BrightSpire Capital, Inc. Q4 FY2024 earnings call

Lending Markets Dynamics - Commercial real estate debt markets improved, CLO issuance increased, AAA spreads tightened ~50 basis points; bank warehouse lenders tightened lending spreads. Higher interest rates and insurance annuity sales drove credit spread compression. - Origination side: Billion in upcoming debt maturities drive refinancing demand, but actionable transactions face headwinds due to Fed rate pause and higher treasury rates. - BrightSpire Actions: Pivoted to building origination pipeline, funded 5 new loans totaling $119 million with $59 million in closing (all multifamily, actively quoting other property types except office). - Watchlist Loans: Made progress on resolution, including summary judgment on San Jose Hotel (largest loan, 1/3 of year-end watchlist) and three-year maturity extension on St. Louis office equity investment. - REO Dispositions: Intend to make considerable progress in 2025; sold Oakland office property, foreclosed on Fort Worth multifamily loan, and working on stabilization of Phoenix multifamily property.

BrightSpire Capital reported a fourth quarter GAAP net loss attributable to common stockholders of $19.7 million or $0.16 per share. Distributable earnings were $13.7 million or $0.11 per share, and adjusted distributable earnings were $23.7 million or $0.18 per share. Current liquidity stood at $418 million, with $253 million in unrestricted cash. As of December 31, 2024, GAAP net book value was $8.08 per share and undepreciated book value was $8.89 per share.

- Intention to execute another CLO to add leverage and lift ROE. - Goal to originate over $1 billion in new loans in 2025 to rebuild loan book and sustain/dividend coverage. - Expect spread tightening to continue, with potential for more lender-driven borrower property sales. - Anticipate modest negative dividend coverage while redeploying capital, aiming for sustained positive coverage via REO sales and turning over under-earning assets.

- Interest rate environment causing negative equity leverage for investments, putting new construction on limits and keeping transactions in interest rate limbo. - Competitive market with a fraction of actionable transactions from the large pipeline. - Potential impairments on REO assets as they are stabilized and sold; risks related to watchlist loans and CLOs where recovery amounts may not match face values.

Q: Steve Delaney asked about CLOs, portfolio growth and if there's a goal for portfolio growth in 2025.

A: Mike Mazzei responded that they intend to execute another CLO, need to originate over $1 billion in new loans to get portfolio well over $3 billion, and there's a lot of transaction activity but much is in interest rate limbo.

Q: Jason Weaver asked about general reserve increase and the San Jose Hotel.

A: Frank Saracino said reserve movement is around risk rank 4 and 5 loans; Mike Mazzei mentioned being pleased with dismissal in bankruptcy court for San Jose Hotel but hesitant to say more due to process.

Q: Tom Catherwood asked about origination timeline and REO actionable assets.

A: Mike Mazzei said it'll take full year to get back to steady state origination; Andy Witt mentioned Texas multifamily assets, Long Island City office assets as actionable in near term.

Q: Randy Binner asked about loan origination pipeline.

A: Mike Mazzei said source of capital is ample, quoting everywhere except office, competitive market, and need to do net $1 billion to cover dividend.

Q: Gaurav Mehta asked about the billion-dollar number being gross or net.

A: Mike Mazzei said need to do net $1 billion on new loans to keep dividend, with more activity expected in second half of year.