BrightSpire Capital (NYSE:BRSP) reported a second-quarter GAAP net loss attributable to common stockholders of $18.3 million, or $0.15 per share, while adjusted distributable earnings totaled $16.8 million, or $0.13 per share. Distributable earnings were $15.8 million, or $0.12 per share.
The company ended the quarter with GAAP net book value of $6.81 per share and undepreciated book value of $8.10 per share. Chief Financial Officer Frank Saracino said the declines from the prior quarter were driven mainly by higher CECL reserves and real estate impairments, partly offset by the effect of share repurchases.
Loan Portfolio Growth and Originations
BrightSpire’s loan portfolio stood at approximately $2.9 billion across 106 loans as of June 30, an increase of nearly $200 million from the prior quarter. President and Chief Operating Officer Andy Witt said the portfolio’s weighted-average loan balance was $27 million and its weighted-average risk ranking was 3.0.
Year to date, the company committed $892 million across 24 loans, with an average loan balance of $37 million. Witt said BrightSpire expects its average loan size going forward to be in a range of roughly $30 million to $35 million, while generally avoiding loans below $20 million.
Mazzei said BrightSpire expects to grow its loan book to about $3.5 billion by year-end and toward $4 billion by the middle of 2027. The company is seeking to shift its portfolio toward more multifamily loans, less office exposure, smaller average loan sizes and a greater share of loans originated after interest-rate increases.
Management said multifamily whole-loan spreads continue to center around roughly 250 basis points over SOFR. BrightSpire sees an active lending environment, with its year-to-date pipeline volume running ahead of 2025. Witt said the company had seen about $57 billion of opportunities through the top of its origination funnel and could reach $110 billion to $120 billion by year-end if current trends continue.
Asset Sales and Capital Recycling
BrightSpire agreed to sell its Albertsons triple-net equity investment for $300 million, including the assumption of $200 million in CMBS debt. The transaction is expected to close in the third quarter and will eliminate refinancing risk associated with the property’s 2028 debt maturity.
Mazzei said the debt carried a 4.77% interest rate, and refinancing it at current market rates could have resulted in a higher borrowing cost, reduced loan proceeds and a need for additional equity. The sale is expected to free approximately $100 million of capital that BrightSpire intends to deploy at a higher return on equity.
While management previously expected to reach full dividend coverage by year-end, Mazzei said the Albertsons sale is likely to delay that objective by about two quarters. He said the company expects stronger dividend coverage during the second or third quarter of 2027 as capital is redeployed into loans.
BrightSpire also repurchased more than 3.8 million shares for approximately $21 million during the quarter, at an average price of $5.46 per share. Saracino said the buyback increased undepreciated book value by $0.08 per share. The company had about $29 million remaining under its repurchase authorization.
Watchlist Loans, REO and Reserves
The company resolved three watchlist loans totaling $99 million during the quarter, producing a net reduction of $30 million in watchlist exposure after two loans were added. BrightSpire’s watchlist consisted of four loans totaling $136 million at quarter-end.
The additions included an $11 million Denver office loan that management expects to sell in the near term and a $57 million Las Vegas multifamily loan. Witt said leasing improved at an Austin multifamily property, which was operating near stabilized occupancy, while a Dallas office property was approaching 70% occupancy.
BrightSpire held six REO properties with a gross book value of $330 million. Two multifamily assets with combined net asset value of $62 million were under contract for sale, including a Mesa, Arizona, property expected to close in the third quarter. The company recorded a $3.8 million GAAP impairment on that property based on expected net sale proceeds, along with an estimated $6.5 million reduction in undepreciated book value.
The company expects two other multifamily REO assets, with combined net asset value of $84 million, to reach the market over the next several quarters. Management continues to target a 2027 resolution for its San Jose hotel property and said it remains patient with a Santa Clara multifamily pre-development asset as Bay Area rents improve.
Second-quarter results also included approximately $9 million of operating real estate impairments related to two legacy retail triple-net assets and an REO multifamily property. Saracino said the retail impairments had an immaterial effect on undepreciated book value because the investments had been written down two years earlier.
BrightSpire increased its general CECL reserve to $100 million, or 327 basis points of total loan commitments, from $87 million, or 306 basis points, in the first quarter. Mazzei said the increase was roughly split between loan-specific factors and broader economic conditions.
Financing and Liquidity
Management said it expects to issue a second CRE CLO in 2026, which would be the first time BrightSpire has completed two CLO transactions in one year. Mazzei said the anticipated fourth-quarter CLO would provide higher leverage than the company’s existing loan-book financing.
As of the call date, BrightSpire reported approximately $131 million of liquidity, including $45 million of cash, $30 million available under its credit facility and about $56 million of approved but undrawn warehouse borrowings. The company’s debt-to-assets ratio was 70%, while its debt-to-equity ratio was 2.7 times.
About BrightSpire Capital (NYSE:BRSP)
BrightSpire Capital Inc (NYSE: BRSP) is a real estate investment trust (REIT) specializing in commercial real estate debt. The company primarily originates, acquires and manages a diversified portfolio of mortgage loans, mezzanine loans and preferred equity investments secured by office, retail, industrial, multifamily and hospitality assets across the United States. By focusing on income-producing credit instruments, BrightSpire seeks to deliver attractive risk-adjusted returns to its shareholders through regular dividend distributions.
BrightSpire’s investment strategy spans the capital structure of commercial real estate, with an emphasis on senior mortgages that offer more stable cash flows and downside protection.
