Earnings call transcript: BrightSpire Capital Q2 2025 shows mixed results

BrightSpire Capital (BRSP) reported its earnings for the second quarter of 2025, revealing a mixed financial performance. The company posted an earnings per share (EPS) of $0.18, surpassing the forecast of $0.16, marking a 12.5% surprise. However, revenue fell short of expectations, coming in at $54 million against a projected $77.56 million, a 30.38% miss. Following the earnings release, BrightSpire’s stock price saw a 6.02% increase, closing at $4.98, as investors reacted positively to the EPS beat despite the revenue shortfall. According to InvestingPro, the company maintains an impressive 12.85% dividend yield and currently trades slightly above its Fair Value estimate. InvestingPro analysis reveals the stock’s beta of 1.54, indicating higher volatility compared to the market.

Key Takeaways

• BrightSpire Capital’s EPS beat expectations by 12.5%.
• Revenue missed forecasts by 30.38%, reflecting challenges in meeting market expectations.
• Stock price rose by 6.02% after earnings announcement.
• The company foreclosed on a San Jose hotel loan and repurchased 561,000 shares.
• BrightSpire anticipates improved loan origination conditions in the latter half of 2025.

Company Performance

BrightSpire Capital’s second-quarter results highlighted a challenging environment with mixed financial outcomes. While the company managed to exceed EPS expectations, its revenue fell significantly below forecasts. BrightSpire’s strategic focus on reducing watch list loans and foreclosing on underperforming assets, such as the San Jose hotel loan, indicates a proactive approach to managing its portfolio. The company’s loan portfolio experienced a modest growth of 3%, and it continues to focus on enhancing its real estate-owned (REO) properties. InvestingPro data shows the company maintains strong liquidity with a current ratio of 8.44, while its Financial Health Score stands at "FAIR" with particularly strong marks in cash flow and relative value metrics.

Financial Highlights

• Revenue: $54 million, missing the forecast of $77.56 million.
• Earnings per share: $0.18, exceeding the forecast of $0.16.
• GAAP net loss: $23.1 million ($0.19 per share).
• Distributable Earnings: $3.4 million ($0.03 per share).
• Adjusted Distributable Earnings: $22.9 million ($0.18 per share).

Earnings vs. Forecast

BrightSpire Capital’s EPS of $0.18 surpassed the forecasted $0.16, resulting in a 12.5% positive surprise. However, the revenue of $54 million was significantly below the expected $77.56 million, a 30.38% miss. This divergence between EPS and revenue performance indicates potential cost management efficiencies or other operational adjustments that offset the revenue shortfall.

Market Reaction

Despite the revenue miss, BrightSpire’s stock price increased by 6.02%, closing at $4.98. This positive market reaction suggests that investors were encouraged by the company’s ability to exceed EPS expectations and its strategic initiatives, such as share repurchases and portfolio management. The stock’s performance aligns with the broader market trend of valuing earnings surprises and strategic management over short-term revenue fluctuations. For deeper insights into BRSP’s valuation and future potential, InvestingPro subscribers can access comprehensive analysis including detailed Fair Value calculations and 7 additional ProTips that help evaluate the company’s investment potential.

Outlook & Guidance

BrightSpire Capital is optimistic about the second half of 2025, expecting improved loan origination conditions. The company has already closed or is executing six loans totaling $114 million. Additionally, BrightSpire anticipates increased repayments and potential portfolio growth to $3.5 billion. The possibility of a Federal Reserve rate cut in September is seen as a potential market stimulant. Analyst consensus from InvestingPro supports this optimistic outlook, with price targets ranging from $5 to $8 per share, and expectations of positive net income growth this year despite recent challenges.

Executive Commentary

CEO Mike Mazzi expressed satisfaction with the company’s progress, stating, "We had a solid second quarter and are pleased with our progress and the results." President Andy Witt highlighted the company’s asset management strategy, noting, "We anticipate exiting the other three assets over the next several quarters." Mazzi also emphasized the company’s positive market outlook, particularly for multifamily properties.

Risks and Challenges

• Revenue shortfall poses a challenge to meeting market expectations.
• Potential volatility in commercial real estate markets could impact future performance.
• Changes in interest rates may affect borrowing costs and investment returns.
• Regulatory changes, such as Texas HFC legislation, could influence operations.
• Economic uncertainties may impact the broader real estate investment landscape.

Q&A

During the earnings call, analysts inquired about the company’s strategy for resolving its REO portfolio and the impact of Texas HFC legislation. BrightSpire’s management addressed these concerns, emphasizing their focus on strategic asset management and adapting to regulatory changes. The discussion also highlighted improvements in the bridge lending market and the company’s approach to maintaining operating margins.

Full transcript - Brightspire Capital Inc (BRSP) Q2 2025:

Conference Operator: Good day, and welcome to the BrightSpire Capital Second Quarter twenty twenty five Earnings Conference Call. All participants will be in a listen only mode. After today’s presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to David Palame, General Counsel.

Please go ahead, sir.

David Palame, General Counsel, BrightSpire Capital: Good morning, and welcome to BrightSpire Capital’s second quarter twenty twenty five earnings conference call. We will refer to BrightSpire Capital as BrightSpire, BRSP or the company throughout this call. Speaking on the call today are the company’s Chief Executive Officer, Mike Mazzi President and Chief Operating Officer, Andy Witt and Chief Financial Officer, Frank Saracina. Before I hand the call over, please note that on this call, certain information presented contains forward looking statements. These statements, which are based on management’s current expectations, are subject to risks, uncertainties and assumptions.

Potential risks and uncertainties could cause the company’s business and financial results to differ materially. For a discussion of risks that could affect results, please see the Risk Factors section of our most recent 10 ks and other risk factors and forward looking statements in the company’s current and periodic reports filed with the SEC from time to time. All information discussed on this call is as of today, 07/30/2025, and the company does not intend and undertakes no duty to update for future events or circumstances. In addition, certain financial information presented on this call represents non GAAP financial measures. The company’s earnings release and supplemental presentation, which was released yesterday afternoon and is available on the company’s website, presents reconciliations to the appropriate GAAP measures and an explanation of why the company believes such non GAAP financial measures are useful to investors.

Before I turn the call over to Mike, I will provide a brief recap on our results. The company reported second quarter GAAP net loss attributable to common stockholders of $23,100,000 or $0.19 per share distributable earnings of $3,400,000 or $03 per share and adjusted distributable earnings of $22,900,000 or $0.18 per share. Current liquidity stands at $325,000,000 of which $106,000,000 is unrestricted cash. The company also reported GAAP net book value of $7.65 per share and undepreciated book value of $8.75 per share as of 06/30/2025. Finally, during this call, management may refer to distributable earnings as DE.

With that, I would now like to turn the call over to Mike.

Mike Mazzi, Chief Executive Officer, BrightSpire Capital: Thanks, David, and welcome to our second quarter earnings call. We had a solid second quarter and are pleased with our progress and the results. Our dividend was covered by adjusted DE, while our undepreciated book value remained unchanged. In addition, our net loan originations were again positive for the quarter. Most importantly, we made substantial headway in reducing exposure to watch list loans, thus making further progress in continuing to de risk the portfolio.

We also, of course, remain actively engaged in managing the resolution of REO assets. Turning briefly to the markets, we saw a notable improvement in market conditions and a welcome decline in volatility since our call in April. Commercial real estate debt markets appear to be largely unaffected by the headlines over the last ninety days. We’ve seen credit and lending spreads stabilize, loan inquiry has increased steadily, and the CMBS market has returned to normal and is quite active. Moreover, bank warehouse lenders have remained ready, willing, and engaged to provide competitive financing throughout the second quarter.

These recent improvements are encouraging and provide optimism for the CRE market’s continued progress. Now turning briefly to our balance sheet. During the quarter and subsequently, we have reduced the watch list on a net basis by 50%. The most notable reduction was the result of foreclosing on the San Jose Hotel loan. We now own the property free and clear with no financing in place.

During the protracted foreclosure process, the hotel experienced meaningful deferred maintenance that we are now in the process of addressing. Our intention is to make much needed and neglected physical and operational improvements to the property ahead of significant events taking place in the Bay Area through mid-twenty twenty six. This is most notably the Super Bowl and the World Cup. We will look to sell the asset sometime in 2026. However, while the asset remains unlevered, it is currently cash flow positive and is now contributing to earnings.

In the interim, given the asset is unlevered, it also serves as a significant source of immediate liquidity as a result of committed but undrawn financing capacity. On the origination side, as anticipated and highlighted in our last call, we experienced a lull in new loan closings during the second quarter.

Conference Operator: Dynamics were mirrored by a slowdown in payoffs in our own loan portfolio. As a result, on a net basis, we experienced positive growth in the loan book.

Mike Mazzi, Chief Executive Officer, BrightSpire Capital: Closings We expect loan origination conditions to improve in the second half of the year as we already have an additional six loans for $114,000,000 that have closed or are in execution. Finally, during the quarter, we repurchased 561,000 shares at an average price of $5.19 Brightspire continues to trade at a roughly 40% discount to its undepreciated book value. This equates to a discount of approximately $450,000,000 to a book value, which includes a CECL reserve of $137,000,000 or $1.06 per share. Given the recent improvements on our watch list and the consistency in book value, we feel the stock is significantly undervalued. In closing, we navigated a very dynamic first half of the year.

We delivered net positive growth in our loan book, our adjusted distributable earnings covered the dividend, and we cut the watch list in half. We will continue to make progress on our remaining watch list loans as well as our OREO resolutions. The REO resolution proceeds are a significant source of liquidity for future loan originations and the continued regrowth in our loan book. We enter the second half of the year with a more defined path forward to capitalize on the opportunities ahead. With that, I will turn the call over to our President, Andy Webb.

Andy?

Andy Witt, President and Chief Operating Officer, BrightSpire Capital: Thank you, Mike. Echoing Mike’s comments, we continued to execute on our stated objectives, resulting in a positive quarter of significant watch list reductions, stable book value, and meaningful progress on the portfolio management front. During the second quarter, the portfolio grew by approximately 3% or $70,000,000 on a net basis, excluding the impact of the San Jose loan moving to REO. Capital deployment was relatively modest during the quarter, consisting of $98,000,000 across two new senior loan originations and across collateralized preferred equity investment, as well as future fundings of $7,000,000 resulting in total deployment of $105,000,000 Repayments were insignificant, consisting of five partial paydowns. However, we anticipate repayment volume related to both loan payoffs and REO resolutions to increase over the next several quarters.

The combination of current liquidity on balance sheet and resolution proceeds will be redeployed in the coming quarters in new loans. During the quarter and subsequently, we continued to make progress on the watchlist loans, reducing total watchlist exposure by nearly 50%, and by two loans on a net basis. The reduction in watchlist exposure was primarily driven by the removal of our two risk rank five loans. During the quarter and subsequently, we took ownership of the San Jose Hotel loan and the Santa Clara multifamily predevelopment loan. As a result, there are no risk rank five loans on our watch list.

Additionally, we upgraded two risk rank four loans. The loans were previously downgraded due to uncertainty. In both cases, the borrower contributed fresh equity to support the execution of the underlying business plan resulting in the upgrades. Also during the quarter, two loans were downgraded to a risk rank four. The Ontario California industrial loan has faced challenges related to increased supply and, most recently, tariff related policy.

Given the uncertainty, the borrower is no longer supporting the property, and BRSP is evaluating options which include either a sale in the short term or potentially managing the property through this period of uncertainty. Additionally, we downgraded the Austin, Texas multifamily loan. Occupancy at the property has been stable. However, the supply glut in the market has put downward pressure on rental rates. On a net basis, watchlist loan exposure was reduced from $396,000,000 at the end of Q1 to $2.00 $2,000,000 today, or 9% of the loan portfolio.

While the watchlist experienced a significant reduction, our REO portfolio has grown commensurately. Currently, our REO portfolio is comprised of eight properties with an aggregate undepreciated gross book value of $379,000,000 The San Jose Hotel property accounts for $136,000,000 or 36% of the REO portion of our portfolio. As Mike previously mentioned, our current plan for the property contemplates holding it in the near term to improve property level performance to maximize shareholder value. The office portion of our REO portfolio is comprised properties with a combined undepreciated gross book value of $60,000,000 or 16% of the REO portfolio. We are focused on leasing up one of the properties where we have a tenant taking one full floor and are negotiating with another for significant space.

Imminently, the second building will be marketed for sale. The remaining portion of our REO portfolio is comprised of four multifamily properties and one multifamily predevelopment site for a combined undepreciated gross book value of $183,000,000 or 48% of the REO portfolio. As it relates to the four multifamily properties, we’re actively engaged in the execution of value add business plans. We anticipate resolving most of the multifamily portion of our REO portfolio over the next year or so, subject to how the market evolves. Currently, we are in the process of finalizing the sale of our Phoenix, Arizona multifamily property in line with our carrying value.

We expect to close on the transaction next month or shortly thereafter. As previously highlighted, our corporate business plan contemplates repatriating capital from this portion of our portfolio for redeployment of new loans. At present, our eight REO properties have an aggregate undepreciated gross carrying value of $379,000,000 and a debt to assets ratio of approximately 31%, resulting in an undepreciated net carrying value of $263,000,000 As we look to execute our business plan, we will exercise prudence with a focus on maximizing the value of our existing properties to provide fuel for loan portfolio growth over the next several quarters. Currently, the loan portfolio stands at $2,400,000,000 across 81 loans, with an average loan balance of $30,000,000 With that, I will turn the call over to Frank Cerecino, our Chief Financial Officer, to elaborate on the second quarter results. Frank?

Frank Saracina, Chief Financial Officer, BrightSpire Capital: Thank you, Andy, and good morning, everyone. For the second quarter, we generated adjusted DE of 22,900,000 or $0.18 per share. Second quarter DE was $3,400,000 or $03 per share. DE includes specific reserves of approximately $19,500,000 Additionally, we reported total company GAAP net loss of $23,100,000 or $0.19 per share. I would first like to provide an update on two of our legacy office equity investments.

First, our Equinor Norway net lease asset reached a maturity default on its bond financing and the lenders foreclosed on the property. As a result, we deconsolidated all Equinor assets and liabilities from the balance sheet and recorded a GAAP impairment of approximately $49,000,000 and an income tax benefit of approximately $22,000,000 As for the second of the two properties, in January earlier this year, we defaulted on the CMBS financing for our multi tenanted office equity property located just outside Pittsburgh. Subsequent to quarter end, a receiver was appointed for the property and as a result, we will deconsolidate the assets and liabilities from the company’s consolidated balance sheet in the third quarter. Accordingly, we reported a GAAP impairment of approximately $2,000,000 related to the property. The combined items lowered second quarter total GAAP net book value to $7.65 per share from $7.92 per share in the first quarter.

However, the impairment charges and offsetting tax benefit had no impact on our undepreciated book value as we had previously written both investments down to zero over a year ago. As such, for the second quarter, we reported undepreciated book value of $8.75 flat quarter over quarter. Now I’d like to quickly bridge to the second quarter adjusted distributable earnings of $0.18 versus the $0.16 recorded in the first quarter. The change was primarily driven by loan originations and operating income from the San Jose Hotel. Looking at reserves, during the second quarter, we recorded specific CECL reserves of approximately 19,500,000 related to taking ownership of the properties associated with the San Jose hotel loan and the Santa Clara California multifamily predevelopment loan.

As both loans were resolved during the quarter and subsequently, we charged off their reserves. Our general CECL provision stands at 137,000,000 or five forty nine basis points on total loan commitments. This is approximately $20,000,000 lower than the prior quarter. As the CECL provision is flat quarter over quarter, the decrease is primarily driven by the charge offs. Our debt to assets ratio is 63 and our debt to equity ratio is two point zero times.

We have no corporate debt or final maturities due until 2027. Lastly, our liquidity as of today stands at approximately $325,000,000 This comprises $106,000,000 in current cash, $165,000,000 under our credit facility and approximately $54,000,000 of approved but undrawn borrowings available on our warehouse lines. This concludes our prepared remarks. With that, let’s open it up for questions. Operator?

Conference Operator: Thank you. We will now begin the question and answer session. And your first question today will come from Randy Binner with B. Riley FBR. Please go ahead.

Randy Binner, Analyst, B. Riley FBR: Hey, good morning. So that was well covered. Good quarter. I guess my question here is related to, the REO portfolio, specifically the San Jose Hotel and the multifamily properties you mentioned. Can you just give a little color on value added activities you mentioned?

And then in San Jose, think there’s events coming to that market. I’d just like to love to hear a little bit of color about how the outlook is going for managing those and adding value to the process, as you said. Thanks.

Mike Mazzi, Chief Executive Officer, BrightSpire Capital: Hey, Randy, how are you? This is Mike. I’ll discuss the San Jose asset. And Andy is deeply involved in the multifamily assets. He could tell you what we’re doing there, which is some of them are very heavy lifts and the team is doing a great job.

On the San Jose Hotel, again, as I said, it was a very protracted process and ended up foreclosing on the asset. There is a considerable amount of deferred maintenance at the asset, given that the foreclosure process was a long one. And there was some distress at the asset. There were just basic things like elevators, some elevators were not operating and offline. So, are things like that that we need to address.

So, when I talk about doing those things, there are some big events that are coming up. You obviously want the hotel fully operational in its best condition. So we are going to be investing capital over the next six months into the hotel for deferred CapEx and things that need to be addressed. There are some big events coming up. I believe the fall is the peak season.

We also have, as I said in the prepared remarks, the Super Bowl coming and the World Cup to Levi’s Stadium, which is a very close proximity to our hotel. And then we have the March Madness in San Jose in March, obviously. So, want to do things that we need to do to get that hotel fully operational and in peak condition before those events. So, we would envision because it’s going to take some time to get some of these things addressed, probably about six months, we’re gonna hold the asset certainly to do that, address the CapEx that’s been deferred, and then prepare for these big events. And that’s why I think we’ll look to potentially sell the hotel sometime in mid twenty twenty six, but we don’t really have a timeline for it yet.

It is contributing to earnings. The hotel is the NOI is above OpEx. So, is a positive NOI, but it’s still in a trough and the ROE on that asset is still low. We don’t have it encumbered right now. We can draw a modest amount against it on our pre approved capacity with our lender, something like $60,000,000 in terms of potential liquidity.

But right now, we’re going to keep it unencumbered. The ROE is low, but hopefully the cash flow will increase. And again, we’ll look to address this in 2026. And now I’ll turn it over to Andy to talk a little bit about some of the multifamily REO that we have.

Andy Witt, President and Chief Operating Officer, BrightSpire Capital: Thank you, Mike. So as it relates to our multifamily REO, we’ve got one that’s on the precipice of being sold. And then for the remaining assets, the business plans largely comprise of addressing deferred CapEx, addressing some of the unit improvements, leasing up the property, in some cases improving the curb appeal. But these are relatively straightforward executions, and in most of the cases here, we’re well along the way in terms of the execution of that business plan. And it’s essentially taking an asset that is leased at a below market rate, improving the look and feel of the asset and driving towards market occupancy.

And so, we anticipate exiting the other three assets over the next several quarters. They’re in various phases of that business plan that I laid out, so they’ll kind of come in sequence. So we’re encouraged by what we’re seeing in terms of the demand for the underlying product, And we anticipate executing these plans and getting them to market.

Randy Binner, Analyst, B. Riley FBR: Okay, That’s great color.

Mike Mazzi, Chief Executive Officer, BrightSpire Capital: Go ahead. I’m sorry, Randy.

Randy Binner, Analyst, B. Riley FBR: No, I was going say that’s super helpful on both fronts. But Mike, you were going to say?

Mike Mazzi, Chief Executive Officer, BrightSpire Capital: No, thank you. That’s it.

Conference Operator: And your next question today will come from Steve Delaney with Citizens JMP. Please go ahead.

Steve Delaney, Analyst, Citizens JMP: Hello, everyone. Thanks for taking the question, and also congratulations on your stock up 6% today. Mike, just a little theoretical question to start. If we look at bridge loans that you’re underwriting today, especially after having worked through some fours and fives bridge loans made in 2022 or 2023, Is there a difference in the quality of the borrowers or the properties of the structures? What have we as an industry, I’m throwing myself in there as an analyst, the interim bridge lending commercial real estate lending apparatus in the country.

Has there been a lesson learned? Is the bridge loan business today meaningfully different from what was being done post COVID twenty twenty two with lower rates? I’m just curious if there’s something kind of cyclical going on there or the new version, if you will, is two point zero going to be better than one point zero? Thanks.

Mike Mazzi, Chief Executive Officer, BrightSpire Capital: I feel like I’m talking to my daddy. Yes, there’s been a lesson learned. Thank you, Pop.

Steve Delaney, Analyst, Citizens JMP: Research there.

Mike Mazzi, Chief Executive Officer, BrightSpire Capital: Yes. Listen, we had a bubble market. We stopped lending in early twenty twenty two because we saw it. We wish we stopped lending a quarter or two earlier. One of the things that were driving the market before that we’ve spoken about in past calls have been the syndicators and that they’re largely gone.

And that’s a huge positive. We’re also operating in a different rate environment. And we’re also operating where some of these properties, the values are getting reset. And so that’s also very positive. So right now we’re looking at going in debt yields at a much better than we were before and exit debt yields also better.

I think the backdrop capital markets are looking very good. CLO market, we have a deal that’s in the market, not us, but another lender that should price shortly. Spreads look like it may tighten on that. The CMBS market, as you’ve heard on other calls today, the CMBS market is wide open and doing well. We mentioned on our call, the bank warehouse lenders are very active.

As you know, Freddie and Fannie, probably from your GSE lender calls, Freddie and Fannie are robust lending activity, very aggressive. And hopefully, we’ll have a Fed cut in September. So, the capital markets are feeling very good after this quarter. We’re very constructive on multifamily. We feel like the recovery is U shaped and we’re at the bottom of that trough.

We’re still seeing concessions that are given, but construction lending is down considerably than where it was in our previous cycle in 2020, ’21 and ’22. The rent versus own proposition is looking stronger than ever, which bodes very well for multifamily. So we think that in 2026, 2027, you’re going to see rent concession, burn offs and rent increases. And hopefully our credit people are recovering from the PTSD of the past two years and they’re seeing that and we’re trying to lean into the underwriting more because we do believe that that market will tighten. We are picking our spots.

We would prefer new construction take out and properties, obviously, brand new in areas where we’re seeing higher household incomes, where you could potentially push rents further than in other older vintage multifamily. We still think it’s a lender driven market. We’ve said that repeatedly on the last two or three calls, meaning that there’s billions of dollars coming up for refinancing in the next two years, which bodes well for the bridge market. And the lenders are at the end of the rope with regard to loan extensions without putting equity in the deals. And so the borrowers that are coming to us are still looking and this is why inquiry has increased dramatically.

75% of it is still refi. The reason why the hit ratio is still low is because those borrowers are seeking to do better than the pay downs required by their existing lenders. So they’re coming to the market asking for an equity neutral refinancing. And those are still a struggle. And so as the lenders that they currently have are working with them, we’re starting to see those refi requests turn into sales and we’re seeing more acquisition activity, which we largely prefer over bridge to bridge lending.

So, hopefully that investment sale activity will continue to grow as lenders are pushing their borrowers into the market saying, sell the property or pay down the loan. So, we’re pretty constructive in the market right now, especially for multifamily. And we think that this is a much different lending market than you’re seeing and evidenced by the fact, Steve, you’re seeing the advance rate on CLOs about five percentage points higher than they were in 2022 because the debt yields going in are much better than what we saw in 2022.

Steve Delaney, Analyst, Citizens JMP: That’s very helpful. Great, you know, look back and roll forward to where we sit here today. And given where we are today at June 30, your portfolio was 2,400,000,000.0. If you look at and maybe Andy wants to whoever wants to answer it, I guess I’ll address it to the team. But looking at your capital base today in that portfolio, how much incremental loan portfolio growth do you believe you have with your existing capital base to maybe move beyond the 2,400,000,000.0 portfolio at June 30?

Thanks.

Mike Mazzi, Chief Executive Officer, BrightSpire Capital: I’m going to turn it over to Andy because he did say, and he’ll clarify further from what his prepared remarks were about how much embedded capital we have in our REO. Andy?

Andy Witt, President and Chief Operating Officer, BrightSpire Capital: Thanks, Mike. So in terms of portfolio growth, right now, today, we’re sitting on about $260,000,000 of net book value in our REO portfolio. So we’re focused getting to liquidity as it relates to those underlying positions. We’re also sitting on a healthy cash position. So we’re deploying capital.

But as we look forward, we think the portfolio has the opportunity to grow to about 3,500,000,000 given our existing capital base. Now that’s going to happen over time. Obviously, you’re going to have repayments occur during that period of time. Our deployment is going to be somewhat moderated by our ability to dispose of the existing REO, but that’s certainly the focus of the organization at this point.

Steve Delaney, Analyst, Citizens JMP: Excellent. Well, thank you for that, all for your comments. That’s very helpful.

Mike Mazzi, Chief Executive Officer, BrightSpire Capital: Thank you, Steve.

Conference Operator: And your next question today will come from John Nicodemus with BTIG. Please go ahead.

John Nicodemus, Analyst, BTIG: Hello. Good morning, everyone. Somewhat related to Steve’s last question, something that Andy went over in your prepared remarks, the repayments. Obviously, noticed that they were low in the second quarter. Good to hear that they’re going to be bouncing back.

We did note that there were just $7,000,000 total so far in July. Is that something that looks like it’ll be happening before the end of the third quarter or deeper into the year? We’re just kind of curious what the repayment trajectory is looking like throughout the rest of 2025.

Andy Witt, President and Chief Operating Officer, BrightSpire Capital: Yes. As always, it’s difficult to predict with a high degree of accuracy what the repayment schedule will look like and getting to the REO proceeds, but we’re certainly going to see an uptick over Q2 without a doubt. We’ve got some rather significant positions that we’ve got a clear line of sight in terms of resolving. So I think over the back half of the year, you are going to see some rather material resolutions, both in the existing REO portfolio and as it relates to repayments. And it’s really difficult to size that.

Mike Mazzi, Chief Executive Officer, BrightSpire Capital: I will also I’ll add to that, that we are seeing we had some modest pay down on one of the risk rated floor office loans. We expect a small office loan to pay off at the end of the month. We also are seeing on some of the larger office loan assets that we have, I think hopefully next quarter, we should have this discussion about some underlying leasing that we’re seeing there in the Phoenix office asset. They’re in the process of working on a lease that could be meaningful for the building. We cannot speak for the borrower, but there’s a chance that that borrower in executing that lease will put that asset up for sale.

So, we’re hopeful of that. Again, we can’t speak to their goals and what their intentions are, but we would hope that that would be the case. In Baltimore, that asset is a relatively highly leased asset, that office asset. And it competing for a number of leases for state agencies. It was a state agency building that was owned by the Maryland government that they are deciding not to invest new capital in.

And they’ve told those tenants, those nine agencies in the building for about 250,000 square feet to go find some new space. And our building is our owner or borrower is competing for some of that space. And again, we can’t speak on their behalf, but we hopefully that will get done and that may lead to that property being sold. And if we can get the office portfolio down by about 20% from where it is today, it’s shrunk over time. That would bring it down to like a five handle, 500 ish million.

Then I think we would potentially look at the market for doing new office loans. The CMBS market is accepting office properties more than it has over the past year. So, we’re optimistic that we can get some one off deals done in the office market again, we’d have to shrink the office portfolio. And then I would also add that in Long Island City, Andy alluded to this, one of the buildings we have leased one floor and we all working with a state agency. We were selected in an RFP process.

We are in lease negotiations with that agency. I would put a grain of salt on that please, because anything could happen, but there is some positive momentum there. Hopefully that lease gets done. It’s probably a little premature to say that because it’s not fully baked. Hopefully we’ll have more to say about that positively next quarter.

John Nicodemus, Analyst, BTIG: Thanks so much, Mike and Andy. That’s some great color and definitely exciting to hear what’s coming through. Then for my follow-up, a little bit more of a pivot and I know this is something we’ve discussed before, I believe in the spring with your team. Just wanted to hear any updates your team might have now that Texas has moved to change legislation on traveling HFCs. Has that changed how your team’s looking at your existing loans as well as any future loans there, just given your Texas multifamily exposure?

Thank you.

Mike Mazzi, Chief Executive Officer, BrightSpire Capital: We have executed on some of the HFCs and we understand what the new legislation says. It gives us a two year benefit in taxes. Unless we sell the assets, we will probably, we will be selling the assets before that two year horizon. So that is what it is. And we think that that will have really no impact on our strategy and executing on those REOs.

We are right now almost complete with a complete CapEx on the Fort Worth asset. And I think that will probably see the light of day in terms of the sale after we list the Mesa multifamily asset, that will be the next one that goes up. The Fort Worth asset is experiencing extensive leasing progress after the refurbishments that we put in place. And we’ll put that one out on the market, my guess, around 2026. And then after that asset, the next one that will follow will be the one in Arlington, Texas.

That’ll probably be around the 2026.

John Nicodemus, Analyst, BTIG: Great. Thank you so much, Mike. Appreciate it. And that’s all for me.

Conference Operator: And your next question will come from Jason Weaver with Jones Trading. Please go ahead.

Jason Weaver, Analyst, Jones Trading: Good morning guys, thanks for taking my question. Just looking at the decline in property operating margin in the quarter, I assume a good portion of that’s from the two you took back, specifically San Jose, But how should we be thinking about the trajectory from here moving forward? Andy, you mentioned in your prepared remarks there was a lot of deferred maintenance. Did that contribute to the extra expense burden there?

Frank Saracina, Chief Financial Officer, BrightSpire Capital: This is Frank. For operating during the quarter, remember we foreclosed on Signia San Jose hotels, so that would have not only increased property income, but as well as property expenditures in the quarter. Maybe that combination that’s looking odd. But CapEx would affect the NOI.

Jason Weaver, Analyst, Jones Trading: Got it. So can you point to anything else that’s affecting the operating margin there? It declined about 10 points is what I’m getting.

Mike Mazzi, Chief Executive Officer, BrightSpire Capital: No, I’m failing to get the gist of where you’re going.

Jason Weaver, Analyst, Jones Trading: We can revisit, no worries. Second, maybe related to Steve’s question, it seems like many of the peers out there, a few have reported that they’re still having some difficulty seeing net growth in their portfolios. Anything that you can point to from a competitive perspective on why you’ve been able to win more mandates, whether that’s pricing, covenant structures, etcetera?

Mike Mazzi, Chief Executive Officer, BrightSpire Capital: I’ll be perfectly honest with you here. We feel we’re disappointed in the second quarter. We said that going into it last quarter that we would have a low and quite frankly hats off to some of our competitors. We’ve looked at our friends at TRTX have done a great job for the quarter and we look to follow suit. We feel like the inquiry that we’ve gotten has increased, as I said in the prepared remarks dramatically year over year.

So, we’re getting the looks that we want and that’s the main thing that we want to see as much as possible that’s out there. And then it’s up to us about the hit ratio. The struggle has been a lot of the borrowers coming to us for refis or looking, as I said earlier, for these cash neutral deals or to get a better deal than their current lender is asking of them. And so that has been a little bit of a struggle, but I think over time we’re seeing the lenders really pushing on the borrowers to move on and we’re starting to see more acquisition financing. So that’s why we’re optimistic for the back half of the year, especially if there’s a Fed cut in September.

But in terms of our peer group, I would not thank you for the generous remarks, but I don’t necessarily think that we’ve done or outperformed our peer group in originations this quarter.

Jason Weaver, Analyst, Jones Trading: All right. Thank you for that color.

Conference Operator: And your next question today will come from Gaurav Mehta with Alliance Global Partners. Please go ahead.

Gaurav Mehta, Analyst, Alliance Global Partners: Thank you. Good morning. I was hoping to get some more color on the cross collateralized preferred equity investments that you guys had in 2Q twenty five.

Andy Witt, President and Chief Operating Officer, BrightSpire Capital: Sure. This is Andy. I’ll take that question. So this is related to the PREF equity position that we originated during the quarter, correct?

Gaurav Mehta, Analyst, Alliance Global Partners: Yes.

Andy Witt, President and Chief Operating Officer, BrightSpire Capital: Okay, so this is a cross collateralized pref across six properties or loans. They’re all located in Phoenix. These were existing loans, so this was crossing the performance of those six properties under this pref equity agreement. And, you know, the underlying collateral consists of just over 900 units, and the occupancy is about 92%, 93%. In terms of the rate on that particular instrument, I believe it was 14%.

I don’t know if you had any other questions as it related to this particular loan.

Gaurav Mehta, Analyst, Alliance Global Partners: No, that’s helpful. As a follow-up, I wanted to ask you on the Santa Clara multifamily that’s in REO. I look at the carry value of 39,000,000. It seems like it’s different than 57,000,000 that was reported when it was in the watch list. Just wanted to get some more color on the difference in the carry value.

Frank Saracina, Chief Financial Officer, BrightSpire Capital: Which asset? The difference is essentially you’re seeing the charge off of the CECL that’s related to that. Was the decrease. This was our CECL reserve that we had against it, And that accounts for the difference.

Gaurav Mehta, Analyst, Alliance Global Partners: Okay, understood. Thank you. That’s all I had.

Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Mike Mazzie for any closing remarks.

Mike Mazzi, Chief Executive Officer, BrightSpire Capital: Thank you. Okay, in closing, we would like to mention to the families, friends and colleagues of the victims of the 345 Park Avenue tragedy, and our friends and industry colleagues at Blackstone and Rudin that we offer our thoughts and prayers and deepest condolences. And a thank you to the NYPD, the first responders and to all of the building security staffs who keep us safe. Thank you. And thank you for joining us today.

This ends our call.

Conference Operator: Conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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