Robinhood shares gain on Q2 beat, as user and crypto growth accelerate
On Tuesday, 03 June 2025, Brightspire Capital (NYSE:BRSP) presented its strategic vision at the Nareit REITweek: 2025 Investor Conference. The company outlined its transition from private equity investments to middle-market lending, focusing on multifamily properties. While Brightspire aims for growth, it faces challenges such as a significant stock price dislocation and a sluggish market environment.
Key Takeaways
- Brightspire aims to grow its loan book from $2.5 billion to $3.5 billion.
- The company plans to increase its dividend from $0.16 to $0.20 per quarter.
- A notable dislocation exists between the company’s market value and book value.
- The San Jose Signia Hilton foreclosure is a major focus for future profitability.
- Brightspire is considering stock buybacks due to attractive valuations.
Financial Results
Brightspire reported a current book value of approximately $8.75, with over $1 accounted for by CECL (Current Expected Credit Losses). The company acknowledged a substantial dislocation between its market value and book value, estimated at almost $500 million. Despite this, Brightspire remains committed to its current dividend of $0.16 per quarter, with plans to increase it to $0.20 as earnings improve. The loan portfolio currently stands at $2.5 billion, with a target to reach $3.5 billion while maintaining leverage at low 3x levels.
Operational Updates
Brightspire is actively managing its portfolio, which is composed of 43% multifamily, 22% office, 14% net lease, 8% industrial, and 13% other. The company aims to increase its multifamily exposure to over 50% and reduce office exposure. The origination market is described as "zombie-like," with refinancing requests dominating the pipeline. Brightspire is focused on managing down its REO and watch list, with significant progress made on the San Jose Signia Hilton foreclosure.
Future Outlook
The company is optimistic about future growth, with plans to increase its loan book, enhance earnings, and potentially explore attractive transactions in the office market. Brightspire also aims to issue another CLO by year-end, contingent on origination volume. The San Jose Signia Hilton is expected to be held until 2026 to improve its performance and value before a potential sale.
Q&A Highlights
During the conference call, CEO Mike Mazze emphasized the company’s commitment to maintaining its dividend despite potential short-term negative coverage. He also highlighted the "zombie-like" market conditions and the attractive entry point for stock buybacks, given the current valuation.
In conclusion, for a detailed understanding of Brightspire Capital’s strategies and financial outlook, refer to the full transcript provided below.
Full transcript - Nareit REITweek: 2025 Investor Conference:
Randy Binner, Sell Side Equity Analyst, B. Riley Securities: Hey, good morning. Thanks for being here for the one of the first firesides of NAREIT. I’m Randy Binner.
I’m a sell side equity analyst for B. Riley Securities and cover Brightspire. With me here is CEO Mike Mazze, CEO Andy Witt and CFO Frank Saracino from Brightspire. Just want to take a little bit of time for Mike and team to provide a brief overview of the company. It’s a really interesting story coming out of Colony Credit and then Mike came in and stabilized things and they’re
Mike Mazze, CEO, Brightspire: doing
Randy Binner, Sell Side Equity Analyst, B. Riley Securities: a great job I think now of stabilizing the platform and moving to origination. With that I’d like to hand it over to Mike. I’ll ask some questions initially and then definitely want to leave time for questions from the audience. So Mike?
Mike Mazze, CEO, Brightspire: Thank you. Can you hear me or do we move that or did you guys hear okay? Yes, thank you. Well, thank you for having us. I’ll give you a very, very brief history.
Andy and I took over the wheel of the company right at the precipice of COVID in very early twenty twenty. At that point, the company was public since 2018. It was brought public by the aftermath of the merger of Colony Capital and North Star. A year later in 2018, they spawned our REIT as Colony Credit. And when Andy and I took over in 2020 in COVID, the REIT had been suffering a lot of the assets that were in the REIT, some which still are very heavy private equity type investments.
Colony and North Star were really private equity firms, not credit firms. And so we were faced with a lot of challenges when we joined the company. Since then, we’ve really tried to maneuver away from some of the larger assets. And quite frankly, some of them were just write downs and loss of book value that were impossible to stop. So that was unfortunate.
But since then, we took over in 2021, we separated from Colony Capital and internalized the management contract by buying it out. So really, we’re one of two in the space, really three. One is very small. Us and Ladder Capital are the two internally managed commercial mortgage REITs today. And since then, what we’ve done, we were dealing with the old portfolio, some of which we still are.
We have a large asset in Norway that they own, which we wrote the equity off in, some office buildings that we just recently wrote the equity off in that were bought ten years ago by North Star. So we’re still dealing with some of their assets. But what we’ve done is we’ve transitioned the company to get away from these big heavy assets to get more into middle market lending, something that was more suitable for our capital base, which now is about a billion 1 of common equity. So we’re not doing 9 figure loans, we’re not doing very large mezz deals behind construction, we’re doing straight up multifamily, mostly 30,000,000 30 5 million dollars average loan size will go as high as 75, maybe perhaps 100. But that’s really a stretch, we really want to keep the portfolio to an average loan size of about 30 ish million dollars We’ve now gone to over 50% multifamily, we’re getting under 30% in office.
We expect that shift in that dynamic to continue as we move along with the portfolio. So we’ve stabilized things. But since the bubble, we’ve been shrinking. And right now, the main focus that we have is to make sure we’re getting our watch list of loans down any REO that we’ve got, some of which was on our watch, some of which is still from our predecessor portfolio. So the goal is manage the REO down, manage the watch list down, repatriate that capital.
And along with that capital and the cash on our balance sheet, just continue to make new loans. We did stop making loans, like early twenty two, like first, second quarter of twenty two. And we started again late last year, we’ve put out about $300,000,000 since. So we are originating again. And we’ll talk about the origination market and what Andy is experiencing there, which I think will be interesting for all the mortgage REITs out there.
Also, good anecdotal information for you about what’s going on in the financing markets. So that’s where we are today. With our stock price, we’re $5. Our underappreciated book value, inclusive of over a buck of CECL is in the high eights, call it $8.75. So we have a huge dislocation between where we’re trading today in book value of almost $500,000,000, where we’ve already got 150,000,000 of CECL on the books.
So huge dislocation between market value and book value, which we need to compress. We’re going to do that by growing earnings, making sure we’re covering our dividend, hopefully growing our dividend back to the 20¢ from the 16¢ a quarter that we have now. And our job is to converge book price, book value and stock price. But right now, based on the amount of discount that market is imputing pretty heavily and we voiced that last quarter by buying some shares and we said we’d continue to do that sporadically and I think that’s the case. So we think this is a very attractive price entry point with very little downside and mostly upside.
Randy Binner, Sell Side Equity Analyst, B. Riley Securities: Great. So and yeah, we have a buy rating on the stock, an $8 price target, so that’s closer to book value and agree with Mike on the discount in the stock. I guess the first question I have and this is a follow-up from the quarter but also I think is important in understanding the overall market is just on origination activity to maybe start there and talk about what you’re seeing in the market as far as pricing terms just overall impact of rates. But also, is the second quarter still a time where activity might be a little bit slower given all those dynamics in the market? And this was a topic that came up during the first quarter earnings call.
Andy Witt, CEO, Brightspire: Okay, sure. Thank you Paul. So in terms of new acquisition or new originations volume, we’re seeing quite a bit of activity so this year we’ve tens of billions of dollars of originations opportunity. Early in the quarter we were pretty active in terms of putting out new loans. Then we hit a little bit of a slow spot.
And a lot of that is really refinancing requests from borrowers who are looking for cash neutral type of refinancings. And so what we found is we’re quoting, we’re very active in the market, but a lot of those quotes are sitting out there for weeks at a time, and oftentimes aren’t moving forward. So that’s been a bit of a challenge and something that we’ve been experiencing over the last, call it, six to eight weeks. In terms of pricing, early in the year, saw pricing really come in. So on high quality multifamily, you saw pricing come to the mid 200s, maybe a bit inside of that.
Post liberation day, we saw pricing push back out and then has now come back in a bit. But in terms of the composition of our pipeline, oftentimes we’re seeing a majority of acquisition financing. We expect in our pipeline to see 60% plus. Right now that’s about 80% refinancing. And so There’s a very different dynamic occurring in the market.
A lot of what we’re seeing is being lender driven, so borrowers getting pushed out into the market to refinance their properties away from their existing lenders. We’ve also seen a lot of those lenders come back and say, No, we’ll keep that loan. We’ve seen that in our own portfolio where folks have gone out and decided to come back and stay with us as the lender. There’s just not a lot of actionable deals out there and there’s just not a lot of velocity of transactions right now, particularly on the acquisition
Mike Mazze, CEO, Brightspire: side? The transaction volume is up in the past two years, but it’s still off of a of a big low. We’re talking ten year low in transaction volume, sales volume, investment sales, and that really is what drives the acquisition market. And so I would I would say words that come to mind are not very flattering words for the market. Zombie like market because of the interest rate bubble.
A lot of loans are just sitting out there where the lenders are the ones forcing the borrowers, as Andy said, a lender driven market. That’s not an organic market. That’s not a market where there’s a lot of activity based on economics. It’s all lender driven where lenders are saying, you know, we’ve reserved against this loan. We’ve modified your loan for a couple of times over.
We’ve waived extension hurdles. We’re good. It’s time you go out and get a new loan or sell the property. We’re doing that ourselves. We’re having borrowers do sales.
They may result in a short sale. We’re foreclosing on properties. We just foreclosed on the San Jose Signia Hilton A Week ago after ten months with the borrower trying to get that property and wrestle out of their hands. So now we’re going to manage that property ourselves. But that’s a lender driven market where the lenders are saying, Okay, we’ve done enough.
Now you’ve got to go out there and get a new loan, or you’ve got to pay me down. And that borrower is going to a broker saying, if you could get me a better deal than my current lender is asking on their pay down, I’ll do that loan. And that often isn’t happening. And so that’s why you’ve got this this kind of like standoff between existing lenders and the market where the borrowers are stuck in the middle and not a lot is happening. And interest rates, obviously, if if we can get at least the short end of the curve down with some Fed easing and so for down where you could at least get the interest rate cap and negative carry component of a bridge loan to be more bearable by the property, that would inspire a lot of activity.
But right now with interest rates on SOFR in the low fours, four thirty, and the Fed being somewhat hawkish right now, that also is not helping.
Randy Binner, Sell Side Equity Analyst, B. Riley Securities: So the current portfolio is $2,500,000,000 and it’s 43% multifamily, 22% office, 14% net lease and then 8% industrial and 13% is other stuff. The first two categories multi family and office, in all of this do you see a shift potentially in where you would be focusing your origination activity? Or is multifamily still where you’re seeing most of the activity?
Mike Mazze, CEO, Brightspire: Multifamily is still where we’re seeing most of the activity and where we want to be. So when you say we’re 43% multifamily, when you really just look at the loan book, the loan book component, take out the net lease stuff, the multifamily is over 50% of the loan book. We really want to get that higher by at least ten, fifteen percentage points. And we need to get the loan book from 2,500,000,000.0 to about 3,500,000,000.0 with the capital that we have from watch list resolutions, REO sales, and using our existing cash balances to grow that portfolio back to about 3,500,000,000.0 and low three times leverage like 3.2, three point three times leverage. That will get our earnings back up higher from what more like where it was before we cut the cut the dividend.
So that’s the goal to to work on the watch list, continue to try to originate, more focus on multifamily. We are seeing other property types. We are seeing industrial, but we’re seeing stuff with a lot of lease exposure, a lot of role risk, a lot of binary risk. And we don’t want to take binary risk in industrial right now. So we are looking at industrial.
We are looking at a lot of lodging and quoting a lot of lodging assets, but nothing yet has has stuck. So right now, is where we’ve had the success, but the you know, we’re willing to do industrial, willing to do retail, willing to do lodging. Office at some point will get pretty interesting. We we still think it’s the the babies are getting thrown out with the bathwater, and they are very actionable office deals right now. We’re not putting the periscope up that because we really want to get the office loan exposure and the portfolio down a little bit more before we venture out there.
But there are some very attractive transactions I think that could be had in the office market in in the middle market in the 30 to $50,000,000 range.
Randy Binner, Sell Side Equity Analyst, B. Riley Securities: That’s great. Just going to pause real quick, any questions from the audience before I keep going? Go ahead. So I’ll restate the question for the benefit of the webcast, but it had to do with syndicator exposure.
Andy Witt, CEO, Brightspire: Yes, so certainly within our portfolio we have exposure to syndicators and I think that cohort has been painted with a pretty broad brush. So on one end of spectrum you’ve had folks that have gone out and really grown beyond their capabilities and that’s certainly been reflected in the operations of their assets and financial performance and we’re not alone in dealing with those situations. We’re fortunate in that most of that was done in the multi family sector and so our ability with our internally managed asset management platform to get in and operate those assets and turn them around when necessary is there and something that we’re certainly comfortable doing. And then on the other end of the spectrum you’ve had syndicators who have built really industrial strength platforms with the right type of capital, capital that has duration and they’ve been able to stick with these assets, continue to buy interest rate caps, continue to fund shortfalls at the operations level and see these assets through. So it’s really been a tale of two cities, if you will, in that regard.
Mike Mazze, CEO, Brightspire: And we’ve worked, some of these syndicators that we’ve, or folks that use syndication for source of equity, we’ve relent money to. We’ve gone out in the new market, and they’ve done such a stellar job with their portfolio. And we are working with them on the existing portfolio that they have because they’re doing all of the right things. And then there are some, as Andy described, who’ve gotten just way over their skis, and those are the guys that we are foreclosing on and saying we need to take this property back. And we had a conversation, Andy and had lunch with another large mortgage REIT yesterday, and then we were commenting on how fast a property can go backwards with bad management.
And so, you know, you visit some of these properties that you’re foreclosing on with this indicator, you’re like, how do you know it’s your property? Because the landscaping is dead. You know, things like bills aren’t getting paid. So you really gotta get in there quickly, get the keys back, and they are cooperating. Get the keys back and take charge of the property, which is what we’re doing with some of the REO that we had.
There’s a common denominator in some of the REL multifamily that we have with one civic
Randy Binner, Sell Side Equity Analyst, B. Riley Securities: care. Anyone else in the audience? So speaking of getting the keys back, the San Jose property has just been, it’s been something that has been a topic of discussion for the company for many quarters, but it also got a fair amount of media attention from the local because there litigation of course. And so can you just review for everyone here the size of this for the watch list, the amount of capital it would free up and kind of when. And I think a lot of you in this room know this, just for the benefit of a broader audience, just kind of putting a finer point on the 80,000,000 paid at auction versus where the fair value accounting would be.
Can we just dig into this? Because this has been a big issue for this stock and it’s moving forward, they’re resolving it. And I think just providing a little more granularity on it, I think would be helpful for the broader audience.
Mike Mazze, CEO, Brightspire: Okay, it’s about a third of our watch list. It’s $136,000,000 loan. It’s no longer a loan. It is now real estate owned. We foreclosed on the property two weeks ago after I protracted a ten month process with the borrower.
It was it’s in California. It should have taken four months, but the borrower put up a fight, declared bankruptcy, which is which is always a mistake to make because it triggers it triggers bad boy carve outs on personal recourse. So ill advised. So we finally foreclosed on the property. Andy’s been there before.
I was there last week. And so the plan with that is it is now unencumbered on the balance sheet. There’s no debt against the property. So that is a big source of capital. The ROE on that right now is very low.
Let’s call it low mid single digit ROE right now because we’re coming out of a trough. But what we are what we what we have to do now is because that property was under stress. It’s fully managed by Hilton, but the ownership was not cooperating. So there is deferred maintenance. So we’re gonna get in there and spend some money on things like elevators, lobby, a little bit of f f and e, and some things that we want to do ourselves.
So we’ve hired somebody who’s excellent in this field to act as an intermediary between us and Hilton who’s been very receptive right up to Chris Naceta, the CEO, welcoming BRSP into the family now that we own a very big asset. There are only four significant assets in the portfolio, which is kind of a JW Marriott competing type asset class. There’s a fifth one that’s getting completed in Indianapolis right now. So they’re very much behind the flag. What we see going forward is we see a Super Bowl peak season in September, October for San Jose.
We see a Super Bowl Levi’s Stadium in January. The March Madness Western Regionals in San Jose in March, and then the World Cup in June in Levi’s. So a lot is coming into the area that is exceptional. So this is really an opportunity to cleanse the trailing 12 with some really powerful numbers. So I think we’re going to hold that asset for a little longer because we think the better days are ahead.
And we think there are things that we need to do with the asset from a CapEx standpoint that any buyer of the assets going to be required to do anyways and come off the purchase price. It’ll be a heavier load if if they if they’re asked to do it, then we’re asked to do it. So we’re going to use our capital to do that. The assets unencumbered. It’s going to be a big source of equity for us in 2026, but I see us holding the asset for a little while longer until we we could, as I said, improve that trailing 12 NOI.
We need it to be, you know, $1,112,000,000 dollar NOI, which it did in the past as a fair amount, and we think it could do in the future. So we think we need a low double digit million NOI before we take that out. And where we are, we’ll come out with where we’re holding it on a book value perspective. But the $80,000,000 foreclosure bid is just how the state of California works in the public foreclosure process. We had a hundred $36,000,000 mortgage.
You have to show up with a certified check-in California to participate in a public auction. Go figure that out. And so we put an opening bid in, and the rules are you know, there are guidelines in the jurisdiction about putting in bids that are credible. So we can’t go in and bid a dollar. But we went in and bid 80, and we were the only ones there.
So that establishes the value of the property for purposes of any deficiency claim that we have against the borrower. But right now, you know, we do we believe the property is worth $80,000,000 now. We it’s it’s we have a loan amount that’s a hundred and 36,000,000, and we’re gonna hold on to this thing and do some work on it and bring it out in 02/1926.
Randy Binner, Sell Side Equity Analyst, B. Riley Securities: That’s great. And and so just sticking with kind of balance sheet and capital structure, you have talked about trying to get one more CLO done this year, and if there’s any update on progress towards that, I’d be interested to hear that kind of in context of getting back to $3,500,000,000 in the portfolio and adding the leverage. The follow-up is going to be on the ’27 maturity, but thought I’d start with how the outlook is going for making a new Right.
Mike Mazze, CEO, Brightspire: So we just did a CLO in the summer, and we collapsed one of our CLOs, and we issued a CLO with existing loans, which was one of the first I think the first time that was ever done. And we had a lot of folks in our space follow suit on that. Yeah. We’d like to issue a CLO by the end of the year, but that all depends on origination volume. And right now, anybody who sits here and says they they know what they’re originating this year, I mean, that’s just impossible to say.
We had a very tough second quarter. You had a Jewish holiday, Easter, Liberation Day, the Fed being hawkish. So a lot of folks who were putting out marketing books to refinance their properties paused and pulled back for several week period. So this was a very low origination quarter. So yes, we still have we still have goals of doing one by the end of the year, but we got to get to get in the next two quarters to get that done.
We’ve gotta originate, you know, $5,600,000,000 of product, which is totally doable, especially if the Fed cooperates a little bit in July. But right now, that’s that’s just an estimate. But we’d like to get a fourth CLO done this year, yes.
Randy Binner, Sell Side Equity Analyst, B. Riley Securities: And then on dividend I’m sorry, no. On the just on the Bright Spire benefits from not having a notable principal maturity due until 2027. So I view that as a relative advantage versus I cover some other stocks that have near term maturities which can come into play. Are you planning for that at all yet or is too early to worry
Mike Mazze, CEO, Brightspire: about that right now and I don’t think we’re going to be doing any form of term loan or pref at this point in time. And that facility that we have that that we’re speaking about now is a revolver, a secured revolver, which we have never tapped. And so it even calls into the question about whether or not we we will will we up on the revolver
Randy Binner, Sell Side Equity Analyst, B. Riley Securities: Got it.
Mike Mazze, CEO, Brightspire: At all because we’re not we haven’t been or we may even downside. We already downsized it once when we we we refinanced it, and we may we may even downsize it again.
Randy Binner, Sell Side Equity Analyst, B. Riley Securities: And then just, you know, touching on the dividend. The dividend was right sized to 16¢ per quarter in the middle of last year and we have you covering it in our forecasted distributable earnings. The question is though, the commitment level to it, you have significant financial resources. I think the narrative here is discipline and patience in getting originations back to work. But could we speak a little bit more to just the commitment to the dividend and the dividend policy, assuming there’s quarters where distributable is not going to be zero one six dollars sometimes it’ll be over, to kind of get a better feel for commitment to continue the dividend at this level.
Mike Mazze, CEO, Brightspire: We’ve said when we set the dividend, we’ve said on every conference call that we’ve had on earnings that our expectation is that we will have some negative coverage going forward. We may be breakeven on a DE basis, but on a cash basis because we have some accruals in the portfolio on a for pick for pick loans that we feel confident we’ll we’ll we’ll we’ll get the capital on. On a cash basis, we may have some leakage over the course of the next few quarters. And it really depends on how fast we can deploy capital into new loans and repatriate the capital that’s stuck in low earning or non earning assets like some of the OREO that we have in Long Island City, which by the way, we listed the Long Island City Paragon. We have two assets there, two office buildings, the Paragon and Blanchard buildings.
We we have just started the sales process on the Paragon Building in Long Island City because we’re getting a lot of interest in leasing, a lot of activities you see in New York real estate and office. So really covering that dividend is going to really be about resolving assets, putting out the money, but we are committed to the dividend. We are committed because we’re telegraphing that we are going to have some slippage and we could have some negative coverage. And I think that’s the case with a lot of our brethren in the sector in terms of negative coverage. So we’re going to tolerate some negative coverage in the short term because we think we’re confident we can get that portfolio back to 3,500,000,000 and more than cover the dividend in 2026.
Randy Binner, Sell Side Equity Analyst, B. Riley Securities: And then just on other kind of capital deployment, so the buyback I think you have $50,000,000 left for the next twelve months or to the end of the year I don’t remember but you did utilize it a bit in the first quarter. Do you view with the stock at $5 trading at this discount to book value? How do you view that as a use of cash especially if there’s there’s less
Mike Mazze, CEO, Brightspire: We bought the stock back here, and we can we’ll continue to look at that. We we did buy at these levels. It’s very attractive. It’s a tension between looking at something that’s trading at a substantial dividend yield, very cheap relative to book like I described. But the tension is you don’t want to shrink too much, right?
It’s permanent capital and you don’t want to part with it. And so that’s the the the type rope that we walk. And but it is very attractive, and we’ve put money out at this level, and we’ll continue to look at that. Just the guardrail being, we don’t wanna we don’t wanna shrink too much. But we’ve underscored that.
We’ve bought the stock back at this level. We think it’s very attractive.
Randy Binner, Sell Side Equity Analyst, B. Riley Securities: Couple minutes left. Any questions from the from the audience here? Anything? Frank, Andy, Mike, anything missed or any other points you want to cover before we wrap up?
Mike Mazze, CEO, Brightspire: I think we hit it all. I think the big takeaway I think that you’ll hear, we should hear, others might say we’re seeing billions of dollars of product. We’re originating. It’s like a carnival. In the first quarter, if you take Starwood out of our peer group, because Starwood does other loans away from commercial real estate.
They have, like, for instance, master limited partnership energy lending portfolio where they lend on pipelines. That’s not something we do. So we take them out of the number. And when you look at that across 10 of us in our commercial mortgage lending peer group, public REITs, the sector shrunk by half a billion dollars. Right?
So we’re putting out money, but also we’ve got some runoff. I think what will happen in the second quarter is that as we have found a hard time putting out money this quarter, I think you’ll see less runoff in the peer group portfolio for the second quarter. But by and large, I think when you look at the numbers and look at if you do a calculation and say, is what are the 10 REITs done, mortgage REITs done in the quarter? In the first quarter, we shrunk by half a billion dollars as a sector. So that’s the challenge right now is, as Andy said, finding actionable deals.
We’re seeing a ton. We’re quoting loans every day. And then we roll our eyes and say, okay, let’s see what happens here. And invariably, there is somebody who raises their hand and says, I’ll do that loan that a lot of guys wouldn’t have done, and that’s fine. You just have to be patient.
And so I think that’s why we expect there to be a little bit of leakage between now and getting to a point where we’re covering that dividend in six to twelve months.
Randy Binner, Sell Side Equity Analyst, B. Riley Securities: Alright, well we’ll wrap it there.
Mike Mazze, CEO, Brightspire: Thank
Randy Binner, Sell Side Equity Analyst, B. Riley Securities: you. Thanks for the time.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.