646 — N/A— — 
BB-1 Facility
 +1.96%(5)
11,474 688,526 February 22, 202414,801 14,690 
MS-1 Facility
 +2.65%(6)
37,537 112,463 October 13, 202589,990 88,855 
NTX-1 Facility
(3)
— 250,000 November 10, 2024— — 
BMO-1 Facility
 +2.00%(3)
80,000 — March 1, 2024276,477 276,259 
Lucid Facility
 +1.15%(3)
15,867 — N/A— — 
242,175 2,033,338 528,312 525,706 
Revolving Credit Facility
MM-1 Facility
 +2.14%(6)(7)
850,000 150,000 September 20, 20291,148,927 1,140,393 
Barclays Facility
(8)
— 310,000 August 1, 2025— — 
850,000 460,000 1,148,927 1,140,393 
Mortgage Loan
Natixis Loan
+2.15%(6)
124,700 — July 9, 2025156,364 184,672 
Total$5,560,665 $2,493,338 $7,332,442 $7,294,863 
________________
(1)    The amount outstanding under the facilities approximates their fair value.
(2)    The rates are expressed over the relevant floating benchmark rates, which include Term SOFR, and SOFR Average (compounded average of SOFR over a rolling 30-day period).
(3)    Benchmark rate is subject to a 0.00% floor. SOFR benchmark rate is selected with respect to a transaction as set forth in the related transaction confirmation for the underlying transaction.
(4)    Term SOFR is subject to a 0.00% floor. GS-1 and Goldman Sachs may mutually agree on rates outside this range or a different floor on an asset by asset basis.
(5)    Term SOFR or SOFR Average (compounded average of SOFR over a rolling 30-day period), subject to a 0.00% floor.
(6)     Term SOFR is subject to a 0.00% floor.
(7)    The rate applicable under the MM-1 Facility is subject to a credit spread adjustment of 0.11%, which was included when the benchmark transitioned from USD LIBOR to Term SOFR.
(8)    Borrowings under the Barclays Facility bear interest, at the Company's election, at either a base rate plus a spread of 1.25% per annum or one-, three- or six-month Term SOFR plus a spread of 2.25% per annum and a credit spread adjustment of 0.10% per annum.

As of December 31, 2022
Arrangement
Weighted Average Interest Rate(2)
Amount Outstanding(1)
Amount AvailableMaturity DateCarrying Amount of CollateralFair Value of Collateral
Collateralized Loan Obligations
2019-FL1 Notes
 +1.55%(3)
$196,785 $— December 18, 2036$294,751 $295,040 
2021-FL2 Notes
 +1.53%(3)
646,935 — May 5, 2038782,767 783,381 
2021-FL3 Notes
 +1.51%(3)
928,483 — November 4, 20361,133,769 1,135,195 
2022-FL4 Notes
 +2.21%(6)
837,662 — January 31, 20391,081,159 1,080,953 
2022-FL5 Notes
 +3.05%(6)
570,112 — June 17, 2037689,885 689,246 
2022-FL6 Notes
 +2.96%(6)
566,250 — August 19, 2037749,837 749,502 
2022-FL7 Notes
 +3.35%(6)
637,592 — October 17, 2039814,611 814,542 
4,383,819 — 5,546,779 5,547,859 
Repurchase Agreements
WF-1 Facility
 +2.04%(4)
375,381 224,619 August 30, 2024481,146 480,371 
GS-1 Facility
 +2.40%(5)
34,519 315,481 January 26, 202348,276 47,846 
RBC Facility
1.39%
55,934 — N/A85,707 79,274 
BB-1 Facility
 +2.14%(6)
186,139 513,861 February 22, 2024236,783 236,462 
MS-1 Facility
 +2.86%(7)
108,263 41,737 October 13, 2025141,312 140,787 
NTX-1 Facility
(4)
— 187,500 November 10, 2024— — 
760,236 1,283,198 993,224 984,740 
Revolving Credit Facilities
MM-1 Facility
 +2.14%(7)(8)
310,982 689,018 September 20, 2029439,431 439,051 
Barclays Facility
(9)
— 310,000 August 1, 2025— — 
310,982 999,018 439,431 439,051 
Mortgage Loan
Natixis Loan
 +2.15%(7)
124,700 2,000 July 9, 2025158,963 192,039 
Total$5,579,737 $2,284,216 $7,138,397 $7,163,689 
_______________________
(1)    The amount outstanding under the facilities approximates their fair value.
(2)    The rates are expressed over the relevant floating benchmark rates, which include USD LIBOR, Term SOFR, and SOFR Average (compounded average of SOFR over a rolling 30-day period).
(3)    USD LIBOR is subject to a 0.00% floor.
(4)    Benchmark rate is subject to a 0.00% floor. LIBOR or SOFR benchmark rate is selected with respect to a transaction as set forth in the related transaction confirmation for the underlying transaction.
(5)    Term SOFR is subject to a 0.00% floor. GS-1 and Goldman Sachs may mutually agree on rates outside this range or a different floor on an asset by asset basis.
(6)    USD LIBOR, Term SOFR or SOFR Average (compounded average of SOFR over a rolling 30-day period), subject to a 0.00% floor.
(7)     Term SOFR is subject to a 0.00% floor.
(8)    The rate applicable under the MM-1 Facility is subject to a credit spread adjustment of 0.11%, which was included when the benchmark transitioned from USD LIBOR to Term SOFR.
(9)    Borrowings under the Barclays Facility bear interest, at the Company's election, at either a base rate plus a spread of 1.25% per annum or one-, three- or six-month Term SOFR plus a spread of 2.25% per annum and a credit spread adjustment of 0.10% per annum.
The Company's average borrowings and weighted average interest rate, including the effect of non-usage fees, for the nine months ended September 30, 2023 were $5,674,603 and 7.12%, respectively. The Company's average borrowings and weighted average interest rate, including the effect of non-usage fees, for the year ended December 31, 2022 were $4,560,400 and 3.83%, respectively.
Under its financing arrangements, the Company has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar financing arrangements. The Company was in compliance with all covenants required by its financing arrangements as of September 30, 2023 and December 31, 2022.
Maturities
The Company generally requires the amount outstanding on debt obligations to be paid down before the financing arrangement's respective maturity date. The following table sets forth the Company's repayment schedule for secured financings outstanding as of September 30, 2023 based on the maturity date of each financing arrangement:
Collateralized Loan Obligations(1)
Repurchase AgreementsRevolving Credit FacilityMortgage LoanTotal
2023$— $— $— $— $— 
202412,597 140,344 — — 152,941 
2025103,096 56,318 — 124,700 284,114 
2026556,744 — — — 556,744 
Thereafter3,671,353 45,513 850,000 — 4,566,866 
Total$4,343,790 $242,175 $850,000 $124,700 $5,560,665 
_______________________
(1)     The allocation of repayments under the Company's collateralized loan obligations is based on the maturity date of each agreement, or the maximum maturity date assuming all extension options are exercised by the borrower if the reinvestment period has expired.
Collateralized Loan Obligations
The Company financed certain pools of loans through collateralized loan obligations, which include 2019-FL1, 2021-FL2, 2021-FL3, 2022-FL4, 2022-FL5, 2022-FL6 and 2022-FL7, or collectively, the CLOs. The following table outlines the number of loans, including partial loans, and the principal balance of the collateralized pool of interests for each CLO.
As of September 30, 2023 (Unaudited)
Collateral AssetsTotal CountPrincipal Balance
2019-FL1 14$292,791 
2021-FL2 26769,064 
2021-FL3 301,102,723 
2022-FL4 251,080,841 
2022-FL5 25690,000 
2022-FL6 24750,000 
2022-FL7 21814,814 
Total165 $5,500,233 
Deferred financing costs and discounts related to the collateralization of the CLO notes are amortized to interest expense over the remaining life of the loans. The following table outlines the net book value of the Company's CLOs on its consolidated balance sheets.
September 30,
20232022
Face value$4,343,790 $3,772,476 
Unamortized deferred financing costs(27,733)(30,649)
Unamortized discount(9,785)(7,887)
Net book value$4,306,272 $3,733,940 
Repurchase Agreements
The Company has entered into and maintains in effect eight repurchase facilities. The Company, through direct or indirect wholly owned subsidiaries, entered into repurchase agreements with Wells Fargo (the “WF-1 Facility”), Goldman Sachs (the “GS-1 Facility”), Royal Bank of Canada (the “RBC Facility”), Barclays Bank PLC (the “BB-1 Facility”), Morgan Stanley Bank, N.A. (the “MS-1 Facility”), Natixis, New York Branch (the “NTX-1 Facility”), Bank of Montreal (the "BMO-1 Facility"), and Lucid Prime Fund (the "Lucid Facility"). The Company uses repurchase facilities for multiple purposes, including, but not limited to, (i) financing the acquisition and origination of (a) real estate loans or senior controlling participation interests in such loans, (b) pari passu participation interests in mortgage loans and (c) mezzanine loans and, (ii) repurchase transactions of securities and financial instruments. Each repurchase facility is subject to certain representations, warranties, covenants, events of default and indemnities unique to each facility but customary for agreements of this type. Further, the Company has entered into guarantees with respect to each of the repurchase facilities in which the Company guarantees obligations of the facility. Each transaction under each repurchase facility has its own specific terms, such as identification of the assets subject to the transaction, sale price, repurchase price and rate.
The Company incurred deferred financing costs in connection with each repurchase facility, which costs are being amortized to interest expense over the life of that repurchase facility. The following table outlines the net book value of the Company's repurchase facilities on its consolidated balance sheets.
September 30,
20232022
Face value$242,175 $883,580 
Unamortized deferred financing costs(2,718)(2,976)
Net book value$239,457 $880,604 

WF-1 Facility
On August 24, 2023, FS CREIT Finance WF-1 LLC, an indirect wholly owned special-purpose financing subsidiary of the Company, entered into a Maturity Date and Funding Period Extension Confirmation Letter and Amendment No. 11 to Master Repurchase and Securities Contract, or Eleventh Amendment to Master Repurchase Agreement, amending Master Repurchase and Securities Contract dated as of August 30, 2017 with Wells Fargo Bank, National Association, as buyer. The Eleventh Amendment to Master Repurchase Agreement provides for, among other things, an extension of each of the Maturity Date and the Funding Expiration Date, in each case, from August 30, 2023 to August 30, 2024.
BMO-1 Facility
On August 3, 2023, the Company closed on the 1st Amendment to the Master Repurchase Agreement between Bank of Montreal and FS CREIT Finance BMO-1 LLC. The amendment provides for, among other things, (i) the addition of “component interest,” “component interest documents,” and “component interest note”, (ii) a revision to Schedule 1(b) – Re: Purchased Assets Consisting of Component Interests, and (iii) a revision to Exhibit A – Form of Transaction Request and Confirmation. There are no changes to the economic terms of the agreement.
Revolving Credit Facilities
The Company has entered into, and maintains in effect, two revolving credit facilities, the Barclays Facility and the MM-1 Facility. The Barclays Facility is utilized for purposes of financing the operating expenses and general corporate purposes of the Company and its subsidiaries. The MM-1 Facility is utilized for the purposes of financing the acquisition and origination of
commercial mortgage loan assets meeting specified eligibility criteria and concentration limits, pay transaction costs and fund distributions to FS CREIT Finance Holdings, LLC (and ultimately to the Company).
The Company incurred deferred financing costs in connection with each revolving credit facility, which costs are being amortized to interest expense over the life of that facility. The following table details the net book value of the Company's revolving credit facilities on its consolidated balance sheets.
September 30,
20232022
Face value$850,000 $704,105 
Unamortized deferred financing costs(10,493)(8,383)
Net book value$839,507 $695,722 

Mortgage Loan
Natixis Loan
On June 23, 2022, FS CREIT 555 Aviation LLC, an indirect wholly-owned subsidiary of the Company, entered into a mortgage loan related to its purchase of 555 Aviation (see Note 5). The Company incurred deferred financing costs, which are being amortized to interest expense over the life of the facility. The following table details the net book value of the Company's mortgage loan on its consolidated balance sheets.
September 30,
20232022
Face value$124,700 $124,700 
Unamortized deferred financing costs(1,220)(2,132)
Net book value$123,480 $122,568 

v3.23.3
Related Party Transactions
9 Months Ended
Sep. 30, 2023
Related Party Transactions [Abstract]  
Related Party Transactions Related Party Transactions
Compensation of FS Real Estate Advisor, Rialto and the Dealer Manager
Base Management Fee
Pursuant to the fourth amended and restated advisory agreement dated as of December 1, 2022 or the New Advisory Agreement, FS Real Estate Advisor is entitled to a base management fee equal to 1.25% of the NAV for the Company's Class T, Class S, Class D, Class M and Class I shares, payable quarterly in arrears. The payment of all or any portion of the base management fee accrued with respect to any quarter may be deferred by FS Real Estate Advisor, without interest, and may be taken in any such other quarter as FS Real Estate Advisor may determine. In calculating the Company's base management fee, the Company will use its NAV before giving effect to accruals for such fee, the performance fee, the administrative services fee, stockholder servicing fees or distributions payable on its shares. The base management fee is a class-specific expense. No base management fee is paid on the Company's Class F or Class Y shares.
Performance Fee
FS Real Estate Advisor is also entitled to the performance fee calculated and payable quarterly in arrears in an amount equal to 10.0% of the Company's Core Earnings (as defined below) for the immediately preceding quarter, subject to a hurdle rate, expressed as a rate of return on average adjusted capital, equal to 1.625% per quarter, or an annualized hurdle rate of 6.5%. As a result, FS Real Estate Advisor does not earn a performance fee for any quarter until the Company's Core Earnings for such quarter exceed the hurdle rate of 1.625%. For purposes of the performance fee, “adjusted capital” means cumulative net proceeds generated from sales of the Company's common stock other than Class F common stock (including proceeds from the Company's distribution reinvestment plan) reduced for distributions from non-liquidating dispositions of the Company's investments paid to stockholders and amounts paid for share repurchases pursuant to the Company's share repurchase plan. Once the Company's Core Earnings in any quarter exceed the
hurdle rate, FS Real Estate Advisor will be entitled to a “catch-up” fee equal to the amount of Core Earnings in excess of the hurdle rate, until the Company's Core Earnings for such quarter equal 1.806%, or 7.222% annually, of adjusted capital. Thereafter, FS Real Estate Advisor is entitled to receive 10.0% of the Company's Core Earnings.
For purposes of calculating the performance fee, “Core Earnings” means: the net income (loss) attributable to stockholders of Class Y, Class T, Class S, Class D, Class M and Class I shares, computed in accordance with GAAP (provided that net income (loss) attributable to Class Y stockholders shall be reduced by an amount equal to the base management fee that would have been paid if Class Y shares were subject to such fee), including realized gains (losses) not otherwise included in GAAP net income (loss) and excluding (i) non-cash equity compensation expense, (ii) the performance fee, (iii) depreciation and amortization, (iv) any unrealized gains or losses or other similar non-cash items that are included in net income for the applicable reporting period, regardless of whether such items are included in other comprehensive income or loss, or in net income, and (v) one-time events pursuant to changes in GAAP and certain material non-cash income or expense items, in each case after discussions between FS Real Estate Advisor and the Company's independent directors and approved by a majority of the Company's independent directors. The performance fee is a class-specific expense. No performance fee is paid on the Company's Class F shares.
Method of Payment
Pursuant to the advisory agreement, the base management fee and performance fee may be paid, at FS Real Estate Advisor’s election, in (i) cash, (ii) Class I shares, (iii) performance-contingent rights Class I share awards, or Class I PCRs, or (iv) any combination of cash, Class I shares or Class I PCRs.
Under the Class I PCR agreement entered into between the Company, FS Real Estate Advisor and Rialto, or the Adviser Entities, the PCR Agreement, management and performance fees may be payable to the Adviser Entities in the form of Class I PCRs to the extent that distributions paid to stockholders in the applicable fiscal quarter exceed the Company’s Adjusted Core Earnings. “Adjusted Core Earnings” means: the net income (loss) attributable to stockholders, computed in accordance with GAAP, including (i) realized gains (losses) not otherwise included in GAAP net income (loss), (ii) stockholder servicing fees, and (iii) reimbursements for organization and offering expenses, and excluding (A) non-cash equity compensation expense, (B) non-cash equity based administration fees, (C) depreciation and amortization, (D) any unrealized gains or losses or other similar non-cash items that are included in net income for the applicable reporting period, regardless of whether such items are included in other comprehensive income or loss, or in net income, and (E) one-time events pursuant to changes in GAAP and certain material non-cash income or expense items. Thereafter, Class I PCRs may become issuable in the form of Class I shares upon the achievement of the following conditions in any fiscal quarter following the initial issuance of the Class I PCRs, together, the Performance Conditions: (a) Adjusted Core Earnings for the quarter exceed distributions paid to stockholders during such quarter (such difference, the “Excess Distributable Income”) and (b) the annualized distribution yield on the Class I Shares (measured over such quarter) is at least at the yield target determined by management given then-current market conditions, the Yield Target. The initial Yield Target will be a 6.0% annualized yield on the Class I shares.
On the last day of any fiscal quarter in which the Company achieves the Performance Conditions (the “Performance Achievement Date”), the Company will issue to the Adviser Entities the number of Class I shares equal in value to the Excess Distributable Income for such quarter in respect of any outstanding Class I PCRs. The Adviser Entities, and their respective affiliates and employees, may not request repurchase by the Company of any Class I shares issued under the PCR Agreement for a period of six (6) months from the date of issuance. Thereafter, upon ten days’ written notice to the Company by the Adviser Entities, the Company must repurchase any Class I shares requested to be repurchased by the Adviser Entities at the then current transaction price per Class I share; provided that no repurchase shall be permitted that would jeopardize the Company’s qualification as a REIT or violate Maryland law. If, prior to the Performance Achievement Date, (i) the New Advisory Agreement is terminated in accordance with Section 12(b) of the New Advisory Agreement (other than Section 12(b)(iii) thereof) or (ii) the sub-advisory agreement is terminated in accordance with Section 9(b) thereof (other than Section 9(b)(v) thereof), any rights related to the Class I PCRs evidenced thereby by the terminated party as of the date of such termination shall immediately vest and the Company shall issue the number of Class I shares issuable upon such vesting. If, prior to the Performance Achievement Date, either of the Adviser Entities resigns as the adviser or sub-adviser, respectively, of the Company, then any rights related to the Class I PCRs evidenced thereby as of the date of such resignation shall remain outstanding and Class I shares issuable in respect thereof shall be issued upon achievement of the Performance Conditions.
Administrative Services Fee
On December 1, 2022, the Company and FS Real Estate Advisor entered into the Fourth Amended and Restated Advisory Agreement (the “Advisory Agreement”), which amends and restates the Third Amended and Restated Advisory Agreement, dated December 15, 2021, to replace the reimbursement of administrative service expenses with an administrative services fee equal to 1.0% of the Company’s net asset value per annum attributable to all shares of common stock, before giving effect to any accruals for the base management fee, the performance fee, the administrative services fee, the stockholder servicing fee or any distributions. Under the Advisory Agreement, the administrative services fee will be payable quarterly and in arrears in the cash equivalent number of restricted stock units (“Class I RSUs”) representing the right to receive Class I shares of the Company’s common stock (“Class I shares”) based on the then-current Class I transaction price as of the last day of such quarter. Class I RSUs in payment of the administrative services fee will provide the Adviser the right to receive a number of Class I shares equivalent to the number of Class I RSUs, subject to the terms and conditions set forth in the Class I RSU Agreement.
FS Real Estate Advisor may elect, at a later date, to have the Company repurchase some or all of the Class I shares issued to the Adviser in accordance with the Advisory Agreement, including Class I shares issued pursuant to any Class I RSUs, at a per share price equal to the then-current Class I share transaction price. Such Class I shares will not be subject to the repurchase limits of the Company’s share repurchase plan or any reduction or penalty for an early repurchase, provided that the approval of the Company’s independent directors is required for any repurchase request of FS Real Estate Advisor or Rialto, for Class I shares received as payment for advisory fees that, when combined with any stockholder repurchase requests submitted through the Company’s share purchase plan, would cause the Company to exceed the monthly and quarterly repurchase limitations of its share repurchase plan. The FS Real Estate Advisor will have no registration rights with respect to such Class I shares. Any such Class I shares and Class I RSUs issued to Rialto will have the same rights and conditions as those issued to FS Real Estate Advisor.
At least annually, the Company’s board of directors reviews the amount of the administrative services expenses reimbursable to FS Real Estate Advisor and Rialto to determine whether such amounts are reasonable in relation to the services provided. The Company will not reimburse FS Real Estate Advisor or Rialto for any services for which it receives a separate fee or for any administrative expenses allocated to employees to the extent they serve as executive officers of the Company.
Class I Restricted Stock Unit Agreement
On December 1, 2022, the Company, FS Real Estate Advisor and Rialto entered into the Class I Restricted Stock Unit Agreement (the “Class I RSU Agreement”). Pursuant to the Class I RSU Agreement, and in accordance with the Advisory Agreement, the administrative services fee will be payable quarterly in arrears on the last day of each quarter in the cash equivalent number of Class I RSUs based on the then-current Class I share transaction price as of the last day of such quarter. On the last day of each quarter, the Company will issue to FS Real Estate Advisor and Rialto the cash equivalent number of Class I RSUs to which each is entitled. Class I RSUs will vest ratably on the first calendar day of the month following the one, two and three-year anniversary of the applicable grant date, provided that (i) 100% of the Adviser’s Class I RSUs will immediately vest upon the nonrenewal or termination of the Advisory Agreement pursuant to Section 12(b)(ii), Section 12(b)(iii) or Section 12(b)(iv) thereof; (ii) 100% of the Sub-Adviser’s Class I RSUs will immediately vest upon the nonrenewal or termination of the sub-advisory agreement between FS Real Estate Advisor and Rialto (the “Sub-Advisory Agreement”) pursuant to Section 9(b)(i), Section 9(b)(iii), Section 9(b)(iv), Section 9(b)(v) or Section 9(b)(vi) thereof; (iii) 100% of the Adviser’s unvested Class I RSUs will be automatically forfeited upon termination of the Advisory Agreement pursuant to Section 12(b)(i) thereof; and (iv) 100% of the Sub-Adviser’s unvested Class I RSUs will be automatically forfeited upon termination of the Sub-Advisory Agreement pursuant to Section 9(b)(ii) thereof. If FS Real Estate Advisor and Rialto resigns as the Company’s adviser or sub-adviser, respectively, then any rights related to the Class I RSUs evidenced thereby as of the date of such resignation will remain outstanding and Class I shares issuable in respect thereof will be issued upon the applicable vesting date. If the Company declares a cash distribution on the Class I shares underlying unvested Class I RSUs, then the Company will credit the account of FS Real Estate Advisor and Rialto with the applicable distribution equivalents, which will be subject to the same vesting and forfeiture restrictions as the Class I RSUs. FS Real Estate Advisor and Rialto, and their respective affiliates and employees, may not request repurchase by the Company of any Class I shares issued under the Class I RSU Agreement for a period of six months from the date of issuance. Thereafter, upon ten days’ written notice to the Company the Company must repurchase any Class I shares requested to be repurchased by FS Real Estate Advisor and Rialto at the most recently published transaction price per Class I share; provided that no repurchase will be permitted that would jeopardize the Company’s qualification as a REIT or violate Maryland law.
Origination Fees
FS Real Estate Advisor has engaged Rialto as sub-adviser to originate loans and other investments on behalf of the Company, and FS Real Estate Advisor oversees the sub-adviser’s origination activities. In connection with these activities, origination fees of up
to 1.0% of the loan amount for first lien, subordinated or mezzanine debt or preferred equity financing may be retained by the sub-adviser or FS Real Estate Advisor. Such origination fees will be retained only to the extent they are paid by the borrower, either directly to Rialto or FS Real Estate Advisor or indirectly through the Company. During the nine months ended September 30, 2023 and 2022, $7,418 and $33,237, respectively, in origination fees were paid directly by the borrowers to FS Real Estate Advisor or Rialto and not to the Company. During the nine months ended September 30, 2023 and 2022, $0 and $2,000, respectively, in capital market fees were paid to affiliates of the Company.
Offering Costs
FS Investments funded the Company’s offering costs in the amount of $23,902 for the period from November 7, 2016 (Inception) to September 30, 2023. These expenses include legal, accounting, printing, mailing and filing fees and expenses, due diligence expenses of participating broker-dealers supported by detailed and itemized invoices, costs in connection with preparing sales materials, design and website expenses, fees and expenses of the Company’s transfer agent, fees to attend retail seminars sponsored by participating broker-dealers and reimbursements for customary travel, lodging, and meals, but excluding selling commissions, dealer manager fees and stockholder servicing fees.
FS Real Estate Advisor may be reimbursed for any organization and offering expenses that it or Rialto has incurred on the Company's behalf, up to a cap of 0.75% of gross proceeds raised. During the nine months ended September 30, 2023, the Company paid $5,159 to FS Real Estate Advisor for offering costs previously funded. As of September 30, 2023, $4,180 of offering expenses previously funded remained subject to reimbursement to FS Real Estate Advisor and Rialto.
The following table describes the fees and expenses accrued under the advisory agreement and sub-advisory agreement during the nine months ended September 30, 2023 and 2022:
Three Months Ended September 30,Nine Months Ended September 30,
Related PartySource AgreementDescription2023202220232022
FS Real Estate AdvisorAdvisory Agreement
Base Management Fee(1)
$9,092 $6,629 $25,514 $15,825 
FS Real Estate AdvisorAdvisory Agreement
Performance Fee(2)
$6,354 $3,904 $17,742 $4,056 
FS Real Estate AdvisorAdvisory Agreement
Administrative Services Expenses(3)
$— $3,434 $— $8,658 
FS Real Estate AdvisorAdvisory Agreement
Administrative Services Fee(4)
$7,366 $— $20,682 $— 
FS Real Estate AdvisorAdvisory AgreementCapital Markets Fees$— $— $— $2,000 
Rialto Capital ManagementSub-Advisory Agreement
Valuation Services Fees(5)
$108 $106 $329 $299 
_______________________
(1)    During the nine months ended September 30, 2023, FS Real Estate Advisor received $23,949, in cash as payment for management fees. During the nine months ended September 2022, FS Real Estate Advisor received $2,007 in cash and $11,409 of performance contingent rights were issued as payment for management fees. As of September 30, 2023 and 2022, there were $9,088 and $0 base management fees payable to FS Real Estate Advisor.
(2)    During the nine months ended September 30, 2023 and 2022, $16,160 and $557, respectively, in performance fees were paid to FS Real Estate Advisor. As of September 30, 2023, there were $6,354 performance fees payable to FS Real Estate Advisor.
(3)    During the nine months ended September 30, 2022, $7,978, of the accrued administrative services expenses related to the allocation of costs of administrative personnel for services rendered to the Company by FS Real Estate Advisor and Rialto and the remainder related to other reimbursable expenses. These amounts are recorded as general and administrative expenses on the accompanying unaudited consolidated statements of operations.
(4)    On December 1, 2022, the Company's method for reimbursing administrative services expense was replaced with an administrative services fee equal to 1.0% of the Company’s net asset value per annum attributable to all shares of common stock, before giving effect to any accruals for the base management fee, the performance fee, the administrative services fee, the stockholder servicing fee or any distributions.
(5)     During the nine months ended September 30, 2023 and 2022, $214 and $193, respectively, in valuation fees were paid by the Company to Rialto.
The dealer manager for the Company’s continuous public offering is FS Investment Solutions, LLC, or FS Investment Solutions, which is an affiliate of FS Real Estate Advisor. Under the amended and restated dealer manager agreement dated as of August 17,
2018, or the dealer manager agreement, FS Investment Solutions is entitled to receive upfront selling commissions of up to 3.0%, and upfront dealer manager fees of 0.5% of the transaction price of each Class T share sold in the primary offering, however such amounts may vary at certain participating broker-dealers provided that the sum will not exceed 3.5% of the transaction price (subject to reductions for certain categories of purchasers). FS Investment Solutions is entitled to receive upfront selling commissions of up to 3.5% of the transaction price per Class S share sold in the primary offering (subject to reductions for certain categories of purchasers). The dealer manager anticipates that all of the selling commissions and dealer manager fees will be re-allowed to participating broker-dealers, unless a particular broker-dealer declines to accept some portion of the dealer manager fee they are otherwise eligible to receive. Pursuant to the dealer manager agreement, the Company also reimburses FS Investment Solutions or participating broker-dealers for bona fide due diligence expenses, provided that total organization and offering expenses shall not exceed 15% of the gross proceeds in the Company's public offering.
No selling commissions or dealer manager fees are payable on the sale of Class D, Class M, Class I, Class F or Class Y shares or on shares of any class sold pursuant to the Company's distribution reinvestment plan.
Subject to the limitations described below, the Company pays FS Investment Solutions stockholder servicing fees for ongoing services rendered to stockholders by participating broker-dealers or by broker-dealers servicing stockholders’ accounts, referred to as servicing broker-dealers:
with respect to the Company's outstanding Class T shares equal to 0.85% per annum of the aggregate NAV of its outstanding Class T shares, consisting of an advisor stockholder servicing fee of 0.65% per annum and a dealer stockholder servicing fee of 0.20% per annum; however, with respect to Class T shares sold through certain participating broker-dealers, the advisor stockholder servicing fee and the dealer stockholder servicing fee may be other amounts, provided that the sum of such fees will always equal 0.85% per annum of the NAV of such shares;
with respect to the Company's outstanding Class S shares equal to 0.85% per annum of the aggregate NAV of its outstanding Class S shares;
with respect to the Company's outstanding Class D shares equal to 0.3% per annum of the aggregate NAV of its outstanding Class D shares; and
with respect to the Company's outstanding Class M shares equal to 0.3% per annum of the aggregate NAV of its outstanding Class M shares.
The Company does not pay a stockholder servicing fee with respect to its Class I, Class F or Class Y shares. The dealer manager reallows some or all of the stockholder servicing fees to participating broker-dealers, servicing broker-dealers and financial institutions (including bank trust departments) for ongoing stockholder services performed by such broker-dealers, and waives (pays back to the Company) stockholder servicing fees to the extent a broker-dealer or financial institution is not eligible or otherwise declines to receive all or a portion of such fees.
The Company will cease paying stockholder servicing fees with respect to any Class D, Class M, Class S and Class T shares held in a stockholder’s account at the end of the month in which the total underwriting compensation from the upfront selling commissions, dealer manager fees and stockholder servicing fees, as applicable, paid with respect to such account would exceed 1.25%, 7.25%, 8.75% and 8.75%, respectively (or a lower limit for shares sold by certain participating broker-dealers or financial institutions) of the gross proceeds from the sale of shares in such account. These amounts are referred to as the sales charge cap. At the end of such month that the sales charge cap is reached, each Class D, Class M, Class S or Class T share in such account will convert into a number of Class I shares (including any fractional shares) with an equivalent aggregate NAV as such share. 
In addition, the Company will cease paying stockholder servicing fees on each Class D share, Class M share, Class S share and Class T share held in a stockholder’s account and each such share will convert to Class I shares on the earlier to occur of the following: (i) a listing of Class I shares on a national securities exchange; (ii) the sale or other disposition of all or substantially all of the Company’s assets or the Company’s merger or consolidation with or into another entity in a transaction in which holders of Class D, Class M, Class S or Class T shares receive cash and/or shares of stock that are listed on a national securities exchange; or (iii) the date following the completion of the Company’s public offering on which, in the aggregate, underwriting compensation from all sources in connection with the Company’s public offering, including selling commissions, dealer manager fees, stockholder servicing fees and other underwriting compensation, is equal to 10% of the gross proceeds from its primary offering.
The Company accrues future stockholder servicing fees in an amount equal to its best estimate of fees payable to FS Investment Solutions at the time such shares are sold. As of September 30, 2023 and December 31, 2022, the Company accrued $115,832 and
$107,692, respectively, of stockholder servicing fees payable to FS Investment Solutions. FS Investment Solutions has entered into agreements with selected dealers distributing the Company's shares in the public offering, which provide, among other things, for the re-allowance of the full amount of the selling commissions and dealer manager fee and all or a portion of the stockholder servicing fees received by FS Investment Solutions to such selected dealers.
FS Investment Solutions also serves or served as the placement agent for the Company’s private offerings of Class I, Class F and Class Y shares pursuant to placement agreements. FS Investment Solutions does not receive any compensation pursuant to these agreements.
Expense Limitation
The Company has entered into an amended and restated expense limitation agreement with FS Real Estate Advisor and Rialto, or the expense limitation agreement, pursuant to which FS Real Estate Advisor and Rialto have agreed to waive reimbursement of or pay, on a quarterly basis, the Company’s annualized ordinary operating expenses for such quarter to the extent such expenses exceed 1.5% per annum of its average net assets attributable to each of its classes of common stock. The Company will repay FS Real Estate Advisor or Rialto on a quarterly basis any ordinary operating expenses previously waived or paid, but only if the reimbursement would not cause the then-current expense limitation, if any, to be exceeded. In addition, the reimbursement of expenses will be made only if payable not more than three years from the end of the fiscal quarter in which the expenses were paid or waived.
To the extent that the conditions to recoupment are satisfied in a future quarter (prior to the expiration of the three-year period for reimbursement set forth in the expense limitation agreement), such expenses may be subject to conditional recoupment in accordance with the terms of the expense limitation agreement.
During the period from September 13, 2017 (Commencement of Operations) to September 30, 2023, the Company accrued $6,592 for reimbursement of expenses that FS Real Estate Advisor and Rialto paid or waived, including $148 in reimbursements for the nine months ended September 30, 2023. During the period from September 13, 2017 (Commencement of Operations) to September 30, 2023, the Company received $6,592 in cash reimbursements from FS Real Estate Advisor. As of September 30, 2023, the Company had $61 of reimbursements due from FS Real Estate Advisor and Rialto.
During the nine months ended September 30, 2023 no expense recoupments were paid to FS Real Estate Advisor and Rialto. As of September 30, 2023, no expense recoupments were payable to FS Real Estate Advisor and Rialto.
The following table reflects the amounts paid or waived by FS Real Estate Advisor and Rialto under the expense limitation agreement and the expiration date for future possible reimbursements by the Company:
For the Three Months EndedAmount of Expense ReimbursementRecoupable AmountRecoupment paid or payable to sponsorExpired AmountRecoupment eligibility expiration
September 30, 2023$— $753 $— $— September 30, 2025
June 30, 202361 — 61 — June 30, 2025
March 31, 202387 — 87 — March 31, 2025
December 31, 2022605 — 605 — December 31, 2024
$753 $753 $753 $— 
Capital Contributions and Commitments
In December 2016, pursuant to a private placement, Michael C. Forman and David J. Adelman, principals of FS Investments, contributed an aggregate of $200 to purchase 8,000 Class F shares at the price of $25.00 per share. These individuals will not tender these shares of common stock for repurchase as long as FS Real Estate Advisor remains the Company's adviser. FS Investments is controlled by Mr. Forman, the Company's president and chief executive officer, and Mr. Adelman.
As of September 30, 2023, the ownership in the Company's Class F Shares by FS Real Estate Advisor and Rialto (and each of their respective affiliates and designees) was $18,583 and $402, respectively.
RIAL 2022-FL8 Transaction
In the second quarter of 2022 and 2023, the Company purchased $36,000 and $15,000, respectively, of mortgage-backed securities in a transaction in which an affiliate of Rialto is the issuer of the notes. These securities are accounted for as available-for-sale.

v3.23.3
Stockholder's Equity
9 Months Ended
Sep. 30, 2023
Equity [Abstract]  
Stockholders' Equity
Below is a summary of transactions with respect to shares of the Company's common stock during the nine months ended September 30, 2023 and 2022:
Shares
Class FClass YClass TClass SClass DClass MClass ITotal
Balance as of December 31, 2022857,710 906,648 1,600,878 54,908,336 742,999 4,645,072 34,011,164 97,672,807 
Issuance of common stock— — 72,725 12,869,916 131,578 734,839 14,478,091 28,287,149 
Reinvestment of distributions22,334 — 33,745 1,484,600 12,790 83,733 1,140,038 2,777,240 
Redemptions of common stock(114,365)— (109,653)(5,080,070)(37,372)(401,787)(3,980,011)(9,723,258)
Transfers in or out(10,259)— (219,302)(55,465)(174,445)(269,434)748,035 19,130 
Balance as of September 30, 2023
755,420 906,648 1,378,393 64,127,317 675,550 4,792,423 46,397,317 119,033,068 
Amount
Class FClass YClass TClass SClass DClass MClass ITotal
Balance as of December 31, 2022$21,008 $22,371 $38,473 $1,274,345 $18,417 $108,522 $832,242 $2,315,378 
Issuance of common stock— — 1,812 322,941 3,275 18,333 339,042 685,403 
Reinvestment of distributions559 — 838 37,215 318 2,088 27,652 68,670 
Redemptions of common stock(2,862)— (2,723)(127,360)(929)(10,015)(96,545)(240,434)
Transfers in or out(257)— (5,447)(1,390)(4,338)(6,722)18,154 — 
Accrued stockholder servicing fees(1)
— — (49)(17,913)(16)(236)— (18,214)
Balance as of September 30, 2023
$18,448 $22,371 $32,904 $1,487,838 $16,727 $111,970 $1,120,545 $2,810,803 
Shares
Class FClass YClass TClass SClass DClass MClass ITotal
Balance as of December 31, 2021902,878 906,648 1,407,377 22,823,721 642,162 2,876,736 11,366,687 40,926,209 
Issuance of common stock— — 188,212 30,189,475 113,587 1,605,166 20,603,163 52,699,603 
Reinvestment of distributions22,136 — 31,615 877,669 11,074 52,503 503,185 1,498,182 
Redemptions of common stock(74,770)— (33,438)(2,268,159)(21,931)(153,213)(1,462,991)(4,014,502)
Transfers in or out— — (1,729)— (18,729)(142,726)167,368 4,184 
Balance as of September 30, 2022
850,244 906,648 1,592,037 51,622,706 726,163 4,238,466 31,177,412 91,113,676 
Amount
Class FClass YClass TClass SClass DClass MClass ITotal
Balance as of December 31, 2021$22,138 $22,371 $33,862 $531,150 $15,945 $66,836 $279,008 $971,310 
Issuance of common stock— — 4,699 760,752 2,840 40,238 503,433 1,311,962 
Reinvestment of distributions554 — 793 22,106 277 1,820 12,288 37,838 
Redemptions of common stock(1,870)— (835)(57,119)(549)(3,840)(35,731)(99,944)
Transfers in or out— — (43)— (468)(3,580)4,091 — 
Accrued stockholder servicing fees(1)
— — (192)(58,903)(32)(2,431)— (61,558)
Balance as of September 30, 2022
$20,822 $22,371 $38,284 $1,197,986 $18,013 $99,043 $763,089 $2,159,608 
_______________________
(1)    Stockholder servicing fees only apply to Class T, Class S, Class D and Class M shares. Under GAAP, the Company accrues future stockholder servicing fees in an amount equal to its best estimate of fees payable to FS Investment Solutions at the time such shares are sold. For purposes of NAV, the Company recognizes the stockholder servicing fee as a reduction of NAV on a monthly basis. As a result, the estimated liability for the future stockholder servicing fees, which are accrued at the time each share is sold, will have no effect on the NAV of any class.
Share Repurchase Plan
The Company has adopted an amended and restated share repurchase plan, or share repurchase plan, whereby on a monthly basis, stockholders may request that the Company repurchase all or any portion of their shares. The repurchase of shares is limited to no more than 2% of the Company's aggregate NAV per month of all classes of shares then participating in the share repurchase plan and no more than 5% of the Company's aggregate NAV per calendar quarter of all classes of shares then participating in the share repurchase plan, which means that in any 12-month period, the Company limits repurchases to approximately 20% of the total NAV of all classes of shares then participating in the share repurchase plan. The Company's board of directors may modify, suspend or terminate the share repurchase plan if it deems such action to be in the Company's best interest and the best interest of its stockholders. During the nine months ended September 30, 2023 and 2022, the Company repurchased 9,723,258 and 4,014,502, respectively, shares of common stock under its share repurchase plan representing a total of $240,434 and $99,944, respectively. The Company had no unfulfilled repurchase requests during the nine months ended September 30, 2023 or 2022, respectively.
Distribution Reinvestment Plan
Pursuant to the Company's distribution reinvestment plan, holders of shares of any class of the Company's common stock may elect to have their cash distributions reinvested in additional shares of the Company's common stock. The purchase price for shares pursuant to the distribution reinvestment plan will be equal to the transaction price for such shares at the time the distribution is payable.
Distributions
The Company generally intends to distribute substantially all of its taxable income, which does not necessarily equal net income as calculated in accordance with GAAP, to its stockholders each year to comply with the REIT provisions of the Code. Dividends are paid first to the holders of the Company's Series A preferred stock at the rate of 12.0% per annum plus all accumulated and unpaid dividends thereon, and then to the holders of the Company's common stock. All distributions will be made at the discretion of the Company's board of directors and will depend upon its taxable income, financial condition, maintenance of REIT status, applicable law, and other factors that the Company's board of directors deems relevant.
The following table reflects the cash distributions per share that the Company paid on its common stock during the nine months ended September 30, 2023:
Record DateClass FClass YClass TClass SClass DClass MClass I
January 30, 2023$0.1696 $0.1696 $0.1259 $0.1259 $0.1374 $0.1374 $0.1436 
February 27, 2023$0.1696 $0.1696 $0.1259 $0.1259 $0.1374 $0.1374 $0.1436 
March 30, 2023$0.1749 $0.1749 $0.1312 $0.1312 $0.1427 $0.1427 $0.1489 
April 27, 2023$0.1749 $0.1749 $0.1312 $0.1312 $0.1427 $0.1427 $0.1489 
May 30, 2023$0.1749 $0.1749 $0.1312 $0.1312 $0.1427 $0.1427 $0.1489 
June 29, 2023$0.1799 $0.1799 $0.1362 $0.1362 $0.1477 $0.1477 $0.1539 
July 28, 2023$0.1799 $0.1799 $0.1362 $0.1362 $0.1477 $0.1477 $0.1539 
August 30, 2023$0.1799 $0.1799 $0.1362 $0.1362 $0.1477 $0.1477 $0.1539 
September 29, 2023$0.1799 $0.1799 $0.1362 $0.1362 $0.1477 $0.1477 $0.1539 
Total$1.5835 $1.5835 $1.1902 $1.1902 $1.2937 $1.2937 $1.3495 
The following table reflects the amount of cash distributions that the Company paid on its common stock during the nine months ended September 30, 2023, and 2022:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Distributions:
Paid or payable in cash$25,820 $16,473 $72,406 $40,805 
Reinvested in shares25,196 15,943 68,670 37,838 
Total distributions$51,016 $32,416 $141,076 $78,643 
Source of distributions:
Cash flows from operating activities$51,016 $32,416 $141,076 $78,643 
Offering proceeds— — — — 
Total sources of distributions$51,016 $32,416 $141,076 $78,643 
Net cash provided by (used in) operating activities(1)
$81,922 $47,173 $201,619 $96,098 
______________________
(1)    Cash flows from operating activities are supported by expense support payments from FS Real Estate Advisor and Rialto pursuant to the Company's expense limitation agreement. See Note 7 for additional information regarding the Company's expense limitation agreement.
The Company currently declares and pays regular cash distributions on a monthly basis. The Company’s board of directors previously authorized regular monthly cash distributions for October 2023 for each class of its outstanding common stock in the net distribution amounts per share set forth below:
Class FClass YClass TClass SClass DClass MClass I
$0.1799 $0.1799 $0.1362 $0.1362 $0.1477 $0.1477 $0.1539 
The distributions for each class of outstanding common stock have been or will be paid monthly to stockholders of record as of the monthly record dates previously determined by the Company's board of directors. These distributions have been or will be paid in cash or reinvested in shares of the Company’s common stock for stockholders participating in the Company’s distribution reinvestment plan.

v3.23.3
Fair Value of Financial Instruments
9 Months Ended
Sep. 30, 2023
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments Fair Value of Financial Instruments
The following table presents the Company's financial assets and liabilities carried at fair value in the consolidated balance sheets by its level in the fair value hierarchy:
September 30, 2023 (Unaudited)December 31, 2022
TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Financial Assets
Mortgage-backed securities, at fair value$225,095 $— $225,095 $— $159,464 $— $159,464 $— 
Mortgage loans held in securitization trusts, at fair value330,629 — — 330,629 324,263 — — 324,263 
Interest rate cap3,246 — 3,246 — 4,616 — 4,616 — 
Total$558,970 $— $228,341 $330,629 $488,343 $— $164,080 $324,263 
Financial Liabilities
Mortgage obligations issued by securitization trusts, at fair value$298,170 — $298,170 — $291,193 — $291,193 — 
The following table presents the changes in fair value of financial assets which are measured at fair value on a recurring basis using Level 3 inputs to determine fair value for the nine months ended September 30, 2023:
Mortgage loans held in securitization trusts, at fair value
Fair value at beginning of period$324,263 
Accretion of discount (amortization of premium)— 
Net realized gain (loss)— 
Net change in unrealized appreciation (depreciation)6,366 
Purchases— 
Sales and repayments— 
Issuances— 
Transfer into Level 3— 
Transfers out of Level 3— 
Consolidation of securitization trusts— 
Deconsolidation of securitization trusts— 
Fair value at end of period$330,629 
Amount of unrealized gains (losses) attributable to assets still held at September 30, 2023
Included in earnings$— 
Included in other comprehensive income— 
As of September 30, 2023, the Company utilized a discounted cash flow model, comparable precedent transactions and other market information to quantify Level 3 fair value measurements on a recurring basis. As of September 30, 2023, the key unobservable inputs used in the valuation of mortgage obligations issued by securitization trusts included a blended yield ranging from 12.69% to 16.82% (weighted average blended yield of 14.16%) and a life of 1 to 3.5 years (weighted average life of 2.6 years). Significant increases or decreases in any one of the inputs described above in isolation may result in significantly different fair value of the financial assets and liabilities using such Level 3 inputs.
As discussed in Note 2, GAAP requires disclosure of fair value information about financial instruments, whether or not recognized in the statement of financial position, for which it is practicable to estimate that value. The following table details the carrying amount, face amount, and fair value of the financial instruments described in Note 2:
September 30, 2023 (Unaudited)December 31, 2022
Book ValueFace AmountFair ValueBook ValueFace AmountFair Value
Financial Assets
Cash, cash equivalents and restricted cash$214,875 $214,875 $214,875 $201,618 $201,618 $201,618 
Loans receivable - held-for-investment(1)
$7,665,632 $7,735,561 $7,655,946 $7,350,315 $7,350,271 $7,339,105 
Mortgage-backed securities held-to-maturity$74,543 $80,300 $67,203 $68,559 $80,300 $68,559 
Financial Liabilities
Repurchase agreements(2)
$239,457 $242,175 $242,175 $756,816 $760,236 $760,236 
Credit facilities$839,507 $850,000 $850,000 $298,544 $310,982 $310,982 
Collateralized loan obligations(2)(3)
$4,306,272 $4,334,005 $4,334,005 $4,336,701 $4,371,684 $4,371,684 
Mortgage note payable(2)
$123,480 $124,700 $124,700 $122,568 $124,700 $124,700 
__________________
(1)    Book value of loans receivable represents the face amount, net of CECL reserve, unamortized loan fees and costs and accrual of exit fees, as applicable.
(2)    Book value represents the face amount, net of deferred financing costs and discount.
(3)    Face value represents the face amount, net of discount.
Estimates of fair value for cash, cash equivalents and restricted cash are measured using observable, quoted market prices, or Level 1 inputs. Estimates of fair value for loans receivable, mortgage-backed securities held-to-maturity, repurchase obligations, credit facility obligations and the collateralized loan and mortgage obligations are measured using unobservable inputs, or Level 3 inputs.
CMBS, Fair Value Option
As discussed in the “Fair Value of Financial Instruments” section of Note 2 herein, the Company elected the fair value option for
certain CMBS mortgage loans in an effort to eliminate an accounting mismatch resulting from consolidation of the related mortgage loans held in securitization trusts. As of September 30, 2023, the fair value and unpaid principal balance of these CMBS, excluding the notional value of interest-only securities and before consolidation of the securitization mortgage loans, were $33,230 and $36,469, respectively. As a result of the consolidation of the mortgage loans, the total fair value balance of $330,629 represents the Company's economic interest in the asset. The vast majority of this fair value (all except $33,230 at September 30, 2023) is eliminated in consolidation of the related mortgage obligations before arriving at the GAAP balance for the fair value option investment securities.

v3.23.3
Variable Interest Entities
9 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Variable Interest Entities Variable Interest Entities
Consolidated Variable Interest Entities
The following table details the assets and liabilities of the Company's consolidated variable interest entities as of September 30, 2023 and December 31, 2022:
September 30, 2023 (Unaudited)December 31, 2022
Assets:
Restricted cash$32,477 $— 
Loans receivable, held-for-investment5,498,839 5,546,779 
Interest receivable23,228 24,144 
Other assets7,034 853 
Mortgage loans held in securitization trusts, at fair value330,629 324,263 
Total assets$5,892,207 $5,896,039 
Liabilities
Collateralized loan obligations, net$4,306,272 $4,336,701 
Interest payable12,022 12,631 
Other liabilities533 473 
Mortgage obligations issued by securitization trusts, at fair value298,170 291,193 
Total liabilities$4,616,997 $4,640,998 
The Company has financed a portion of its loans through CLOs, which are considered VIEs. The Company has a controlling financial interest in the CLOs and, therefore, consolidates them on its balance sheets because the Company has both (i) the power to direct activities of the CLOs that most significantly affect the CLOs' economic performance and (ii) the obligation to absorb losses and the right to receive benefits of the CLOs that could potentially be significant to the CLOs.
Assets held by the CLOs are restricted and can be used only to settle obligations of the CLOs. The liabilities are non-recourse to the Company and can only be satisfied from the assets of the CLOs.
Investment Securities
Mortgage loans and obligations held in securitization trusts consolidated in accordance with ASC 810 are structured as pass through entities that receive principal and interest on the underlying collateral and distribute those payments to the certificate holders. The assets and other instruments held by these securitization entities are restricted and can only be used to fulfill the obligations of the entity. Additionally, the obligations of the securitization entities do not have any recourse to the general credit of any other consolidated entities, nor to the Company as the primary beneficiary. The mortgage obligations initially represent investment securities on the balance sheet (pre-consolidation). Upon consolidation of the mortgage loans and obligations, the associated investment securities are eliminated, as is the interest income related to those securities.
The inclusion of the assets and liabilities of the mortgage loans and obligations in which the Company is deemed the primary beneficiary has no economic effect on the Company. Its exposure to the obligations of mortgage loans and obligations held in securitization is generally limited to its investment in these entities. The Company is not obligated to provide, nor has provided, any financial support for any of these consolidated structures.
Non-Consolidated Variable Interest Entities
The Company invested in subordinated positions of CMBS trusts which are considered mortgage loans and obligations held in securitization trusts. The Company is not the primary beneficiary of the mortgage loans and obligations because it does not have the power to direct the activities that most significantly affect the mortgage loans and obligations' economic performance, nor does it provide guarantees or recourse to the mortgage loans and obligations other than standard representations and warranties and, therefore, does not consolidate the mortgage loans and obligations on its balance sheets. The Company has classified its investment in the CMBS as either held-to-maturity or available-for-sale debt securities that are included on the Company's consolidated balance sheets and are
part of the Company's ongoing impairment review. The Company's maximum exposure to loss of the securities are limited to its book value of $317,117 as of September 30, 2023.
The Company is not obligated to provide, nor has it provided financial support to these consolidated and non-consolidated mortgage loans and obligations.

v3.23.3
Commitments and Contingencies
9 Months Ended
Sep. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
The Company enters into contracts that contain a variety of indemnification provisions. The Company’s maximum exposure under these arrangements is unknown; however, the Company has not had prior claims or losses pursuant to these contracts. Management of FS Real Estate Advisor has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote.
The Company is not currently subject to any material legal proceedings and, to the Company’s knowledge, no material legal proceedings are threatened against the Company. From time to time, the Company may be party to certain legal proceedings in the ordinary course of business. While the outcome of any legal proceedings cannot be predicted with certainty, the Company does not expect that any such proceedings will have a material effect on its financial condition or results of operations.
See Note 7 for a discussion of the Company’s commitments to FS Real Estate Advisor and its affiliates (including FS Investments) for the reimbursement of organization and offering costs funded by FS Investments and for the reimbursement of amounts paid or waived by FS Real Estate Advisor and Rialto under the expense limitation agreement.

v3.23.3
Derivative Instrument
9 Months Ended
Sep. 30, 2023
Summary of Derivative Instruments [Abstract]  
Derivative Instrument Derivative Instrument
The Company has entered into an interest rate cap contract in order to limit its exposure against the variability of future interest rates on its variable interest rate borrowing. The Company has not designated this derivative as a hedge for accounting purposes. The Company has not entered into a master netting arrangement with its third-party counterparty and does not offset on its consolidated balance sheets the fair value amount recorded for its derivative instrument. The table below provides additional information regarding the Company's derivative instrument as of September 30, 2023.
Type of DerivativeNotional AmountStrikeEffective DateMaturity Date
Fair Value(1)
Interest Rate Cap$126,700 2.25 %June 21, 2022July 9, 2024$3,246 
__________________
(1)    Included in Other assets in the Company's consolidated balance sheets.
The following table details the fair value of the Company's derivative financial instrument:
Type of DerivativeRealized/Unrealized Gain (Loss)Location of Gain (Loss) Recognized in Net IncomeThree Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Interest Rate CapUnrealized LossOther income (loss)$(762)$1,758 $(1,370)$309 

v3.23.3
Summary of Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]  
Basis of Presentation Basis of Presentation: The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The unaudited consolidated financial statements include both the Company’s accounts and the accounts of its wholly owned subsidiaries and variable interest entities, or VIEs, of which the Company is the primary beneficiary, as of September 30, 2023. All significant intercompany transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. The Company has evaluated the impact of subsequent events through the date the unaudited consolidated financial statements were issued.
Reclassifications Reclassifications: Certain amounts in the unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2023 and the audited consolidated financial statements as of and for the year ended December 31, 2022 may have been reclassified to conform to the classifications used to prepare the unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2023.
Use of Estimates Use of Estimates: The preparation of the unaudited consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
Principles of Consolidation: Financial Accounting Standards Board, or FASB, Accounting Standards Codification Topic 810—Consolidation, or ASC Topic 810, provides guidance on the identification of a VIE (an entity for which control is achieved through means other than voting rights) and the determination of which business enterprise, if any, should consolidate the VIE. An entity is considered a VIE if any of the following applies: (1) the equity investors (if any) lack one or more of the essential characteristics of a controlling financial interest; (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support; or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest.
The Company consolidates VIEs in which it is considered to be the primary beneficiary. The primary beneficiary is defined as the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the VIE’s performance; and (2) the obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE. The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the VIE’s capital structure, contractual terms, nature of the VIE’s operations and purpose and the
Company’s relative exposure to the related risks of the VIE on the date it becomes initially involved in the VIE. The Company reassesses its VIE determination with respect to an entity on an ongoing basis. For the Company's consolidated securitization VIEs, the third party ownership interests are reflected as liabilities in the Company's consolidated balance sheet because the beneficial interests payable to these third parties are legally issued in the form of debt. The Company's presentation of net income attributes earnings to controlling and non-controlling interests.
Cash, Cash Equivalents and Restricted Cash Cash, Cash Equivalents and Restricted Cash: The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company invests its cash in overnight institutional money market funds. As of September 30, 2023 and 2022, the Company's investment in overnight institutional money market funds was $138,344 and $49,725, respectively. The Company's uninvested cash is maintained with high credit quality financial institutions, which are members of the Federal Deposit Insurance Corporation. The Company's cash is held with major financial institutions and may at times exceed federally insured limits. Restricted cash primarily represents cash held in an account to fund additional collateral interests within the Company's collateralized loan obligations.
Loans Receivable Loans Receivable: The Company originates and purchases commercial real estate debt and related instruments generally to be held as long-term investments at amortized cost. Loans that the Company originates or purchases that the Company is unable to hold, or intends to sell or otherwise dispose of, in the foreseeable future are classified as held-for-sale and are carried at the lower of amortized cost or fair value. The Company's held-for-sale securities are subject to the adoption of ASU 2016-13, as discussed below.
Mortgage-backed Securities Mortgage-backed Securities: Mortgage-backed securities are classified as held-to-maturity or available-for-sale or accounted for under the fair value option. The Company determines the appropriate classification of its securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. Mortgage-backed securities are classified as held-to-maturity when the Company intends to, and has the ability to hold until maturity. Held-to-maturity securities are stated at amortized cost on the consolidated balance sheets. The Company’s remaining mortgage-backed securities are classified as either available-for-sale or accounted for under the fair value option and are reported at fair value on the consolidated balance sheets as components of Mortgage-backed securities, at fair value. The Company elected the fair value option for all mortgage-backed securities acquired during the three and nine months ended September 30, 2023. Changes in fair value for mortgage-backed securities accounted for under the fair value option are recorded in the consolidated statements of operations as a component of Net change in unrealized gain (loss) on mortgage-backed securities, fair value option. The Company chose to elect the fair value option in order to simplify the accounting treatment for its investment securities. The fair value option provides an option to elect fair value as an alternative measurement for selected financial instruments. The fair value option may be elected only upon the occurrence of certain specified events, including when the Company enters into an eligible firm commitment, at initial recognition of the financial instrument, as well as upon a business combination or consolidation of a subsidiary. The election is irrevocable unless a new election event occurs. Prior to the three and nine months ended September 30, 2023, all mortgage-backed securities acquired that were not classified as held-to-maturity were classified as available-for-sale, stated at fair value and the changes in fair value are recorded in other comprehensive income. The Company’s held-to-maturity and available-for-sale securities are subject to the adoption of ASU 2016-13, as discussed below.
Credit Losses Credit Losses: ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), or ASU 2016-13, became effective for the Company on January 1, 2023. ASU 2016-13 significantly changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the previous incurred loss model with a current expected credit loss (“CECL”) model for instruments measured at amortized cost. The CECL model applies to the Company's loans receivable, held-for-investment and its mortgage-backed securities held-to-maturity which are carried at amortized cost, including future funding commitments and accrued interest receivable related to those loans and securities. However, as permitted by ASC Topic 326, the Company has elected not to measure an allowance for credit
losses on accrued interest receivable (which is classified separately on its consolidated balance sheets), but rather write off in a timely manner by reversing interest income and/or cease accruing interest that would likely be uncollectible.
CECL requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the macroeconomic environment. Considering the lack of historical company data related to any realized loan losses since its inception, the Company elected to estimate its general CECL reserve by using a probability-weighted analytical model that considers the likelihood of default and loss-given-default for each individual loan. The credit loss model utilizes historical loss rates derived from a third party commercial real estate loan database with historical loan loss data beginning in 1998. The Company provides specific loan-level inputs which include loan-to-value, principal balances, property type, location, coupon, origination year, term, subordination, expected repayment dates, and property net operating income. The Company also considers qualitative and environmental factors, including, but not limited to, macroeconomic forecasts and business conditions and trends, concentration of credit and changes in the level of such concentrations. The reasonable and supportable forecast period is followed by an immediate reversion period back to historical loss rates.
The Company's loans typically include commitments to fund incremental proceeds to its borrowers over the life of the loan, which future funding commitments are also subject to the CECL model. The CECL reserve related to future loan fundings is recorded as a component of Other liabilities on its consolidated balance sheets. This CECL reserve is estimated using the same process outlined above for its outstanding loan balances, and changes in this component of the CECL reserve will similarly impact its consolidated net income.
For both the funded and unfunded portions of its loans, the Company considers its internal risk rating of each loan as the primary credit quality indicator underlying the assessment. FS Real Estate Advisor and Rialto perform a quarterly review of the Company's portfolio of loans. In connection with this review, FS Real Estate Advisor and Rialto assess the risk factors of each loan and assign a risk rating based on a variety of factors, including, without limitation, loan-to-value ratio, or LTV, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. Based on a 5-point scale, the Company's loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:
Loan Risk RatingSummary Description
1
Very Low Risk
2
Low Risk
3
Medium Risk
4
High Risk/Potential for Loss
5
Impaired/Loss Likely: A loan that has a very high risk of realizing a principal loss or has otherwise incurred a principal loss
Impairment is indicated when it is deemed probable that the Company will not be able to collect all amounts due to it pursuant to the contractual terms of the loan. If a loan is determined to be impaired, the Company records the impairment as a specific CECL reserve. For determining a specific CECL reserve, financial instruments are assessed outside of the CECL model on an individual basis. For collateral dependent loans that the Company determines foreclosure of the collateral is probable, the Company measures the expected losses based on the differences between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. For collateral dependent loans where the Company determine foreclosure is not probable, a practical expedient to estimate expected losses is applied using the difference between the collateral’s fair value (less costs to sell the asset if repayment is expected through the sale of the collateral) and the amortized cost basis of the loan. These valuations require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed necessary by FS Real Estate Advisor and Rialto. Actual losses, if any, could ultimately differ from these estimates.
The Company adopted ASU 2016-13 using the modified-retrospective method for all financial assets measured at amortized cost. Prior to its adoption, the Company had no loan loss provisions on its consolidated balance sheets. The Company recorded a cumulative-effect adjustment to the opening retained earnings in its unaudited consolidated statement of changes in equity as of January 1, 2023. The following table details the impact of this adoption:
Impact of ASU 2016-13 Adoption
Assets:
Loans receivable, held-for-investment
Senior loans$35,456 
Mezzanine loans3,963 
CECL reserve on Loans receivable, held-for-investment39,419 
CECL reserve on Mortgage-backed securities held-to-maturity939 
Liabilities:
Other liabilities
CECL reserve on unfunded loan commitments1,163 
Total impact of 2016-13 adoption on retained earnings$41,521 
Separate provisions of ASC Topic 326 apply to the Mortgage-backed securities available-for-sale, which are carried at fair value with unrealized gains and losses reported as a component of Accumulated other comprehensive income (loss). The Company is required to establish an initial credit loss allowance for those available-for-sale securities that are purchased with credit deterioration (“PCD”) by grossing up the amortized cost basis of each security and providing an offsetting credit loss allowance for the difference between expected cash flows and contractual cash flows, both on a present value basis. As of the January 1, 2023 effective date, no such credit loss allowance gross-up was required on available-for-sale debt securities with PCD.
The Company uses a discounted cash flow method to estimate and recognize a credit loss allowance on its available-for-sale securities. The credit loss allowance represents the difference between the security's amortized cost basis and the present value of expected cash flows. The credit loss allowance is limited to the difference between the security's fair value and its amortized cost. Changes in the credit loss allowance are recognized immediately in earnings as a component of (Increase) decrease in current expected credit loss reserve.
Real Estate
Real Estate: In accordance with the guidance for business combinations, the Company determines whether the acquisition of a property qualifies as a business combination, which requires that the assets acquired and liabilities assumed constitute a business. If the property acquired is not a business, the Company accounts for the transaction as an asset acquisition. The guidance for business combinations states that when substantially all the fair value of the gross assets to be acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the asset or set of assets is not a business. The one property acquisition to date was acquired in 2022 and was accounted for as an asset acquisition.
Upon the acquisition of a property, the Company assesses the fair value of acquired tangible and intangible assets (including land, buildings, tenant improvements, “above-market” and “below-market” leases, acquired in-place leases, other identified intangible assets and assumed liabilities) and allocates the purchase price to the acquired assets and assumed liabilities. The Company assesses and considers fair value based on estimated cash flow projections that utilize discount and/or capitalization rates that it deems appropriate, as well as other available market information. Estimates of future cash flows are based on several factors including the historical operating results, known and anticipated trends and market and economic conditions. The Company capitalizes acquisition-related costs associated with asset acquisitions.
The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant. The Company records acquired in-place lease values based on the Company’s evaluation of the specific characteristics of each tenant’s lease. The Company will record acquired above-market and below-market leases at their fair values which represents the present value of the difference between contractual rents of acquired leases and market rents at the time of the acquisition for the remaining lease term, discounted for tenant credit risks. The Company also considers an allocation of purchase price of other acquired intangibles, including acquired in-place leases that may have a customer relationship intangible value, including (but not limited to) the nature and extent of the existing relationship with the tenants, the tenants’ credit quality and expectations of lease renewals. Based on its acquisition to date, the Company’s allocation to customer relationship intangible assets has not been material.
Intangible assets and intangible liabilities are recorded as a component of other assets and other liabilities, respectively, on the Company’s consolidated balance sheets. The amortization of acquired above-market, below-market, and in-place leases is recorded as an adjustment to rental operations, net, on the Company’s unaudited consolidated statements of operations.
The cost of buildings and improvements includes the purchase price of the Company’s properties and any acquisition-related costs, along with any subsequent improvements to such properties. The Company’s investments in real estate are stated at cost and are generally depreciated on a straight-line basis over the estimated useful lives of the assets as follows:
DescriptionDepreciable Life
Building
30 to 42 years
Building and land improvements
2 to 20 years
Furniture, fixtures and equipment
1 to 10 years
Tenant improvementsShorter of estimated useful life or lease term
Lease intangibles Over lease term
The Company’s management reviews its real estate properties for impairment each quarter or when there is an event or change in circumstances that indicates an impaired value. Since the impairment model considers real estate properties to be “long-lived assets to be held and used,” cash flows to determine whether an asset has been impaired are undiscounted. Accordingly, the Company’s strategy of holding properties over the long term directly decreases the likelihood of recording an impairment loss. If the Company’s strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized and such loss could be material to the Company’s results. If the Company determines that an impairment has occurred, the affected assets must be reduced to their fair value.
Fair Value of Financial Instruments
Fair Value of Financial Instruments: Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, or ASC Topic 820, defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date.
ASC Topic 820 also establishes a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring financial instruments. Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument, and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination, as follows:
Level 1: Generally includes only unadjusted quoted prices that are available in active markets for identical financial instruments as of the reporting date.
Level 2: Pricing inputs include quoted prices in active markets for similar instruments, quoted prices in less active or inactive markets for identical or similar instruments where multiple price quotes can be obtained, and other observable inputs, such as interest rates, yield curves, credit risks, and default rates.
Level 3: Pricing inputs are unobservable for the financial instruments and include situations where there is little, if any, market activity for the financial instrument. These inputs require significant judgment or estimation by management or third parties when determining fair value and generally represent anything that does not meet the criteria of Levels 1 and 2.
The estimated value of each asset reported at fair value using Level 3 inputs is determined by an internal committee comprised of members of senior management of FS Real Estate Advisor.
Certain of the Company's assets are reported at fair value either (i) on a recurring basis, as of each quarter-end, or (ii) on a nonrecurring basis, as a result of impairment or other events. The Company generally values its assets recorded at fair value by either (i) discounting expected cash flows based on assumptions regarding the collection of principal and interest and estimated market rates, or (ii) obtaining assessments from third-party dealers. For collateral-dependent loans that are identified as impaired, the Company
measures impairment by comparing FS Real Estate Advisor's estimation of fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. These valuations may require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed necessary by FS Real Estate Advisor and Rialto.
The Company is also required by GAAP to disclose fair value information about financial instruments that are not otherwise reported at fair value in the Company's consolidated balance sheets, to the extent it is practicable to estimate a fair value for those instruments. These disclosure requirements exclude certain financial instruments and all non-financial instruments.
The Company elected the fair value option for initial and subsequent recognition of the assets and liabilities of its consolidated securitization mortgage loans held in securitization trusts and the related CMBS investments. Interest income and interest expense associated with these loans are presented separately on the unaudited consolidated statements of operations.
The Company separately presents the assets and liabilities of its consolidated securitization loans as individual line items on its consolidated balance sheets. The liabilities of its consolidated securitization loans consist solely of obligations to the bondholders of the related trusts, and are thus presented as a single line item entitled “Mortgage obligations issued by securitization trusts.” The assets of its consolidated securitization loans consist principally of loans. These assets in the aggregate are likewise presented as a single line item entitled “Mortgage loans held in securitization trusts.” The residual difference shown on its unaudited consolidated statements of operations in the line item “Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts” represents the Company's beneficial interest in the mortgage loans.
The securitization mortgage loan assets as a whole can only be used to settle the obligations of the consolidated mortgage loans. The assets of the Company's securitization mortgage loans are not individually accessible by the bondholders, which creates inherent limitations from a valuation perspective.
The securitization mortgage loans in which the Company invests are “static”; that is, no reinvestment is permitted, and there is no active management of the underlying assets. In determining the fair value of the assets and liabilities of the securitization mortgage loans, the Company maximizes the use of observable inputs over unobservable inputs.
Liabilities of the consolidated mortgage obligations: The Company's consolidated mortgage obligations generally represent bonds that are not owned by the Company directly. The majority of these are either traded in the marketplace or can be analogized to similar securities that are traded in the marketplace. For these liabilities, pricing is considered to be Level 2, where the valuation is based upon quoted prices for similar instruments traded in active markets. The Company generally utilizes third party pricing service providers for valuing these liabilities. In order to determine whether to utilize the valuations provided by third parties, the Company conducts an ongoing evaluation of their valuation methodologies and processes, as well as a review of the individual valuations themselves. In evaluating third party pricing for reasonableness, the Company considers a variety of factors, including market transaction information for the particular bond, market transaction information for bonds within the same trust, market transaction information for similar bonds, the bond’s ratings and the bond’s subordination levels.
For the minority portion of the Company's consolidated mortgage obligations which consist of unrated or non-investment grade bonds that are not owned by the Company directly, pricing may be either Level 2 or Level 3. If independent third party pricing similar to that noted above is available, the Company considers the valuation to be Level 2. If such third party pricing is not available, the valuation is generated from model-based techniques that use significant unobservable assumptions, and the Company considers the valuation to be Level 3. For mortgage obligations classified as Level 3, valuation is determined based on discounted expected future cash flows which take into consideration expected duration and yields based on market transaction information, ratings, subordination levels, vintage and current market spread. Mortgage obligations may shift between Level 2 and Level 3 of the fair value hierarchy if the significant fair value inputs used to price the mortgage obligations become or cease to be observable.
Assets of the consolidated mortgage loans: The individual assets of a mortgage loan are inherently incapable of precise measurement given their illiquid nature and the limitations on available information related to these assets. Because the Company's methodology for valuing these assets does not value the individual assets of a mortgage loan, but rather uses the value of the mortgage obligations as an indicator of the fair value of mortgage loan assets as a whole, the Company has determined that its valuations of mortgage loan assets in their entirety should be classified in Level 3 of the fair value hierarchy.
The following methods and assumptions are used to estimate the fair value of other classes of financial instruments, for which it is practicable to estimate that value:
Cash and cash equivalents: The carrying amount of cash on deposit and in money market funds approximates fair value.
Restricted cash: The carrying amount of restricted cash approximates fair value.
Loans receivable held-for-investment, net: The fair values for these loans were estimated by FS Real Estate Advisor based on a discounted cash flow methodology taking into consideration factors, including capitalization rates, discount rates, leasing, occupancy rates, availability and cost of financing, exit plan, sponsorship, actions of other lenders, and indications of market value from other market participants.
Mortgage-backed securities, at fair value : The fair values for these investments were based on indicative deal quotes.
Mortgage-backed securities held-to-maturity: The fair values for these investments were estimated by FS Real Estate Advisor based on a discounted cash flow methodology pursuant to which a discount rate or market yield is used to discount the estimated future cash flows expected to be received from the underlying investment, which include both future principal and interest payments. Significant increases or decreases in the discount rate or market yield would result in a decrease or increase in the fair value measurement.
Collateralized loan obligations, repurchase agreements payable, credit facilities payable, and mortgage note payable: The fair values for these instruments were estimated based on the rate at which similar credit facilities would have currently been priced.
Deferred Financing Costs Deferred Financing Costs: Deferred financing costs include issuance and other costs related to the Company’s debt obligations. The deferred financing costs related to the Company’s collateralized loan obligations, repurchase agreements, and mortgage note payable, are recorded as a reduction in the net book value of the related liability on the Company's consolidated balance sheets. Deferred financing costs related to the Company’s revolving credit facilities and facilities that are undrawn as of the reporting date are recorded as an asset on the Company’s consolidated balance sheets. These costs are amortized as interest expense using the straight-line method over the term of the related obligation, which approximates the effective interest method.
Revenue Recognition
Revenue Recognition: Security transactions are accounted for on the trade date. The Company records interest income from its loans receivable portfolio on an accrual basis to the extent that the Company expects to collect such amounts. The Company does not accrue as a receivable interest or dividends on loans and securities if there is reason to doubt the collectability of such income. Discounts or premiums associated with the investment securities are amortized or accreted into interest income as a yield adjustment on the effective interest method, based on expected cash flows through the expected maturity date of the investment. On at least a quarterly basis, the Company reviews and, if appropriate, makes adjustments to its cash flow projections. The Company records dividend income on the ex-dividend date. Any loan origination fees to which the Company is entitled, loan exit fees, original issue discount and market discount are capitalized and such amounts are amortized as interest income over the respective term of the investment. Upon the prepayment of a loan or security, any unamortized loan origination fees to which the Company is entitled are recorded as fee income. The Company records prepayment premiums on loans and securities as fee income when it receives such amounts.
Loans are considered past due when payments are not made in accordance with the contractual terms. The Company does not accrue as receivable interest on loans if it is not probable that such income will be collected. Unless the loan is both well secured and in the process of collection, loans are placed on non-accrual status when principal or interest is 120 days or more past due or when repayment of interest and principal is, in our judgment, in doubt. Interest payments received on non-accrual loans are generally recognized as interest income on a cash basis. If a full recovery of principal is doubtful, the cost recovery method is applied whereby any cash received is applied to the outstanding principal balance of the loan. Recognition of interest income on non-performing loans on an accrual basis is resumed when it is probable that the Company will be able to collect amounts due according to the contractual terms. As of September 30, 2023 and December 31, 2022, there were no loans with accrued interest past due 30 days or more, respectively.
Offering Costs Offering Costs: Offering costs primarily include, among other things, marketing expenses and printing, legal and due diligence fees and other costs pertaining to the Company’s continuous public offering of shares of its common stock, including the preparation of the registration statement and salaries and direct expenses of FS Real Estate Advisor’s personnel, employees of its respective affiliates and others while engaged in such activities. The Company may reimburse FS Real Estate Advisor and Rialto for any offering expenses that they incurred on the Company's behalf, up to a cap of 0.75% of gross proceeds raised after such time.
Income Taxes Income Taxes: The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the Code, commencing with its taxable year ended December 31, 2017. In order to maintain its status as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to its stockholders. As a REIT, the Company generally will not be subject to federal income tax on income that it distributes to stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions.
Uncertainty in Income Taxes Uncertainty in Income Taxes: The Company evaluates each of its tax positions to determine if they meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax benefits or liabilities in the unaudited consolidated financial statements. Recognition of a tax benefit or liability with respect to an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. The Company recognizes interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in the unaudited consolidated statements of operations.
Stockholder Servicing Fees Stockholder Servicing Fees: The Company follows the guidance in Accounting Standards Codification Topic 405, Liabilities, when accounting for stockholder servicing fees. The Company will pay stockholder servicing fees over time on its shares of Class T, Class S, Class D and Class M common stock as described in Note 7. The Company records stockholder servicing fees as a reduction to additional paid-in capital and records the related liability in an amount equal to its best estimate of the fees payable in relation to the shares of Class T, Class S, Class D and Class M common stock on the date such shares are issued. The liability will be reduced over time, as the fees are paid to the dealer manager, or adjusted if the fees are no longer payable.
Earnings Per Share Earnings Per Share: The restricted stock units grant Class I shares issued to FS Real Estate Advisor and Rialto for payment of the administrative services fee are considered to be participating securities. The impact of these restricted stock units on basic and diluted earnings per common share ("EPS") has been calculated using the two-class method whereby earnings are allocated to the restricted stock units based on dividends declared and the restricted stock units' participation rights in undistributed earnings.
Derivative Instruments
Derivative Instruments: The Company uses interest rate caps to manage risks from fluctuations in interest rates. The Company has not designated any of these contracts as fair value or cash flow hedges for accounting purposes. The Company records its derivatives on its consolidated balance sheets at fair value and such amounts are included in Other assets. Any changes in the fair value of these derivatives are recorded in earnings.
The valuation of the Company's interest rate caps is determined based on assumptions that management believes market participants would use in pricing, using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivative. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. However, as of September 30, 2023, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

v3.23.3
Summary of Significant Accounting Policies (Tables)
9 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]  
Schedule of Cash and Cash Equivalents
The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Company’s unaudited consolidated balance sheets to the total amount shown in the Company’s unaudited consolidated statements of cash flows:
September 30,
20232022
Cash and cash equivalents$166,940 $147,321 
Restricted cash47,935 26,121 
Total cash, cash equivalents and restricted cash$214,875 $173,442 
Schedule of Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Company’s unaudited consolidated balance sheets to the total amount shown in the Company’s unaudited consolidated statements of cash flows:
September 30,
20232022
Cash and cash equivalents$166,940 $147,321 
Restricted cash47,935 26,121 
Total cash, cash equivalents and restricted cash$214,875 $173,442 
Summary of Internal Risk Ratings Based on a 5-point scale, the Company's loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:
Loan Risk RatingSummary Description
1
Very Low Risk
2
Low Risk
3
Medium Risk
4
High Risk/Potential for Loss
5
Impaired/Loss Likely: A loan that has a very high risk of realizing a principal loss or has otherwise incurred a principal loss
The following table allocates the net book value of the Company's loans receivable, held-for-investment portfolio based on the Company's internal risk ratings:
September 30, 2023 (Unaudited)December 31, 2022
Risk RatingNumber of LoansNet Book ValuePercentageNumber of LoansNet Book ValuePercentage
1— $— — — $— — 
2— — — — — — 
3132 7,293,831 95 %142 7,350,315 100 %
410 407,584 %— — — 
536,487 — %— — — 
Loans receivable at end of period143 7,737,902 100 %142 7,350,315 100 %
CECL reserve(72,270)— 
Loans receivable, net, at end of period$7,665,632 $7,350,315 
The Company's primary credit quality indicator is its risk ratings, which are further discussed in Note 2. The following table presents the net book value of its loans receivable, held-for-investment portfolio as of September 30, 2023 by year of origination and risk rating:
Risk Rating
Net Book Value of Loans Receivable by Year of Origination
September 30, 2023 (Unaudited)
20232022202120202019PriorTotal
1$— $— $— $— $— $— $— 
2— — — — — — — 
3639,009 3,758,801 2,704,837 84,303 65,431 41,450 7,293,831 
4— 324,836 49,667 17,669 15,412 — 407,584 
5— — 36,487 — — — 36,487 
Loans receivable$639,009 $4,083,637 $2,790,991 $101,972 $80,843 $41,450 $7,737,902 
CECL reserve(72,270)
Loans receivable, net$7,665,632 
Schedule of Impact of ASU 2016-13 Adoption The following table details the impact of this adoption:
Impact of ASU 2016-13 Adoption
Assets:
Loans receivable, held-for-investment
Senior loans$35,456 
Mezzanine loans3,963 
CECL reserve on Loans receivable, held-for-investment39,419 
CECL reserve on Mortgage-backed securities held-to-maturity939 
Liabilities:
Other liabilities
CECL reserve on unfunded loan commitments1,163 
Total impact of 2016-13 adoption on retained earnings$41,521 
Summary of Useful Lives of Investments in Real Estate The Company’s investments in real estate are stated at cost and are generally depreciated on a straight-line basis over the estimated useful lives of the assets as follows:
DescriptionDepreciable Life
Building
30 to 42 years
Building and land improvements
2 to 20 years
Furniture, fixtures and equipment
1 to 10 years
Tenant improvementsShorter of estimated useful life or lease term
Lease intangibles Over lease term

v3.23.3
Loans Receivable, net (Tables)
9 Months Ended
Sep. 30, 2023
Receivables [Abstract]  
Summary of Loans Receivable Portfolio
The following table details overall statistics for the Company's loans receivable portfolio as of September 30, 2023 and December 31, 2022:
September 30, 2023 (Unaudited)December 31, 2022
Number of loans143 142 
Principal balance$7,735,561 $7,350,271 
Net book value$7,665,632 $7,350,315 
Unfunded loan commitments(1)
$456,666 $574,510 
Weighted-average cash coupon(2)(3)
+3.90%+3.83 %
Weighted-average all-in yield(2)(3)
+3.97%+3.90 %
Weighted-average maximum maturity (years)(4)
3.34.0
_________________________
(1)    The Company may be required to provide funding when requested by the borrowers in accordance with the terms of the underlying agreements.
(2)    The Company's floating rate loans are expressed as a spread over the relevant benchmark rates, which include the Secured Overnight Financing Rate, or SOFR. In addition to cash coupon, all-in yield includes accretion of discount (amortization of premium) and accrual of exit fees.
(3)    As of September 30, 2023, the one-month SOFR rate was 5.32%. As of December 31, 2022, the one-month LIBOR rate was 4.39% and the one-month SOFR rate was 4.36%.
(4)    Maximum maturity assumes all extension options are exercised by the borrowers; however, loans may be repaid prior to such date.
For the nine months ended September 30, 2023 and 2022, the activity in the Company's loan portfolio, was as follows:
For the Nine Months Ended September 30,
20232022
Loans receivable at beginning of period$7,350,315 $3,841,868 
Loan fundings1,014,971 3,731,304 
Loan repayments(631,692)(483,832)
Amortization of deferred fees on loans5,159 2,973 
Exit and extension fees received on loans receivable(851)(472)
Loans receivable at end of period7,737,902 7,091,841 
CECL reserve (72,270)— 
Loans receivable, net, at end of period$7,665,632 $7,091,841 
The following tables detail the property type and geographic location of the properties securing the loans in the Company's loans receivable, held-for-investment portfolio as of September 30, 2023 and December 31, 2022:
September 30, 2023 (Unaudited)December 31, 2022
Property TypeNet Book ValuePercentageNet Book ValuePercentage
Multifamily$4,752,761 61 %$4,439,830 61 %
Hospitality1,025,990 13 %792,305 11 %
Office678,392 %755,797 10 %
Industrial573,407 %369,551 %
Retail268,112 %424,374 %
Self Storage200,490 %317,861 %
Various142,919 %156,031 %
Mixed Use95,831 %94,566 %
Loans receivable at end of period7,737,902 100 %7,350,315 100 %
CECL reserve(72,270)— 
Loans receivable, net, at end of period$7,665,632 $7,350,315 
September 30, 2023 (Unaudited)December 31, 2022
Geographic Location(1)
Net Book ValuePercentageNet Book ValuePercentage
South$3,753,978 49 %$3,719,093 51 %
West1,546,279 20 %1,487,391 20 %
Northeast1,430,235 18 %1,326,408 18 %
Various688,390 %507,105 %
Midwest319,020 %310,318 %
Loans receivable at end of period7,737,902 100 %7,350,315 100 %
CECL reserve(72,270)— 
Loans receivable, net, at end of period$7,665,632 $7,350,315 
__________________________
(1)    As defined by the United States Department of Commerce, Bureau of the Census.
Summary of Loans by Year of Origination and Risk Rating Based on a 5-point scale, the Company's loans are rated "1" through "5," from less risk to greater risk, which ratings are defined as follows:
Loan Risk RatingSummary Description
1
Very Low Risk
2
Low Risk
3
Medium Risk
4
High Risk/Potential for Loss
5
Impaired/Loss Likely: A loan that has a very high risk of realizing a principal loss or has otherwise incurred a principal loss
The following table allocates the net book value of the Company's loans receivable, held-for-investment portfolio based on the Company's internal risk ratings:
September 30, 2023 (Unaudited)December 31, 2022
Risk RatingNumber of LoansNet Book ValuePercentageNumber of LoansNet Book ValuePercentage
1— $— — — $— — 
2— — — — — — 
3132 7,293,831 95 %142 7,350,315 100 %
410 407,584 %— — — 
536,487 — %— — — 
Loans receivable at end of period143 7,737,902 100 %142 7,350,315 100 %
CECL reserve(72,270)— 
Loans receivable, net, at end of period$7,665,632 $7,350,315 
The Company's primary credit quality indicator is its risk ratings, which are further discussed in Note 2. The following table presents the net book value of its loans receivable, held-for-investment portfolio as of September 30, 2023 by year of origination and risk rating:
Risk Rating
Net Book Value of Loans Receivable by Year of Origination
September 30, 2023 (Unaudited)
20232022202120202019PriorTotal
1$— $— $— $— $— $— $— 
2— — — — — — — 
3639,009 3,758,801 2,704,837 84,303 65,431 41,450 7,293,831 
4— 324,836 49,667 17,669 15,412 — 407,584 
5— — 36,487 — — — 36,487 
Loans receivable$639,009 $4,083,637 $2,790,991 $101,972 $80,843 $41,450 $7,737,902 
CECL reserve(72,270)
Loans receivable, net$7,665,632 
Summary of Allowance for Credit Loss on Financing Receivable
The following table provides details on the changes in CECL reserve for funded loans by investment pool:
Senior LoansMezzanine LoansTotal
CECL Reserve as of December 31, 2022$— $— $— 
CECL reserve recorded on January 1, 202335,456 3,963 39,419 
Increase (Decrease) in general CECL reserve1,224 378 1,602 
CECL reserve as of March 31, 2023$36,680 $4,341 $41,021 
Increase (Decrease) in general CECL reserve29,456 1,162 30,618 
Increase (Decrease) in specific CECL reserve2,967 — 2,967 
CECL reserve as of June 30, 2023$69,103 $5,503 $74,606 
Increase (Decrease) in general CECL reserve(2,291)(45)(2,336)
Increase (Decrease) in specific CECL reserve— — — 
CECL reserve as of September 30, 2023
$66,812 $5,458 $72,270 
The following table provides details on the changes in CECL reserve for unfunded loan commitments by investment pool:
Unfunded Commitments CECL Reserve
September 30, 2023 (Unaudited)
Senior LoansMezzanine LoansTotal
Unfunded Loan Commitments
CECL Reserve as of December 31, 2022$— $— $— 
CECL reserve recorded on January 1, 20231,129 34 1,163 
Increase (Decrease) in CECL reserve(33)(32)
CECL reserve as of March 31, 2023$1,096 $35 $1,131 
Increase (Decrease) in CECL reserve638 (3)635 
CECL reserve as of June 30, 2023$1,734 $32 $1,766 
Increase (Decrease) in CECL reserve(122)(8)(130)
CECL reserve as of September 30, 2023
$1,612 $24 $1,636 

v3.23.3
Mortgage Backed Securities (Tables)
9 Months Ended
Sep. 30, 2023
Investments, Debt and Equity Securities [Abstract]  
Schedule of Available-for-Sale Debt Securities
The table below summarizes various attributes of the Company's investments in CMBS reported at fair value as of September 30, 2023 and December 31, 2022, respectively.
Gross UnrealizedWeighted Average
Outstanding Face AmountAmortized Cost BasisAllowance for Credit LossesGainsLossesFair ValueCouponRemaining Duration (years)
September 30, 2023 (Unaudited)
CMBS, available-for-sale$172,392 $169,739 $(9,674)$96 $(8,226)$151,935 
10.06%(1)
14.7
CMBS, fair value option$75,830 $72,835 $— $406 $(81)$73,160 
7.30%(1)
2.8
December 31, 2022
CMBS, available-for-sale$173,207 $171,369 $— $45 $(11,950)$159,464 
9.18%(2)
12.7
__________________________
(1)    Calculated using the one-month SOFR rate of 5.32% as of September 30, 2023.
(2)    Calculated using the one-month LIBOR rate of 4.39% and the one-month SOFR rate of 4.36% as of December 31, 2022.
Schedule of Debt Securities Under Fair Value Option
The table below summarizes various attributes of the Company's investments in CMBS reported at fair value as of September 30, 2023 and December 31, 2022, respectively.
Gross UnrealizedWeighted Average
Outstanding Face AmountAmortized Cost BasisAllowance for Credit LossesGainsLossesFair ValueCouponRemaining Duration (years)
September 30, 2023 (Unaudited)
CMBS, available-for-sale$172,392 $169,739 $(9,674)$96 $(8,226)$151,935 
10.06%(1)
14.7
CMBS, fair value option$75,830 $72,835 $— $406 $(81)$73,160 
7.30%(1)
2.8
December 31, 2022
CMBS, available-for-sale$173,207 $171,369 $— $45 $(11,950)$159,464 
9.18%(2)
12.7
__________________________
(1)    Calculated using the one-month SOFR rate of 5.32% as of September 30, 2023.
(2)    Calculated using the one-month LIBOR rate of 4.39% and the one-month SOFR rate of 4.36% as of December 31, 2022.
Schedule of Recognize an Allowance for Its Available-for Sale Securities
The Company uses a discounted cash flow method to estimate and recognize an allowance for its available-for sale securities. The following table provides details on the changes in allowance for credit losses for available-for sale securities:
Nine Months Ended September 30, 2023
Allowance for credit losses at beginning of period$— 
Additions on securities for which credit losses were not previously recorded— 
(Increase) decrease on securities with previously recorded credit losses— 
Allowance for credit losses as of March 31, 2023— 
Additions on securities for which credit losses were not previously recorded(6,992)
(Increase) decrease on securities with previously recorded credit losses— 
Allowance for credit losses as of June 30, 2023(6,992)
Additions on securities for which credit losses were not previously recorded— 
(Increase) decrease on securities with previously recorded credit losses(2,682)
Allowance for credit losses as of September 30, 2023$(9,674)
Schedule of Available-for-sale an Unrealized Loss Position
The following table presents the gross unrealized losses and estimated fair value of any available-for-sale securities for which an allowance for credit losses has not been recorded that were in an unrealized loss position as of September 30, 2023 and December 31, 2022, respectively.
Estimated Fair ValueUnrealized Losses
Securities with a loss less than 12 monthsSecurities with a loss greater than 12 monthsSecurities with a loss less than 12 monthsSecurities with a loss greater than 12 months
September 30, 2023 (Unaudited)
CMBS, available-for-sale$175,428 $97,174 $(8,312)$(8,183)
December 31, 2022
CMBS, available-for-sale$150,230 $756 $(11,889)$(61)
Summary of Investment Held-to-maturity CMBS
The table below summarizes various attributes of the Company's investments in held-to-maturity CMBS as of September 30, 2023 and December 31, 2022, respectively.
Amortized Cost BasisCredit Loss AllowanceNet Carrying AmountGross Unrecognized Holding GainsGross Unrecognized Holding LossesFair Value
September 30, 2023 (Unaudited)
CMBS, held-to-maturity$74,614 $(71)$74,543 $— $(7,340)$67,203 
December 31, 2022
CMBS, held-to-maturity$68,559 $— $68,559 $— $— $68,559 
Schedule of Activity in CECL Reserve for Held-to Maturity CMBS
The following table provides details on the changes in CECL reserve for held-to-maturity CMBS:
September 30, 2023 (Unaudited)
CMBS, held-to-maturity
CECL Reserve as of December 31, 2022$— 
CECL reserve recorded on January 1, 2023939 
Increase (Decrease) in CECL reserve(283)
CECL reserve as of March 31, 2023$656 
Increase (Decrease) in CECL reserve(268)
CECL reserve as of June 30, 2023$388 
Increase (Decrease) in CECL reserve(317)
CECL reserve as of September 30, 2023
$71 
Summary of Maturities of Investment Held-to-maturity CMBS
The table below summarizes the maturities of the Company's investments in held-to-maturity CMBS as of September 30, 2023 and December 31, 2022, respectively:
TotalLess than 1 year1-3 years3-5 yearsMore than 5 years
September 30, 2023 (Unaudited)
CMBS, held-to-maturity$74,614 $— $44,492 $30,122 $— 
December 31, 2022
CMBS, held-to-maturity$68,559 $— $38,435 $30,124 $— 

v3.23.3
Real Estate (Tables)
9 Months Ended
Sep. 30, 2023
Real Estate [Abstract]  
Schedule of Real Estate Investments Investment in real estate, net, consisted of the following as of September 30, 2023 and December 31, 2022:
September 30, 2023 (Unaudited)
December 31, 2022
Building and building improvements$120,527 $120,527 
Land and land improvements39,186 39,186 
Furniture, fixtures and equipment1,064 1,064 
In-place lease intangibles33,530 33,402 
Total194,307 194,179 
Accumulated depreciation and amortization(9,131)(3,630)
Real estate, net$185,176 $190,549 
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense
The following table details the Company's future amortization of intangible assets for each of the next five years and thereafter:

Amortization
2023 (remaining)$912 
20243,814 
20253,814 
20263,806 
20273,803 
Thereafter12,134 
Total$28,283 
Schedule of Rental Operations
The components of rental operations, net on the Company's unaudited consolidated statements of operations consisted of the following:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Rental income$5,297 $3,569 $14,985 $3,569 
Less: depreciation and amortization(1,835)(1,839)(5,501)(1,839)
Less: cost of rental operations(1)
(3,696)(2,798)(11,415)(2,798)
Rental operations, net$(234)$(1,068)$(1,931)$(1,068)
________________
(1)    Cost of rental operations during the three and nine months ended September 30, 2023, includes $2,365 and $6,718, respectively, of interest expense related to the mortgage note payable.

v3.23.3
Financing Arrangements (Tables)
9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
Summary of Information of Outstanding Financing Arrangement
The following tables present summary information with respect to the Company's outstanding financing arrangements as of September 30, 2023 and December 31, 2022.
As of September 30, 2023 (Unaudited)
Arrangement
Weighted Average Spread(2)
Amount Outstanding(1)
Amount AvailableMaturity DateCarrying Amount of CollateralFair Value of Collateral
Collateralized Loan Obligations
2019-FL1 Notes
 +1.66%(2)
$194,223 $— December 18, 2036$292,227 $290,996 
2021-FL2 Notes
 +1.64%(2)
640,056 — May 5, 2038768,945 761,177 
2021-FL3 Notes
 +1.61%(2)
928,483 — November 4, 20361,102,550 1,094,349 
2022-FL4 Notes
 +2.21%(5)
837,662 — January 31, 20391,080,659 1,068,520 
2022-FL5 Notes
 +2.78%(5)
560,224 — June 17, 2037689,919 680,370 
2022-FL6 Notes
 +2.84%(5)
552,100 — August 19, 2037749,880 742,077 
2022-FL7 Notes
 +3.18%(5)
631,042 — October 17, 2039814,659 806,603 
4,343,790 — 5,498,839 5,444,092 
Repurchase Agreements
WF-1 Facility
 +1.88%(3)
48,870 551,130 August 30, 202462,596 61,921 
GS-1 Facility
 +2.83%(4)
18,781 431,219 January 26, 202584,448 83,981 
RBC Facility
+1.30%
29,646 — N/A— — 
BB-1 Facility
 +1.96%(5)
11,474 688,526 February 22, 202414,801 14,690 
MS-1 Facility
 +2.65%(6)
37,537 112,463 October 13, 202589,990 88,855 
NTX-1 Facility
(3)
— 250,000 November 10, 2024— — 
BMO-1 Facility
 +2.00%(3)
80,000 — March 1, 2024276,477 276,259 
Lucid Facility
 +1.15%(3)
15,867 — N/A— — 
242,175 2,033,338 528,312 525,706 
Revolving Credit Facility
MM-1 Facility
 +2.14%(6)(7)
850,000 150,000 September 20, 20291,148,927 1,140,393 
Barclays Facility
(8)
— 310,000 August 1, 2025— — 
850,000 460,000 1,148,927 1,140,393 
Mortgage Loan
Natixis Loan
+2.15%(6)
124,700 — July 9, 2025156,364 184,672 
Total$5,560,665 $2,493,338 $7,332,442 $7,294,863 
________________
(1)    The amount outstanding under the facilities approximates their fair value.
(2)    The rates are expressed over the relevant floating benchmark rates, which include Term SOFR, and SOFR Average (compounded average of SOFR over a rolling 30-day period).
(3)    Benchmark rate is subject to a 0.00% floor. SOFR benchmark rate is selected with respect to a transaction as set forth in the related transaction confirmation for the underlying transaction.
(4)    Term SOFR is subject to a 0.00% floor. GS-1 and Goldman Sachs may mutually agree on rates outside this range or a different floor on an asset by asset basis.
(5)    Term SOFR or SOFR Average (compounded average of SOFR over a rolling 30-day period), subject to a 0.00% floor.
(6)     Term SOFR is subject to a 0.00% floor.
(7)    The rate applicable under the MM-1 Facility is subject to a credit spread adjustment of 0.11%, which was included when the benchmark transitioned from USD LIBOR to Term SOFR.
(8)    Borrowings under the Barclays Facility bear interest, at the Company's election, at either a base rate plus a spread of 1.25% per annum or one-, three- or six-month Term SOFR plus a spread of 2.25% per annum and a credit spread adjustment of 0.10% per annum.

As of December 31, 2022
Arrangement
Weighted Average Interest Rate(2)
Amount Outstanding(1)
Amount AvailableMaturity DateCarrying Amount of CollateralFair Value of Collateral
Collateralized Loan Obligations
2019-FL1 Notes
 +1.55%(3)
$196,785 $— December 18, 2036$294,751 $295,040 
2021-FL2 Notes
 +1.53%(3)
646,935 — May 5, 2038782,767 783,381 
2021-FL3 Notes
 +1.51%(3)
928,483 — November 4, 20361,133,769 1,135,195 
2022-FL4 Notes
 +2.21%(6)
837,662 — January 31, 20391,081,159 1,080,953 
2022-FL5 Notes
 +3.05%(6)
570,112 — June 17, 2037689,885 689,246 
2022-FL6 Notes
 +2.96%(6)
566,250 — August 19, 2037749,837 749,502 
2022-FL7 Notes
 +3.35%(6)
637,592 — October 17, 2039814,611 814,542 
4,383,819 — 5,546,779 5,547,859 
Repurchase Agreements
WF-1 Facility
 +2.04%(4)
375,381 224,619 August 30, 2024481,146 480,371 
GS-1 Facility
 +2.40%(5)
34,519 315,481 January 26, 202348,276 47,846 
RBC Facility
1.39%
55,934 — N/A85,707 79,274 
BB-1 Facility
 +2.14%(6)
186,139 513,861 February 22, 2024236,783 236,462 
MS-1 Facility
 +2.86%(7)
108,263 41,737 October 13, 2025141,312 140,787 
NTX-1 Facility
(4)
— 187,500 November 10, 2024— — 
760,236 1,283,198 993,224 984,740 
Revolving Credit Facilities
MM-1 Facility
 +2.14%(7)(8)
310,982 689,018 September 20, 2029439,431 439,051 
Barclays Facility
(9)
— 310,000 August 1, 2025— — 
310,982 999,018 439,431 439,051 
Mortgage Loan
Natixis Loan
 +2.15%(7)
124,700 2,000 July 9, 2025158,963 192,039 
Total$5,579,737 $2,284,216 $7,138,397 $7,163,689 
_______________________
(1)    The amount outstanding under the facilities approximates their fair value.
(2)    The rates are expressed over the relevant floating benchmark rates, which include USD LIBOR, Term SOFR, and SOFR Average (compounded average of SOFR over a rolling 30-day period).
(3)    USD LIBOR is subject to a 0.00% floor.
(4)    Benchmark rate is subject to a 0.00% floor. LIBOR or SOFR benchmark rate is selected with respect to a transaction as set forth in the related transaction confirmation for the underlying transaction.
(5)    Term SOFR is subject to a 0.00% floor. GS-1 and Goldman Sachs may mutually agree on rates outside this range or a different floor on an asset by asset basis.
(6)    USD LIBOR, Term SOFR or SOFR Average (compounded average of SOFR over a rolling 30-day period), subject to a 0.00% floor.
(7)     Term SOFR is subject to a 0.00% floor.
(8)    The rate applicable under the MM-1 Facility is subject to a credit spread adjustment of 0.11%, which was included when the benchmark transitioned from USD LIBOR to Term SOFR.
(9)    Borrowings under the Barclays Facility bear interest, at the Company's election, at either a base rate plus a spread of 1.25% per annum or one-, three- or six-month Term SOFR plus a spread of 2.25% per annum and a credit spread adjustment of 0.10% per annum.
Summary of Repayment for Secured Financings Outstanding The following table sets forth the Company's repayment schedule for secured financings outstanding as of September 30, 2023 based on the maturity date of each financing arrangement:
Collateralized Loan Obligations(1)
Repurchase AgreementsRevolving Credit FacilityMortgage LoanTotal
2023$— $— $— $— $— 
202412,597 140,344 — — 152,941 
2025103,096 56,318 — 124,700 284,114 
2026556,744 — — — 556,744 
Thereafter3,671,353 45,513 850,000 — 4,566,866 
Total$4,343,790 $242,175 $850,000 $124,700 $5,560,665 
_______________________
(1)     The allocation of repayments under the Company's collateralized loan obligations is based on the maturity date of each agreement, or the maximum maturity date assuming all extension options are exercised by the borrower if the reinvestment period has expired.
Summary of Number of Loans and the Principal Balance The following table outlines the number of loans, including partial loans, and the principal balance of the collateralized pool of interests for each CLO.
As of September 30, 2023 (Unaudited)
Collateral AssetsTotal CountPrincipal Balance
2019-FL1 14$292,791 
2021-FL2 26769,064 
2021-FL3 301,102,723 
2022-FL4 251,080,841 
2022-FL5 25690,000 
2022-FL6 24750,000 
2022-FL7 21814,814 
Total165 $5,500,233 
Summary of Net Book Value of Debt Instrument The following table outlines the net book value of the Company's CLOs on its consolidated balance sheets.
September 30,
20232022
Face value$4,343,790 $3,772,476 
Unamortized deferred financing costs(27,733)(30,649)
Unamortized discount(9,785)(7,887)
Net book value$4,306,272 $3,733,940 
The following table outlines the net book value of the Company's repurchase facilities on its consolidated balance sheets.
September 30,
20232022
Face value$242,175 $883,580 
Unamortized deferred financing costs(2,718)(2,976)
Net book value$239,457 $880,604 
The following table details the net book value of the Company's revolving credit facilities on its consolidated balance sheets.
September 30,
20232022
Face value$850,000 $704,105 
Unamortized deferred financing costs(10,493)(8,383)
Net book value$839,507 $695,722 
The following table details the net book value of the Company's mortgage loan on its consolidated balance sheets.
September 30,
20232022
Face value$124,700 $124,700 
Unamortized deferred financing costs(1,220)(2,132)
Net book value$123,480 $122,568 

v3.23.3
Related Party Transactions (Tables)
9 Months Ended
Sep. 30, 2023
Related Party Transactions [Abstract]  
Schedule of Related Party Transactions
The following table describes the fees and expenses accrued under the advisory agreement and sub-advisory agreement during the nine months ended September 30, 2023 and 2022:
Three Months Ended September 30,Nine Months Ended September 30,
Related PartySource AgreementDescription2023202220232022
FS Real Estate AdvisorAdvisory Agreement
Base Management Fee(1)
$9,092 $6,629 $25,514 $15,825 
FS Real Estate AdvisorAdvisory Agreement
Performance Fee(2)
$6,354 $3,904 $17,742 $4,056 
FS Real Estate AdvisorAdvisory Agreement
Administrative Services Expenses(3)
$— $3,434 $— $8,658 
FS Real Estate AdvisorAdvisory Agreement
Administrative Services Fee(4)
$7,366 $— $20,682 $— 
FS Real Estate AdvisorAdvisory AgreementCapital Markets Fees$— $— $— $2,000 
Rialto Capital ManagementSub-Advisory Agreement
Valuation Services Fees(5)
$108 $106 $329 $299 
_______________________
(1)    During the nine months ended September 30, 2023, FS Real Estate Advisor received $23,949, in cash as payment for management fees. During the nine months ended September 2022, FS Real Estate Advisor received $2,007 in cash and $11,409 of performance contingent rights were issued as payment for management fees. As of September 30, 2023 and 2022, there were $9,088 and $0 base management fees payable to FS Real Estate Advisor.
(2)    During the nine months ended September 30, 2023 and 2022, $16,160 and $557, respectively, in performance fees were paid to FS Real Estate Advisor. As of September 30, 2023, there were $6,354 performance fees payable to FS Real Estate Advisor.
(3)    During the nine months ended September 30, 2022, $7,978, of the accrued administrative services expenses related to the allocation of costs of administrative personnel for services rendered to the Company by FS Real Estate Advisor and Rialto and the remainder related to other reimbursable expenses. These amounts are recorded as general and administrative expenses on the accompanying unaudited consolidated statements of operations.
(4)    On December 1, 2022, the Company's method for reimbursing administrative services expense was replaced with an administrative services fee equal to 1.0% of the Company’s net asset value per annum attributable to all shares of common stock, before giving effect to any accruals for the base management fee, the performance fee, the administrative services fee, the stockholder servicing fee or any distributions.
(5)     During the nine months ended September 30, 2023 and 2022, $214 and $193, respectively, in valuation fees were paid by the Company to Rialto.
The following table reflects the amounts paid or waived by FS Real Estate Advisor and Rialto under the expense limitation agreement and the expiration date for future possible reimbursements by the Company:
For the Three Months EndedAmount of Expense ReimbursementRecoupable AmountRecoupment paid or payable to sponsorExpired AmountRecoupment eligibility expiration
September 30, 2023$— $753 $— $— September 30, 2025
June 30, 202361 — 61 — June 30, 2025
March 31, 202387 — 87 — March 31, 2025
December 31, 2022605 — 605 — December 31, 2024
$753 $753 $753 $— 

v3.23.3
Stockholders' Equity (Tables)
9 Months Ended
Sep. 30, 2023
Equity [Abstract]  
Summary of Common Stock Transactions Stockholders' Equity
Below is a summary of transactions with respect to shares of the Company's common stock during the nine months ended September 30, 2023 and 2022:
Shares
Class FClass YClass TClass SClass DClass MClass ITotal
Balance as of December 31, 2022857,710 906,648 1,600,878 54,908,336 742,999 4,645,072 34,011,164 97,672,807 
Issuance of common stock— — 72,725 12,869,916 131,578 734,839 14,478,091 28,287,149 
Reinvestment of distributions22,334 — 33,745 1,484,600 12,790 83,733 1,140,038 2,777,240 
Redemptions of common stock(114,365)— (109,653)(5,080,070)(37,372)(401,787)(3,980,011)(9,723,258)
Transfers in or out(10,259)— (219,302)(55,465)(174,445)(269,434)748,035 19,130 
Balance as of September 30, 2023
755,420 906,648 1,378,393 64,127,317 675,550 4,792,423 46,397,317 119,033,068 
Amount
Class FClass YClass TClass SClass DClass MClass ITotal
Balance as of December 31, 2022$21,008 $22,371 $38,473 $1,274,345 $18,417 $108,522 $832,242 $2,315,378 
Issuance of common stock— — 1,812 322,941 3,275 18,333 339,042 685,403 
Reinvestment of distributions559 — 838 37,215 318 2,088 27,652 68,670 
Redemptions of common stock(2,862)— (2,723)(127,360)(929)(10,015)(96,545)(240,434)
Transfers in or out(257)— (5,447)(1,390)(4,338)(6,722)18,154 — 
Accrued stockholder servicing fees(1)
— — (49)(17,913)(16)(236)— (18,214)
Balance as of September 30, 2023
$18,448 $22,371 $32,904 $1,487,838 $16,727 $111,970 $1,120,545 $2,810,803 
Shares
Class FClass YClass TClass SClass DClass MClass ITotal
Balance as of December 31, 2021902,878 906,648 1,407,377 22,823,721 642,162 2,876,736 11,366,687 40,926,209 
Issuance of common stock— — 188,212 30,189,475 113,587 1,605,166 20,603,163 52,699,603 
Reinvestment of distributions22,136 — 31,615 877,669 11,074 52,503 503,185 1,498,182 
Redemptions of common stock(74,770)— (33,438)(2,268,159)(21,931)(153,213)(1,462,991)(4,014,502)
Transfers in or out— — (1,729)— (18,729)(142,726)167,368 4,184 
Balance as of September 30, 2022
850,244 906,648 1,592,037 51,622,706 726,163 4,238,466 31,177,412 91,113,676 
Amount
Class FClass YClass TClass SClass DClass MClass ITotal
Balance as of December 31, 2021$22,138 $22,371 $33,862 $531,150 $15,945 $66,836 $279,008 $971,310 
Issuance of common stock— — 4,699 760,752 2,840 40,238 503,433 1,311,962 
Reinvestment of distributions554 — 793 22,106 277 1,820 12,288 37,838 
Redemptions of common stock(1,870)— (835)(57,119)(549)(3,840)(35,731)(99,944)
Transfers in or out— — (43)— (468)(3,580)4,091 — 
Accrued stockholder servicing fees(1)
— — (192)(58,903)(32)(2,431)— (61,558)
Balance as of September 30, 2022
$20,822 $22,371 $38,284 $1,197,986 $18,013 $99,043 $763,089 $2,159,608 
_______________________
(1)    Stockholder servicing fees only apply to Class T, Class S, Class D and Class M shares. Under GAAP, the Company accrues future stockholder servicing fees in an amount equal to its best estimate of fees payable to FS Investment Solutions at the time such shares are sold. For purposes of NAV, the Company recognizes the stockholder servicing fee as a reduction of NAV on a monthly basis. As a result, the estimated liability for the future stockholder servicing fees, which are accrued at the time each share is sold, will have no effect on the NAV of any class.
Summary of Cash Distributions Per Share that Paid on its Common Stock
The following table reflects the cash distributions per share that the Company paid on its common stock during the nine months ended September 30, 2023:
Record DateClass FClass YClass TClass SClass DClass MClass I
January 30, 2023$0.1696 $0.1696 $0.1259 $0.1259 $0.1374 $0.1374 $0.1436 
February 27, 2023$0.1696 $0.1696 $0.1259 $0.1259 $0.1374 $0.1374 $0.1436 
March 30, 2023$0.1749 $0.1749 $0.1312 $0.1312 $0.1427 $0.1427 $0.1489 
April 27, 2023$0.1749 $0.1749 $0.1312 $0.1312 $0.1427 $0.1427 $0.1489 
May 30, 2023$0.1749 $0.1749 $0.1312 $0.1312 $0.1427 $0.1427 $0.1489 
June 29, 2023$0.1799 $0.1799 $0.1362 $0.1362 $0.1477 $0.1477 $0.1539 
July 28, 2023$0.1799 $0.1799 $0.1362 $0.1362 $0.1477 $0.1477 $0.1539 
August 30, 2023$0.1799 $0.1799 $0.1362 $0.1362 $0.1477 $0.1477 $0.1539 
September 29, 2023$0.1799 $0.1799 $0.1362 $0.1362 $0.1477 $0.1477 $0.1539 
Total$1.5835 $1.5835 $1.1902 $1.1902 $1.2937 $1.2937 $1.3495 
The following table reflects the amount of cash distributions that the Company paid on its common stock during the nine months ended September 30, 2023, and 2022:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Distributions:
Paid or payable in cash$25,820 $16,473 $72,406 $40,805 
Reinvested in shares25,196 15,943 68,670 37,838 
Total distributions$51,016 $32,416 $141,076 $78,643 
Source of distributions:
Cash flows from operating activities$51,016 $32,416 $141,076 $78,643 
Offering proceeds— — — — 
Total sources of distributions$51,016 $32,416 $141,076 $78,643 
Net cash provided by (used in) operating activities(1)
$81,922 $47,173 $201,619 $96,098 
______________________
(1)    Cash flows from operating activities are supported by expense support payments from FS Real Estate Advisor and Rialto pursuant to the Company's expense limitation agreement. See Note 7 for additional information regarding the Company's expense limitation agreement.
Schedule of Cash Distribution on Class of Common Stock
The Company currently declares and pays regular cash distributions on a monthly basis. The Company’s board of directors previously authorized regular monthly cash distributions for October 2023 for each class of its outstanding common stock in the net distribution amounts per share set forth below:
Class FClass YClass TClass SClass DClass MClass I
$0.1799 $0.1799 $0.1362 $0.1362 $0.1477 $0.1477 $0.1539 

v3.23.3
Fair Value of Financial Instruments (Tables)
9 Months Ended
Sep. 30, 2023
Fair Value Disclosures [Abstract]  
Summary of Financial Assets and Liabilities Carried at Fair Value
The following table presents the Company's financial assets and liabilities carried at fair value in the consolidated balance sheets by its level in the fair value hierarchy:
September 30, 2023 (Unaudited)December 31, 2022
TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Financial Assets
Mortgage-backed securities, at fair value$225,095 $— $225,095 $— $159,464 $— $159,464 $— 
Mortgage loans held in securitization trusts, at fair value330,629 — — 330,629 324,263 — — 324,263 
Interest rate cap3,246 — 3,246 — 4,616 — 4,616 — 
Total$558,970 $— $228,341 $330,629 $488,343 $— $164,080 $324,263 
Financial Liabilities
Mortgage obligations issued by securitization trusts, at fair value$298,170 — $298,170 — $291,193 — $291,193 — 
Summary of Changes in Fair Value of Financial Assets Which Are Measured at Fair Value on a Recurring Basis The following table presents the changes in fair value of financial assets which are measured at fair value on a recurring basis using Level 3 inputs to determine fair value for the nine months ended September 30, 2023:
Mortgage loans held in securitization trusts, at fair value
Fair value at beginning of period$324,263 
Accretion of discount (amortization of premium)— 
Net realized gain (loss)— 
Net change in unrealized appreciation (depreciation)6,366 
Purchases— 
Sales and repayments— 
Issuances— 
Transfer into Level 3— 
Transfers out of Level 3— 
Consolidation of securitization trusts— 
Deconsolidation of securitization trusts— 
Fair value at end of period$330,629 
Amount of unrealized gains (losses) attributable to assets still held at September 30, 2023
Included in earnings$— 
Included in other comprehensive income— 
Summary of Carrying Amount, Face Amount, and Fair Value of Financial Instruments The following table details the carrying amount, face amount, and fair value of the financial instruments described in Note 2:
September 30, 2023 (Unaudited)December 31, 2022
Book ValueFace AmountFair ValueBook ValueFace AmountFair Value
Financial Assets
Cash, cash equivalents and restricted cash$214,875 $214,875 $214,875 $201,618 $201,618 $201,618 
Loans receivable - held-for-investment(1)
$7,665,632 $7,735,561 $7,655,946 $7,350,315 $7,350,271 $7,339,105 
Mortgage-backed securities held-to-maturity$74,543 $80,300 $67,203 $68,559 $80,300 $68,559 
Financial Liabilities
Repurchase agreements(2)
$239,457 $242,175 $242,175 $756,816 $760,236 $760,236 
Credit facilities$839,507 $850,000 $850,000 $298,544 $310,982 $310,982 
Collateralized loan obligations(2)(3)
$4,306,272 $4,334,005 $4,334,005 $4,336,701 $4,371,684 $4,371,684 
Mortgage note payable(2)
$123,480 $124,700 $124,700 $122,568 $124,700 $124,700 
__________________
(1)    Book value of loans receivable represents the face amount, net of CECL reserve, unamortized loan fees and costs and accrual of exit fees, as applicable.
(2)    Book value represents the face amount, net of deferred financing costs and discount.
(3)    Face value represents the face amount, net of discount.

v3.23.3
Variable Interest Entities (Tables)
9 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of Detailed Information About the Assets and Liabilities
The following table details the assets and liabilities of the Company's consolidated variable interest entities as of September 30, 2023 and December 31, 2022:
September 30, 2023 (Unaudited)December 31, 2022
Assets:
Restricted cash$32,477 $— 
Loans receivable, held-for-investment5,498,839 5,546,779 
Interest receivable23,228 24,144 
Other assets7,034 853 
Mortgage loans held in securitization trusts, at fair value330,629 324,263 
Total assets$5,892,207 $5,896,039 
Liabilities
Collateralized loan obligations, net$4,306,272 $4,336,701 
Interest payable12,022 12,631 
Other liabilities533 473 
Mortgage obligations issued by securitization trusts, at fair value298,170 291,193 
Total liabilities$4,616,997 $4,640,998 

v3.23.3
Derivative Instrument (Tables)
9 Months Ended
Sep. 30, 2023
Summary of Derivative Instruments [Abstract]  
Summary of Derivative Instruments The table below provides additional information regarding the Company's derivative instrument as of September 30, 2023.
Type of DerivativeNotional AmountStrikeEffective DateMaturity Date
Fair Value(1)
Interest Rate Cap$126,700 2.25 %June 21, 2022July 9, 2024$3,246 
__________________
(1)    Included in Other assets in the Company's consolidated balance sheets.
Summary of Fair Value of the Company Derivative Financial Instrument
The following table details the fair value of the Company's derivative financial instrument:
Type of DerivativeRealized/Unrealized Gain (Loss)Location of Gain (Loss) Recognized in Net IncomeThree Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Interest Rate CapUnrealized LossOther income (loss)$(762)$1,758 $(1,370)$309 

v3.23.3
Principal Business and Organization (Details) - Class T, Class S, Class D, Class M and Class I shares - Maximum
9 Months Ended
Sep. 30, 2023
USD ($)
Subsidiary, Sale of Stock [Line Items]  
Common stock value submitted for approval under initial public offering $ 2,750,000
Primary Offering  
Subsidiary, Sale of Stock [Line Items]  
Common stock value submitted for approval under initial public offering 2,500,000
Distribution Reinvestment Plan  
Subsidiary, Sale of Stock [Line Items]  
Common stock value submitted for approval under initial public offering $ 250,000

v3.23.3
Summary of Significant Accounting Policies - Additional Information (Details)
9 Months Ended 12 Months Ended
Sep. 30, 2023
USD ($)
Sep. 30, 2022
USD ($)
Dec. 31, 2022
asset_acquisition
Accounting Policies [Abstract]      
Cash investment in money market fund $ 138,344,000 $ 49,725,000  
Number of asset acquisitions | asset_acquisition     1
Percentage of reimbursement revenue 0.75%    
Offering costs incurred $ 23,659,000    
Unrecognized interest or penalties 0 $ 0  
Accrued unrecognized interest or penalties $ 0    

v3.23.3
Summary of Significant Accounting Policies - Reconciliation of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Sep. 30, 2022
Dec. 31, 2021
Accounting Policies [Abstract]        
Cash and cash equivalents $ 166,940 $ 183,665 $ 147,321  
Restricted cash 47,935 17,953 26,121  
Total cash, cash equivalents and restricted cash $ 214,875 $ 201,618 $ 173,442 $ 85,808

v3.23.3
Summary of Significant Accounting Policies - Schedule Of Impact Of ASU 2016-13 Adoption (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Dec. 31, 2022
Sep. 30, 2022
Jan. 01, 2022
Loans receivable, held-for-investment            
CECL reserve on Loans receivable, held-for-investment $ 72,270 $ 74,606 $ 41,021 $ 0 $ 0  
CECL reserve on Mortgage-backed securities held-to-maturity 71 388 656 0    
Liabilities            
CECL reserve on unfunded loan commitments 1,636 $ 1,766 $ 1,131 0    
Total impact of 2016-13 adoption on retained earnings $ (53,300)     13,448    
Cumulative Effect, Period of Adoption, Adjustment            
Loans receivable, held-for-investment            
CECL reserve on Loans receivable, held-for-investment       39,419    
CECL reserve on Mortgage-backed securities held-to-maturity       939    
Liabilities            
CECL reserve on unfunded loan commitments       $ 1,163    
Impact of ASU 2016-13 Adoption | Cumulative Effect, Period of Adoption, Adjustment            
Loans receivable, held-for-investment            
CECL reserve on Loans receivable, held-for-investment           $ 39,419
CECL reserve on Mortgage-backed securities held-to-maturity           939
Liabilities            
CECL reserve on unfunded loan commitments           1,163
Total impact of 2016-13 adoption on retained earnings           41,521
Impact of ASU 2016-13 Adoption | Cumulative Effect, Period of Adoption, Adjustment | Senior loans            
Loans receivable, held-for-investment            
CECL reserve on Loans receivable, held-for-investment           35,456
Impact of ASU 2016-13 Adoption | Cumulative Effect, Period of Adoption, Adjustment | Mezzanine loans            
Loans receivable, held-for-investment            
CECL reserve on Loans receivable, held-for-investment           $ 3,963

v3.23.3
Summary of Significant Accounting Policies - Summary of Useful Lives of Investments in Real Estate (Details)
Sep. 30, 2023
Minimum | Building  
Property, Plant and Equipment [Line Items]  
Depreciable life 30 years
Minimum | Building and land improvements  
Property, Plant and Equipment [Line Items]  
Depreciable life 2 years
Minimum | Furniture, fixtures and equipment  
Property, Plant and Equipment [Line Items]  
Depreciable life 1 year
Maximum | Building  
Property, Plant and Equipment [Line Items]  
Depreciable life 42 years
Maximum | Building and land improvements  
Property, Plant and Equipment [Line Items]  
Depreciable life 20 years
Maximum | Furniture, fixtures and equipment  
Property, Plant and Equipment [Line Items]  
Depreciable life 10 years

v3.23.3
Loans Receivable, net - Summary of Details Overall Statistics for Loans Receivable Portfolio (Details)
$ in Thousands
9 Months Ended 12 Months Ended
Sep. 30, 2023
USD ($)
loan
Dec. 31, 2022
USD ($)
loan
Sep. 30, 2022
USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]      
Number of loans | loan 143 142  
Principal balance $ 7,735,561 $ 7,350,271  
Net Book Value 7,665,632 7,350,315 $ 7,091,841
Unfunded loan commitments $ 456,666 $ 574,510  
Weighted-average cash coupon 3.90% 3.83%  
Weighted average all-in yield 3.97% 3.90%  
Weighted-average maximum maturity (years) 3 years 3 months 18 days 4 years  
LIBOR      
Accounts, Notes, Loans and Financing Receivable [Line Items]      
Variable Rate   4.39%  
SOFR      
Accounts, Notes, Loans and Financing Receivable [Line Items]      
Variable Rate 5.32% 4.36%  

v3.23.3
Loans Receivable, net - Summary of Activity in Loan Portfolio (Details) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Jun. 30, 2023
Mar. 31, 2023
Dec. 31, 2022
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Losses [Roll Forward]          
Loans receivable at beginning of period $ 7,350,315 $ 3,841,868      
Loan fundings 1,014,971 3,731,304      
Loan repayments (631,692) (483,832)      
Amortization of deferred fees on loans 5,159 2,973      
Exit and extension fees received on loans receivable (851) (472)      
Loans receivable at end of period 7,737,902 7,091,841      
CECL reserve (72,270) 0 $ (74,606) $ (41,021) $ 0
Net Book Value $ 7,665,632 $ 7,091,841     $ 7,350,315

v3.23.3
Loans Receivable, net - Loan Receivables Acquired By Property (Details) - USD ($)
$ in Thousands
9 Months Ended 12 Months Ended
Sep. 30, 2023
Dec. 31, 2022
Jun. 30, 2023
Mar. 31, 2023
Sep. 30, 2022
Dec. 31, 2021
Accounts, Notes, Loans and Financing Receivable [Line Items]            
Loans receivable at end of period $ 7,737,902 $ 7,350,315     $ 7,091,841 $ 3,841,868
CECL reserve (72,270) 0 $ (74,606) $ (41,021) 0  
Net Book Value $ 7,665,632 $ 7,350,315     $ 7,091,841  
Percentage 100.00% 100.00%        
Multifamily            
Accounts, Notes, Loans and Financing Receivable [Line Items]            
Loans receivable at end of period $ 4,752,761 $ 4,439,830        
Percentage 61.00% 61.00%        
Hospitality            
Accounts, Notes, Loans and Financing Receivable [Line Items]            
Loans receivable at end of period $ 1,025,990 $ 792,305        
Percentage 13.00% 11.00%        
Office            
Accounts, Notes, Loans and Financing Receivable [Line Items]            
Loans receivable at end of period $ 678,392 $ 755,797        
Percentage 9.00% 10.00%        
Industrial            
Accounts, Notes, Loans and Financing Receivable [Line Items]            
Loans receivable at end of period $ 573,407 $ 369,551        
Percentage 7.00% 5.00%        
Retail            
Accounts, Notes, Loans and Financing Receivable [Line Items]            
Loans receivable at end of period $ 268,112 $ 424,374        
Percentage 4.00% 6.00%        
Self Storage            
Accounts, Notes, Loans and Financing Receivable [Line Items]            
Loans receivable at end of period $ 200,490 $ 317,861        
Percentage 3.00% 4.00%        
Various            
Accounts, Notes, Loans and Financing Receivable [Line Items]            
Loans receivable at end of period $ 142,919 $ 156,031        
Percentage 2.00% 2.00%        
Mixed Use            
Accounts, Notes, Loans and Financing Receivable [Line Items]            
Loans receivable at end of period $ 95,831 $ 94,566        
Percentage 1.00% 1.00%        

v3.23.3
Loans Receivable, net - Loan Receivables Acquired By Geographic Area (Details) - USD ($)
$ in Thousands
9 Months Ended 12 Months Ended
Sep. 30, 2023
Dec. 31, 2022
Jun. 30, 2023
Mar. 31, 2023
Sep. 30, 2022
Dec. 31, 2021
Accounts, Notes, Loans and Financing Receivable [Line Items]            
Loans receivable at end of period $ 7,737,902 $ 7,350,315     $ 7,091,841 $ 3,841,868
CECL reserve (72,270) 0 $ (74,606) $ (41,021) 0  
Net Book Value $ 7,665,632 $ 7,350,315     $ 7,091,841  
Percentage 100.00% 100.00%        
South            
Accounts, Notes, Loans and Financing Receivable [Line Items]            
Loans receivable at end of period $ 3,753,978 $ 3,719,093        
Percentage 49.00% 51.00%        
West            
Accounts, Notes, Loans and Financing Receivable [Line Items]            
Loans receivable at end of period $ 1,546,279 $ 1,487,391        
Percentage 20.00% 20.00%        
Northeast            
Accounts, Notes, Loans and Financing Receivable [Line Items]            
Loans receivable at end of period $ 1,430,235 $ 1,326,408        
Percentage 18.00% 18.00%        
Various            
Accounts, Notes, Loans and Financing Receivable [Line Items]            
Loans receivable at end of period $ 688,390 $ 507,105        
Percentage 9.00% 7.00%        
Midwest            
Accounts, Notes, Loans and Financing Receivable [Line Items]            
Loans receivable at end of period $ 319,020 $ 310,318        
Percentage 4.00% 4.00%        

v3.23.3
Loans Receivable, net - Summary of Loans Receivable Based on Internal Risk Ratings (Details)
$ in Thousands
9 Months Ended 12 Months Ended
Sep. 30, 2023
USD ($)
loan
Dec. 31, 2022
USD ($)
loan
Jun. 30, 2023
USD ($)
Mar. 31, 2023
USD ($)
Sep. 30, 2022
USD ($)
Dec. 31, 2021
USD ($)
Financing Receivable, Credit Quality Indicator [Line Items]            
Number of Loans | loan 143 142        
Net Book Value $ 7,737,902 $ 7,350,315     $ 7,091,841 $ 3,841,868
CECL reserve (72,270) 0 $ (74,606) $ (41,021) 0  
Net Book Value $ 7,665,632 $ 7,350,315     $ 7,091,841  
Percentage 100.00% 100.00%        
1            
Financing Receivable, Credit Quality Indicator [Line Items]            
Number of Loans | loan 0 0        
Net Book Value $ 0 $ 0        
Percentage 0.00% 0.00%        
2            
Financing Receivable, Credit Quality Indicator [Line Items]            
Number of Loans | loan 0 0        
Net Book Value $ 0 $ 0        
Percentage 0.00% 0.00%        
3            
Financing Receivable, Credit Quality Indicator [Line Items]            
Number of Loans | loan 132 142        
Net Book Value $ 7,293,831 $ 7,350,315        
Percentage 95.00% 100.00%        
4            
Financing Receivable, Credit Quality Indicator [Line Items]            
Number of Loans | loan 10 0        
Net Book Value $ 407,584 $ 0        
Percentage 5.00% 0.00%        
5            
Financing Receivable, Credit Quality Indicator [Line Items]            
Number of Loans | loan 1 0        
Net Book Value $ 36,487 $ 0        
Percentage 0.00% 0.00%        

v3.23.3
Loans Receivable, net - Summary of Allowance For Credit Loss On Financing Receivable (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Sep. 30, 2023
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]        
CECL reserve, beginning balance $ 74,606 $ 41,021 $ 0 $ 0
Increase in CECL Reserves 2,336   1,602 32,851
CECL reserve, ending balance 72,270 74,606 41,021 72,270
General Credit Loss Reserve        
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]        
Increase in CECL Reserves (2,336) 30,618    
Specific Credit Loss Reserve        
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]        
Increase in CECL Reserves 0 2,967    
Cumulative Effect, Period of Adoption, Adjustment        
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]        
CECL reserve, beginning balance     39,419 39,419
Senior loans        
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]        
CECL reserve, beginning balance 69,103 36,680 0 0
Increase in CECL Reserves     1,224  
CECL reserve, ending balance 66,812 69,103 36,680 66,812
Senior loans | General Credit Loss Reserve        
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]        
Increase in CECL Reserves (2,291) 29,456    
Senior loans | Specific Credit Loss Reserve        
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]        
Increase in CECL Reserves 0 2,967    
Senior loans | Cumulative Effect, Period of Adoption, Adjustment        
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]        
CECL reserve, beginning balance     35,456 35,456
Mezzanine loans        
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]        
CECL reserve, beginning balance 5,503 4,341 0 0
Increase in CECL Reserves     378  
CECL reserve, ending balance 5,458 5,503 4,341 5,458
Mezzanine loans | General Credit Loss Reserve        
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]        
Increase in CECL Reserves (45) 1,162    
Mezzanine loans | Specific Credit Loss Reserve        
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]        
Increase in CECL Reserves $ 0 $ 0    
Mezzanine loans | Cumulative Effect, Period of Adoption, Adjustment        
Financing Receivable, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]        
CECL reserve, beginning balance     $ 3,963 $ 3,963

v3.23.3
Loans Receivable, net - Additional Information (Details)
$ in Thousands
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2023
USD ($)
Jun. 30, 2023
USD ($)
Mar. 31, 2023
USD ($)
Sep. 30, 2023
USD ($)
loan
Dec. 31, 2022
USD ($)
loan
Sep. 30, 2022
USD ($)
Dec. 31, 2021
USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]              
CECL reserve $ 72,270 $ 74,606 $ 41,021 $ 72,270 $ 0 $ 0  
CECL reserve against its loans receivable portfolio 2,336   1,602 $ 32,851      
Number of loans | loan       143 142    
Net Book Value 7,665,632     $ 7,665,632 $ 7,350,315 7,091,841  
Loans receivable at end of period 7,737,902     7,737,902 7,350,315 $ 7,091,841 $ 3,841,868
Unfunded loan commitments 456,666     456,666 574,510    
CECL reserve on unfunded loan commitments 1,636 1,766 1,131 1,636 0    
Increase (decrease) in CECL reserve (130) 635 (32) $ 473      
Cumulative Effect, Period of Adoption, Adjustment              
Accounts, Notes, Loans and Financing Receivable [Line Items]              
CECL reserve         39,419    
CECL reserve on unfunded loan commitments         $ 1,163    
5              
Accounts, Notes, Loans and Financing Receivable [Line Items]              
Number of loans | loan       1 0    
Loans receivable at end of period 36,487     $ 36,487 $ 0    
Specific Credit Loss Reserve              
Accounts, Notes, Loans and Financing Receivable [Line Items]              
CECL reserve against its loans receivable portfolio 0 2,967          
Senior loans              
Accounts, Notes, Loans and Financing Receivable [Line Items]              
CECL reserve 66,812 69,103 36,680 66,812 0    
CECL reserve against its loans receivable portfolio     1,224        
CECL reserve on unfunded loan commitments 1,612 1,734 1,096 1,612 0    
Increase (decrease) in CECL reserve (122) 638 $ (33)        
Senior loans | Cumulative Effect, Period of Adoption, Adjustment              
Accounts, Notes, Loans and Financing Receivable [Line Items]              
CECL reserve         35,456    
CECL reserve on unfunded loan commitments         $ 1,129    
Senior loans | 5              
Accounts, Notes, Loans and Financing Receivable [Line Items]              
Net Book Value 36,500     36,500      
Loans receivable at end of period 36,487     36,487      
Unfunded loan commitments 9,600     9,600      
Senior loans | Specific Credit Loss Reserve              
Accounts, Notes, Loans and Financing Receivable [Line Items]              
CECL reserve against its loans receivable portfolio 0 $ 2,967          
Senior loans | Specific Credit Loss Reserve | 5              
Accounts, Notes, Loans and Financing Receivable [Line Items]              
CECL reserve against its loans receivable portfolio $ 2,967     $ 2,967      
Capitalization Rate | 5              
Accounts, Notes, Loans and Financing Receivable [Line Items]              
Measurement input 0.0725     0.0725      
Discount Rate | 5              
Accounts, Notes, Loans and Financing Receivable [Line Items]              
Measurement input 0.0925     0.0925      

v3.23.3
Loans Receivable, net - Summary of Net Book Value of Loans Receivable by Year of Origination (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Dec. 31, 2022
Sep. 30, 2022
Dec. 31, 2021
Financing Receivable, Credit Quality Indicator [Line Items]            
2023 $ 639,009          
2022 4,083,637          
2021 2,790,991          
2020 101,972          
2019 80,843          
Prior 41,450          
Total 7,737,902     $ 7,350,315 $ 7,091,841 $ 3,841,868
CECL reserve (72,270) $ (74,606) $ (41,021) 0 0  
Net Book Value 7,665,632     7,350,315 $ 7,091,841  
1            
Financing Receivable, Credit Quality Indicator [Line Items]            
2023 0          
2022 0          
2021 0          
2020 0          
2019 0          
Prior 0          
Total 0     0    
2            
Financing Receivable, Credit Quality Indicator [Line Items]            
2023 0          
2022 0          
2021 0          
2020 0          
2019 0          
Prior 0          
Total 0     0    
3            
Financing Receivable, Credit Quality Indicator [Line Items]            
2023 639,009          
2022 3,758,801          
2021 2,704,837          
2020 84,303          
2019 65,431          
Prior 41,450          
Total 7,293,831     7,350,315    
4            
Financing Receivable, Credit Quality Indicator [Line Items]            
2023 0          
2022 324,836          
2021 49,667          
2020 17,669          
2019 15,412          
Prior 0          
Total 407,584     0    
5            
Financing Receivable, Credit Quality Indicator [Line Items]            
2023 0          
2022 0          
2021 36,487          
2020 0          
2019 0          
Prior 0          
Total $ 36,487     $ 0    

v3.23.3
Loans Receivable, net - Credit Loss Reserve on Unfunded Commitments (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Sep. 30, 2023
Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]        
CECL reserved beginning of period $ 1,766 $ 1,131 $ 0 $ 0
Increase (decrease) in CECL reserve (130) 635 (32) 473
CECL reserved end of period 1,636 1,766 1,131 1,636
Cumulative Effect, Period of Adoption, Adjustment        
Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]        
CECL reserved beginning of period     1,163 1,163
Senior loans        
Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]        
CECL reserved beginning of period 1,734 1,096 0 0
Increase (decrease) in CECL reserve (122) 638 (33)  
CECL reserved end of period 1,612 1,734 1,096 1,612
Senior loans | Cumulative Effect, Period of Adoption, Adjustment        
Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]        
CECL reserved beginning of period     1,129 1,129
Mezzanine Loans        
Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]        
CECL reserved beginning of period 32 35 0 0
Increase (decrease) in CECL reserve (8) (3) 1  
CECL reserved end of period $ 24 $ 32 35 24
Mezzanine Loans | Cumulative Effect, Period of Adoption, Adjustment        
Off-Balance-Sheet, Credit Loss, Liability [Roll Forward]        
CECL reserved beginning of period     $ 34 $ 34

v3.23.3
Mortgage Backed Securities - Schedule of Available-for-sale Securities Reconciliation (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Dec. 31, 2022
Debt Securities, Available-for-Sale [Line Items]        
Allowance for Credit Losses $ (9,674) $ (6,992) $ 0 $ 0
Weighted-average cash coupon 3.90%     3.83%
LIBOR        
Debt Securities, Available-for-Sale [Line Items]        
Variable Rate       4.39%
SOFR        
Debt Securities, Available-for-Sale [Line Items]        
Variable Rate 5.32%     4.36%
Commercial Mortgage Backed Securities        
Debt Securities, Available-for-Sale [Line Items]        
Outstanding Face Amount $ 172,392     $ 173,207
Amortized Cost Basis 169,739     171,369
Allowance for Credit Losses (9,674)     0
Gross Unrealized Gains 96     45
Gross Unrealized Losses (8,226)     (11,950)
Fair Value $ 151,935     $ 159,464
Weighted-average cash coupon 10.06%     9.18%
Weighted Average Remaining Duration (years) 14 years 8 months 12 days     12 years 8 months 12 days
Debt and Equity Securities, FV-NI [Line Items]        
Outstanding Face Amount $ 75,830      
Amortized Cost Basis 72,835      
Allowance for Credit Losses 0      
Gross unrealized gains 406      
Gross unrealized losses (81)      
Fair Value $ 73,160      
Weighted-average cash coupon 7.30%      
Weighted Average Remaining Duration (years) 2 years 9 months 18 days      

v3.23.3
Mortgage Backed Securities - Schedule of Recognize an Allowance for Its Available-for Sale Securities (Details) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Debt Securities, Available-for-Sale, Allowance for Credit Loss [Roll Forward]      
Allowance for credit losses at beginning of period $ (6,992) $ 0 $ 0
Additions on securities for which credit losses were not previously recorded 0 (6,992) 0
(Increase) decrease on securities with previously recorded credit losses (2,682) 0 0
Allowance for credit losses at ending of period $ (9,674) $ (6,992) $ 0

v3.23.3
Mortgage Backed Securities - Schedule of Available-for-sale an Unrealized Loss Position (Details) - Commercial Mortgage Backed Securities - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Estimated Fair Value    
Securities with a loss less than 12 months $ 175,428 $ 150,230
Securities with a loss greater than 12 months 97,174 756
Unrealized Losses    
Securities with a loss less than 12 months (8,312) (11,889)
Securities with a loss greater than 12 months $ (8,183) $ (61)

v3.23.3
Mortgage Backed Securities - Narrative (Details)
$ in Thousands
Sep. 30, 2023
USD ($)
security
Dec. 31, 2022
security
Debt Securities, Available-for-Sale [Line Items]    
Debt securities, available-for-sale, nonaccrual, number of commercial mortgage-backed securities 1  
Debt securities, available-for-sale, nonaccrual | $ $ 14,126  
Commercial Mortgage Backed Securities    
Debt Securities, Available-for-Sale [Line Items]    
Debt securities available for sale unrealized loss positions number of positions 10 15

v3.23.3
Mortgage Backed Securities - Summary of Investment Held-to-maturity CMBS (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Dec. 31, 2022
Schedule of Held-to-Maturity Securities [Line Items]        
Credit Loss Allowance $ (71) $ (388) $ (656) $ 0
Net Carrying Amount 74,543     68,559
Commercial Mortgage Backed Securities        
Schedule of Held-to-Maturity Securities [Line Items]        
Amortized Cost Basis 74,614     68,559
Credit Loss Allowance (71)     0
Net Carrying Amount 74,543     68,559
Gross Unrecognized Holding Gains 0     0
Gross Unrecognized Holding Losses (7,340)     0
Fair Value $ 67,203     $ 68,559

v3.23.3
Mortgage Backed Securities - Summary of Debt Securities, Held-to-Maturity, Allowance for Credit Loss (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Sep. 30, 2023
Mar. 31, 2023
Jun. 30, 2023
Debt Securities, Held-to-Maturity, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]      
CECL reserve, beginning balance $ 388 $ 0 $ 0
Increase (Decrease) in CECL reserve (317) (283) (268)
CECL reserve, ending balance $ 71 656 388
Cumulative Effect, Period of Adoption, Adjustment      
Debt Securities, Held-to-Maturity, Excluding Accrued Interest, Allowance for Credit Loss [Roll Forward]      
CECL reserve, beginning balance   $ 939 $ 939

v3.23.3
Mortgage Backed Securities - Summary of Maturities of Investment Held-to-maturity CMBS (Details) - Commercial Mortgage Backed Securities - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Schedule of Held-to-Maturity Securities [Line Items]    
Total $ 74,614 $ 68,559
Less than 1 year 0 0
1-3 years 44,492 38,435
3-5 years 30,122 30,124
More than 5 years $ 0 $ 0

v3.23.3
Real Estate - Schedule of Real Estate Properties (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Real Estate [Line Items]    
Real estate, gross $ 194,307 $ 194,179
Accumulated depreciation and amortization (9,131) (3,630)
Real estate, net 185,176 190,549
In-place lease intangibles    
Real Estate [Line Items]    
Real estate, gross 33,530 33,402
Building and building improvements    
Real Estate [Line Items]    
Real estate, gross 120,527 120,527
Land and land improvements    
Real Estate [Line Items]    
Real estate, gross 39,186 39,186
Furniture, fixtures and equipment    
Real Estate [Line Items]    
Real estate, gross $ 1,064 $ 1,064

v3.23.3
Real Estate - Schedule of Finite Lived Intangible Assets Future Amortization Expense (Details)
$ in Thousands
Sep. 30, 2023
USD ($)
Real Estate [Abstract]  
2023 (remaining) $ 912
2024 3,814
2025 3,814
2026 3,806
2027 3,803
Thereafter 12,134
Total $ 28,283

v3.23.3
Real Estate - Schedule of Rental Operations (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Real Estate [Abstract]        
Rental income $ 5,297 $ 3,569 $ 14,985 $ 3,569
Less: depreciation and amortization (1,835) (1,839) (5,501) (1,839)
Less: cost of rental operations (3,696) (2,798) (11,415) (2,798)
Rental operations, net (234) $ (1,068) (1,931) $ (1,068)
Interest expense related to mortgage note payable $ 2,365   $ 6,718  

v3.23.3
Financing Arrangements - Summary of Information of Outstanding Financing Arrangement (Details) - USD ($)
$ in Thousands
9 Months Ended 12 Months Ended
Sep. 30, 2023
Dec. 31, 2022
Debt Instrument [Line Items]    
Amount Outstanding $ 5,560,665 $ 5,579,737
Amount Available 2,493,338 2,284,216
Carrying Amount of Collateral [1] 8,784,408 8,337,816
Carrying Amount of Collateral    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 7,332,442 7,138,397
Fair Value of Collateral    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 7,294,863 $ 7,163,689
Minimum    
Debt Instrument [Line Items]    
Weighted Average Spread 0.00% 0.00%
Minimum | LIBOR    
Debt Instrument [Line Items]    
Weighted Average Spread   0.00%
Minimum | Benchmark Rate    
Debt Instrument [Line Items]    
Weighted Average Spread 0.00%  
WF-1 Facility | Minimum | SOFR    
Debt Instrument [Line Items]    
Weighted Average Spread   0.00%
GS-1 Facility | Minimum | SOFR    
Debt Instrument [Line Items]    
Weighted Average Spread 0.00% 0.00%
BB-1 Facility | Minimum | SOFR    
Debt Instrument [Line Items]    
Weighted Average Spread   0.00%
MM-1 Facility | SOFR    
Debt Instrument [Line Items]    
Weighted Average Spread 0.11% 0.11%
Natixis Loan | Weighted Average    
Debt Instrument [Line Items]    
Weighted Average Spread 2.15%  
Collateralized Loan Obligations    
Debt Instrument [Line Items]    
Amount Outstanding $ 4,343,790 $ 4,383,819
Amount Available 0 0
Collateralized Loan Obligations | Carrying Amount of Collateral    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 5,498,839 5,546,779
Collateralized Loan Obligations | Fair Value of Collateral    
Debt Instrument [Line Items]    
Fair Value of Collateral 5,444,092 5,547,859
Collateralized Loan Obligations | 2019-FL1 Notes    
Debt Instrument [Line Items]    
Amount Outstanding 194,223 196,785
Amount Available 0 0
Collateralized Loan Obligations | 2019-FL1 Notes | Carrying Amount of Collateral    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 292,227 294,751
Collateralized Loan Obligations | 2019-FL1 Notes | Fair Value of Collateral    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 290,996 $ 295,040
Collateralized Loan Obligations | 2019-FL1 Notes | Weighted Average    
Debt Instrument [Line Items]    
Weighted Average Spread 1.66% 1.55%
Collateralized Loan Obligations | 2021-FL2 Notes    
Debt Instrument [Line Items]    
Amount Outstanding $ 640,056 $ 646,935
Amount Available 0 0
Collateralized Loan Obligations | 2021-FL2 Notes | Carrying Amount of Collateral    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 768,945 782,767
Collateralized Loan Obligations | 2021-FL2 Notes | Fair Value of Collateral    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 761,177 $ 783,381
Collateralized Loan Obligations | 2021-FL2 Notes | Weighted Average    
Debt Instrument [Line Items]    
Weighted Average Spread 1.64% 1.53%
Collateralized Loan Obligations | 2021-FL3 Notes    
Debt Instrument [Line Items]    
Amount Outstanding $ 928,483 $ 928,483
Amount Available 0 0
Collateralized Loan Obligations | 2021-FL3 Notes | Carrying Amount of Collateral    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 1,102,550 1,133,769
Collateralized Loan Obligations | 2021-FL3 Notes | Fair Value of Collateral    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 1,094,349 $ 1,135,195
Collateralized Loan Obligations | 2021-FL3 Notes | Weighted Average    
Debt Instrument [Line Items]    
Weighted Average Spread 1.61% 1.51%
Collateralized Loan Obligations | 2022-FL4 Notes    
Debt Instrument [Line Items]    
Amount Outstanding $ 837,662 $ 837,662
Amount Available 0 0
Collateralized Loan Obligations | 2022-FL4 Notes | Carrying Amount of Collateral    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 1,080,659 1,081,159
Collateralized Loan Obligations | 2022-FL4 Notes | Fair Value of Collateral    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 1,068,520 $ 1,080,953
Collateralized Loan Obligations | 2022-FL4 Notes | Weighted Average    
Debt Instrument [Line Items]    
Weighted Average Spread 2.21% 2.21%
Collateralized Loan Obligations | 2022-FL5 Notes    
Debt Instrument [Line Items]    
Amount Outstanding $ 560,224 $ 570,112
Amount Available 0 0
Collateralized Loan Obligations | 2022-FL5 Notes | Carrying Amount of Collateral    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 689,919 689,885
Collateralized Loan Obligations | 2022-FL5 Notes | Fair Value of Collateral    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 680,370 $ 689,246
Collateralized Loan Obligations | 2022-FL5 Notes | Weighted Average    
Debt Instrument [Line Items]    
Weighted Average Spread 2.78% 3.05%
Collateralized Loan Obligations | 2022-FL6 Notes    
Debt Instrument [Line Items]    
Amount Outstanding $ 552,100 $ 566,250
Amount Available 0 0
Collateralized Loan Obligations | 2022-FL6 Notes | Carrying Amount of Collateral    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 749,880 749,837
Collateralized Loan Obligations | 2022-FL6 Notes | Fair Value of Collateral    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 742,077 $ 749,502
Collateralized Loan Obligations | 2022-FL6 Notes | Weighted Average    
Debt Instrument [Line Items]    
Weighted Average Spread 2.84% 2.96%
Collateralized Loan Obligations | 2022-FL7 Notes    
Debt Instrument [Line Items]    
Amount Outstanding $ 631,042 $ 637,592
Amount Available 0 0
Collateralized Loan Obligations | 2022-FL7 Notes | Carrying Amount of Collateral    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 814,659 814,611
Collateralized Loan Obligations | 2022-FL7 Notes | Fair Value of Collateral    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 806,603 $ 814,542
Collateralized Loan Obligations | 2022-FL7 Notes | Weighted Average    
Debt Instrument [Line Items]    
Weighted Average Spread 3.18% 3.35%
Line of Credit | Repurchase Agreements    
Debt Instrument [Line Items]    
Amount Outstanding $ 242,175 $ 760,236
Amount Available 2,033,338 1,283,198
Line of Credit | Revolving Credit Facility    
Debt Instrument [Line Items]    
Amount Outstanding 850,000 310,982
Amount Available 460,000 999,018
Line of Credit | Carrying Amount of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 528,312 993,224
Line of Credit | Carrying Amount of Collateral | Revolving Credit Facility    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 1,148,927 439,431
Line of Credit | Fair Value of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Fair Value of Collateral 525,706 984,740
Line of Credit | Fair Value of Collateral | Revolving Credit Facility    
Debt Instrument [Line Items]    
Fair Value of Collateral 1,140,393 439,051
Line of Credit | WF-1 Facility | Repurchase Agreements    
Debt Instrument [Line Items]    
Amount Outstanding 48,870 375,381
Amount Available 551,130 224,619
Line of Credit | WF-1 Facility | Carrying Amount of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 62,596 481,146
Line of Credit | WF-1 Facility | Fair Value of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 61,921 $ 480,371
Line of Credit | WF-1 Facility | Weighted Average | Repurchase Agreements    
Debt Instrument [Line Items]    
Weighted Average Spread 1.88% 2.04%
Line of Credit | GS-1 Facility | Repurchase Agreements    
Debt Instrument [Line Items]    
Amount Outstanding $ 18,781 $ 34,519
Amount Available 431,219 315,481
Line of Credit | GS-1 Facility | Carrying Amount of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 84,448 48,276
Line of Credit | GS-1 Facility | Fair Value of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 83,981 $ 47,846
Line of Credit | GS-1 Facility | Weighted Average | Repurchase Agreements    
Debt Instrument [Line Items]    
Weighted Average Spread 2.83% 2.40%
Line of Credit | RBC Facility | Repurchase Agreements    
Debt Instrument [Line Items]    
Amount Outstanding $ 29,646 $ 55,934
Amount Available 0 0
Line of Credit | RBC Facility | Carrying Amount of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 0 85,707
Line of Credit | RBC Facility | Fair Value of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 0 $ 79,274
Line of Credit | RBC Facility | Weighted Average | Repurchase Agreements    
Debt Instrument [Line Items]    
Weighted Average Spread 1.30% 1.39%
Line of Credit | BB-1 Facility | Repurchase Agreements    
Debt Instrument [Line Items]    
Amount Outstanding $ 11,474 $ 186,139
Amount Available 688,526 513,861
Line of Credit | BB-1 Facility | Carrying Amount of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 14,801 236,783
Line of Credit | BB-1 Facility | Fair Value of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 14,690 $ 236,462
Line of Credit | BB-1 Facility | Weighted Average | Repurchase Agreements    
Debt Instrument [Line Items]    
Weighted Average Spread 1.96% 2.14%
Line of Credit | MS-1 Facility | Repurchase Agreements    
Debt Instrument [Line Items]    
Amount Outstanding $ 37,537 $ 108,263
Amount Available 112,463 41,737
Line of Credit | MS-1 Facility | Carrying Amount of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 89,990 141,312
Line of Credit | MS-1 Facility | Fair Value of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 88,855 $ 140,787
Line of Credit | MS-1 Facility | Weighted Average | Repurchase Agreements    
Debt Instrument [Line Items]    
Weighted Average Spread 2.65% 2.86%
Line of Credit | NTX-1 Facility | Repurchase Agreements    
Debt Instrument [Line Items]    
Amount Outstanding $ 0 $ 0
Amount Available 250,000 187,500
Line of Credit | NTX-1 Facility | Carrying Amount of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 0 0
Line of Credit | NTX-1 Facility | Fair Value of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Fair Value of Collateral 0 0
Line of Credit | BMO-1 Facility | Repurchase Agreements    
Debt Instrument [Line Items]    
Amount Outstanding 80,000  
Amount Available 0  
Line of Credit | BMO-1 Facility | Carrying Amount of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 276,477  
Line of Credit | BMO-1 Facility | Fair Value of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 276,259  
Line of Credit | BMO-1 Facility | Weighted Average | Repurchase Agreements    
Debt Instrument [Line Items]    
Weighted Average Spread 2.00%  
Line of Credit | Lucid Facility | Repurchase Agreements    
Debt Instrument [Line Items]    
Amount Outstanding $ 15,867  
Amount Available 0  
Line of Credit | Lucid Facility | Carrying Amount of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 0  
Line of Credit | Lucid Facility | Fair Value of Collateral | Repurchase Agreements    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 0  
Line of Credit | Lucid Facility | Weighted Average | Repurchase Agreements    
Debt Instrument [Line Items]    
Weighted Average Spread 1.15%  
Line of Credit | MM-1 Facility | Revolving Credit Facility    
Debt Instrument [Line Items]    
Amount Outstanding $ 850,000 310,982
Amount Available 150,000 689,018
Line of Credit | MM-1 Facility | Carrying Amount of Collateral | Revolving Credit Facility    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 1,148,927 439,431
Line of Credit | MM-1 Facility | Fair Value of Collateral | Revolving Credit Facility    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 1,140,393 $ 439,051
Line of Credit | MM-1 Facility | Weighted Average | Revolving Credit Facility    
Debt Instrument [Line Items]    
Weighted Average Spread 2.14% 2.14%
Line of Credit | Barclays Facility | SOFR    
Debt Instrument [Line Items]    
Debt instrument credit spread adjustment 0.10%  
Line of Credit | Barclays Facility | Revolving Credit Facility    
Debt Instrument [Line Items]    
Amount Outstanding $ 0 $ 0
Amount Available 310,000 $ 310,000
Debt instrument credit spread adjustment   0.10%
Line of Credit | Barclays Facility | Carrying Amount of Collateral | Revolving Credit Facility    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 0 $ 0
Line of Credit | Barclays Facility | Fair Value of Collateral | Revolving Credit Facility    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 0 $ 0
Line of Credit | Barclays Facility | Minimum | Revolving Credit Facility    
Debt Instrument [Line Items]    
Weighted Average Spread   1.25%
Line of Credit | Barclays Facility | Minimum | Revolving Credit Facility | Base Rate    
Debt Instrument [Line Items]    
Weighted Average Spread 1.25%  
Line of Credit | Barclays Facility | Maximum | SOFR    
Debt Instrument [Line Items]    
Weighted Average Spread 2.25%  
Line of Credit | Barclays Facility | Maximum | Revolving Credit Facility    
Debt Instrument [Line Items]    
Weighted Average Spread   2.25%
Mortgage Loan    
Debt Instrument [Line Items]    
Amount Outstanding $ 124,700  
Mortgage Loan | Natixis Loan    
Debt Instrument [Line Items]    
Amount Outstanding 124,700 $ 124,700
Amount Available 0 2,000
Mortgage Loan | Natixis Loan | Carrying Amount of Collateral    
Debt Instrument [Line Items]    
Carrying Amount of Collateral 156,364 158,963
Mortgage Loan | Natixis Loan | Fair Value of Collateral    
Debt Instrument [Line Items]    
Fair Value of Collateral $ 184,672 $ 192,039
Mortgage Loan | Natixis Loan | Weighted Average    
Debt Instrument [Line Items]    
Weighted Average Spread   2.15%
[1] The September 30, 2023 and December 31, 2022 consolidated balance sheets include assets of consolidated variable interest entities, or VIEs, that can only be used to settle obligations of the VIEs, and liabilities of consolidated VIEs for which creditors do not have recourse to FS Credit Real Estate Income Trust, Inc. As of September 30, 2023 and December 31, 2022, assets of the VIEs totaled $5,892,207 and $5,896,039, respectively, and liabilities of the VIEs totaled $4,616,997 and $4,640,998, respectively. See Note 10 for further details.

v3.23.3
Financing Arrangements - Additional Information (Details)
$ in Thousands
9 Months Ended 12 Months Ended
Sep. 30, 2023
USD ($)
facility
Dec. 31, 2022
USD ($)
Debt Disclosure [Abstract]    
Average borrowings | $ $ 5,674,603 $ 4,560,400
Weighted average spread 7.12% 3.83%
Number of repurchase facilities 8  
Number of revolving credit facilities 2  

v3.23.3
Financing Arrangements - Summary of Repayment for Secured Financings Outstanding (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Debt Instrument [Line Items]    
2023 $ 0  
2024 152,941  
2025 284,114  
2026 556,744  
Thereafter 4,566,866  
Total 5,560,665 $ 5,579,737
Collateralized Loan Obligations    
Debt Instrument [Line Items]    
2023 0  
2024 12,597  
2025 103,096  
2026 556,744  
Thereafter 3,671,353  
Total 4,343,790 4,383,819
Line of Credit | Repurchase Agreements    
Debt Instrument [Line Items]    
2023 0  
2024 140,344  
2025 56,318  
2026 0  
Thereafter 45,513  
Total 242,175 760,236
Line of Credit | Revolving Credit Facility    
Debt Instrument [Line Items]    
2023 0  
2024 0  
2025 0  
2026 0  
Thereafter 850,000  
Total 850,000 $ 310,982
Mortgage Loan    
Debt Instrument [Line Items]    
2023 0  
2024 0  
2025 124,700  
2026 0  
Thereafter 0  
Total $ 124,700  

v3.23.3
Financing Arrangements - Summary of Number of Loans and the Principal Balance (Details) - Collateralized Loan Obligations
$ in Thousands
Sep. 30, 2023
USD ($)
loan
Debt Instrument [Line Items]  
Total Count | loan 165
Principal Balance | $ $ 5,500,233
2019-FL1  
Debt Instrument [Line Items]  
Total Count | loan 14
Principal Balance | $ $ 292,791
2021-FL2  
Debt Instrument [Line Items]  
Total Count | loan 26
Principal Balance | $ $ 769,064
2021-FL3  
Debt Instrument [Line Items]  
Total Count | loan 30
Principal Balance | $ $ 1,102,723
2022-FL4  
Debt Instrument [Line Items]  
Total Count | loan 25
Principal Balance | $ $ 1,080,841
2022-FL5  
Debt Instrument [Line Items]  
Total Count | loan 25
Principal Balance | $ $ 690,000
2022-FL6  
Debt Instrument [Line Items]  
Total Count | loan 24
Principal Balance | $ $ 750,000
2022-FL7  
Debt Instrument [Line Items]  
Total Count | loan 21
Principal Balance | $ $ 814,814

v3.23.3
Financing Arrangements - Summary of Net Book Value of Debt Instrument (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Sep. 30, 2022
Collateralized Loan Obligations    
Debt Instrument [Line Items]    
Face value $ 4,343,790 $ 3,772,476
Unamortized deferred financing costs (27,733) (30,649)
Unamortized discount (9,785) (7,887)
Net book value 4,306,272 3,733,940
Line of Credit | Repurchase Agreements    
Debt Instrument [Line Items]    
Face value 242,175 883,580
Unamortized deferred financing costs (2,718) (2,976)
Net book value 239,457 880,604
Line of Credit | Revolving Credit Facility    
Debt Instrument [Line Items]    
Face value 850,000 704,105
Unamortized deferred financing costs (10,493) (8,383)
Net book value 839,507 695,722
Mortgage Loan    
Debt Instrument [Line Items]    
Face value 124,700 124,700
Unamortized deferred financing costs (1,220) (2,132)
Net book value $ 123,480 $ 122,568

v3.23.3
Related Party Transactions - Additional Information (Details) - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended 80 Months Ended
Dec. 01, 2022
Dec. 31, 2016
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Dec. 31, 2022
Sep. 30, 2022
Jun. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Jun. 30, 2023
Related Party Transaction [Line Items]                        
Administrative service fee percentage 1.00%                      
Organization and offering costs                       $ 23,902
Offering expenses     $ 116,585     $ 107,692     $ 116,585   $ 116,585  
Recoupment paid or payable to sponsor                 148      
Purchases of mortgage-backed securities, at fair value                 $ 86,636 $ 150,598    
Related Party                        
Related Party Transaction [Line Items]                        
Performance fee percentage                 10.00%      
Hurdle rate on average adjusted capital                 1.625%      
Annualized hurdle rate                 6.50%      
Quarterly core earnings rate                 1.806%      
Annualized core earnings rate                 7.222%      
Percentage of origination fees of loan amount                 1.00%      
Recoupment paid or payable to sponsor     0 $ 61 $ 87 605         753  
Recoupment amount                 $ 6,592      
Recoupment payable     $ 61           $ 61   $ 61  
Related Party | Maximum                        
Related Party Transaction [Line Items]                        
Public offering     15.00%           15.00%   15.00%  
Related Party | Common Stock Class F                        
Related Party Transaction [Line Items]                        
Investments owned     $ 402           $ 402   $ 402  
Related Party | FS Real Estate Advisor                        
Related Party Transaction [Line Items]                        
Base management fee percentage 1.25%                      
Administrative service fee percentage 1.00%                      
Capital Markets Fees     $ 0       $ 0   $ 0 2,000    
Public offering     0.75%           0.75%   0.75%  
Offering costs previously funded                 $ 5,159      
Offering expenses     $ 4,180           4,180   $ 4,180  
Investments owned     $ 18,583           $ 18,583   $ 18,583  
Related Party | FS Real Estate Advisor | Expense Limitation                        
Related Party Transaction [Line Items]                        
Percentage of minimum operating expenses to be waived or paid                 1.50%      
Related Party | FS Real Estate Advisor | Maximum | Expense Limitation                        
Related Party Transaction [Line Items]                        
Period for which reimbursement payable                 3 years      
Related Party | FS Real Estate Advisor | Class T, Class S, Class D and Class M Share                        
Related Party Transaction [Line Items]                        
Stockholder servicing fees percentage     10.00%           10.00%   10.00%  
Related Party | FS Real Estate Advisor | Common Stock Class T                        
Related Party Transaction [Line Items]                        
Stockholder servicing fees percentage     8.75%           8.75%   8.75%  
Dealer manager upfront selling commissions fees percentage                 3.00%      
Upfront dealer manager fees percentage                 0.50%      
Selling commission and fee maximum percent                 3.50%      
Stockholders servicing fee percentage on aggregate NAV of outstanding shares                 0.85%      
Advisor stockholders servicing fee percentage on aggregate NAV of outstanding shares                 0.65%      
Dealer stockholders servicing fee percentage on aggregate NAV of outstanding shares                 0.20%      
Related Party | FS Real Estate Advisor | Common Stock Class S                        
Related Party Transaction [Line Items]                        
Stockholder servicing fees percentage     8.75%           8.75%   8.75%  
Dealer manager upfront selling commissions fees percentage                 3.50%      
Stockholders servicing fee percentage on aggregate NAV of outstanding shares                 0.85%      
Related Party | FS Real Estate Advisor | Common Stock Class D                        
Related Party Transaction [Line Items]                        
Stockholder servicing fees percentage     1.25%           1.25%   1.25%  
Stockholders servicing fee percentage on aggregate NAV of outstanding shares                 0.30%      
Related Party | FS Real Estate Advisor | Common Stock Class M                        
Related Party Transaction [Line Items]                        
Stockholder servicing fees percentage     7.25%           7.25%   7.25%  
Stockholders servicing fee percentage on aggregate NAV of outstanding shares                 0.30%      
Related Party | FS Real Estate Advisor | Class T, Class T-C and Class M Shares                        
Related Party Transaction [Line Items]                        
Stockholder servicing fees percentage     10.00%           10.00%   10.00%  
Related Party | FS Real Estate Advisor and Rialto                        
Related Party Transaction [Line Items]                        
Payment of loan origination fees                 $ 7,418 $ 33,237    
Related Party | FS Real Estate Advisor and Rialto | Class I Share Performance-contingent Rights Agreement | Performance-Contingent Rights (PCRs)                        
Related Party Transaction [Line Items]                        
Annualized distribution yield                 6.00%      
Agreement period                 6 months      
Period of written notice to the company by the adviser entities                 10 days      
Related Party | FS Real Estate Advisor and Rialto | Class I Restricted Stock Units Sub Advisory Agreement | Restricted Stock Units (RSUs)                        
Related Party Transaction [Line Items]                        
Agreement period 6 months                      
Period of written notice to the company by the adviser entities 10 days                      
Award vesting rights, percentage 100.00%                      
Award non vesting rights, percentage 100.00%                      
Related Party | FS Investment Solutions                        
Related Party Transaction [Line Items]                        
Offering expenses     $ 115,832     $ 107,692     $ 115,832   $ 115,832  
Related Party | Rialto                        
Related Party Transaction [Line Items]                        
Purchase of floating-rate whole mortgage loan                 $ 6,592      
Related Party | FS Investments and Rialto | Private Placement                        
Related Party Transaction [Line Items]                        
Aggregate proceeds from private placement   $ 200                    
Issuance of common stock (in shares)   8,000                    
Common stock, price per share (in dollars per share)   $ 25.00                    
Related Party | Affiliate Of Rialto | Class E Notes Mortgage Backed Securities                        
Related Party Transaction [Line Items]                        
Purchases of mortgage-backed securities, at fair value       $ 15,000       $ 36,000        

v3.23.3
Related Party Transactions - Summary of Fees and Expenses Accrued under Advisory Agreement (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Dec. 01, 2022
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Related Party Transaction [Line Items]          
Base Management Fee   $ 9,092 $ 6,629 $ 25,514 $ 15,825
Performance contingent rights issued       0 11,409
Administrative service fee percentage 1.00%        
Related Party | FS Real Estate Advisor          
Related Party Transaction [Line Items]          
Base Management Fee   9,092 6,629 25,514 15,825
Performance fee   6,354 3,904 17,742 4,056
Administrative Services Expenses   0 3,434 0 8,658
Administrative Services Fee   7,366 0 20,682 0
Capital Markets Fees   0 0 0 2,000
Payment for management fees       23,949 2,007
Performance contingent rights issued         11,409
Management fee payable   9,088 0 9,088 0
Payment for incentive fees       16,160 557
Incentive fee payable   6,354   6,354  
Allocation of administrative expense         7,978
Administrative service fee percentage 1.00%        
Related Party | Rialto Capital Management          
Related Party Transaction [Line Items]          
Valuation Services Fees   $ 108 $ 106 329 299
Payment of valuation service fees       $ 214 $ 193

v3.23.3
Related Party Transactions - Summary of Reimbursed by FS Real Estate (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Dec. 31, 2022
Sep. 30, 2023
Sep. 30, 2023
Related Party Transaction [Line Items]            
Recoupment paid or payable to sponsor         $ 148  
Related Party            
Related Party Transaction [Line Items]            
Amount of Expense Reimbursement $ 0 $ 61 $ 87 $ 605   $ 753
Recoupable Amount 753 0 0 0   753
Recoupment paid or payable to sponsor 0 61 87 605   753
Expired Amount $ 0 $ 0 $ 0 $ 0   $ 0

v3.23.3
Stockholders' Equity - Summary of Common Stock Transactions (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Beginning balance $ 2,630,503 $ 1,821,230 $ 2,317,157 $ 973,340
Issuance of common stock 171,962 381,818 685,403 1,311,962
Reinvestment of distributions 25,196 15,943 68,670 37,838
Redemptions of common stock (71,309) (43,173) (240,434) (99,944)
Ending balance $ 2,765,134 $ 2,163,769 $ 2,765,134 $ 2,163,769
Common Stock        
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Balance at beginning of period, shares     97,672,807 40,926,209
Beginning balance     $ 2,315,378 $ 971,310
Issuance of common stock (in shares)     28,287,149 52,699,603
Issuance of common stock     $ 685,403 $ 1,311,962
Reinvestment of distributions (in shares)     2,777,240 1,498,182
Reinvestment of distributions     $ 68,670 $ 37,838
Redemptions of common stock (in shares)     (9,723,258) (4,014,502)
Redemptions of common stock     $ (240,434) $ (99,944)
Transfers in or out (in shares)     (19,130) (4,184)
Transfers in or out     $ 0 $ 0
Accrued stockholder servicing fees     $ (18,214) $ (61,558)
Balance at end of period, shares 119,033,068 91,113,676 119,033,068 91,113,676
Ending balance $ 2,810,803 $ 2,159,608 $ 2,810,803 $ 2,159,608
Common Stock | Class F        
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Balance at beginning of period, shares     857,710 902,878
Beginning balance     $ 21,008 $ 22,138
Issuance of common stock (in shares)     0 0
Issuance of common stock     $ 0 $ 0
Reinvestment of distributions (in shares)     22,334 22,136
Reinvestment of distributions     $ 559 $ 554
Redemptions of common stock (in shares)     (114,365) (74,770)
Redemptions of common stock     $ (2,862) $ (1,870)
Transfers in or out (in shares)     10,259 0
Transfers in or out     $ (257) $ 0
Accrued stockholder servicing fees     $ 0 $ 0
Balance at end of period, shares 755,420 850,244 755,420 850,244
Ending balance $ 18,448 $ 20,822 $ 18,448 $ 20,822
Common Stock | Class Y        
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Balance at beginning of period, shares     906,648 906,648
Beginning balance     $ 22,371 $ 22,371
Issuance of common stock (in shares)     0 0
Issuance of common stock     $ 0 $ 0
Reinvestment of distributions (in shares)     0 0
Reinvestment of distributions     $ 0 $ 0
Redemptions of common stock (in shares)     0 0
Redemptions of common stock     $ 0 $ 0
Transfers in or out (in shares)     0 0
Transfers in or out     $ 0 $ 0
Accrued stockholder servicing fees     $ 0 $ 0
Balance at end of period, shares 906,648 906,648 906,648 906,648
Ending balance $ 22,371 $ 22,371 $ 22,371 $ 22,371
Common Stock | Class T        
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Balance at beginning of period, shares     1,600,878 1,407,377
Beginning balance     $ 38,473 $ 33,862
Issuance of common stock (in shares)     72,725 188,212
Issuance of common stock     $ 1,812 $ 4,699
Reinvestment of distributions (in shares)     33,745 31,615
Reinvestment of distributions     $ 838 $ 793
Redemptions of common stock (in shares)     (109,653) (33,438)
Redemptions of common stock     $ (2,723) $ (835)
Transfers in or out (in shares)     219,302 1,729
Transfers in or out     $ (5,447) $ (43)
Accrued stockholder servicing fees     $ (49) $ (192)
Balance at end of period, shares 1,378,393 1,592,037 1,378,393 1,592,037
Ending balance $ 32,904 $ 38,284 $ 32,904 $ 38,284
Common Stock | Class S        
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Balance at beginning of period, shares     54,908,336 22,823,721
Beginning balance     $ 1,274,345 $ 531,150
Issuance of common stock (in shares)     12,869,916 30,189,475
Issuance of common stock     $ 322,941 $ 760,752
Reinvestment of distributions (in shares)     1,484,600 877,669
Reinvestment of distributions     $ 37,215 $ 22,106
Redemptions of common stock (in shares)     (5,080,070) (2,268,159)
Redemptions of common stock     $ (127,360) $ (57,119)
Transfers in or out (in shares)     55,465 0
Transfers in or out     $ (1,390) $ 0
Accrued stockholder servicing fees     $ (17,913) $ (58,903)
Balance at end of period, shares 64,127,317 51,622,706 64,127,317 51,622,706
Ending balance $ 1,487,838 $ 1,197,986 $ 1,487,838 $ 1,197,986
Common Stock | Class D        
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Balance at beginning of period, shares     742,999 642,162
Beginning balance     $ 18,417 $ 15,945
Issuance of common stock (in shares)     131,578 113,587
Issuance of common stock     $ 3,275 $ 2,840
Reinvestment of distributions (in shares)     12,790 11,074
Reinvestment of distributions     $ 318 $ 277
Redemptions of common stock (in shares)     (37,372) (21,931)
Redemptions of common stock     $ (929) $ (549)
Transfers in or out (in shares)     174,445 18,729
Transfers in or out     $ (4,338) $ (468)
Accrued stockholder servicing fees     $ (16) $ (32)
Balance at end of period, shares 675,550 726,163 675,550 726,163
Ending balance $ 16,727 $ 18,013 $ 16,727 $ 18,013
Common Stock | Class M        
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Balance at beginning of period, shares     4,645,072 2,876,736
Beginning balance     $ 108,522 $ 66,836
Issuance of common stock (in shares)     734,839 1,605,166
Issuance of common stock     $ 18,333 $ 40,238
Reinvestment of distributions (in shares)     83,733 52,503
Reinvestment of distributions     $ 2,088 $ 1,820
Redemptions of common stock (in shares)     (401,787) (153,213)
Redemptions of common stock     $ (10,015) $ (3,840)
Transfers in or out (in shares)     269,434 142,726
Transfers in or out     $ (6,722) $ (3,580)
Accrued stockholder servicing fees     $ (236) $ (2,431)
Balance at end of period, shares 4,792,423 4,238,466 4,792,423 4,238,466
Ending balance $ 111,970 $ 99,043 $ 111,970 $ 99,043
Common Stock | Class I        
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Balance at beginning of period, shares     34,011,164 11,366,687
Beginning balance     $ 832,242 $ 279,008
Issuance of common stock (in shares)     14,478,091 20,603,163
Issuance of common stock     $ 339,042 $ 503,433
Reinvestment of distributions (in shares)     1,140,038 503,185
Reinvestment of distributions     $ 27,652 $ 12,288
Redemptions of common stock (in shares)     (3,980,011) (1,462,991)
Redemptions of common stock     $ (96,545) $ (35,731)
Transfers in or out (in shares)     (748,035) (167,368)
Transfers in or out     $ 18,154 $ 4,091
Accrued stockholder servicing fees     $ 0 $ 0
Balance at end of period, shares 46,397,317 31,177,412 46,397,317 31,177,412
Ending balance $ 1,120,545 $ 763,089 $ 1,120,545 $ 763,089

v3.23.3
Stockholders' Equity - Additional Information (Details) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Class of Stock [Line Items]    
Percentage of share repurchases of aggregate net asset value 20.00%  
Shares repurchased under repurchase plan (in shares) 9,723,258 4,014,502
Shares repurchased under repurchase plan, value $ 240,434 $ 99,944
Series A Preferred Stock    
Class of Stock [Line Items]    
Dividend rate 12.00%  
Minimum    
Class of Stock [Line Items]    
Repurchase of shares to NAV of all classes of shares, percentage 2.00%  
Maximum    
Class of Stock [Line Items]    
Repurchase of shares to NAV of all classes of shares, percentage 5.00%  

v3.23.3
Stockholders' Equity - Summary of Cash Distributions Per Share that Paid on its Common Stock (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 29, 2023
Aug. 30, 2023
Jul. 28, 2023
Jun. 29, 2023
May 30, 2023
Apr. 27, 2023
Mar. 30, 2023
Feb. 27, 2023
Jan. 30, 2023
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Distributions:                          
Paid or payable in cash                   $ 25,820 $ 16,473 $ 72,406 $ 40,805
Reinvested in shares                   25,196 15,943 68,670 37,838
Total distributions                   51,016 32,416 141,076 78,643
Cash flows from operating activities                   51,016 32,416 141,076 78,643
Offering proceeds                   0 0 0 0
Total sources of distributions                   51,016 32,416 141,076 78,643
Net cash provided by (used in) operating activities                   $ 81,922 $ 47,173 $ 201,619 $ 96,098
Class F                          
Dividends Payable [Line Items]                          
Distributions paid per share of common stock (in dollars per share) $ 0.1799 $ 0.1799 $ 0.1799 $ 0.1799 $ 0.1749 $ 0.1749 $ 0.1749 $ 0.1696 $ 0.1696     $ 1.5835  
Class Y                          
Dividends Payable [Line Items]                          
Distributions paid per share of common stock (in dollars per share) 0.1799 0.1799 0.1799 0.1799 0.1749 0.1749 0.1749 0.1696 0.1696     1.5835  
Class T                          
Dividends Payable [Line Items]                          
Distributions paid per share of common stock (in dollars per share) 0.1362 0.1362 0.1362 0.1362 0.1312 0.1312 0.1312 0.1259 0.1259     1.1902  
Class S                          
Dividends Payable [Line Items]                          
Distributions paid per share of common stock (in dollars per share) 0.1362 0.1362 0.1362 0.1362 0.1312 0.1312 0.1312 0.1259 0.1259     1.1902  
Class D                          
Dividends Payable [Line Items]                          
Distributions paid per share of common stock (in dollars per share) 0.1477 0.1477 0.1477 0.1477 0.1427 0.1427 0.1427 0.1374 0.1374     1.2937  
Class M                          
Dividends Payable [Line Items]                          
Distributions paid per share of common stock (in dollars per share) 0.1477 0.1477 0.1477 0.1477 0.1427 0.1427 0.1427 0.1374 0.1374     1.2937  
Class I                          
Dividends Payable [Line Items]                          
Distributions paid per share of common stock (in dollars per share) $ 0.1539 $ 0.1539 $ 0.1539 $ 0.1539 $ 0.1489 $ 0.1489 $ 0.1489 $ 0.1436 $ 0.1436     $ 1.3495  

v3.23.3
Stockholders' Equity - Schedule of Cash Distribution On Class of Common Stock (Details)
1 Months Ended
Jul. 31, 2023
$ / shares
Class F  
Class of Stock [Line Items]  
Distributions declared (in USD per share) $ 0.1799
Class Y  
Class of Stock [Line Items]  
Distributions declared (in USD per share) 0.1799
Class T  
Class of Stock [Line Items]  
Distributions declared (in USD per share) 0.1362
Class S  
Class of Stock [Line Items]  
Distributions declared (in USD per share) 0.1362
Class D  
Class of Stock [Line Items]  
Distributions declared (in USD per share) 0.1477
Class M  
Class of Stock [Line Items]  
Distributions declared (in USD per share) 0.1477
Class I  
Class of Stock [Line Items]  
Distributions declared (in USD per share) $ 0.1539

v3.23.3
Fair Value of Financial Instruments - Summary Of Company Financial Instruments Carried At Fair Value In The Consolidated Balance Sheets (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Financial Assets    
Mortgage-backed securities, at fair value $ 225,095 $ 159,464
Mortgage loans held in securitization trusts, at fair value 330,629 324,263
Interest rate cap 3,246 4,616
Total 558,970 488,343
Financial Liabilities    
Mortgage obligations issued by securitization trusts, at fair value 298,170 291,193
Level 1    
Financial Assets    
Mortgage-backed securities, at fair value 0 0
Mortgage loans held in securitization trusts, at fair value 0 0
Interest rate cap 0 0
Total 0 0
Financial Liabilities    
Mortgage obligations issued by securitization trusts, at fair value 0 0
Level 2    
Financial Assets    
Mortgage-backed securities, at fair value 225,095 159,464
Mortgage loans held in securitization trusts, at fair value 0 0
Interest rate cap 3,246 4,616
Total 228,341 164,080
Financial Liabilities    
Mortgage obligations issued by securitization trusts, at fair value 298,170 291,193
Level 3    
Financial Assets    
Mortgage-backed securities, at fair value 0 0
Mortgage loans held in securitization trusts, at fair value 330,629 324,263
Interest rate cap 0 0
Total 330,629 324,263
Financial Liabilities    
Mortgage obligations issued by securitization trusts, at fair value $ 0 $ 0

v3.23.3
Fair Value of Financial Instruments - Summary of changes in fair value of financial assets which are measured at fair value on a recurring basis (Details) - Mortgage loans held in securitization trusts, at fair value
$ in Thousands
9 Months Ended
Sep. 30, 2023
USD ($)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]  
Fair value at beginning of period $ 324,263
Accretion of discount (amortization of premium) 0
Net realized gain (loss) 0
Net change in unrealized appreciation (depreciation) 6,366
Purchases 0
Sales and repayments 0
Issuances 0
Transfer into Level 3 0
Transfers out of Level 3 0
Consolidation of securitization trusts 0
Deconsolidation of securitization trusts 0
Fair value at end of period 330,629
Included in earnings 0
Included in other comprehensive income $ 0

v3.23.3
Fair Value of Financial Instruments - Additional Information (Details)
$ in Thousands
Sep. 30, 2023
USD ($)
yr
Dec. 31, 2022
USD ($)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Mortgage-backed securities, at fair value | $ $ 225,095 $ 159,464
Commercial Mortgage Backed Securities | CMBS, fair value option    
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Mortgage-backed securities, at fair value | $ 33,230  
Face value | $ $ 36,469  
Minimum | Level 3 | Blended Yield | Discounted Cash Flow    
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Mortgage obligation, measurement input 0.1269  
Minimum | Level 3 | Expected Term    
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Mortgage obligation, measurement input | yr 1  
Maximum | Level 3 | Blended Yield | Discounted Cash Flow    
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Mortgage obligation, measurement input 0.1682  
Maximum | Level 3 | Expected Term    
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Mortgage obligation, measurement input | yr 3.5  
Weighted Average | Level 3 | Blended Yield | Discounted Cash Flow    
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Mortgage obligation, measurement input 0.1416  
Weighted Average | Level 3 | Expected Term    
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Mortgage obligation, measurement input | yr 2.6  

v3.23.3
Fair Value of Financial Instruments - Summary of Carrying Amount, Face Amount, and Fair Value of Financial Instruments (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Financial Liabilities    
Collateralized loan obligations $ 4,306,272 $ 4,336,701
Book Value    
Financial Assets    
Cash, cash equivalents and restricted cash 214,875 201,618
Loans receivable, held-for-investment 7,665,632 7,350,315
Mortgage-backed securities held-to-maturity 74,543 68,559
Financial Liabilities    
Repurchase agreements 239,457 756,816
Credit facilities 839,507 298,544
Collateralized loan obligations 4,306,272 4,336,701
Mortgage note payable 123,480 122,568
Face Amount    
Financial Assets    
Cash, cash equivalents and restricted cash 214,875 201,618
Loans receivable, held-for-investment 7,735,561 7,350,271
Mortgage-backed securities held-to-maturity 80,300 80,300
Financial Liabilities    
Repurchase agreements 242,175 760,236
Credit facilities 850,000 310,982
Collateralized loan obligations 4,334,005 4,371,684
Mortgage note payable 124,700 124,700
Fair Value    
Financial Assets    
Cash, cash equivalents and restricted cash 214,875 201,618
Loans receivable, held-for-investment 7,655,946 7,339,105
Mortgage-backed securities held-to-maturity 67,203 68,559
Financial Liabilities    
Repurchase agreements 242,175 760,236
Credit facilities 850,000 310,982
Collateralized loan obligations 4,334,005 4,371,684
Mortgage note payable $ 124,700 $ 124,700

v3.23.3
Variable Interest Entities - Schedule of detailed information about the assets and liabilities (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Sep. 30, 2022
Assets      
Restricted cash $ 47,935 $ 17,953 $ 26,121
Loans receivable, held-for-investment 7,665,632 7,350,315 $ 7,091,841
Interest receivable 35,987 32,240  
Other assets 6,155 9,281  
Mortgage loans held in securitization trusts, at fair value 330,629 324,263  
Total assets [1] 8,784,408 8,337,816  
Liabilities      
Collateralized loan obligations, net 4,306,272 4,336,701  
Interest payable 28,722 19,379  
Other liabilities 40,014 27,278  
Mortgage obligations issued by securitization trusts, at fair value 298,170 291,193  
Total liabilities [1] 6,019,274 6,020,659  
Variable Interest Entity, Primary Beneficiary      
Assets      
Restricted cash 32,477 0  
Loans receivable, held-for-investment 5,498,839 5,546,779  
Interest receivable 23,228 24,144  
Other assets 7,034 853  
Mortgage loans held in securitization trusts, at fair value 330,629 324,263  
Total assets 5,892,207 5,896,039  
Liabilities      
Collateralized loan obligations, net 4,306,272 4,336,701  
Interest payable 12,022 12,631  
Other liabilities 533 473  
Mortgage obligations issued by securitization trusts, at fair value 298,170 291,193  
Total liabilities $ 4,616,997 $ 4,640,998  
[1] The September 30, 2023 and December 31, 2022 consolidated balance sheets include assets of consolidated variable interest entities, or VIEs, that can only be used to settle obligations of the VIEs, and liabilities of consolidated VIEs for which creditors do not have recourse to FS Credit Real Estate Income Trust, Inc. As of September 30, 2023 and December 31, 2022, assets of the VIEs totaled $5,892,207 and $5,896,039, respectively, and liabilities of the VIEs totaled $4,616,997 and $4,640,998, respectively. See Note 10 for further details.

v3.23.3
Variable Interest Entities - Additional Information (Details)
$ in Thousands
Sep. 30, 2023
USD ($)
Variable Interest Entity, Not Primary Beneficiary  
Variable Interest Entity [Line Items]  
Maximum exposure to loss $ 317,117

v3.23.3
Derivative Instrument - Summary of Derivative Instruments (Details) - Interest Rate Cap
$ in Thousands
Sep. 30, 2023
USD ($)
Derivative [Line Items]  
Notional Amount $ 126,700
Strike 2.25%
Fair Value $ 3,246

v3.23.3
Derivative Instrument - Summary of Fair Value of the Company Derivative Financial Instrument (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Derivative Instruments, Gain (Loss) [Line Items]        
Net change in unrealized gain on interest rate cap $ (762) $ 1,758 $ (1,370) $ 309
Interest Rate Cap | Unrealized Loss | Other income (loss)        
Derivative Instruments, Gain (Loss) [Line Items]        
Net change in unrealized gain on interest rate cap $ (762) $ 1,758 $ (1,370) $ 309

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