Key Highlights

  • GAAP net income was $46.9 million, or $0.37 per share, versus $1.0 million a year earlier.
  • Adjusted distributable earnings were $17.8 million, or $0.14 per share, and distributable earnings were $0.08.
  • GAAP book value rose to $7.08 per share from $6.81 in the second quarter.
  • Originations were $272 million across 7 senior loans, against $79 million of repayments.
  • The watchlist grew to $187 million, or 6% of the portfolio, from $136 million.

BrightSpire Earnings: Why Did GAAP Profit Jump While Distributable Earnings Were $0.08?

BrightSpire Capital (NYSE:BRSP) reported third-quarter results on Tuesday, October 27, with GAAP net income to common stockholders of $46.9 million, or $0.37 per share, compared with $1.0 million a year earlier. Gains on sales of $60.3 million drove the difference, and adjusted distributable earnings were $17.8 million, or $0.14 per share. As screened, the estimate was $0.14.

Distributable earnings were $10.3 million, or $0.08 per share. The company said adjusted distributable earnings represent a 7.1% yield on undepreciated book value. The release gives no explicit guidance, and the conference call is scheduled for Wednesday, October 28.

BrightSpire is a commercial real estate credit REIT that originates senior floating-rate loans secured by properties across the U.S.

Asset Sales and REO: How Did the Largest Net Lease Sale Change the Balance Sheet?

The company sold its triple net lease industrial distribution centers for a $300 million gross price, with the purchaser assuming a $200 million mortgage. Net lease assets fell 68% to $136 million across five assets from $429 million in the second quarter.

Real estate owned fell 9% to $301 million from $330 million, and would be $269 million pro forma for anticipated sales. A Mesa, Arizona multifamily asset sold for $25 million in the quarter, and a Fort Worth, Texas asset sold for $32 million in October.

Undepreciated book value fell to $7.87 per share from $8.10, as a $0.12 impairment effect and a $0.02 reserve effect outweighed a $0.15 benefit from buybacks.

Loan Book and Credit: Is the Watchlist Growing as Originations Accelerate?

The loan portfolio carried $3.08 billion gross across 111 loans, up from $2.89 billion in the second quarter. Multifamily was 72% of the book, up from 63%, while office fell to 19% from 28%. The weighted average yield on an unlevered basis was 7.4%, and 98% of loans are floating rate.

Originations were $272 million across seven senior loans at a spread of 2.43% over SOFR, with $66 million more in the fourth quarter to date. Repayments were $79 million, so net deployment was $193 million.

The watchlist rose 38% to $187 million across eight loans, and the weighted average risk ranking moved to 3.1 from 3.0. Two office loans totaling $60 million were downgraded, and one $15 million mezzanine loan is on nonaccrual. The CECL reserve rose to $107 million, or $0.86 per share, and the quarter's expense was $15.0 million.

Funding, Liquidity and Buybacks: What Do the CLO and Repurchases Add?

After quarter-end, the company priced a $960 million collateralized loan obligation with an 88.0% advance rate and funding cost of 1.54% over SOFR. Total liquidity was $181 million, and debt-to-equity was 2.7 times.

It repurchased 2.1 million shares for $9.9 million at a blended $4.81. The dividend of $0.16 per share was paid on October 14, which compares with adjusted distributable earnings of $0.14, a calculated gap of $0.02 per share.

What to Watch Next for BrightSpire After the Call

Management commentary on October 28 should address the watchlist, the office downgrades, and the dividend relative to earnings. Maturities of $275 million in 2026 and $1.02 billion in 2027 are also ahead.