BrightSpire Capital's Q3 2025: Contradictions Emerge on Loan Book Growth, CLO Market, and Liquidity Strategies

Date of Call: October 29, 2025

Financials Results

• EPS: $0.01 per share GAAP net income attributable to common stockholders ($1.0M); distributable earnings $0.03 per share; adjusted distributable earnings $0.16 per share (down from $0.18 in Q2).

Guidance:

• Hold Signia Hotel through H1 2026 and market additional REO assets in early 2026.
• Target loan portfolio of ~ $3.5B; expect > $1B net originations in 2026 (roughly $300M per quarter; ~ $1.0–1.5B gross to offset paydowns).
• Preparing for a new CLO securitization (timing/size not disclosed).
• Expect improved dividend coverage and earnings in 2026 as originations, watchlist resolutions and REO sales progress.

Business Commentary:

• Loan Portfolio Growth and Diversification:
• BrightSpire Capital originated 10 loans totaling $224 million in Q3, with 7 loans in execution for an additional $242 million.
• The loan portfolio stands at $2.4 billion across 85 loans, with an average loan balance of $28 million and a risk ranking of 3.1.

• This growth and diversification are driven by tightening credit and lending spreads, increased loan inquiries, and a favorable interest rate environment.

• Watch List and REO Property Reductions:

• The watch list has been reduced from $411 million at the start of 2025 to $182 million by Q3, with several borrowers commencing formal sales processes.
• The REO portfolio stands at $364 million, with two office properties in the market for sale and plans to market additional assets early next year.

• Progress in these areas is due to successful borrower-led sales and strategic asset management, aimed at reducing exposure and generating liquidity for future growth.

• Net Loan Originations and Dividend Coverage:

• BrightSpire achieved net positive loan originations for the second consecutive quarter, contributing to the company's adjusted DE covering its dividend.
• Adjusted DE was $21.2 million or $0.16 per share, covering the dividend of $0.12 per share.

• This trend is supported by a reduction in risk-weighted assets and strong performance in core portfolio segments.

• Favorable Market Conditions and Pipeline Growth:

• BrightSpire has observed improvements in the overall commercial real estate market, with tightening loan spreads and higher loan inquiry volumes, supported by a dovish Fed policy and lower interest rates.
• The loan pipeline has gained momentum, with increased requests for acquisition financing and a boost in transaction sales volume.
• These factors are contributing to a supportive environment for increased loan originations and portfolio growth.

Sentiment Analysis:

Overall Tone: Positive

• Management described 'strong results' and being 'encouraged by the overall trajectory.' Adjusted DE covered the dividend; net positive originations for two consecutive quarters; pipeline and loan inquiry are 'gaining momentum,' and management expects upcoming quarters to be 'among our most productive.'

Q&A:

• Question from Jason Weaver (JonesTrading Institutional Services, LLC): Congrats on the quarter. First, I wonder if you could give me some update on your liquidity position, post quarter-to-date originations and those what you expect to -- the ones that are in execution that you expect to close? And if you're placing those recent loans into the 2024 CLO or holding those online?
  Response: Loans are being held on balance sheet; cash around $100M post-quarter; future fundings expected to come from REO resolutions and equity repatriation.

• Question from Jason Weaver (JonesTrading Institutional Services, LLC): Then just help me think about the pace of 4Q originations through the next couple of months... for November and December, do you expect that to be more muted or similarly active?
  Response: Expect a similarly active pace—pipeline momentum supports sustained originations; management targets roughly $300M per quarter to reach a ~$3.5B loan book (~$1B+ net in 2026).

• Question from Christopher Muller (Citizens JMP Securities, LLC): We just saw Blackstone and Starwood jump into that space. So I wanted to ask how you guys are thinking about that space? And is this an area that there could be some growth for BrightSpire? Or are you happy with the assets you have there already?
  Response: No current plan to expand into triple-net/net-lease; management is satisfied with existing net-lease assets and would consider selling if attractive bids arise.

• Question from Christopher Muller (Citizens JMP Securities, LLC): Do you expect to see a boost in demand if we get another cut from the Fed today? Or does that more just help continue to close that gap between buyers and sellers?
  Response: Lower rates and a dovish Fed are improving conditions—cap prices down, 10-year yields sub-4%, driving more loan inquiries, increased acquisition financing and higher transaction volume.

• Question from William Catherwood (BTIG, LLC): With that $320 million of loans that you've talked about closed or in closing in 4Q, are we at the point where you think we can grow the loan book going forward? Or with other potential REOs in the pipeline, could it be 2 steps forward, 1 step back? What are your thoughts as far as getting beyond the takeback period so that the portfolio can get up to $3.5 billion that you're targeting?
  Response: Yes—management believes they are at the point to grow the loan book; originations momentum plus capital from REO sales will drive increasing growth toward the $3.5B target.

• Question from William Catherwood (BTIG, LLC): With that packed event schedule in San Jose, what could the asset contribute towards distributable earnings as occupancy ramps up? What are you underwriting for 2026?
  Response: Underwriting roughly a ~$10M NOI for 2026 (2025 running below that); planned CapEx and event-driven demand should drive uplift but work is required before sale.

• Question from Gaurav Mehta (Alliance Global Partners): I think in your prepared remarks, you talked about preparing for a new CLO issuance. Can you provide some details on the size and timing of the expected issuance?
  Response: No comment—timing and size withheld because issuance is imminent and details are inappropriate to disclose now.

• Question from Gaurav Mehta (Alliance Global Partners): You talked about 2 office properties listed for sale. I think one of them was Oregon. Can you provide some detail on which is the second office property you're looking to sell?
  Response: The second office property is a Long Island City asset and management is currently soliciting offers.

Contradiction Point 1

Loan Book Growth and Targets

It involves the company's strategy and timeline for growing its loan book, which directly impacts revenue and market positioning.

What is the expected pace of 4Q originations through December and how does it compare to November and December 2024? - Jason Weaver

2025Q3: The pace is expected to be similarly active, driven by a strong pipeline and increasing loan inquiry. To reach a $3.5 billion loan book, over $1 billion in originations is needed by the end of 2026, targeting approximately $300 million per quarter. - [Andrew Witt](COO)

What is the repayment outlook for the rest of 2025, considering low Q2 repayments? - John Nickodemus

2025Q2: We actually have a bullet point here where we believe there is a very high probability that we reach $3.5 billion in the loan book by year-end. - [Michael Mazzei](CEO)

Contradiction Point 2

CLO Issuance and Market Conditions

It involves the company's plans for new CLO issuance and the market conditions surrounding these issuances, which can impact capital raising efforts and financial strategy.

What are the size and timing of the expected new CLO issuance? - Gaurav Mehta

2025Q3: We cannot comment on specifics, but it will be within the context of current CLO market conditions. - [Michael Mazzei](CEO)

Could you elaborate on the cross-collateralized preferred equity investments in Q2 '25? - Gaurav Mehta

2025Q2: We expect to be in the market in the second half of the year with a new CLO issuance. - [Andrew Witt](COO)

Contradiction Point 3

Liquidity and Funding Strategy

It involves differences in strategy regarding liquidity management and funding future originations, which are crucial for the company's growth and financial health.

What is the update on your liquidity position since the end of the quarter, including originations and those expected to close? Are recent loans placed in the 2024 CLO or held online? - Jason Weaver

2025Q3: Loans are being held on the balance sheet, and liquidity is around $100 million in cash. Future originations will be funded through REO resolutions and equity repatriation. - [Andrew Witt](COO)

What were the cash flow earnings this quarter? - Gaurav Mehta

2025Q1: We will fund future capital needs with a combination of free cash flow, unsecured debt issuance and equity offerings or repurchases. - [Frank Saracino](CFO)

Contradiction Point 4

Loan Book Growth and Targets

It highlights differences in expectations regarding the growth of the loan book and the strategies to achieve specific target sizes, impacting company performance and investor expectations.

Can BrightSpire grow its loan book beyond the takeback period to reach the $3.5 billion target? - William Catherwood

2025Q3: Yes, we're currently at that point. Loan book growth is increasing, and REO resolutions will provide capital to fuel future originations. - [Andrew Witt](COO)

Does the $1 billion in originations needed to sustain the dividend remain relevant, and how is the origination pipeline trending? - John Nicodemus

2025Q1: The objective is to increase to $3.5 billion by the end of 2025. That's really unchanged from what we had said previously. - [Michael Mazzei](CEO)

Contradiction Point 5

CLO Market and Issuance Expectations

It involves differing expectations regarding the CLO market and the timing of future CLO issuances, which are critical for the company's financial strategy and market positioning.

Can you clarify the size and timing of the planned CLO issuance? - Gaurav Mehta

2025Q3: We cannot comment on specifics, but it will be within the context of current CLO market conditions. - [Michael Mazzei](CEO)

What is the CLO market update and expected issuance for this year? What were this quarter’s cash flow earnings? - Gaurav Mehta

2025Q1: The CLO market widened in April but has since tightened. A CLO issuance is planned for the fourth quarter, aiming to leverage the portfolio and grow earnings. - [Michael Mazzei](CEO)