BrightSpire Capital (BRSP) 1 May 242024 Q1 Earnings call transcript

Greetings, and welcome to the BrightSpire Capital, Inc.

First Quarter 2024 Earnings Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce David Palame, General Counsel. David. you, Thank

begin. You may

and Earnings welcome First morning, BrightSpire to Call. XXXX Conference Quarter Good Capital's

We BrightSpire refer throughout will to this the BRSP call. company or Capital as BrightSpire,

Officer, are Speaking call and Chief Saracino. Operating the Mike Frank Witt; Mazzei, Officer, company's Officer, on Andy President today Chief the Financial Chief and Executive

to contains assumptions. over, management's statements, These which risks based on the Before that could company's this statements. I call cause hand and call, results business forward-looking on expectations risks, are and uncertainties and subject current note Potential to please certain uncertainties information presented the materially. differ are financial

for information in For Risk and company's reports periodic time with SEC that Factors is does risks XX-K of current today, could from the the our filed the of please no X, statements time. undertakes most not recent duty see factors events a the discussion as to section risk company and on and affect call of and update other or XXXX, results, circumstances. forward-looking and future May intend this discussed All to

addition, earnings In presentation, non-GAAP GAAP and presented measures financial the on was represents such financial this presents is and to company's investors. measures which explanation are and this available release released morning supplemental the an believes The company measures. website, certain non-GAAP financial appropriate useful why call reconciliations information company's on the to of

as like to refer to earnings to over may DE call would With the Mike. management call, distributable this during turn that, with. Finally, I now

specifics will is as highlights. the conditions and financial will joining my on Andy for quarter for David. turn key more call, portfolio. Welcome marketing thank earnings for remarks Then focus us you I financial some morning. discuss visibility to off Starting some you, call company, our over highlights to with the this briefly first In the on XXXX what provide Thank to today, I and ahead.

$XX.X $XX.X DE net $X.XX a positive million per or adjusted quarter, $X.XX share, million loss or $X.XX reported first of DE of we of million the For and GAAP or share share. $XX.X per per

liquidity $XXX on at current hand. stands Our million, is of million cash $XXX which

This in to primarily a which in a $X.XX This by $XXX reduction net $XX.XX. or $X.XX value, our our ] reserves recorded quarter, brings undepreciated at few stands was million driven CECL currently per increase reduction $X.XX we total [ share. This per share. a CECL reserves book

dividend leverage was Our remains and coverage unchanged quarter ratio our DE the at X.XXx. first X.Xx, adjusted for

a year, mode, in the rally. markets. the went markets discuss into gear briefly the of let's financial high which In risk-on this Now X resulted first months everything an

As higher-for-longer we was next rate. of fueled telegraphing near-term by cut the move all be period end economic for strong a conviction soft and growth and a Fed continued driven know, the worst at would This a Fed the in the that the very funds this landing.

first risks REO have critical became assets while of starting prices, of we cuts cut. as improving it next the risk-rated while to new inflation not X interest progressed, generally Therefore, and will a and apparent CECL that downgraded rates as light a to reserves once XX-year position, a of shifted a the this, quarter our to However, when maintaining The as up business Fed's not the along the We, increased the loans of starting path during In course, in of is our until segment and focused portfolio perhaps have price remain watch list on thing. to yield loans December. are risen is are sticking positively good two commodity has and gold increased. with move [ doing be expectations quarter multiple second again, while from the a likely our is response, quarter. gold the all-time high, earnings. we treasury an the to result, rallied conservative resolutions correlated ] this also it and In geopolitical

do cash February, increases months, along of stated with of over as call also many I the the that in holding future higher earnings. our factors dividend Separately, recognized capital. last sector, emphasize XX impact balances underperforming and assets. coverages in impact on points our as peers time Therefore, these BrightSpire in well quarter unencumbered in on by write-downs reflect the fourth obviously in not I have

dividend For BrightSpire, from quarter. remains prior our the unchanged

previous on is coverage dividend per This coverage current then based $X.XX based from share. of DE X.XXx our quarter's X.Xx is $X.XX adjusted adjusted down our on per share. Our DE of of

further This coverage based X.XXx. share. $X.XX this flow first for on our is coverage earnings on dividend solely ratio flow of quarter per cash context, For based quarter is cash

In based of the flow cash a the previous dividend equivalent quarter, $X.XX. ratio was coverage share X.XXx per on

including earning assets, look unencumbered we watch achieving monetization assets, will lower As ahead, loans, buffered our and list earnings of be faster REO. whether resolutions by

said headway unlock I As on to this portion earnings of of portfolio striving our we're make this capital. earlier, power to the

quarters, immediately but potential cash affect flow. would in distributable that headwinds affect we're also earnings facing earnings the some coming on However, might not

X this our office which we often Specifically, discussed [ in to pertains ] older of past. X our property Norway equity The of the have investments. is largest vintage the asset,

covenant few tests these next investments the have equity date or form upcoming quarters. within maturity of debt Each of some

example, having in challenging. hurdle more For has test, Norway the year's be of year's the a this second past this last will Despite asset year. test quarter loan-to-value

equity have dates maturity The debt other X the next months. office within X investments

early it's outcomes to to be. what We get those work but still in as an will will with the certainty attempt too to have lenders extensions,

equity assets on there flow. excess by said, cash BrightSpire. might recognized debt result as passed investments could be be events flow on going held and these Therefore, not forward the in I cash while earnings to debt near may actual lower the Forthcoming distributable term, still service lenders over on these

is along asset for can narratives $X.XX aggregate, assets, in these found The be per in share our net NAVs undepreciated X We approximately cash with flow each, supplemental. annually. generated equity by

REO as I We assets. offset mentioned these by movement could anticipate having list these on Importantly, of positive pickup more near select watch There do as to be the say earlier, earnings much and from list where additional to impacts next and fluid borrowers. watch can multiple are be assets very assets X work prove with also a we developments monetizing term over quarters. our

more We by much will know next call. our earnings

commitment discussed in will debt Regarding office for Norway equity well the each investments property on existing the tenants' be our our significant I valuation as factors months. as to coming the

effect and to what geopolitical I control while turn Directors, discussed. along our these We, to of assess the to we the call based I coverages closing, prudently have in will continue the of will with the factors Andy events continue in and the capital Board net the continue sheet balance markets will And both on act we focused term In over dividend to a our near progress, now with challenge, timing be liquidity. on that, and managing Witt. can and remain President, maintaining

Good you, Thank morning, you thank for and Mike. all joining.

for On X for $XXX X largest During the office partial received loan loan million million. in included which repayments. investments, first and quarter, industrial we repayments across our $XX $XX million

the the relief. end for to for end, We remainder of expect rate remain quarter the million million $XXX upsized Deployment by loan slow consolidate the of asset X% obligations or expectations total for quarter of capacity obligations. commitments. of funding quarter, to activity consisted future to outstanding stand we remaining collateral one a million to in California. at related mixed-use Subsequent future interest $X given of At repayment tempered $XX XXXX, funding

in original the The leased proceeds a square collateral building previously consists to provided land. loan the borrower of office land of purchase complete additional foot the developer fully contract. Upside of XX,XXX under with parcels

entitlements of project. under a step XXX-unit towards an protecting one Assembling consisting development senior the was collateral important lender living

and of XXXX asset level exploring terms the of is current loan loan In risk The property to San and nonaccrual. a we from [ remain Colorado loan loan ] for updates, in the on placed downgraded refinancing April. Jose rating quarter, alternatives. continuing market a multifamily the Last hotel Denver, the borrower sale

marketing property under property with hard cooperation will liquidity this evidenced sector. was the it year. for in sale. in currently quarter, The deposit. and multifamily the we borrower, contract sale the marketed There with a interest close substantial ample anticipate the We the a is process During in

we our net at side, REO finalizing office of Washington, the the contract is anticipate the midyear. value, we D.C. which ownership during took and the property, On asset under fourth now also sale quarter

watch list update. our to Turning

collateral. Santa concurrent During was California upcoming Clara, loan, of with We uncertainty the loan the the million paid from maturity. release This to development for due first development of associated multifamily a XXXX, investments with X multifamily a to quarter, remaining we in down with June the list the added a parcel $XX collateral watch the which by $XX associated total $XX the million is of added million.

market Current the business borrowers' go-forward have impacted conditions plan.

borrower remaining options alternative We are for with in the active regarding the parts. dialogue

In addition, downgraded to Florida The buildings. plan office effectuate was in owns consisted loan, this adjacent borrower of conversion buildings parcel the and we to of order X and the a collateral on also consolidate the to redevelopment. borrower pursuing the in one multifamily Miami, the the was parcels

X. from investments or watch of a both approaching final able properties. of these us a not investments will the has X to combined maturity of the refinance move the compelled lack it's unclear to and are on whether risk-rating borrower the We certainty The be list to to

to value investments billion portfolio portfolio. of sheet, it as loan of relates $XXX aggregate excluding on loan net and $X.X the cash of comprised balance the million portfolio of XXXX, with is carrying an As total or assets XX, March XX% value carrying of the a the investment and net XX

The is flat weighted remained quarter-over-quarter ranking size risk Our $XX average loan million. X.X%. at average

of are of loans loan aggregate largest XX% rate or all portfolio The and of X% constitute with multi-family segment caps. with portfolio comprises $X.X comprised balance and collateral billion which making The representing have remainder. of remainder of of portfolio, portfolio XX% mixed-use our million loan consisting the interest First Office loan floating of is of million. our average carrying $XX XX of of the mortgage across loan an XX% aggregate portion XXX% loans XX loan rate industrial of up remains which value. value our $XXX with carrying the loans the of hospitality portfolio

over Frank? I call our the Frank on will quarter to first elaborate the results. Financial to that, Saracino, Officer, turn With Chief

everyone. morning, and Thank good you, Andy,

our our first report our quarter want website. I the Investor financial XXXX Relations to section results, is available that mention on quarter discussing first Before supplemental of

million As quarter, $XX.X share. DE for generated $X.XX per adjusted first we mentioned, Mike of the or

was DE approximately $XX.X the $X.X per DE Colorado multifamily quarter million. First million of includes reserve Denver share. a specific $X.XX loan or of

share. $X.XX CECL reserves. our $XX.X in company sequential value reported company per we net increase share, which GAAP loss per decreased Quarter-over-quarter, total from Additionally, book of million net to reflects $X.XX total $X.XX a or GAAP

quickly value per dividends to would $XX.XX book reserves like is our an earnings increase offset driven operating estate I bridge adjusted by loan $X.XX mainly the The the decreased adjusted declared. fourth $X.XX distributable performance repayments, also $XX.XX of our and nonaccrual The Undepreciated excess at by versus first partially recorded from in change loans DE to in change quarter is CECL share. of by and driven quarter. real portfolio. in the

reserves. at Looking

to reserves specific Our million related Colorado the Denver, multifamily CECL $X.X totaled loans. and is

mentioned, this is X% loan XQ property and to Andy contract the with was under hard currently As in deposits. underlying downgraded

to loans no XQ, During were X%. downgraded

primarily conditions stands total the on prior was points of in increase provision loans. million quarter. or The on commitments, XXX from Our general economic an specific at $XX driven inputs the certain general all basis $XXX.X season and CECL increase by million loan

one Looking of our prepared open X. at questions. the total remarks. portfolio loans X risk-rate X% up loans risk-ranked loans, XX or let's our list portfolio This And that, to loan equating with for the carrying represents value, total concludes watch XX% Operator? of our carrying it value

[Operator Instructions].

Our Laws of with the come James. first from line questions Raymond Stephen

listening. and been estate. the faster cash may base to touch real I wanted flow But I on typing been comment around back Mike, have the should have

more If than It said XX like $X.XX has say, I that dividend. I clearly of kind trailing distributable adjusted contribute. assets $X.XX X earnings. on overearned think looks the is months, look, those you by the number

if I'm as far coverage maybe as bit little So to speak less that? can that comments you little you a make a Or clear to sure could on talk coverage bit the it's the just dividend?

Great.

that various that Some the came kind deterioration X of also can the came through -- we came where we that from. coverage places various of from from had sources go that $X.XX

out But capital on flow So about as numbers those we are paying DE, cash companies small $X.XX. a all there really -- to it's forward, are up to It's dividend. and our adding lot these questions about. not of look we sustain we calls about just are see the

cash very you coverage we the to And DE will, that drop coverage, was. to that as going flow in if -- drivers, drop is telling you cash same So similar coverage clear coverage. the drop want the be flow backward, what dividend

So getting income cash we're your can distributable are there lender, but events when recognize level we out you're that they getting i.e., ahead, an in your that may certain if they you're entity do still seeing actual earnings with affect affect not that trapped we look while cash. that DE, at

that test And the difficult. see was want sure there these going Norway passed test $X.XX the and out be about this so that Everyone assets. but We we knows to asset. putting last something more telegraphing. dividend we make to year, Everyone about is knows

one and timing also call, working we that. know a make going want these issue the of just coverage, earmark be that. be The assets, events, we're are maturity things other with two that tests I be It have we investments, we that to as of are maturities, will beginning to sure to offset end I to the make next cash we said certains dates, or a we want in And have tests year. going we're ahead year So that that on should equity say, focused U.S. drop the that are happen. covenant that flow of dead you those to will sure the on is at very and the going date

lenders the with working start we'll So there.

talking up about. offset -- will list hopefully, what those that. we're to $X.XX resolutions add things that the working X watch we're And the with on and So

on No. I the there. to the leads next appreciate nonaccrual. my that the clarity think already When loan, I And about question. it's Denver

that's finalize the Or that sale. a you under sale? into we on about about whether new Is earnings? recycled that office in Can transaction on is repaid the performing And that see debt interest financing is income? accretive capital REO that completed? expects net pickup to -- talk is it's from for D.C. can you lift similarly, mid-year Now that? potential loans talk contract there's sale be will that to the after Will

a lot requests. There of were

are Denver requesting those bids lender both the all multifamily cash. even Andy were transactions, so the said, had we effectively Many many of sort we're As or the seller, though on of assets. some of seller financing them REO both staple

in an indicates that you debt that And no like there's be investors market there'll where us. So provided that's basis, the from come but it feels kind looks and of can trough a okay. on expensive, also all-cash out say, know what, this

you're And it indication that kind an an markets. so if some out is of transactions bottoming in of you're happening on these getting all-cash basis,

leverage generally, around investments. then, guess, And portfolio I for appetite new

expect opportunities? the portfolio here look Do you the increase you you at do is versus expect new it originations flattish. you the end trend the loan you of to as see As over year, year? to of think repayments how Kind

drive we up. down drive to this before We're it going

make we quarter sure track before plans list there list assets that when we been actually on watch remaining around. so. like assets chopping are headway. the a wood for REO watch and the We about talking are business assets there, time. are We've another long that look as of two of We're that list well. to there. some We're some see really going So them. make the on waiting stick the watch tired resolution upgrade do going that think are can on assets those quite to to We we it But of multifamily

done So hesitated. that quarter. But we have this probably could we

a started. about I that marketing it's believe asset $XX the multifamily marketing has That another asset. have process Phoenix million. process, is We

to here. we're that public not large patiently asset provide if chatter know on to to see public We're underway things hotel been there's a to San debt going are that. about We're don't And resolved. on that it wait in We indicate how that comment Jose, going going gets some chatter that. But would there. on

the there's think us going us the capital decrease list, of we'll on is which amount work watch going in do give increase some give be assets, with. in have we movement So an to that to to a

So it's to happen going sequentially.

utilize watch it and and the equity those get and with then list regard on the against issue cash flow to can to we a watch the trigger Let's capital resolve coupled timing that effects will the on capital on repatriate that how fixed be what be reinvest, dates list. will fast and

sell I'll City assets the the DC-X. could in sell thing other One Island we capital Long did the is on $XX REO, collectively we that have X unencumbered. add roughly there, million We

through. those playing are We

significant anything, we'll and take it is. focused little have where those on we falls innings enough closely so as in and more to single We see more before then that to enough, money question, do trough be to those the looking going user again. say there. those start a back them on putting I'd would get out that shorting where early bit through to significant balance be sell list allow I'm market if to the we're think But play otherwise, is and we're growing -- and watch and at you a that your to REO But assets the the would to not that goes. that down, sheet,

come Citizens Our Steve line next JMP. of Delaney from questions the with

about look, So new scratched Mike, was ask I I loan I'm originations, glad going to but that.

team, of XXX% just than of better new be ease being sort clarity the lending. kind rather as the the toe applaud task -- it playing sounds liquidity effective like near-term to to to defense managing focus It's me, I focused it's on loans. water the into the in of a new opposed putting as as -- in far and your about Your to

just to want that. So I applaud

in we the boost sit. very the clarity in where that need Fed's management helpful and the you to your the boosting the CECL opening in shift by that, talked evaluating of for the Ian, of about of To focus thought How comments, policy. in you think assets $X.XX? higher was for reserves reserve impactful as us terms longer were is your I the

Thank you for the words. kind

the our underscore been list I others that that to now recognize little what effect want on have make focusing we'd very we've substantial of we their You're defense And that that generous. on group do like. playing watch are in and been. than we seen we assets seen a has that longer headway bit and -- -- REO peer

And the to we accomplish same. are looking so really

been And over are I on the hard or dams the X around there. their resolutions are. making to to terms so at in really progress to working that. but want to We rear things been start the next quarter use really we've do we some think We've are don't word a of break, while. heads for this going going

Fed underscore getting with there. and want we right estate that has we saw this its other of the that, wearing do on listen, on -- our after we our which calls We CECL around the borrowers had for did a it's we we of TreT peers what's certainty be model. where that, hire. in to that. the quarter, real heard And to generally, We've into recognize index, out. reduce regard that effect With big terms This some no surprise. our out And rolls commercial earnings last long forward mentioned

away. and to the now is further better, that's of looking going year half look Second

lean in into in of more then we're We're kind model is so where where trying we're recognizing And the we model. that it. markets to those the our we're -- be softer, sure softness really not can -- aspects and reflecting markets. And to those also make are to trying

are did at where won't on coming, combination model those be rate persisting I say we we environment So more and how this our trends. it's of is, looking X can't -- a the we effect really it have things. but a big any seasonal there -- were underlying

it group stock to I that ahead mean, the loan. of bank putting able at I range to a or financings, of I that comment would see is the the be percent of great peer think your XX-some stock your was I able going hope to about gosh, book, respect buyback, and for applaud XX% to in up for manage back cash I that book being rather you're your be Obviously, not watch lending. some important guess to work Applaud so and it. how and With liquidity new new et the with the seat, But the my cetera. forward? I Board make into to I we'll if in authorization know the buy -- just flow I'd

think would resolve And our be it where correct. blunt. I just arithmetically, let's a of bigger firm that. for letting to stock, I first buying lead because you, now. and doing loans, But you're now, than new isn't capital that. a some back all The uncertainty here have it is is make that sure we're the say to we're of making think job stock get the right And you're reason, impact around is would that, I out but right right, helpful really

think resolving where a bigger the trading we are. us buying And I are those back than stock. reward list assets will pay watch We

We'll year that in you some maybe modeling more later the resolve for after this and that of problem. mind until keep purposes defer

term, headway position right it's We'd exactly said that. make love be what near in do now, I can on think we a watch But list. I to where the

Instructions]. [Operator

JonesTrading. questions from Erdner the next with line Matthew come Our of

watch same sponsors or loans, some list a are On of of you borrowers group way. of out specific kind guys these the seeing play

Okay.

of family that with you working and more where that are that finding limited, highly your where have a have tap, in those closely you seeing and the those money don't think resilient, are where but that sector, those where have breakdown. and divergent sponsors, could deals, I getting owners all back multifamily more is with more of terms local finding proving go there is been and really think syndicators, GPs. syndicated watch are weaker list they you're at they're So more friends connectivity is on and deals. we're in the We're multifamily what the We're politely I there we're loans especially with

That's in whether they're it's sensitive point big really, soft So syndicated. the multifamily. tissue

in out don't is multifamily office and group peer we through the matter. resolve we there's watch office with there and liquidity as plenty answer to for this mean probably and everyone and your of towards watch that list think remarks, multi the in going issue. the Andy office, the to multifamily But more And to get REO, our as office. hotel, sector list his the I list, or start And be in and it's -- resolve to watch the is as is case the the gravitate weakest it going in I the we're we the think indicated we question, issue. it's indicators that

are helpful. That's extensions, And then I Yes. willing as do to guess, to you guys' open loan talking part continue on willingness making to And And your you. then then that? the are guys those? the what's borrowers Got about that do well?

can we and the the that assets to game, is If somebody here can else a to where a There's back do bid. on there's sense. borrowers. is willingness really much committed folks And borrower it focused them or putting far that of a with think than we we're really absolutely skin the that. the to go. so really they're hitting could only all and the work operator table they're pull those then they're out better them the makes level rug some asset, of We're sides for job There's a at best we the buying and where they willingness do from showing to running and willingness in not asset, on so is

and felt worked watch with there and loans So on we've run both we've sides, a out really out go willingness. environment rope, the on downgraded. for that them. those set longer We we're out borrowers, assets, situation weighing those forward economic questioning really higher really with we to there's the list is the a ability If that's the like think with

so downgraded those And why that's loans. we

Thank you.

turn back We our to Michael now over session. for to closing like end have I reached of Mazzei question-and-answer floor remarks. would the the

Sarah before She in the you she today, we BTI. but seeing short made thank give time look out August. big just in leading joined that forward time, joining short for we Well, we to a you us And a to shout to who was want go, ago, a just impact. sector and Bacon,

We role. joining today, you in respect new Sarah. wish see to And you we have thank us August. a We will you and luck lot of again, in her for

Thank participation. you. does appreciate teleconference. today's This your We conclude

disconnect may this day. your at the You your Enjoy lines time. of rest