BrightSpire Capital, Inc. Announces Second Quarter 2024 Financial Results

Rhea-AI Summary

BrightSpire Capital (NYSE: BRSP) reported its Q2 2024 financial results, revealing a GAAP net loss of ($67.9) million, or ($0.53) per share. The company's Distributable Earnings were $17.0 million ($0.13 per share), while Adjusted Distributable Earnings reached $28.8 million ($0.22 per share). BrightSpire's GAAP net book value stood at $8.41 per share, with an undepreciated book value of $9.08 per share as of June 30, 2024.

The Board declared a dividend of $0.16 per share for Q3 2024, payable on October 15, 2024. CEO Michael J. Mazzei noted that the reduction in book value was primarily due to legacy office equity investments. The company plans to reduce dividends during the reinvestment period as it transitions from legacy equity investments to new loan originations.

Positive

• Adjusted Distributable Earnings of $28.8 million, or $0.22 per share
• Stable watchlist quarter over quarter
• Commencing lending activities

Negative

• GAAP net loss of ($67.9) million, or ($0.53) per share
• Reduction in book value due to legacy office equity investments
• Dividend reduction announced
• Loss of cash earnings from legacy equity investments

Insights

Financial Analyst

BrightSpire Capital's Q2 2024 results reveal significant challenges, particularly in its legacy office equity investments. The company reported a GAAP net loss of $67.9 million, or $0.53 per share, which is a concerning figure for investors. However, it's important to note the difference between GAAP results and the company's Distributable Earnings of $17.0 million ($0.13 per share) and Adjusted Distributable Earnings of $28.8 million ($0.22 per share).

The reduction in book value, primarily attributed to legacy office equity investments, is a red flag. The GAAP net book value decreased to $8.41 per share, while the undepreciated book value stands at $9.08 per share. This decline suggests ongoing challenges in the office real estate sector, which could continue to pressure BrightSpire's performance.

A critical development is the dividend reduction to $0.16 per share for Q3 2024. While this move may disappoint income-focused investors, it reflects a prudent approach to capital management during a period of reinvestment and portfolio restructuring. The company's decision to recommence lending activities indicates a strategic shift, but the timeline for this to translate into improved earnings remains uncertain.

Investors should closely monitor BrightSpire's loan origination progress and the performance of its CRE debt investments, which are expected to become the primary investment strategy. The stability of the watchlist is a positive sign, but the near-term impact of lost cash earnings from legacy equity investments could continue to weigh on financial results.

Real Estate Market Analyst

BrightSpire Capital's Q2 2024 results underscore the ongoing challenges in the commercial real estate market, particularly in the office sector. The significant impact on the company's book value from legacy office equity investments reflects broader market trends of declining office property values and occupancy rates.

The company's strategic pivot towards CRE debt investments, primarily first mortgage loans, is a calculated move in response to these market conditions. This shift could potentially provide more stable returns and lower risk exposure compared to equity investments in the current environment. However, the success of this strategy will depend on BrightSpire's ability to originate high-quality loans in a competitive market.

The decision to reduce the dividend and enter a reinvestment period suggests management's cautious outlook on the near-term market conditions. This approach may help strengthen the company's financial position but could also signal expectations of continued headwinds in the CRE sector.

Investors should pay close attention to several key factors:

• The performance of BrightSpire's CRE debt portfolio and any changes in credit quality
• The pace and quality of new loan originations
• Any further write-downs or dispositions of legacy office equity investments
• Overall trends in the commercial real estate market, including property values, occupancy rates and lending conditions

While the company's focus on CRE debt could provide some insulation from direct property value fluctuations, the overall health of the commercial real estate market will remain a critical factor in BrightSpire's performance going forward.

NEW YORK--(BUSINESS WIRE)-- BrightSpire Capital, Inc. (NYSE: BRSP) (“BrightSpire Capital” or the “Company”) today announced its financial results for the second quarter 2024 and certain updates. The Company reported second quarter 2024 GAAP net loss attributable to common stockholders of ($67.9) million, or ($0.53) per share, Distributable Earnings of $17.0 million, or $0.13 per share, and Adjusted Distributable Earnings of $28.8 million, or $0.22 per share. The Company reported GAAP net book value of $8.41 per share and undepreciated book value of $9.08 per share as of June 30, 2024.

In addition, the Board of Directors of BrightSpire Capital declared a dividend of $0.16 per share of Class A common stock with respect to the third quarter of 2024. The dividend is payable on October 15, 2024, to stockholders of record as of September 30, 2024.

Michael J. Mazzei, Chief Executive Officer, commented, “The reduction in our book value this past quarter was largely driven by legacy office equity investments. Our watchlist has been stable quarter over quarter and we have gained enough visibility in resolutions to commence lending activities. However, the loss of cash earnings from these legacy equity investments is more near term versus our future loan origination timeline. Therefore, in planning for the long term, we are reducing the dividend through this reinvestment period.”

Supplemental Financial Report

A Second Quarter 2024 Supplemental Financial Report is available on the Shareholders – Events and Presentations section of the Company’s website at www.brightspire.com. This information will be furnished to the SEC in a Current Report on Form 8-K.

We refer to “Distributable Earnings” and “Adjusted Distributable Earnings”, which are non-GAAP financial measures, in this release. A reconciliation to net income/(loss) attributable to BrightSpire Capital common stockholders, the most directly comparable GAAP measure, is included in our full detailed Second Quarter 2024 Supplemental Financial Report and is available on our website at www.brightspire.com.

Second Quarter 2024 Conference Call

The Company will conduct a conference call to discuss the results on Wednesday, July 31, 2024, at 10:00 a.m. ET / 7:00 a.m. PT. To participate in the event by telephone, please dial (877) 407-0784 ten minutes prior to the start time (to allow time for registration). International callers should dial (201) 689-8560. The call will also be broadcast live over the Internet and can be accessed on the ‘Shareholders’ section of the Company’s website at www.brightspire.com. A webcast of the call will be available for 90 days on the Company’s website.

For those unable to participate during the live call, a replay will be available starting July 31, 2024, at 12:00 p.m. ET / 9:00 a.m. PT, through August 7, 2024, at 11:59 p.m. ET / 8:59 p.m. PT. To access the replay, dial (844) 512-2921 and use conference ID code 13746975. International callers should dial (412) 317-6671 and enter the same conference ID.

About BrightSpire Capital, Inc.

BrightSpire Capital, Inc. (NYSE: BRSP) is internally managed and one of the largest publicly traded commercial real estate (CRE) credit REITs, focused on originating, acquiring, financing and managing a diversified portfolio consisting primarily of CRE debt investments and net leased properties predominantly in the United States. CRE debt investments primarily consist of first mortgage loans, which we expect to be the primary investment strategy. BrightSpire Capital is organized as a Maryland corporation and taxed as a REIT for U.S. federal income tax purposes. For additional information regarding the Company and its management and business, please refer to www.brightspire.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond our control, and may cause actual results to differ significantly from those expressed in any forward-looking statement. Among others, the following uncertainties and other factors could cause actual results to differ from those set forth in the forward-looking statements: operating costs and business disruption may be greater than expected; uncertainties regarding the ongoing impact of the novel coronavirus (COVID-19) and its adverse impact on the real estate market, the economy and the Company’s investments, financial condition and business operation; the Company's operating results may differ materially from the information presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as well as in the Company’s other filings with the Securities and Exchange Commission; the fair value of the Company's investments may be subject to uncertainties (including impacts associated with accelerating inflationary trends, recent and potential further interest rate increases, the volatility of interest rates, credit spreads and the transition from LIBOR to SOFR, increased market volatility affecting commercial real estate businesses and public securities); the Company's use of leverage and interest rate mismatches between the Company’s assets and borrowings could hinder its ability to make distributions and may significantly impact its liquidity position; the ability to simplify the portfolio, realize substantial efficiencies as well as anticipated strategic and financial benefits, including, but not limited to expected cost savings through the internalization or expected returns on equity and/or yields on investments; the timing of and ability to generate additional liquidity and deploy available liquidity, including in senior mortgage loans; whether the Company will achieve its anticipated Distributable Earnings per share (as adjusted), or maintain or produce higher Distributable Earnings per share (as adjusted) in the near term or ever; the Company’s ability to maintain or grow the dividend at all in the future; defaults by borrowers in paying debt service on outstanding indebtedness; borrowers’ abilities to manage and stabilize properties; deterioration in the performance of the properties securing our investments (including the impact of higher interest expense, depletion of interest and other reserves or payment-in-kind concessions in lieu of current interest payment obligations, population shifts and migration, reduced demand for office, multifamily, hospitality or retail space) that may cause deterioration in the performance of our investments and, potentially, principal losses to us; adverse impacts on the Company's corporate revolver, including covenant compliance and borrowing base capacity; adverse impacts on the Company's liquidity, including available capacity under and margin calls on master repurchase facilities; lease payment defaults or deferrals, demands for protective advances and capital expenditures; the ability of the Company to refinance certain mortgage debt on similar terms to those currently existing or at all; the ability to execute CRE CLO’s on a go forward basis, including at a reduced cost of capital; the impact of legislative, regulatory, tax and competitive changes, regime changes and the actions of government authorities and in particular those affecting the commercial real estate finance and mortgage industry or our business; and the impact of the conflict between Russia and Ukraine, global trade tensions, and the implementation and expansion of economic and trade sanctions. The foregoing list of factors is not exhaustive. Additional information about these and other factors can be found in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as well as in BrightSpire Capital’s other filings with the Securities and Exchange Commission. Moreover, each of the factors referenced above are likely to also be impacted directly or indirectly by the ongoing impact of COVID-19 and investors are cautioned to interpret substantially all of such statements and risks as being heightened as a result of the ongoing impact of the COVID-19.

We caution investors not to unduly rely on any forward-looking statements. The forward-looking statements speak only as of the date of this press release. BrightSpire Capital is under no duty to update any of these forward-looking statements after the date of this press release, nor to conform prior statements to actual results or revised expectations, and BrightSpire Capital does not intend to do so.

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Investor Relations

BrightSpire Capital, Inc.

Addo Investor Relations

Anne McGuinness

310-829-5400

brsp@addo.com

Source: BrightSpire Capital, Inc.

FAQ

What were BrightSpire Capital's (BRSP) Q2 2024 financial results?

BrightSpire Capital reported a GAAP net loss of ($67.9) million, or ($0.53) per share, Distributable Earnings of $17.0 million, or $0.13 per share, and Adjusted Distributable Earnings of $28.8 million, or $0.22 per share for Q2 2024.

What dividend did BrightSpire Capital (BRSP) declare for Q3 2024?

BrightSpire Capital's Board of Directors declared a dividend of $0.16 per share of Class A common stock for Q3 2024, payable on October 15, 2024, to stockholders of record as of September 30, 2024.

Why is BrightSpire Capital (BRSP) reducing its dividend?

BrightSpire Capital is reducing its dividend due to the loss of cash earnings from legacy equity investments and the need to reinvest during the transition to new loan originations. This reduction is part of the company's long-term planning strategy.

What was BrightSpire Capital's (BRSP) book value per share as of June 30, 2024?

As of June 30, 2024, BrightSpire Capital reported a GAAP net book value of $8.41 per share and an undepreciated book value of $9.08 per share.