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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-38377
BRIGHTSPIRE CAPITAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
Maryland38-4046290
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
590 Madison Avenue, 33rd Floor
New York, NY 10022
(Address of Principal Executive Offices, Including Zip Code)
(212547-2631
(Registrant’s Telephone Number, Including Area Code)

(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s)Name of each exchange on which registered
Class A common stock, par value $0.01 per shareBRSPNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No   
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No   
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerAccelerated filerNon-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No  
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:
As of October 30, 2023, BrightSpire Capital, Inc. had 129,985,107 shares of Class A common stock, par value $0.01 per share, outstanding.


Table of Contents

BRIGHTSPIRE CAPITAL, INC.
FORM 10-Q
TABLE OF CONTENTS
IndexPage












Table of Contents
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond our control, and may cause actual results to differ significantly from those expressed in any forward-looking statement.
Currently, one of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the ongoing adverse effects of the COVID-19 pandemic on the financial condition, results of operations, cash flows and performance of the Company, its borrowers and tenants, the real estate market and the global economy and financial markets.
Among others, the following uncertainties and other factors could cause actual results to differ from those set forth in the forward-looking statements:
operating costs and business disruption may be greater than expected;
the ongoing impacts of the COVID-19 pandemic, such as changes in consumer behavior and corporate policies that have affected the use of and demand for traditional retail, hotel and office space;
we depend on borrowers and tenants for a substantial portion of our revenue and, accordingly, our revenue and our ability to make distributions to stockholders will be dependent upon the success and economic viability of such borrowers and tenants;
rising interest rates may adversely impact the value of our variable-rate investments, result in higher interest expense and in disruptions to our borrowers’ and tenants’ ability to finance their activities, on whom we depend for a substantial portion of our revenue;
deterioration in the performance of the properties securing our investments (including depletion of interest and other reserves or payment-in-kind concessions in lieu of current interest payment obligations, population shifts and migration, or reduced demand for office, multifamily, hospitality or retail space) may cause deterioration in the performance of our investments and, potentially, principal losses to us;
the fair value of our investments may be subject to uncertainties including impacts associated with accelerating inflationary trends, recent and potential further interest rate increases, the volatility of interest rates, credit spreads and the transition from LIBOR to SOFR, and increased market volatility affecting commercial real estate businesses and public securities;
our use of leverage and interest rate mismatches between our assets and borrowings could hinder our ability to make distributions and may significantly impact our liquidity position;
the ability to realize expected returns on equity and/or yields on investments;
adverse impacts on our corporate revolver, including covenant compliance and borrowing base capacity;
adverse impacts on our liquidity, including available capacity under and margin calls on master repurchase facilities, debt service or lease payment defaults or deferrals, demands for protective advances and capital expenditures;
our real estate investments are relatively illiquid and we may not be able to vary our portfolio in response to changes in economic and other conditions, which may result in losses to us;
the timing of and ability to deploy available capital;
our lack of an established minimum distribution payment level, and we cannot assure you of our ability to pay distributions in the future;
the timing of and ability to complete repurchases of our common stock;
the risks associated with obtaining mortgage financing on our real estate, which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to stockholders; and
the impact of legislative, regulatory, tax and competitive changes, regime changes and the actions of governmental authorities, and in particular those affecting the commercial real estate finance and mortgage industry or our business; and
the ongoing impacts of global geopolitical uncertainty and unforeseen public health crises such as the COVID-19 pandemic on the real estate market.
The foregoing list of factors is not exhaustive, and many of these risks are heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic. We urge you to carefully review the disclosures we make concerning risks in the sections entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, “Risk Factors” in


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this Form 10-Q for the quarter ended September 30, 2023 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein.
We caution investors not to unduly rely on any forward-looking statements. The forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. The Company is under no duty to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q, nor to conform prior statements to actual results or revised expectations, and the Company does not intend to do so.


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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
BRIGHTSPIRE CAPITAL, INC.
CONSOLIDATED BALANCE SHEETS
(in Thousands, Except Share and Per Share Data)
September 30, 2023 (Unaudited)December 31, 2022
Assets
Cash and cash equivalents$236,197 $306,320 
Restricted cash97,432 92,508 
Loans and preferred equity held for investment3,145,196 3,574,989 
Current expected credit loss reserve(89,172)(106,247)
Loans and preferred equity held for investment, net3,056,024 3,468,742 
Real estate, net775,256 732,468 
Receivables, net76,418 40,698 
Deferred leasing costs and intangible assets, net59,890 53,980 
Other assets51,459 55,673 
Total assets$4,352,676 $4,750,389 
Liabilities
Securitization bonds payable, net$993,000 $1,167,600 
Mortgage and other notes payable, net643,995 656,468 
Credit facilities1,207,182 1,339,993 
Accrued and other liabilities82,464 87,633 
Intangible liabilities, net4,503 4,839 
Escrow deposits payable80,251 79,055 
Dividends payable25,987 25,777 
Total liabilities$3,037,382 $3,361,365 
Commitments and contingencies (Note 15)
Equity
Stockholders’ equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
  
Common stock, $0.01 par value per share
Class A, 950,000,000 shares authorized, 129,985,107 and 128,872,471 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
1,300 1,289 
Additional paid-in capital2,862,080 2,853,723 
Accumulated deficit(1,543,962)(1,466,568)
Accumulated other comprehensive income (loss)(5,240)(676)
Total stockholders’ equity1,314,178 1,387,768 
Noncontrolling interests in investment entities1,116 1,256 
Total equity1,315,294 1,389,024 
Total liabilities and equity$4,352,676 $4,750,389 


The accompanying notes are an integral part of these consolidated financial statements.


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BRIGHTSPIRE CAPITAL, INC.
CONSOLIDATED BALANCE SHEETS
(in Thousands)
The following table presents assets and liabilities of securitization trusts and certain real estate properties that have noncontrolling interests as variable interest entities for which the Company is determined to be the primary beneficiary.
September 30, 2023 (Unaudited)December 31, 2022
Assets
Cash and cash equivalents$4,620 $5,163 
Restricted cash9,431 7,831 
Loans and preferred equity held for investment, net1,226,541 1,444,398 
Real estate, net167,563 167,821 
Receivables, net46,624 11,869 
Deferred leasing costs and intangible assets, net8,550 10,956 
Other assets20,735 21,977 
Total assets$1,484,064 $1,670,015 
Liabilities
Securitization bonds payable, net$993,000 $1,167,600 
Mortgage and other notes payable, net171,307 173,960 
Accrued and other liabilities8,347 5,026 
Intangible liabilities, net3,804 4,839 
Escrow deposits payable773 2,366 
Total liabilities$1,177,231 $1,353,791 


The accompanying notes are an integral part of these consolidated financial statements.
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BRIGHTSPIRE CAPITAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Net interest income
Interest income$75,630 $63,671 $225,584 $161,325 
Interest expense(43,647)(32,944)(130,404)(70,471)
Interest income on mortgage loans held in securitization trusts 9,597  28,692 
Interest expense on mortgage obligations issued by securitization trusts (8,977) (26,051)
Net interest income31,983 31,347 95,180 93,495 
Property and other income
Property operating income24,247 22,265 68,525 68,213 
Other income2,855 1,616 9,158 2,679 
Total property and other income27,102 23,881 77,683 70,892 
Expenses
Property operating expense7,392 5,814 18,687 17,804 
Transaction, investment and servicing expense311 932 1,966 3,037 
Interest expense on real estate6,833 7,047 19,115 21,720 
Depreciation and amortization8,851 8,572 24,788 25,886 
Increase of current expected credit loss reserve7,671 40,750 76,250 50,026 
Compensation and benefits (including $5,855, $2,217, $11,253 and $6,383 of equity-based compensation expense, respectively)
11,971 8,373 30,144 24,868 
Operating expense3,286 3,545 10,033 11,964 
Total expenses46,315 75,033 180,983 155,305 
Other income
Other gain (loss), net(220)(30)615 34,590 
Income (loss) before equity in earnings of unconsolidated ventures and income taxes12,550 (19,835)(7,505)43,672 
Equity in earnings of unconsolidated ventures  9,055 25 
Income tax expense(158)(633)(859)(1,135)
Net income (loss)12,392 (20,468)691 42,562 
Net (income) loss attributable to noncontrolling interests:
Investment entities(3)5 84 (2)
Operating Partnership   (1,013)
Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders$12,389 $(20,463)$775 $41,547 
Net income (loss) per common share - basic (Note 17)
$0.10 $(0.16)$0.01 $0.32 
Net income (loss) per common share - diluted (Note 17)
$0.09 $(0.16)$0.01 $0.31 
Weighted average shares of common stock outstanding - basic (Note 17)
127,197 126,564 127,014 127,551 
Weighted average shares of common stock outstanding - diluted (Note 17)
129,986 126,564 129,730 129,432 


The accompanying notes are an integral part of these consolidated financial statements.



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BRIGHTSPIRE CAPITAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in Thousands)
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Net income (loss)$12,392 $(20,468)$691 $42,562 
Other comprehensive income (loss)
Foreign currency translation gain (loss)505 (6,068)(4,564)(15,202)
Total other comprehensive income (loss)505 (6,068)(4,564)(15,202)
Comprehensive income (loss)12,897 (26,536)(3,873)27,360 
Comprehensive (income) loss attributable to noncontrolling interests:
Investment entities(3)5 84 (2)
Operating Partnership   (1,175)
Comprehensive income (loss) attributable to common stockholders$12,894 $(26,531)$(3,789)$26,183 


The accompanying notes are an integral part of these consolidated financial statements.
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BRIGHTSPIRE CAPITAL, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in Thousands)
(Unaudited)

Common StockAdditional Paid-in CapitalRetained Earnings (Accumulated Deficit)Accumulated Other Comprehensive IncomeTotal Stockholders’ EquityNoncontrolling Interests in Investment EntitiesNoncontrolling Interest in the Operating PartnershipTotal Equity
Class A
SharesAmount
Balance as of December 31, 2021129,769 $1,298 $2,855,766 $(1,410,562)$8,786 $1,455,288 $1,472 $34,555 $1,491,315 
Distributions— — — — — — (110)— (110)
Issuance and amortization of equity-based compensation— — 1,880 — — 1,880 — — 1,880 
Other comprehensive income— — — — 660 660 — 16 676 
Dividends and distributions declared ($0.19 per share)
— — — (24,657)— (24,657)— (584)(25,241)
Shares canceled for tax withholding on vested stock awards(136)(2)(998)— — (1,000)— — (1,000)
Reallocation of equity— — (13)— — (13)— 13  
Net income— — — 27,724 — 27,724 22 654 28,400 
Balance as of March 31, 2022129,633 $1,296 $2,856,635 $(1,407,495)$9,446 $1,459,882 $1,384 $34,654 $1,495,920 
Distributions— $— $— $— $— $— $(28)$— $(28)
Issuance and amortization of equity-based compensation1,524 16 2,270 — — 2,286 — — 2,286 
Repurchase of common stock(2,181)(22)(18,298)— — (18,320)— — (18,320)
Other comprehensive income (loss)— — — — (9,956)(9,956)— 146 (9,810)
Dividends and distributions declared $0.20 per share)
— — — (25,565)— (25,565)— — (25,565)
Shares canceled for tax withholding on vested stock awards(11)— (254)— — (254)— — (254)
OP Redemption— — 9,648 — — 9,648 — (35,159)(25,511)
Net income— — — 34,287 — 34,287 (15)359 34,631 
Balance as of June 30, 2022128,965 $1,290 $2,850,001 $(1,398,773)$(510)$1,452,008 $1,341 $ $1,453,349 
Distributions— $— $— $— $— $— $(28)$— $(28)
Issuance and amortization of equity-based compensation— — 2,217 — — 2,217 — — 2,217 
Other comprehensive loss— — — — (6,068)(6,068)— — (6,068)
Dividends and distributions declared ($0.20 per share)
— — — (25,794)— (25,794)— — (25,794)
Net loss— — — (20,463)— (20,463)(5) (20,468)
Balance as of September 30, 2022128,965 $1,290 $2,852,218 $(1,445,030)$(6,578)$1,401,900 $1,308 $ $1,403,208 


The accompanying notes are an integral part of these consolidated financial statements.






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BRIGHTSPIRE CAPITAL, INC.
CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(in Thousands)
(Unaudited)
Common StockAdditional Paid-in CapitalRetained Earnings (Accumulated Deficit)Accumulated Other Comprehensive IncomeTotal Stockholders’ EquityNoncontrolling Interests in Investment EntitiesTotal Equity
Class A
SharesAmount
Balance as of December 31, 2022128,872 $1,289 $2,853,723 $(1,466,568)$(676)$1,387,768 $1,256 $1,389,024 
Distributions— — — — — — (28)(28)
Issuance and amortization of equity-based compensation1,527 15 2,280 — — 2,295 — 2,295 
Other comprehensive loss— — — — (3,463)(3,463)— (3,463)
Dividends and distributions declared ($0.20 per share)
— — — (26,170)— (26,170)— (26,170)
Shares canceled for tax withholding on vested stock awards(453)(5)(2,880)— — (2,885)— (2,885)
Net loss— — — (4,127)— (4,127)(75)(4,202)
Balance as of March 31, 2023129,946 $1,299 $2,853,123 $(1,496,865)$(4,139)$1,353,418 $1,153 $1,354,571 
Distributions— $— $— $— $— $— $(28)$(28)
Issuance and amortization of equity-based compensation93 1 3,102 — — 3,103 — 3,103 
Other comprehensive loss— — — — (1,606)(1,606)— (1,606)
Dividends and distributions declared ($0.20 per share)
— — — (26,000)— (26,000)— (26,000)
Net loss— — — (7,486)— (7,486)(12)(7,498)
Balance as of June 30, 2023130,039 $1,300 $2,856,225 $(1,530,351)$(5,745)$1,321,429 $1,113 $1,322,542 
Amortization of equity-based compensation— $— $5,855 $— $— $5,855 $— $5,855 
Share forfeitures(54)— — — — — — — 
Other comprehensive income— — — — 505 505 — 505 
Dividends and distributions declared ($0.20 per share)
— — — (26,000)— (26,000)— (26,000)
Net income— — — 12,389 — 12,389 3 12,392 
Balance as of September 30, 2023129,985 $1,300 $2,862,080 $(1,543,962)$(5,240)$1,314,178 $1,116 $1,315,294 


The accompanying notes are an integral part of these consolidated financial statements.












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BRIGHTSPIRE CAPITAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in Thousands)
(Unaudited)
Nine Months Ended September 30,
20232022
Cash flows from operating activities:
Net income (loss)$691 $42,562 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity in (earnings) losses of unconsolidated ventures (25)
Depreciation and amortization24,788 25,886 
Straight-line rental income(1,526)(1,159)
Amortization of above/below market lease values, net(244)(174)
Amortization of premium/accretion of discount and fees on investments and borrowings, net(8,558)(10,041)
Amortization of deferred financing costs8,358 7,786 
Amortization of right-of-use lease assets and operating lease liabilities98 367 
Paid-in-kind interest added to loan principal, net of interest received(3,750)4,906 
Realized gain on sale of real estate (10,632)
Increase (decrease) of current expected credit loss reserve76,250 50,249 
Amortization of equity-based compensation11,253 6,383 
Mortgage notes above/below market value amortization(1,425)127 
Realized gain on sales of unconsolidated ventures (21,900)
Deferred income tax (benefit) expense(602)(1,887)
Other (gain) loss, net335 (2,355)
Changes in assets and liabilities:
Receivables, net1,053 (2,878)
Deferred costs and other assets152 1,446 
Other liabilities(5,656)319 
Net cash provided by operating activities101,217 88,980 
Cash flows from investing activities:
Acquisition, origination and funding of loans held for investment, net(57,495)(929,163)
Repayment on loans held for investment288,703 525,577 
Proceeds from sale of real estate 55,600 
Acquisition of and additions to real estate, related intangibles and leasing commissions(5,750)(2,212)
Proceeds from sale of investments in unconsolidated ventures  38,100 
Distributions in excess of cumulative earnings from unconsolidated ventures421 1,286 
Repayment of principal in mortgage loans held in securitization trusts 18,660 
Cash received related to foreclosure of loans held for investment1,835  
Change in escrow deposits payable1,195 14,099 
Net cash provided by (used in) investing activities228,909 (278,053)
Cash flows from financing activities:
Distributions paid on common stock(77,951)(73,597)
Distributions paid on common stock to noncontrolling interests (1,138)
Shares canceled for tax withholding on vested stock awards(2,885)(1,254)
Repurchase of common stock (18,320)
Redemption of OP units (25,383)
Borrowings from mortgage notes34,466  
Repayment of mortgage notes(32,492)(83,544)
Borrowings from credit facilities110,790 771,184 
Repayment of credit facilities(243,722)(142,736)
Repayment of securitization bonds(177,690)(163,045)
Repayment of mortgage obligations issued by securitization trusts (18,660)
Payment of deferred financing costs(5,670)(8,339)
Distributions to noncontrolling interests(56)(166)
Issuance of common stock16  
Net cash provided by (used in) financing activities(395,194)235,002 
Effect of exchange rates on cash, cash equivalents and restricted cash(131)(1,168)
Net increase (decrease) in cash, cash equivalents and restricted cash(65,199)44,761 
Cash, cash equivalents and restricted cash - beginning of period398,828 346,563 
Cash, cash equivalents and restricted cash - end of period$333,629 $391,324 


The accompanying notes are an integral part of these consolidated financial statements.

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BRIGHTSPIRE CAPITAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in Thousands)
(Unaudited)
Nine Months Ended September 30,
20232022
Reconciliation of cash, cash equivalents, and restricted cash to consolidated balance sheets
Beginning of the period
Cash and cash equivalents$306,320 $259,722 
Restricted cash92,508 86,841 
Total cash, cash equivalents and restricted cash, beginning of period$398,828 $346,563 
End of the period
Cash and cash equivalents$236,197 $286,456 
Restricted cash97,432 104,868 
Total cash, cash equivalents and restricted cash, end of period$333,629 $391,324 

Nine Months Ended September 30,
20232022
Supplemental disclosure of non-cash investing and financing activities:
Accrual of distribution payable$(25,987)$(25,791)
Assumption of accounts payable, accrued expenses and other liabilities related to real estate owned(2,232) 
Assumption of real estate87,032  
Right-of-use lease assets and operating lease liabilities 3,271 


The accompanying notes are an integral part of these consolidated financial statements.
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BRIGHTSPIRE CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Business and Organization
BrightSpire Capital, Inc. (the “Company”) is a commercial real estate (“CRE”) credit real estate investment trust (“REIT”) focused on originating, acquiring, financing and managing a diversified portfolio consisting primarily of CRE debt investments and net leased properties predominantly in the United States. CRE debt investments primarily consist of first mortgage loans, which the Company expects to be its primary investment strategy. Additionally, the Company may selectively originate mezzanine loans and make preferred equity investments, which may include profit participations. The mezzanine loans and preferred equity investments may be in conjunction with the Company’s origination of corresponding first mortgages on the same properties. Net leased properties consist of CRE properties with long-term leases to tenants on a net-lease basis, where such tenants generally will be responsible for property operating expenses such as insurance, utilities, maintenance capital expenditures and real estate taxes. The Company will continue to target net leased equity investments on a selective basis.
The Company was organized in the state of Maryland on August 23, 2017 and maintains key offices in New York, New York and Los Angeles, California. The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, beginning with the taxable year ended December 31, 2018. The Company conducts all activities and holds substantially all assets and liabilities through the Company’s operating subsidiary, BrightSpire Capital Operating Company, LLC (the “OP”).
Trends Affecting the Business
The global markets are currently characterized by volatility, driven by a tightening of monetary policy and geopolitical uncertainty, coupled with the ongoing impacts of the COVID-19 pandemic. In response to heightened inflation, the Federal Reserve has continued to raise interest rates, which has tempered the loan financing market and created further uncertainty for the economy and for the Company’s borrowers and tenants. To the extent certain borrowers are experiencing significant financial dislocation as a result of economic conditions or the ongoing effects of the COVID-19 pandemic, the Company has and may continue to use interest and other reserves and/or replenishment obligations of the borrower and/or guarantors to meet current interest payment obligations for a limited period. Additionally, the market for office properties was particularly negatively impacted by the COVID-19 pandemic and remains distressed, with high overall vacancy rates due to the normalization of work from home and the hybrid attendance models.
As a result of fewer employees commuting to their offices, businesses are re-evaluating their need for physical office space. These current macroeconomic conditions may continue or intensify and could cause the United States economy or other global economies to experience an economic slowdown or recession. While the Company monitors macroeconomic conditions closely, there are too many uncertainties to predict and quantify the full impact that these factors may have on its business.
2. Summary of Significant Accounting Policies
The significant accounting policies of the Company are described below. The accounting policies of the Company’s unconsolidated ventures are substantially similar to those of the Company.
Basis of Presentation
The accompanying unaudited interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles in the United States of America (“GAAP”) for complete financial statements. These statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. However, the results of operations for the interim period presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2023, or any other future period. These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in, or presented as exhibits to, the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
The accompanying consolidated financial statements include the accounts of the Company and its controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated. The portions of equity, net income and other comprehensive income of consolidated subsidiaries that are not attributable to the parent are presented separately as amounts attributable to noncontrolling interests in the consolidated financial statements.
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BRIGHTSPIRE CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates and assumptions.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its controlled subsidiaries. The portions of the equity, net income and other comprehensive income of consolidated subsidiaries that are not attributable to the parent are presented separately as amounts attributable to noncontrolling interests in the consolidated financial statements.
The Company consolidates entities in which it has a controlling financial interest by first considering if an entity meets the definition of a variable interest entity (“VIE”) for which the Company is deemed to be the primary beneficiary, or if the Company has the power to control an entity through a majority of voting interest or through other arrangements.
Variable Interest Entities
Variable Interest Entities—A VIE is an entity that either (i) lacks sufficient equity to finance its activities without additional subordinated financial support from other parties; (ii) whose equity holders lack the characteristics of a controlling financial interest; or (iii) is established with non-substantive voting rights. A VIE is consolidated by its primary beneficiary, which is defined as the party who has a controlling financial interest in the VIE through (a) power to direct the activities of the VIE that most significantly affect the VIE’s economic performance, and (b) obligation to absorb losses or right to receive benefits of the VIE that could be significant to the VIE. The Company also considers interests held by its related parties, including de facto agents. The Company assesses whether it is a member of a related party group that collectively meets the power and benefits criteria and, if so, whether the Company is most closely associated with the VIE. In performing the related party analysis, the Company considers both qualitative and quantitative factors, including, but not limited to: the amount and characteristics of its investment relative to the related party; the Company’s and the related party’s ability to control or significantly influence key decisions of the VIE including consideration of involvement by de facto agents; the obligation or likelihood for the Company or the related party to fund operating losses of the VIE; and the similarity and significance of the VIE’s business activities to those of the Company and the related party. The determination of whether an entity is a VIE, and whether the Company is the primary beneficiary, may involve significant judgment, including the determination of which activities most significantly affect the entities’ performance, and estimates about the current and future fair values and performance of assets held by the VIE.
Voting Interest Entities—Unlike VIEs, voting interest entities have sufficient equity to finance their activities and equity investors exhibit the characteristics of a controlling financial interest through their voting rights. The Company consolidates such entities when it has the power to control these entities through ownership of a majority of the entities’ voting interests or through other arrangements.
At each reporting period, the Company reassesses whether changes in facts and circumstances cause a change in the status of an entity as a VIE or voting interest entity, and/or a change in the Company’s consolidation assessment.
Changes in consolidation status are applied prospectively. An entity may be consolidated as a result of this reassessment, in which case, the assets, liabilities and noncontrolling interest in the entity are recorded at fair value upon initial consolidation. Any existing equity interest held by the Company in the entity prior to the Company obtaining control will be remeasured at fair value, which may result in a gain or loss recognized upon initial consolidation. However, if the consolidation represents an asset acquisition of a voting interest entity, the Company’s existing interest in the acquired assets, if any, is not remeasured to fair value but continues to be carried at historical cost. The Company may also deconsolidate a subsidiary as a result of this reassessment, which may result in a gain or loss recognized upon deconsolidation depending on the carrying values of deconsolidated assets and liabilities compared to the fair value of any interests retained.
As of September 30, 2023 and December 31, 2022, the Company had identified certain consolidated VIEs. As of December 31, 2022, the Company had identified certain unconsolidated VIEs. Assets of each of the VIEs, other than the OP, may only be used to settle obligations of the respective VIE. Creditors of each of the VIEs have no recourse to the general credit of the Company.
Consolidated VIEs
Consolidated VIEs include the Investing VIEs (as defined and discussed below) and certain operating real estate properties that have noncontrolling interests. At September 30, 2023 and December 31, 2022, the noncontrolling interests in the operating real




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BRIGHTSPIRE CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
estate properties represent third party joint venture partners with ownership ranging from 5.0% to 11.0%. These noncontrolling interests do not have substantive kick-out nor participating rights.
Investing VIEs
The Company’s previous investments in securitization financing entities (“Investing VIEs”) included subordinate first-loss tranches of securitization trusts, which represented interests in such VIEs. As of September 30, 2023, the Company did not hold any tranches of any securitization trusts, with the exception of its securitization bonds payable, net. Refer to Note 8, “Debt” for further discussion. During the three months ended December 31, 2022, the Company sold its remaining subordinate tranches of a securitization trust in one Investing VIE for which it had determined it was the primary beneficiary because it had the power to direct the activities that most significantly impacted the economic performance of the securitization trust. The Company’s subordinate tranches of the securitization trust, which represented the retained interest and related interest income, were eliminated in consolidation. As a result, all of the assets, liabilities (obligations to the certificate holders of the securitization trust, less the Company’s retained interest from the subordinate tranches of the securitization trust), income and expenses of the Investing VIE were presented in the consolidated financial statements of the Company although the Company legally owned the subordinate tranches of the securitization trust only. Regardless of the presentation, the Company’s consolidated financial statements of operations ultimately reflect the net income attributable to its retained interest in the subordinate tranches of the securitization trust.
The Company elected the fair value option for the initial recognition of the assets and liabilities of its consolidated Investing VIE. Interest income and interest expense associated with the Investing VIE are presented separately on the consolidated statements of operations, and the assets and liabilities of the Investing VIE are separately presented as “Mortgage loans held in securitization trusts, at fair value” and “Mortgage obligations issued by securitization trusts, at fair value,” respectively, on the consolidated balance sheets. Refer to Note 13, “Fair Value” for further discussion.
The Company has adopted guidance issued by the Financial Accounting Standards Board (“FASB”), allowing the Company to measure both the financial assets and liabilities of a qualifying collateralized financing entity (“CFE”), such as its Investing VIE, using the fair value of either the CFE’s financial assets or financial liabilities, whichever is more observable. A CFE is a VIE that holds financial assets, issues beneficial interests in those assets and has no more than nominal equity, and the beneficial interests have contractual recourse only to the related assets of the CFE. As the liabilities of the Company’s Investing VIE are marketable securities with observable trade data, their fair value is more observable and is referenced to determine fair value of the assets of its Investing VIE. Refer to Note 13, “Fair Value” for further discussion.
Unconsolidated VIEs
As of September 30, 2023, the Company did not hold, and had no remaining obligations to, any unconsolidated VIEs. As of December 31, 2022, the Company held one investment which had no carrying value in an unconsolidated VIE to which the Company did not provide financial support during the year ended December 31, 2022.
The maximum exposure to loss of investments in unconsolidated ventures was determined as the carrying value plus any future funding commitments.
Noncontrolling Interests
Noncontrolling Interests in Investment Entities—This represents interests in consolidated investment entities held by third party joint venture partners.
Allocation of net income or loss is generally based upon relative ownership interests held by equity owners in each investment entity, or based upon contractual arrangements that may provide for disproportionate allocation of economic returns among equity interests, including using a hypothetical liquidation at book value (“HLBV”) basis, where applicable and substantive. HLBV uses a balance sheet approach, which measures each party’s capital account at the end of a period assuming that the subsidiary was liquidated or sold at book value. Each party’s share of the subsidiary’s earnings or loss is calculated by measuring the change in the party’s capital account from the beginning of the period in question to the end of period, adjusting for effects of distributions and new investments.
Noncontrolling Interests in the Operating Partnership—Prior to the May 2022 redemption of the noncontrolling interests in the OP held by third parties, noncontrolling interests in the OP were allocated a share of net income or loss in the OP based on their weighted average ownership interest in the OP during the period. Noncontrolling interests in the OP had the right to require the OP to redeem part or all of the membership units in the OP for cash based on the market value of an equivalent number of shares of Class A common stock at the time of redemption, or at the Company’s election as managing member of the OP,




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BRIGHTSPIRE CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
through the issuance of shares of Class A common stock on a one-for-one basis. At the end of each reporting period, noncontrolling interests in the OP were adjusted to reflect their ownership percentage in the OP at the end of the period, through a reallocation between controlling and noncontrolling interests in the OP, as applicable.
There are no noncontrolling interests in the OP and the OP is owned by the Company directly, and indirectly through the Company’s subsidiary, BRSP-T Partner, LLC.
Comprehensive Income (Loss)
The Company reports consolidated comprehensive income (loss) in separate statements following the consolidated statements of operations. Comprehensive income (loss) is defined as the change in equity resulting from net income (loss) and other comprehensive income (“OCI”). The components of OCI include unrealized gain (loss) on CRE debt securities available for sale for which the fair value option was not elected, gain (loss) on derivative instruments used in the Company’s risk management activities used for economic hedging purposes (“designated hedges”), and gain (loss) on foreign currency translation.
Fair Value Measurement
Fair value is based on an exit price, defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Where appropriate, the Company makes adjustments to estimated fair values to appropriately reflect counterparty credit risk as well as the Company’s own creditworthiness.
The estimated fair value of financial assets and financial liabilities are categorized into a three-tier hierarchy, prioritized based on the level of transparency in inputs used in the valuation techniques, as follows:
Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in non-active markets, or valuation techniques utilizing inputs that are derived principally from or corroborated by observable data directly or indirectly for substantially the full term of the financial instrument.
Level 3—At least one assumption or input is unobservable and it is significant to the fair value measurement, requiring significant management judgment or estimate.
Where the inputs used to measure the fair value of a financial instrument fall into different levels of the fair value hierarchy, the financial instrument is categorized within the hierarchy based on the lowest level of input that is significant to its fair value measurement.
Fair Value Option
The fair value option provides an option to elect fair value as an alternative measurement for selected financial instruments. Gains and losses on items for which the fair value option has been elected are reported in earnings. The fair value option may be elected only upon the occurrence of certain specified events, including when the Company enters into an eligible firm commitment, at initial recognition of the financial instrument, as well as upon a business combination or consolidation of a subsidiary. The election is irrevocable unless a new election event occurs.
The Company has elected the fair value option for its indirect interests in real estate through real estate private equity funds (“PE Investme