• GAAP Net Loss: $57.1 million or $0.45 per share

• Distributable Earnings (DE): $22.5 million or $0.17 per share

• Adjusted Distributable Earnings: $29.7 million or $0.23 per share

• Liquidity: $323 million, with $158 million in cash

• Book Value: Undepreciated book value at $10.67, down $0.68

• CECL Reserves: Total $151 million or $1.15 per share

• Leverage Ratio: Unchanged at 1.8 times

• Adjusted DE Dividend Coverage: 1.15 times

• Dividend Coverage (Cash Flow): 1.05 times based on $0.21 per share

• Warning! GuruFocus has detected 9 Warning Signs with BRSP.

Release Date: May 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• BrightSpire Capital Inc reported positive distributable earnings (DE) of $22.5 million or $0.17 per share, and adjusted DE of $29.7 million or $0.23 per share.

• The company maintains a strong liquidity position with $323 million available, including $158 million in cash on hand.

• BrightSpire Capital Inc received $114 million in repayments across four investments during the quarter, demonstrating effective capital recovery.

• The company's leverage ratio remains stable at 1.8 times, indicating prudent financial management.

• BrightSpire Capital Inc is actively working on monetizing lower earning assets and resolving watch list loans and REO assets to improve earnings.

Negative Points

• BrightSpire Capital Inc reported a GAAP net loss of $57.1 million or $0.45 a share for the first quarter.

• The company recorded a $0.68 reduction in undepreciated book value, primarily due to an increase in CECL reserves.

• BrightSpire Capital Inc faces challenges with upcoming debt covenant tests and maturity dates on three key office property equity investments, which may impact future cash flows.

• The company's dividend coverage based on cash flow for this quarter decreased to 1.05 times, down from 1.25 times in the previous quarter.

• BrightSpire Capital Inc added two investments totaling $87 million to the watch list due to uncertainties, indicating potential risk in asset performance.

Q & A Highlights

Q: Hi. Good morning. Mike, I may have been typing faster and should have been listening, but I wanted to touch base back on the cash flow comment around the real estate. I think you said $0.15 is the number that those three assets contribute. A: Great. Thank you. Some of the coverage deterioration that we had came from various -- that $0.05 or so came from various sources that we can go through the three places where that came from. So those are all small numbers adding up to $0.05. But as we look forward, we really are -- there are a lot of questions we see on these calls about -- it's not just about DE; it's about cash flow and our companies paying out capital to sustain the dividend.

Q: No. I appreciate the clarity there. And that leads to my next question. When I think about the Denver loan, it's already on non-accrual. Now, it's under contract for sale. A: There were a lot of requests. As Andy said, we had so many bids on the Denver multi-family assets. Many of them were requesting some seller -- effectively seller, even though we're the lender, or staple financing. Both of those transactions, the sale of the Denver multi-family and the sale of the DC REO are both all cash. So there'll be no debt provided from us.

Q: And then, I guess, generally, around portfolio leverage appetite for new investments. As you look here at the end of the year, you think the loan portfolio is flattish. Do you expect it to increase as you see opportunities? How do you expect new originations versus repayments to trend over the year? A: We're going to drive this down before we drive it up. So that's really -- we're going to have some pay-off. But it's really around the resolution of the watch list assets and some of the remaining REO there. We've been chopping wood on that watch list for quite a long time. We're actually tired of talking about it as well, but we are going to make headway.

Q: Thanks. Good morning, everyone. So look, Mike, I was going to ask about new loan originations, but I'm glad I scratched that. Your -- I applaud the clarity about playing defense and being effective in managing your liquidity as opposed to putting a toe in the water as far as new loans. It sounds like to me, the focus of the team, it's just better to be 100% focused on the near-term task rather than to ease into new lending. A: Steve, thank you for the kind words. You're very generous. I want to underscore that we are playing defense a little bit longer than we'd like. And we do recognize that we have seen others in our peer group make substantial headway on their watch list assets and now focusing on REO. And we've seen that -- what the effect of that been -- that has been.

Q: Hey. Good morning, guys. Thanks for taking the question. On some of these watch list loans, are you guys seeing a specific group of sponsors or borrowers play out the same way? Thank you. A: Okay .So all watch list is really divergent in terms of sponsors. But I think what you're getting at politely is there are deals, especially in the multi-family sector, where there have been syndicators, and I think those are the weaker deals.

Q: Got you. Yeah, that's helpful. Thanks for the color there. And then talking about loan extensions, are you guys open to continue making those? And then I guess, what's the willingness on your guys' part to do that? And then are the borrowers willing to do that as well? A: There's willingness on all sides of the table to do that. And the willingness is really where it makes sense. There's only so much and so far we can go. If a borrower is showing that they're really focused on the asset, they're the best operator for that asset, and they're putting some level of skin back in the game, then there's a willingness to absolutely work with those borrowers.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.