BrightSpire Capital, Inc. Q3 FY2025 earnings call

Key Points - Strong third quarter results with stable book value and progress on watch list loans, REO properties, loan portfolio rebuilding, and dividend coverage. - Net positive loan originations for the second consecutive quarter and growth in origination pipeline. - Improvements in commercial real estate markets with tightening credit and lending spreads, increased loan inquiry, and active CMBS and CLO markets. - During the third quarter, 10 loans totaling $224 million were originated, with 7 loans in execution for an additional $242 million, bringing total new closed and in execution commitments to $741 million since resuming originations. - Watch list reduced from $411 million at the start of 2025 to $182 million, with borrowers commencing sales processes on underlying properties. - REO portfolio progress with gradual improvements to the Signia Hotel property, 2 REO office properties for sale, and plans to market additional REO assets early next year. - Office loan portfolio reduced from $769 million at the start of 2025 to $653 million, with borrowers indicating intentions to sell properties in the improving market.

In the third quarter, BrightSpire Capital reported GAAP net income attributable to common stockholders of $1 million or $0.01 per share, distributable earnings of $3.3 million or $0.03 per share, and adjusted distributable earnings of $21.2 million or $0.16 per share. Current liquidity stood at $280 million, with $87 million unrestricted cash. GAAP net book value was $7.53 per share and undepreciated book value was $8.68 per share as of September 30, 2025. The loan portfolio was $2.4 billion across 85 loans, with an average loan balance of $28 million and a risk ranking of 3.1. The watch list portion of the loan portfolio was 8% with a total gross book value of $182 million, and the REO portfolio was $364 million of undepreciated gross book value across 8 properties.

Forward-Looking Statements - Preparing for next CLO securitization. - Target to grow loan book to approximately $3.5 billion. - Need to do well over $1 billion in originations between now and the end of 2026, with gross originations close to $1.5 billion to offset payments. - Expect increased rate of loan book growth in future quarters moving towards the $3.5 billion target.

Q: Could you give an update on liquidity position post quarter-to-date originations and those in execution that are expected to close, and if recent loans are placed in 2024 CLO or held on balance sheet?

A: Those are being held on balance sheet. Liquidity is hovering around $100 million in cash, with much of future originations expected to come from REO resolutions.

Q: How are you thinking about the net lease portfolio and potential growth?

A: Happy with current assets, not exploring triple net market, may consider selling assets if interesting bids are received but no change in plan currently.

Q: Do you expect a boost in demand if there's another Fed cut, and what's your sentiment on the market?

A: It's improving; dovish Fed, lower long end of treasury, some lenders exhausted, encouraging borrowers to refinance or sell properties, Goldilocks environment with increasing transaction sales volume.

Q: Are we at the point where we can grow the loan book going forward, and what about the San Jose hotel's contribution to distributable earnings?

A: Loan book is expected to increase with increased momentum in originations and pipeline growth. The San Jose hotel's NOI is expected to be sub-$10 million, with hope for uplift in the Bay Area, but need to observe latent group demand; roughly a $10 million NOI would be a target for 2026.

Q: Can you provide details on the size and timing of the expected CLO issuance, and the second office property for sale?

A: Can't comment on CLO issuance size and timing as it's too close. The second office property for sale is one of the Long Island City properties, with offers being solicited.