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, 2021~~March 31, 2022


☐			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)

Maryland

38-4046290

(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)

(212) 547-2631

(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 share

BRSP

New 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 filer

☒

Accelerated filer

☐

Non-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 ~~November 2, 2021,~~May 5, 2022, BrightSpire Capital, Inc. had ~~129,764,822~~131,083,848 shares of Class A common stock, par value $0.01 per share, outstanding

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BRIGHTSPIRE CAPITAL, INC.

FORM 10-Q

TABLE OF CONTENTS


Index		Page

Part I.		4
Item 1.	Financial Information	4
	Financial Statements	4
	Consolidated Balance Sheets as of ~~September 30, 2021~~March 31, 2022 (unaudited) and December 31, ~~2020~~2021	4
	Consolidated Statements of Operations (unaudited) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	6
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	7
	Consolidated Statements of Equity (unaudited) for the three ~~and nine~~ months ended ~~September~~ ~~30,~~March 31, 2022 and 2021 ~~and 2020~~	8
	Consolidated Statements of Cash Flows (unaudited) for the ~~nine~~three months ended ~~September~~ ~~30,~~March 31, 2022 and 2021 ~~and 2020~~	109
	Notes to Consolidated Financial Statements (unaudited)	1211
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6957
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	~~101~~85
Item 4.	Controls and Procedures	~~103~~87
Part II.	Other Information	~~105~~88
Item 1.	Legal Proceedings	~~105~~88
Item 1A.	Risk Factors	~~105~~88
Item 2.	Unregistered Sales of Equity ~~Securities~~ and Use of Proceeds	~~105~~88
Item 3.	Defaults Upon Senior Securities	~~105~~88
Item 4.	Mine Safety Disclosures	~~105~~88
Item 5.	Other Information	~~105~~88
Item 6.	Exhibits	~~106~~89
Signatures

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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 adverse effect of the current pandemic of the ~~novel~~ongoing coronavirus, or COVID-19, 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. The extent to which the COVID-19 pandemic impacts us, our borrowers and our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, the availability and acceptance of effective vaccines, and the direct and indirect economic effects of the pandemic and containment measures, among others.

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 ~~novel~~ongoing coronavirus pandemic, measures intended to prevent its spread and government actions to mitigate its economic impact have had and may ~~continue to~~ have a material adverse effect on our business, results of operations and financial condition;

•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 fixed-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) that may cause deterioration in the performance of our investments and, potentially, principal losses to ~~us (including, but not limited to, the Los Angeles mixed-use development loan, other hospitality loans and Dublin development financings);~~us;

•the fair value of our investments may be subject to uncertainties or decrease;

•~~our ability to realize the anticipated benefits from the internalization of management following the termination of our relationship with our former external manager;~~

•the ability to realize substantial efficiencies as well as anticipated strategic and financial benefits, including, but not limited to 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 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;

•implementation of our investment strategy may be delayed or hindered as a result of terminating our relationship with our former manager;

•we have not established a 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 stock;

•we are subject to 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;

•the impact of legislative, regulatory, tax and competitive changes and the actions of governmental authorities, and in particular those affecting the commercial real estate finance and mortgage industry or our business.

The foregoing list of factors is not exhaustive. 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, ~~2020,~~2021, the section entitled “Risk Factors” in ~~our~~this Form 10-Q for the quarter ended ~~September 30, 2021 herein~~March 31, 2022 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein.

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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, 2021 (Unaudited)		December 31, 2020			March 31, 2022 (Unaudited)		December 31, 2021
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	208,711	$	474,817	Cash and cash equivalents	$	246,070	$	259,722
Restricted cash	Restricted cash	70,304		65,213		Restricted cash	84,492		86,841
Loans and preferred equity held for investment		3,166,236		2,220,688
Allowance for loan losses		(42,730)		(37,191)
Loans and preferred equity held for investment, net		3,123,506		2,183,497
Real estate securities, available for sale, at fair value		3,945		10,389
Loans held for investment						Loans held for investment	3,759,873		3,485,607
Current expected credit loss reserve						Current expected credit loss reserve	(34,004)		(36,598)
Loans held for investment, net						Loans held for investment, net	3,725,869		3,449,009

Real estate, net	Real estate, net	791,946		839,257		Real estate, net	781,629		783,211
Investments in unconsolidated ventures ($4,848 and $6,883 at fair value, respectively)		204,428		373,364
Investments in unconsolidated ventures ($4,406 and $4,406 at fair value, respectively)						Investments in unconsolidated ventures ($4,406 and $4,406 at fair value, respectively)	20,615		20,591
Receivables, net	Receivables, net	57,789		37,375		Receivables, net	60,131		54,499
Deferred leasing costs and intangible assets, net	Deferred leasing costs and intangible assets, net	67,316		75,700		Deferred leasing costs and intangible assets, net	62,697		64,981
Assets held for sale	Assets held for sale	44,218		323,356		Assets held for sale	—		44,345
Other assets	Other assets	66,051		60,900		Other assets	64,531		61,860
Mortgage loans held in securitization trusts, at fair value	Mortgage loans held in securitization trusts, at fair value	840,341		1,768,069		Mortgage loans held in securitization trusts, at fair value	754,579		813,310
Total assets	Total assets	$	5,478,555	$	6,211,937	Total assets	$	5,800,613	$	5,638,369
Liabilities	Liabilities					Liabilities
Securitization bonds payable, net	Securitization bonds payable, net	$	1,500,223	$	835,153	Securitization bonds payable, net	$	1,461,340	$	1,500,899
Mortgage and other notes payable, net	Mortgage and other notes payable, net	764,731		1,022,757		Mortgage and other notes payable, net	719,801		760,583
Credit facilities	Credit facilities	558,462		535,224		Credit facilities	1,199,789		905,122
Due to related party (Note 10)		—		10,060

Accrued and other liabilities	Accrued and other liabilities	92,341		96,578		Accrued and other liabilities	103,931		99,814
Intangible liabilities, net	Intangible liabilities, net	6,574		7,657		Intangible liabilities, net	5,878		6,224
Liabilities related to assets held for sale		—		323

Escrow deposits payable	Escrow deposits payable	54,866		36,973		Escrow deposits payable	70,004		73,344
Dividends payable	Dividends payable	21,234		—		Dividends payable	25,525		23,912
Mortgage obligations issued by securitization trusts, at fair value	Mortgage obligations issued by securitization trusts, at fair value	800,831		1,708,534		Mortgage obligations issued by securitization trusts, at fair value	718,425		777,156
Total liabilities	Total liabilities	3,799,262		4,253,259		Total liabilities	4,304,693		4,147,054
Commitments and contingencies (Note 16)	Commitments and contingencies (Note 16)	0		0		Commitments and contingencies (Note 16)	0		0
Equity	Equity					Equity
Stockholders’ equity	Stockholders’ equity					Stockholders’ equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		—		—
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively						Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	—		—
Common stock, $0.01 par value per share	Common stock, $0.01 par value per share					Common stock, $0.01 par value per share
Class A, 950,000,000 shares authorized, 129,759,132 and 128,564,930 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		1,298		1,286
Class A, 950,000,000 shares authorized, 129,633,136 and 129,769,365 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively						Class A, 950,000,000 shares authorized, 129,633,136 and 129,769,365 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	1,296		1,298
Additional paid-in capital	Additional paid-in capital	2,854,626		2,844,023		Additional paid-in capital	2,856,635		2,855,766
Accumulated deficit	Accumulated deficit	(1,468,231)		(1,234,224)		Accumulated deficit	(1,407,495)		(1,410,562)
Accumulated other comprehensive income	Accumulated other comprehensive income	44,886		54,588		Accumulated other comprehensive income	9,446		8,786
Total stockholders’ equity	Total stockholders’ equity	1,432,579		1,665,673		Total stockholders’ equity	1,459,882		1,455,288
Noncontrolling interests in investment entities	Noncontrolling interests in investment entities	213,243		253,225		Noncontrolling interests in investment entities	1,384		1,472
Noncontrolling interests in the Operating Partnership	Noncontrolling interests in the Operating Partnership	33,471		39,780		Noncontrolling interests in the Operating Partnership	34,654		34,555
Total equity	Total equity	1,679,293		1,958,678		Total equity	1,495,920		1,491,315
Total liabilities and equity	Total liabilities and equity	$	5,478,555	$	6,211,937	Total liabilities and equity	$	5,800,613	$	5,638,369

The accompanying notes are an integral part of these consolidated financial ~~statements (unaudited).~~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, 2021 (Unaudited)		December 31, 2020			March 31, 2022 (Unaudited)		December 31, 2021
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	10,983	$	19,248	Cash and cash equivalents	$	5,527	$	6,720
Restricted cash	Restricted cash	13,456		15,397		Restricted cash	10,193		9,658
Loans and preferred equity held for investment, net		1,729,782		919,681
Loans held for investment, net						Loans held for investment, net	1,716,090		1,781,522
Real estate, net	Real estate, net	405,108		413,057		Real estate, net	169,728		170,201
Investments in unconsolidated ventures	Investments in unconsolidated ventures	199,279		252,384		Investments in unconsolidated ventures	16,200		16,200
Receivables, net	Receivables, net	42,905		25,127		Receivables, net	37,922		12,808
Deferred leasing costs and intangible assets, net	Deferred leasing costs and intangible assets, net	46,302		52,240		Deferred leasing costs and intangible assets, net	14,036		15,105

Other assets	Other assets	22,697		21,984		Other assets	21,808		21,901
Mortgage loans held in securitization trusts, at fair value	Mortgage loans held in securitization trusts, at fair value	840,341		1,768,069		Mortgage loans held in securitization trusts, at fair value	754,579		813,310
Total assets	Total assets	$	3,310,853	$	3,487,187	Total assets	$	2,746,083	$	2,847,425
Liabilities	Liabilities					Liabilities
Securitization bonds payable, net	Securitization bonds payable, net	$	1,500,223	$	835,153	Securitization bonds payable, net	$	1,461,340	$	1,500,899
Mortgage and other notes payable, net	Mortgage and other notes payable, net	377,138		399,337		Mortgage and other notes payable, net	176,506		177,373

Accrued and other liabilities	Accrued and other liabilities	72,869		98,576		Accrued and other liabilities	7,624		6,768
Intangible liabilities, net	Intangible liabilities, net	6,574		7,657		Intangible liabilities, net	5,878		6,224

Escrow deposits payable	Escrow deposits payable	5,258		3,591		Escrow deposits payable	2,476		3,484
Mortgage obligations issued by securitization trusts, at fair value	Mortgage obligations issued by securitization trusts, at fair value	800,831		1,708,534		Mortgage obligations issued by securitization trusts, at fair value	718,425		777,156
Total liabilities	Total liabilities	$	2,762,893	$	3,052,848	Total liabilities	$	2,372,249	$	2,471,904

The accompanying notes are an integral part of these consolidated financial ~~statements (unaudited).~~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,				Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Net interest income	Net interest income										Net interest income
Interest income	Interest income	$	47,082	$	36,391	$	119,377	$	122,003		Interest income	$	44,570	$	34,374
Interest expense	Interest expense	(14,962)		(13,426)		(40,450)		(50,915)			Interest expense	(16,072)		(12,495)
Interest income on mortgage loans held in securitization trusts	Interest income on mortgage loans held in securitization trusts	10,806		20,462		41,885		61,556			Interest income on mortgage loans held in securitization trusts	9,375		19,689
Interest expense on mortgage obligations issued by securitization trusts	Interest expense on mortgage obligations issued by securitization trusts	(9,508)		(18,204)		(36,955)		(54,627)			Interest expense on mortgage obligations issued by securitization trusts	(8,488)		(17,336)
Net interest income	Net interest income	33,418		25,223		83,857		78,017			Net interest income	29,385		24,232

Property and other income	Property and other income										Property and other income
Property operating income	Property operating income	26,376		41,678		76,897		137,913			Property operating income	24,168		25,722
Other income	Other income	946		30		2,101		1,079			Other income	276		45
Total property and other income	Total property and other income	27,322		41,708		78,998		138,992			Total property and other income	24,444		25,767

Expenses	Expenses										Expenses
Management fee expense	Management fee expense	—		7,083		9,596		22,235			Management fee expense	—		7,258
Property operating expense	Property operating expense	7,266		15,277		22,135		54,119			Property operating expense	6,724		8,111
Transaction, investment and servicing expense	Transaction, investment and servicing expense	1,086		1,627		4,018		7,668			Transaction, investment and servicing expense	1,124		2,288
Interest expense on real estate	Interest expense on real estate	7,968		12,205		24,378		37,101			Interest expense on real estate	7,556		8,633
Depreciation and amortization	Depreciation and amortization	8,850		14,770		28,383		46,766			Depreciation and amortization	8,594		9,539
Provision for loan losses		769		10,404		5,194		80,285
Impairment of operating real estate		—		3,451		—		33,512
Administrative expense (including $2,695, $1,376, $12,379 and $3,268 of equity-based compensation expense, respectively)		11,812		5,780		38,460		19,569
Increase (decrease) of current expected credit loss reserve											Increase (decrease) of current expected credit loss reserve	(866)		3,225

Compensation and benefits (including $1,880 and $4,262 of equity-based compensation expense, respectively)											Compensation and benefits (including $1,880 and $4,262 of equity-based compensation expense, respectively)	8,225		6,786
Operating expense											Operating expense	4,349		5,809
Restructuring charges	Restructuring charges	—		—		109,321		—			Restructuring charges	—		109,171
Total expenses	Total expenses	37,751		70,597		241,485		301,255			Total expenses	35,706		160,820

Other income (loss)
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net		3,867		(13,162)		32,021		(41,589)
Realized loss on mortgage loans and obligations held in securitization trusts, net		(3,867)		—		(23,383)		—
Other gain (loss), net		3,309		9,680		12,512		(130,115)
Other income											Other income
Unrealized gain on mortgage loans and obligations held in securitization trusts, net											Unrealized gain on mortgage loans and obligations held in securitization trusts, net	—		8,638

Other gain, net											Other gain, net	10,288		8,367
Income (loss) before equity in earnings of unconsolidated ventures and income taxes	Income (loss) before equity in earnings of unconsolidated ventures and income taxes	26,298		(7,148)		(57,480)		(255,950)			Income (loss) before equity in earnings of unconsolidated ventures and income taxes	28,411		(93,816)
Equity in earnings (loss) of unconsolidated ventures	Equity in earnings (loss) of unconsolidated ventures	(95,977)		(1,779)		(132,243)		(69,889)			Equity in earnings (loss) of unconsolidated ventures	25		(2,478)
Income tax benefit (expense)	Income tax benefit (expense)	(2,065)		15,357		(130)		11,544			Income tax benefit (expense)	(36)		1,801
Net income (loss)	Net income (loss)	(71,744)		6,430		(189,853)		(314,295)			Net income (loss)	28,400		(94,493)
Net (income) loss attributable to noncontrolling interests:	Net (income) loss attributable to noncontrolling interests:										Net (income) loss attributable to noncontrolling interests:
Investment entities	Investment entities	61		(1,222)		3,746		6,362			Investment entities	(22)		226
Operating Partnership	Operating Partnership	1,626		(201)		4,016		7,109			Operating Partnership	(654)		1,953
Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	$	(70,057)	$	5,007	$	(182,091)	$	(300,824)		Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	$	27,724	$	(92,314)

Net income (loss) per common share - basic and diluted (Note 18)	Net income (loss) per common share - basic and diluted (Note 18)	$	(0.54)	$	0.04	$	(1.42)	$	(2.34)		Net income (loss) per common share - basic and diluted (Note 18)	$	0.21	$	(0.71)

Weighted average shares of common stock outstanding - basic and diluted (Note 18)		128,693		128,583		128,430		128,537
Weighted average shares of common stock outstanding - basic (Note 18)											Weighted average shares of common stock outstanding - basic (Note 18)	128,758		129,781
Weighted average shares of common stock outstanding - diluted (Note 18)											Weighted average shares of common stock outstanding - diluted (Note 18)	129,745		129,781

The accompanying notes are an integral part of these consolidated financial ~~statements (unaudited).~~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,				Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Net income (loss)	Net income (loss)	$	(71,744)	$	6,430	$	(189,853)	$	(314,295)		Net income (loss)	$	28,400	$	(94,493)
Other comprehensive income (loss)	Other comprehensive income (loss)										Other comprehensive income (loss)
Unrealized gain (loss) on real estate securities, available for sale		—		4,291		(200)		(12,228)
Change in fair value of net investment hedges		—		—		—		21,764
Unrealized loss on real estate securities, available for sale											Unrealized loss on real estate securities, available for sale	—		(200)

Foreign currency translation gain (loss)	Foreign currency translation gain (loss)	(3,900)		12,656		(10,219)		4,315			Foreign currency translation gain (loss)	676		(8,533)
Total other comprehensive income (loss)	Total other comprehensive income (loss)	(3,900)		16,947		(10,419)		13,851			Total other comprehensive income (loss)	676		(8,733)
Comprehensive income (loss)	Comprehensive income (loss)	(75,644)		23,377		(200,272)		(300,444)			Comprehensive income (loss)	29,076		(103,226)
Comprehensive (income) loss attributable to noncontrolling interests:	Comprehensive (income) loss attributable to noncontrolling interests:										Comprehensive (income) loss attributable to noncontrolling interests:
Investment entities	Investment entities	(58)		(2,138)		4,067		5,189			Investment entities	(22)		1,002
Operating Partnership	Operating Partnership	1,719		(519)		4,413		7,091			Operating Partnership	(670)		2,168
Comprehensive income (loss) attributable to common stockholders	Comprehensive income (loss) attributable to common stockholders	$	(73,983)	$	20,720	$	(191,792)	$	(288,164)		Comprehensive income (loss) attributable to common stockholders	$	28,384	$	(100,056)

The accompanying notes are an integral part of these consolidated financial ~~statements (unaudited).~~statements.

Table of Contents

~~BRIGHTSPIRE CAPITAL, INC.~~

~~CONSOLIDATED STATEMENTS OF EQUITY (Continued)~~

~~(in Thousands)~~

~~(Unaudited)~~

Common Stock Additional
Paid-in
Capital Retained
Earnings
(Accumulated
Deficit) Accumulated
Other
Comprehensive
Income Total
Stockholders’
Equity Noncontrolling Interests in Investment Entities Noncontrolling Interests in the Operating Partnership Total
Equity
Class A
Shares Amount
Balance as of December 31, 2019 128,539 $ 1,285 $ 2,909,181 $ (819,738) $ 28,294 $ 2,119,022 $ 31,631 $ 50,697 $ 2,201,350
Distributions — — — — — — (11,013) — (11,013)
Issuance and amortization of equity-based compensation — — 342 — — 342 — — 342
Other comprehensive income — — — — (70,999) (70,999) — (1,702) (72,701)
Dividends and distributions declared ($0.30 per share) — — — (38,541) — (38,541) — (922) (39,463)
Shares canceled for tax withholding on vested stock awards (173) (1) (1,686) — — (1,687) — — (1,687)
Reallocation of equity — — (41) — — (41) — 41 —
Costs of noncontrolling equity — — — — — — — — —
Investment by JV partner in consolidated JV and equity reallocation related to that partner's return (see Note 2) — — — — — — — — —
Effect of CECL Adoption (see Note 2)
— — — (22,644) — (22,644) — (542) (23,186)
Net income (loss) — — — (78,772) — (78,772) 523 (1,892) (80,141)
Balance as of March 31, 2020 128,366 $ 1,284 $ 2,907,796 $ (959,695) $ (42,705) $ 1,906,680 $ 21,141 $ 45,680 $ 1,973,501
Contributions — — — — — — 200,467 — 200,467
Distributions — — — — — — (3,156) — (3,156)
Issuance and amortization of equity-based compensation 237 2 1,547 — — 1,549 — — 1,549
Other comprehensive income — — — — 67,946 67,946 257 1,404 69,607
Dividends and distributions declared ($0.10 per share) — — — — — — — — —
Shares canceled for tax withholding on vested stock awards (20) — (81) — — (81) — — (81)
Reallocation of equity — — 1,777 — — 1,777 — (1,777) —
Costs of noncontrolling equity — — (466) — — (466) — — (466)
Investments by JV partner in consolidated JV and equity reallocation to that partner's return (see Note 2) — — (70,439) — — (70,439) 70,439 — —
Net income (loss) — — — (227,059) — (227,059) (8,107) (5,418) (240,584)
Balance as of June 30, 2020 128,583 $ 1,286 $ 2,840,134 $ (1,186,754) $ 25,241 $ 1,679,907 $ 281,041 $ 39,889 $ 2,000,837
Contributions — — — — — — 27 — 27
Distributions — — — — — — (8,724) — (8,724)
Issuance and amortization of equity-based compensation — — 1,376 — — 1,376 — — 1,376
Other comprehensive income — — — — 15,713 15,713 916 318 16,947
Shares canceled for tax withholding on vested stock awards — — (1) — — (1) — — (1)
Reallocation of equity — — (296) — — (296) — 296 —
Investment by JV partner in consolidated JV and equity reallocation related to that partner's return (see Note 2) — — 1,679 — — 1,679 (1,679) — —
Net income — — — 5,007 — 5,007 1,222 201 6,430
Balance as of September 30, 2020 128,583 $ 1,286 $ 2,842,892 $ (1,181,747) $ 40,954 $ 1,703,385 $ 272,803 $ 40,704 $ 2,016,892

~~The accompanying notes are an integral part of these consolidated financial statements (unaudited).~~

~~Table of Contents~~

BRIGHTSPIRE CAPITAL, INC.

CONSOLIDATED STATEMENTS OF EQUITY (Continued)

(in Thousands)

~~(Unaudited)~~


		Common Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income		Total Stockholders’ Equity		Noncontrolling Interests in Investment Entities		Noncontrolling Interest in the Operating Partnership		Total Equity			Common Stock			Additional Paid-in Capital	Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income			Total Stockholders’ Equity			Noncontrolling Interests in Investment Entities			Noncontrolling Interest in the Operating Partnership			Total Equity
		Class A																		Class A
		Shares	Amount																	Shares	Amount
Balance as of December 31, 2020	Balance as of December 31, 2020	128,565	$	1,286	$	2,844,023	$	(1,234,224)	$	54,588	$	1,665,673	$	253,225	$	39,780	$	1,958,678	Balance as of December 31, 2020	128,565	$	1,286			$	2,844,023		$	(1,234,224)		$	54,588		$	1,665,673		$	253,225		$	39,780	$	1,958,678
Contributions	Contributions	—	—		—		—		—		—		1,384		—		1,384		Contributions	—	—				—			—			—			—			1,384			—		1,384
Distributions	Distributions	—	—		—		—		—		—		(10,794)		—		(10,794)		Distributions	—	—				—			—			—			—			(10,794)			—		(10,794)
Issuance and amortization of equity-based compensation	Issuance and amortization of equity-based compensation	1,420	14		4,248		—		—		4,262		—		—		4,262		Issuance and amortization of equity-based compensation	1,420	14				4,248			—			—			4,262			—			—		4,262
Other comprehensive income	Other comprehensive income	—	—		—		—		(7,742)		(7,742)		(776)		(215)		(8,733)		Other comprehensive income	—	—				—			—			(7,742)			(7,742)			(776)			(215)		(8,733)
Dividends and distributions declared ($0.10 per share)	Dividends and distributions declared ($0.10 per share)	—	—		—		(12,988)		—		(12,988)		—		(308)		(13,296)		Dividends and distributions declared ($0.10 per share)	—	—				—			(12,988)			—			(12,988)			—			(308)		(13,296)
Shares canceled for tax withholding on vested stock awards	Shares canceled for tax withholding on vested stock awards	(136)	(2)		(1,307)		—		—		(1,309)		—		—		(1,309)		Shares canceled for tax withholding on vested stock awards	(136)	(2)				(1,307)			—			—			(1,309)			—			—		(1,309)
Reallocation of equity	Reallocation of equity	—	—		521		—		—		521		—		(521)		—		Reallocation of equity	—	—				521			—			—			521			—			(521)		—

Net income (loss)		—	—		—		(92,314)		—		(92,314)		(226)		(1,953)		(94,493)
Net loss																			Net loss	—	—				—			(92,314)			—			(92,314)			(226)			(1,953)		(94,493)
Balance as of March 31, 2021	Balance as of March 31, 2021	129,849	$	1,298	$	2,847,485	$	(1,339,526)	$	46,846	$	1,556,103	$	242,813	$	36,783	$	1,835,699	Balance as of March 31, 2021	129,849	$	1,298			$	2,847,485		$	(1,339,526)		$	46,846		$	1,556,103		$	242,813		$	36,783	$	1,835,699
Contributions		—	—		—		—		—		—		838		—		838

Balance as of December 31, 2021																			Balance as of December 31, 2021	129,769	$	1,298			$	2,855,766		$	(1,410,562)		$	8,786		$	1,455,288		$	1,472		$	34,555	$	1,491,315

Distributions	Distributions	—	—		—		—		—		—		(13,148)		—		(13,148)		Distributions	—	—				—			—			—			—			(110)			—		(110)
Issuance and amortization of equity-based compensation	Issuance and amortization of equity-based compensation	41	—		5,443		—		—		5,443		—		—		5,443		Issuance and amortization of equity-based compensation	—	—				1,880			—			—			1,880			—			—		1,880
Other comprehensive income	Other comprehensive income	—	—		—		—		1,966		1,966		336		(89)		2,213		Other comprehensive income	—	—				—			—			660			660			—			16		676
Dividends and distributions declared ($0.14 per share)		—	—		—		(18,166)		—		(18,166)		—		(431)		(18,597)
Dividends and distributions declared ($0.19 per share)																			Dividends and distributions declared ($0.19 per share)	—	—				—			(24,657)			—			(24,657)			—			(584)		(25,241)
Shares canceled for tax withholding on vested stock awards	Shares canceled for tax withholding on vested stock awards	(131)	—		(1,141)		—		—		(1,141)		—		—		(1,141)		Shares canceled for tax withholding on vested stock awards	(136)	(2)				(998)			—			—			(1,000)			—			—		(1,000)
Reallocation of equity	Reallocation of equity	—	—		129		—		—		129		—		(129)		—		Reallocation of equity	—	—				(13)			—			—			(13)			—			13		—
Net income																			Net income	—	—				—			27,724			—			27,724			22			654		28,400
Balance as of March 31, 2022																			Balance as of March 31, 2022	129,633	$	1,296			$	2,856,635		$	(1,407,495)		$	9,446		$	1,459,882		$	1,384		$	34,654	$	1,495,920

Net income (loss)		—	—		—		(19,720)		—		(19,720)		(3,459)		(437)		(23,616)
Balance as June 30, 2021		129,759	$	1,298	$	2,851,916	$	(1,377,412)	$	48,812	$	1,524,614	$	227,380	$	35,697	$	1,787,691
Contributions		—	—		—		—		—		—		2,096		—		2,096
Distributions		—	—		—		—		—		—		(16,291)		—		(16,291)
Issuance and amortization of equity-based compensation		—	—		2,695		—		—		2,695		—		—		2,695
Other comprehensive income		—	—		—		—		(3,926)		(3,926)		119		(93)		(3,900)
Dividends and distributions declared ($0.16 per share)		—	—		—		(20,762)		—		(20,762)		—		(492)		(21,254)

Reallocation of equity		—	—		15		—		—		15		—		(15)		—
Net loss		—	—		—		(70,057)		—		(70,057)		(61)		(1,626)		(71,744)
Balance as of September 30, 2021		129,759	$	1,298	$	2,854,626	$	(1,468,231)	$	44,886	$	1,432,579	$	213,243	$	33,471	$	1,679,293

The accompanying notes are an integral part of these consolidated financial ~~statements (unaudited).~~statements.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in Thousands)

(Unaudited)


		Nine Months Ended September 30,				Three Months Ended March 31,
		2021		2020				2022		2021
Cash flows from operating activities:	Cash flows from operating activities:						Cash flows from operating activities:
Net loss		$	(189,853)	$	(314,295)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net income (loss)							Net income (loss)	$	28,400	$	(94,493)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:							Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity in (earnings) losses of unconsolidated ventures	Equity in (earnings) losses of unconsolidated ventures	132,243		69,889			Equity in (earnings) losses of unconsolidated ventures	(25)		2,478
Depreciation and amortization	Depreciation and amortization	28,383		46,766			Depreciation and amortization	8,594		9,539
Straight-line rental income	Straight-line rental income	(2,199)		(3,100)			Straight-line rental income	(391)		(1,082)
Amortization of above/below market lease values, net	Amortization of above/below market lease values, net	(59)		(409)			Amortization of above/below market lease values, net	(42)		182
Amortization of premium/accretion of discount and fees on investments and borrowings, net	Amortization of premium/accretion of discount and fees on investments and borrowings, net	(4,659)		(7,823)			Amortization of premium/accretion of discount and fees on investments and borrowings, net	(2,999)		(1,490)
Amortization of deferred financing costs	Amortization of deferred financing costs	9,129		9,522			Amortization of deferred financing costs	2,327		3,016
Amortization of right-of-use lease assets and operating lease liabilities	Amortization of right-of-use lease assets and operating lease liabilities	69		74			Amortization of right-of-use lease assets and operating lease liabilities	99		26
Paid-in-kind interest added to loan principal, net of interest received	Paid-in-kind interest added to loan principal, net of interest received	(13,277)		3,856			Paid-in-kind interest added to loan principal, net of interest received	2,719		(2,547)
Distributions of cumulative earnings from unconsolidated ventures		—		13,429

Unrealized (gain) loss on mortgage loans and obligations held in securitization trusts, net	Unrealized (gain) loss on mortgage loans and obligations held in securitization trusts, net	(32,021)		41,589			Unrealized (gain) loss on mortgage loans and obligations held in securitization trusts, net	—		(8,638)
Realized loss on mortgage loans and obligations held in securitization trusts, net		23,383		—

Realized loss on securities from write-down to fair value	Realized loss on securities from write-down to fair value	990		32,606			Realized loss on securities from write-down to fair value	—		990
Realized (gain) loss on sale of real estate securities, available for sale	Realized (gain) loss on sale of real estate securities, available for sale	(131)		51,889			Realized (gain) loss on sale of real estate securities, available for sale	—		(131)

Realized gain on sale of real estate	Realized gain on sale of real estate	(11,911)		(9,240)			Realized gain on sale of real estate	(10,632)		(11,911)
Realized loss on sale of loans receivable		—		1,457
Provision for loan losses		5,194		80,285
Impairment of operating real estate		—		33,512
Increase (decrease) of current expected credit loss reserve							Increase (decrease) of current expected credit loss reserve	(866)		3,225

Amortization of equity-based compensation	Amortization of equity-based compensation	12,379		3,265			Amortization of equity-based compensation	1,880		4,262
Mortgage notes above/below market value amortization	Mortgage notes above/below market value amortization	92		(628)			Mortgage notes above/below market value amortization	53		27

Deferred income tax (benefit) expense	Deferred income tax (benefit) expense	407		(397)			Deferred income tax (benefit) expense	(500)		(768)
Other (gain) loss, net	Other (gain) loss, net	1,369		23,524			Other (gain) loss, net	269		1,369
Changes in assets and liabilities:	Changes in assets and liabilities:						Changes in assets and liabilities:
Receivables, net	Receivables, net	(3,402)		(30,907)			Receivables, net	2,010		(3,992)
Deferred costs and other assets	Deferred costs and other assets	(3,158)		7,169			Deferred costs and other assets	472		1,439
Due to related party	Due to related party	(10,059)		(1,824)			Due to related party	—		101,956
Other liabilities	Other liabilities	(13,894)		(5,347)			Other liabilities	989		(1,797)
Net cash provided (used in) by operating activities		(70,985)		44,862
Net cash provided by operating activities							Net cash provided by operating activities	32,357		1,660
Cash flows from investing activities:	Cash flows from investing activities:						Cash flows from investing activities:
Acquisition, origination and funding of loans and preferred equity held for investment, net		(1,305,599)		(122,424)
Repayment on loans and preferred equity held for investment		357,210		334,208
Repayment on loans held for sale		—		137,132
Acquisition, origination and funding of loans held for investment, net							Acquisition, origination and funding of loans held for investment, net	(498,195)		(432,918)
Repayment on loans held for investment							Repayment on loans held for investment	215,305		41,337

Proceeds from sale of real estate	Proceeds from sale of real estate	332,003		300,469			Proceeds from sale of real estate	55,600		332,003

Acquisition of and additions to real estate, related intangibles and leasing commissions	Acquisition of and additions to real estate, related intangibles and leasing commissions	(9,539)		(19,749)			Acquisition of and additions to real estate, related intangibles and leasing commissions	(1,468)		(1,760)
Investments in unconsolidated ventures	Investments in unconsolidated ventures	(7,477)		(47,541)			Investments in unconsolidated ventures	—		(1,795)
Proceeds from sale of investments in unconsolidated ventures		—		99,985

Distributions in excess of cumulative earnings from unconsolidated ventures	Distributions in excess of cumulative earnings from unconsolidated ventures	35,930		25,011			Distributions in excess of cumulative earnings from unconsolidated ventures	(4)		8,784

Repayment of real estate securities, available for sale, from sales	Repayment of real estate securities, available for sale, from sales	5,079		118,586			Repayment of real estate securities, available for sale, from sales	—		5,079
Repayment of real estate securities, available for sale, from cost recovery	Repayment of real estate securities, available for sale, from cost recovery	310		3,020			Repayment of real estate securities, available for sale, from cost recovery	—		118
Repayment of principal in mortgage loans held in securitization trusts	Repayment of principal in mortgage loans held in securitization trusts	70,839		19,816			Repayment of principal in mortgage loans held in securitization trusts	13,300		7,128
Proceeds from sale of beneficial interests of securitization trusts		28,662		—
Net receipts on settlement of derivative instruments		—		19,637

Change in escrow deposits	Change in escrow deposits	17,892		(36,855)			Change in escrow deposits	(3,340)		3,690
Net cash provided (used in) by investing activities		(474,690)		831,295
Net cash used in investing activities							Net cash used in investing activities	(218,802)		(38,334)
Cash flows from financing activities:	Cash flows from financing activities:						Cash flows from financing activities:
Distributions paid on common stock	Distributions paid on common stock	(31,154)		(51,705)			Distributions paid on common stock	(23,934)		—
Distributions paid on common stock to noncontrolling interests		(739)		(922)

Shares canceled for tax withholding on vested stock awards	Shares canceled for tax withholding on vested stock awards	(2,451)		(1,768)			Shares canceled for tax withholding on vested stock awards	(998)		(1,309)
Borrowings from mortgage notes	Borrowings from mortgage notes	7,443		15,026			Borrowings from mortgage notes	—		37
Repayment of mortgage notes	Repayment of mortgage notes	(264,790)		(156,066)			Repayment of mortgage notes	(43,303)		(251,804)
Borrowings from credit facilities	Borrowings from credit facilities	943,718		255,128			Borrowings from credit facilities	383,334		329,336
Repayment of credit facilities	Repayment of credit facilities	(920,609)		(745,729)			Repayment of credit facilities	(88,667)		(76,765)
Borrowing from securitization bonds		670,000		—

Repayment of securitization bonds							Repayment of securitization bonds	(40,736)		—
Repayment of mortgage obligations issued by securitization trusts	Repayment of mortgage obligations issued by securitization trusts	(70,839)		(19,816)			Repayment of mortgage obligations issued by securitization trusts	(13,300)		(7,128)
Payment of deferred financing costs	Payment of deferred financing costs	(11,129)		(6,943)			Payment of deferred financing costs	(2,338)		(1,490)
Contributions from noncontrolling interests	Contributions from noncontrolling interests	4,318		200,028			Contributions from noncontrolling interests	—		1,384
Distributions to noncontrolling interests	Distributions to noncontrolling interests	(40,233)		(22,893)			Distributions to noncontrolling interests	(110)		(10,794)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	283,535		(535,660)			Net cash provided by (used in) financing activities	169,948		(18,533)
Effect of exchange rates on cash, cash equivalents and restricted cash	Effect of exchange rates on cash, cash equivalents and restricted cash	1,125		(1,132)			Effect of exchange rates on cash, cash equivalents and restricted cash	496		3,520
Net increase (decrease) in cash, cash equivalents and restricted cash	Net increase (decrease) in cash, cash equivalents and restricted cash	(261,015)		339,365			Net increase (decrease) in cash, cash equivalents and restricted cash	(16,001)		(51,687)
Cash, cash equivalents and restricted cash - beginning of period	Cash, cash equivalents and restricted cash - beginning of period	540,030		195,684			Cash, cash equivalents and restricted cash - beginning of period	346,563		540,030
Cash, cash equivalents and restricted cash - end of period	Cash, cash equivalents and restricted cash - end of period	$	279,015	$	535,049		Cash, cash equivalents and restricted cash - end of period	$	330,562	$	488,343

The accompanying notes are an integral part of these consolidated financial ~~statements (unaudited).~~statements.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(in Thousands)

(Unaudited)

Nine Months Ended September 30,
2021 2020
Reconciliation of cash, cash equivalents, and restricted cash to consolidated balance sheets
Beginning of the period
Cash and cash equivalents $ 474,817 $ 69,619
Restricted cash 65,213 126,065
Total cash, cash equivalents and restricted cash, beginning of period $ 540,030 $ 195,684
End of the period
Cash and cash equivalents $ 208,711 $ 461,990
Restricted cash 70,304 73,059
Total cash, cash equivalents and restricted cash, end of period $ 279,015 $ 535,049

Nine Months Ended September 30,
2021 2020
Supplemental disclosure of non-cash investing and financing activities:
Deconsolidation of securitization trust (VIE asset/liability reductions) $ (802,196) $ —
Accrual of distribution payable (21,234) (13,164)
Right-of-use lease assets and operating lease liabilities 5,435 (730)


	Three Months Ended March 31,
	2022		2021
Reconciliation of cash, cash equivalents, and restricted cash to consolidated balance sheets
Beginning of the period
Cash and cash equivalents	$	259,722	$	474,817
Restricted cash	86,841		65,213
Total cash, cash equivalents and restricted cash, beginning of period	$	346,563	$	540,030

End of the period
Cash and cash equivalents	$	246,070	$	430,312
Restricted cash	84,492		58,031
Total cash, cash equivalents and restricted cash, end of period	$	330,562	$	488,343


	Three Months Ended March 31,
	2022		2021



Supplemental disclosure of non-cash investing and financing activities:





Accrual of distribution payable	$	25,525	$	13,295

Right-of-use lease assets and operating lease liabilities	3,271		—

The accompanying notes are an integral part of these consolidated financial ~~statements (unaudited).~~statements.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Business and Organization

On June 24, 2021, BrightSpire Capital, Inc. (together with its consolidated subsidiaries, the “Company”) changed its name from Colony Credit Real Estate, Inc. As of June 25, 2021, the Company also changed its principal place of business and corporate headquarters from Los Angeles to New York City, now located at 590 Madison Avenue, 33rd Floor, New York, NY 10022. The Company will continue to be publicly traded on the New York Stock Exchange, trading under the new ticker symbol, BRSP.

BrightSpire Capital, Inc. 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 ~~equity~~ 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 also currently has investments in CRE debt securities ~~primarily~~ consisting of commercial mortgage-backed securities (“CMBS”) ~~(including~~that are “B-pieces” of a CMBS securitization pool) or CRE collateralized loan obligations (“CLOs”) (including the junior tranches thereof, collateralized by pools of CRE debt investments). Any future investments in more highly rated investment grade CRE debt securities would be selective and opportunistic.pool.

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, ~~(formerly known as Credit RE Operating Company, LLC, the~~(the “OP”). At ~~September 30, 2021,~~March 31, 2022, the Company owned 97.7% of the OP, as its sole managing member. The remaining 2.3% is owned as noncontrolling interests.

~~The Internalization~~

On April 30, 2021, the Company completed the internalization of the Company’s management and operating functions and terminated its relationship with CLNC Manager, LLC (the “Manager”), a subsidiary of DigitalBridge Group, Inc., formerly known as Colony Capital, Inc. (“DigitalBridge”), in accordance with that termination agreement dated April 4, 2021 between the Company, the OP, the Manager and Colony Capital Investment Advisors, LLC (the “Termination Agreement,” and the transactions contemplated thereunder, the “Internalization”). Pursuant to the Termination Agreement, the Company paid the Manager a one-time termination fee of $102.3 million. Therefore, the Company will no longer pay management or incentive fees to the Manager for any post-closing period and the Company has assumed general and administrative expenses directly. The Company anticipates a savings in operating costs as a result of the Internalization. Further, in connection with the Internalization, certain affiliates of each of the Company and the Manager entered into a transition services agreement to facilitate an orderly internalization transition of the Company’s management of its operations and, in addition, the Company will provide affiliates of the Manager with certain limited transition services.

The Company’s executive team remains unchanged, including Michael J. Mazzei, Chief Executive Officer and President; Andrew E. Witt, Chief Operating Officer and Executive Vice President; Frank V. Saracino, Chief Financial Officer and Executive Vice President; David A. Palamé, General Counsel, Secretary and Executive Vice President; George Kok, Chief Credit Officer; and Daniel Katz, Head of Originations. Following the Company’s 2021 Annual Meeting of Stockholders (the “Annual Meeting”), DigitalBridge no longer has affiliated representatives on the Company’s board of directors. The Company’s board of directors is comprised of six members, including five incumbent independent directors, led by Catherine D. Rice, the Company’s Independent Chairperson, Vernon Schwartz, John Westerfield, Winston W. Wilson and Kim S. Diamond, who was recently appointed during the fourth quarter of 2021, and Michael J. Mazzei, the Company’s Chief Executive Officer and President. Additionally, certain employees that have contributed substantially to the Company’s investment, underwriting, portfolio and asset management, loan servicing, financial reporting, treasury, legal, tax, credit, risk and compliance responsibilities seamlessly moved forward with the Company.

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~~Segment Realignment~~

During the first quarter of 2021, the Company realigned the business and reportable segment information to reflect how the Chief Operating Decision Makers (“CODM”) regularly review and manage the business. Refer to Note 17, “Segment Reporting” for further detail.

Impact of COVID-19

The COVID-19 pandemic has negatively impacted CRE credit REITs across the industry, as well as other companies that own and operate commercial real estate investments. Throughout 2020, continuing into the ~~third~~first quarter of ~~2021,~~2022, countries around the world ~~continue~~continued to face healthcare and economic challenges arising from the ~~novel~~ coronavirus, or COVID-19. Efforts to address the pandemic, such as social distancing, closures or reduced capacity of retail and service outlets, hotels, factories and public venues, often mandated by governments, have had a significant impact on the global economy and financial markets across major industries, including many sectors of real estate. In particular, the Company’s loans ~~and preferred equity held~~ for investment and real estate investments in the hospitality and retail sectors have experienced or anticipate a myriad of challenges, including, but not limited to: significant declines in operating cash flows of the Company’s investments which in turn affect their ability to meet debt service and covenant requirements on investment-level debt (non-recourse to the Company); flexible lease payment terms sought by tenants; increased property operating costs such as labor and supplies as a result of COVID-19; potential payment defaults on the Company's loans ~~and preferred equity~~ held for investment; and a distressed market affecting real estate values in general. The COVID-19 crisis may also lead to heightened risk of litigation at the investment and corporate level, with an ensuing increase in litigation and related costs.

The volatility in equity and debt markets, and the economic fallout from COVID-19 ~~continue to~~may affect the valuation of the Company’s financial assets, carried at fair value. The Company’s consideration and assessment of impairment is discussed further in Note 3, “Loans ~~and Preferred Equity~~ Held for Investment, net,” Note 5, “Real Estate Securities, Available for Sale,” Note 6, “Real Estate, net and Real Estate Held for Sale” and Note 14, “Fair Value.”

A prolonged economic downturn as a result of efforts to contain COVID-19 may continue to negatively affect the Company’s financial condition and results of operations. While the extent and duration of the broad effects of COVID-19 on the global economy and the Company remain unclear, the Company believes it has materially addressed overall recoverability in value across its assets based upon external factors known to date and assumptions using the Company’s best estimate at this time. The Company will continue to monitor the progress of the COVID-19 crisis and reassess its effects on the Company’s results of operations and recoverability in value across its assets as conditions change.

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

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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, ~~2021,~~2022, 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, ~~2020.~~2021.

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.

Reclassifications

Certain prior period amounts have been reclassified from operating expense to compensation and benefits in the consolidated financial statements to conform to current period presentation. This reclassification did not affect the Company’s financial position, results of operations or cash flows.

Use of Estimates

The preparation of consolidated financial statements in conformity with ~~U.S. GAAP~~generally accepted accounting principles in the United States of America (“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.

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Restructuring Charges

On April 4, 2021, the Company entered into the ~~Termination Agreement~~termination agreement (the “Termination Agreement”) with ~~the Manager~~its former external manager (the “Manager”), a subsidiary of DigitalBridge Group, Inc. (“DigitalBridge”) whereby its management agreement (the “Management Agreement”) terminated on April 30, 2021. The termination of the ~~management agreement~~Management Agreement resulted in a material change in the management structure of the Company, and was accounted for under ASC 420, Exit or disposal cost obligations. The one-time payment made during the three months ended March 31, 2021 to the Manager under the Termination Agreement, and other associated costs, were recorded within restructuring charges on the consolidated statement of operations. Se~~e Note 19, “Restructuring Charges”~~ ~~for additional discussion of the Company’s internalization.~~

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

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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,~~March 31, 2022 and December 31, 2021, the Company has identified certain consolidated and 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.

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Consolidated VIEs

The Company’s operating subsidiary, the OP, is a limited liability company that has governing provisions that are the functional equivalent of a limited partnership. The Company holds the majority of membership interest in the OP, is the managing member of the OP and exercises full responsibility, discretion and control over the day-to-day management of the OP. The noncontrolling interests in the OP do not have substantive liquidation rights, substantive kick-out rights without cause, or substantive participating rights that could be exercised by a simple majority of noncontrolling interest members (including by such a member unilaterally). The absence of such rights, which represent voting rights in a limited partnership equivalent structure, would render the OP to be a VIE. The Company, as managing member, has the power to direct the core activities of the OP that most significantly affect the OP’s performance, and through its majority interest in the OP, has both the right to receive benefits from and the obligation to absorb losses of the OP. Accordingly, the Company is the primary beneficiary of the OP and consolidates the OP. As the Company conducts its business and holds its assets and liabilities through the OP, the total assets and liabilities of the OP represent substantially all of the total consolidated assets and liabilities of the Company.

Other consolidated VIEs include the Investing VIEs (as defined and discussed below) and certain operating real estate properties that have noncontrolling interests. At ~~September 30,~~March 31, 2022 and December 31, 2021, the noncontrolling interests in the operating real 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 investments in securitization financing entities (“Investing VIEs”) include subordinate first-loss tranches of securitization trusts, which represent interests in such VIEs. Investing VIEs are structured as pass through entities that receive principal and interest payments from the underlying debt collateral assets and distribute those payments to the securitization trust’s certificate holders, including the most subordinate tranches of the securitization trust. Generally, a securitization trust designates the most junior subordinate tranche outstanding as the controlling class, which entitles the holder of the controlling class to unilaterally appoint and remove the special servicer for the trust, and as such may qualify as the primary beneficiary of the trust.

If it is determined that the Company is the primary beneficiary of an Investing VIE as a result of acquiring the subordinate first-loss tranches of the securitization trust, the Company would consolidate the assets, liabilities, income and expenses of the entire Investing VIE. The assets held by an Investing VIE are restricted and can only be used to fulfill its own obligations. The obligations of an Investing VIE have neither any recourse to the general credit of the Company as the consolidating parent entity of an Investing VIE, nor to any of the Company’s other consolidated entities.

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As of ~~September 30, 2021,~~March 31, 2022, the Company held subordinate tranches of a securitization trust in 1 Investing VIE for which the Company has determined it is the primary beneficiary because it has the power to direct the activities that most significantly impact the economic performance of the securitization trust. The Company’s subordinate tranches of the securitization trust, which represents the retained interest and related interest income, are 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 are presented in the consolidated financial statements of the Company although the Company legally owns 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.

During the nine months ended September 30, 2021, the Company recognized unrealized gains of $32.0 million and realized losses of $23.4 million. In the second quarter of 2021, the Company sold its retained investments in the subordinate tranches of 1 securitization trust for $28.7 million in total proceeds. In connection with the sale, the Company recognized an unrealized gain of $19.5 million. The Company also recognized a realized loss of $19.5 million when the accumulated losses related to the retained investment were reversed and subsequently recorded to realized loss on mortgage loans and obligations held in securitization trusts, net. The Company deconsolidated the securitization trust with gross assets and liabilities of approximately $830.9 million and $802.2 million, respectively, which excludes accrued interest receivable and payable amounts of $3.0 million and $2.8 million, respectively.

During the three months ended September 30, 2021, the Company recorded a realized loss of $3.9 million related to the sale of an underlying loan held within 1 of its retained investments in the subordinate tranches of a securitization trust. The Company also recorded an unrealized gain of $3.9 million when the accumulated losses related to the retained investment were reversed and subsequently recorded to realized loss on mortgage loans and obligations held in securitization trusts, net. The

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realized loss was previously included in the Company’s loss projections and therefore no additional fair value write down was required in the third quarter of 2021. Refer to Note 5, “Real Estate Securities, Available for Sale” for further discussion.

The Company elected the fair value option for the initial recognition of the assets and liabilities of its consolidated Investing ~~VIEs.~~VIE. Interest income and interest expense associated with the Investing ~~VIEs~~VIE are presented separately on the consolidated statements of operations, and the assets and liabilities of the Investing ~~VIEs~~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 14, “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 ~~VIEs,~~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 ~~VIEs~~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 ~~VIEs.~~VIE. Refer to Note 14, “Fair Value” for further discussion.

Unconsolidated VIEs

As of ~~September 30,~~March 31, 2022 and December 31, 2021, the Company identified unconsolidated VIEs related to its ~~securities investments, indirect interests in real estate through real estate private equity funds (“PE Investments”) and~~ CRE debt investments. Based on management’s analysis, the Company determined that it is not the primary beneficiary of the above VIEs. Accordingly, the VIEs are not consolidated in the Company’s financial statements as of ~~September 30,~~March 31, 2022 or December 31, 2021.

Assets of each of the VIEs 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.

The following table presents the Company’s classification, carrying value and maximum exposure of unconsolidated VIEs as of ~~September 30,~~March 31, 2022 and December 31, 2021 (dollars in thousands):


		Carrying Value		Maximum Exposure to Loss			March 31, 2022				December 31, 2021
Loans and preferred equity held for investment, net		$	18,909	$	18,909
Real estate securities, available for sale		3,945		3,945
							Carrying Value		Maximum Exposure to Loss		Carrying Value		Maximum Exposure to Loss

Investments in unconsolidated ventures	Investments in unconsolidated ventures	199,279		203,753		Investments in unconsolidated ventures	$	16,200	$	16,200	$	16,200	$	16,200

Total assets	Total assets	$	222,133	$	226,607	Total assets	$	16,200	$	16,200	$	16,200	$	16,200

The Company did not provide financial support to the unconsolidated VIEs during the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and the fiscal year ended December 31, 2021. As of ~~September 30,~~March 31, 2022 and December 31, 2021, there were no explicit arrangements or implicit variable interests that could require the Company to provide financial support to the unconsolidated VIEs. The maximum exposure to loss of real estate securities, available for sale was determined as the amortized cost as of September 30, 2021. See Note 5, “Real Estate Securities, Available for Sale” for further discussion on fair value of the real estate securities. The maximum exposure to loss of investments in unconsolidated ventures ~~and loans and preferred equity held for investment, net~~ was determined as the carrying value plus any future funding commitments. Refer to ~~Note 3, “Loans and Preferred Equity Held for Investment, net” and~~ Note 16, “Commitments and Contingencies” for further discussion.

Noncontrolling Interests

Noncontrolling Interests in Investment Entities—This represents interests in consolidated investment entities held by third party joint venture partners and prior to the closing of the Company’s formation transactions (the “Combination”) on January 31, 2018, such interests held by private funds managed by DigitalBridge. Subsequent to the Combination, the Company entered into a preferred financing arrangement with Goldman Sachs (“GS”) limited to interests in 4 co-investments and a triple-net industrial distribution center. 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

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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.

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Noncontrolling Interests in the Operating Partnership—This represents membership interests in the OP which were held by an affiliate of ~~DigitalBridge.~~DigitalBridge through February 2022, after which such entity was sold to an unaffiliated third party. Noncontrolling interests in the OP are 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 have 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, through the issuance of shares of Class A common stock on a 1-for-one basis. At the end of each reporting period, noncontrolling interests in the OP is 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.

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 credit-worthiness.

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 ~~Investments.~~Investments”). The Company has also elected the fair value option to account for the eligible financial assets and liabilities of its consolidated Investing VIEs in order to mitigate potential accounting mismatches between the carrying value of the instruments and the related assets and liabilities to be consolidated. The Company has adopted the measurement alternative allowing the Company to measure both the financial assets and financial liabilities of a qualifying CFE it consolidates using the fair value of either the CFE’s financial assets or financial liabilities, whichever is more observable.

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Business Combinations

Definition of a Business—The Company evaluates each purchase transaction to determine whether the acquired assets meet the definition of a business. If substantially all of the fair value of gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the set of transferred assets and activities is not a business. If not, for an acquisition to be considered a business, it would have to include an input and a substantive process that together significantly

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contribute to the ability to create outputs (i.e., there is a continuation of revenue before and after the transaction). A substantive process is not ancillary or minor, cannot be replaced without significant costs, effort or delay or is otherwise considered unique or scarce. To qualify as a business without outputs, the acquired assets would require an organized workforce with the necessary skills, knowledge and experience that performs a substantive process.

Asset Acquisitions—For acquisitions that are not deemed to be businesses, the assets acquired are recognized based on their cost to the Company as the acquirer and no gain or loss is recognized. The cost of assets acquired in a group is allocated to individual assets within the group based on their relative fair values and does not give rise to goodwill. Transaction costs related to the acquisition of assets are included in the cost basis of the assets acquired. Such valuations require management to make significant estimates and assumptions.

Business Combinations—The Company accounts for acquisitions that qualify as business combinations by applying the acquisition method. Transaction costs related to the acquisition of a business are expensed as incurred and excluded from the fair value of consideration transferred. The identifiable assets acquired, liabilities assumed and noncontrolling interests in an acquired entity are recognized and measured at their estimated fair values. The excess of the fair value of consideration transferred over the fair values of identifiable assets acquired, liabilities assumed and noncontrolling interests in an acquired entity, net of fair value of any previously held interest in the acquired entity, is recorded as goodwill. Such valuations require management to make significant estimates and assumptions.

Cash and Cash Equivalents

Short-term, highly liquid investments with original maturities of three months or less are considered to be cash equivalents. The Company did not have any cash equivalents at ~~September 30, 2021~~March 31, 2022 or December 31, ~~2020.~~2021. The Company’s cash is held with major financial institutions and may at times exceed federally insured limits.

Restricted Cash

Restricted cash consists primarily of borrower escrow deposits, tenant escrow deposits and real estate capital expenditure reserves.

Loans ~~and Preferred Equity~~ Held for Investment

The Company originates and purchases loans and preferred equity held for investment. The accounting framework for loans and preferred equity held for investment depends on the Company’s strategy whether to hold or sell the loan, whether the loan was credit-impaired at the time of acquisition, or if the lending arrangement is an acquisition, development and construction loan.

Loans ~~and Preferred Equity~~ Held for Investment

Loans and preferred equity that the Company has the intent and ability to hold for the foreseeable future are classified as held for investment. Originated loans and preferred equity are recorded at amortized cost, or outstanding unpaid principal balance plus exit fees less net deferred loan fees. Net deferred loan fees include unamortized origination and other fees charged to the borrower less direct incremental loan origination costs incurred by the Company. Purchased loans and preferred equity are recorded at amortized cost, or unpaid principal balance plus purchase premium or less unamortized discount. Costs to purchase loans and preferred equity are expensed as incurred.

Interest Income—Interest income is recognized based upon contractual interest rate and unpaid principal balance of the loans and preferred equity investments. Net deferred loan fees on originated loans and preferred equity investments are deferred and amortized as adjustments to interest income over the expected life of the loans and preferred equity investments using the effective yield method. Premium or discount on purchased loans and preferred equity investments are amortized as adjustments to interest income over the expected life of the loans and preferred equity investments using the effective yield method. When a loan or preferred equity investment is prepaid, prepayment fees and any excess of proceeds over the carrying amount of the loan or preferred equity investment is recognized as additional interest income.

The Company has debt investments in its portfolio that contain a payment-in-kind (“PIK”) provision. Contractual PIK interest, which represents contractually deferred interest added to the loan balance that is due at the end of the loan term, is generally

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recorded on an accrual basis to the extent such amounts are expected to be collected. The Company will generally cease accruing PIK interest if there is insufficient value to support the accrual or management does not expect the borrower to be able to pay all principal and interest due.

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Nonaccrual—Accrual of interest income is suspended on nonaccrual loans and preferred equity investments. Loans and preferred equity investments that are past due 90 days or more as to principal or interest, or where reasonable doubt exists as to timely collection, are generally considered nonperforming and placed on nonaccrual status. Interest receivable is reversed against interest income when loans and preferred equity investments are placed on nonaccrual status. Interest collected is recognized on a cash basis by crediting income when received; or if ultimate collectability of loan and preferred equity principal is uncertain, interest collected is recognized using a cost recovery method by applying interest collected as a reduction to loan and preferred equity carrying value. Loans and preferred equity investments may be restored to accrual status when all principal and interest are current and full repayment of the remaining contractual principal and interest are reasonably assured.

Loans Held for Sale

Loans that the Company intends to sell or liquidate in the foreseeable future are classified as held for sale. Loans held for sale are carried at the lower of amortized cost or fair value less disposal cost, with valuation changes recognized as impairment loss. Loans held for sale are not subject to ~~allowance for loan losses.~~CECL reserves. Net deferred loan origination fees and loan purchase premiums or discounts are deferred and capitalized as part of the carrying value of the held for sale loan until the loan is sold, therefore included in the periodic valuation adjustments based on lower of cost or fair value less disposal cost.

At ~~September 30,~~March 31, 2022 and December 31, 2021, the Company had no loans classified as held for sale.

Acquisition, Development and Construction (“ADC”) Arrangements

The Company provides loans to third party developers for the acquisition, development and construction of real estate. Under an ADC arrangement, the Company participates in the expected residual profits of the project through the sale, refinancing or other use of the property. The Company evaluates the characteristics of each ADC arrangement, including its risks and rewards, to determine whether they are more similar to those associated with a loan or an investment in real estate. ADC arrangements with characteristics implying loan classification are presented as loans held for investment and result in the recognition of interest income. ADC arrangements with characteristics implying real estate joint ventures are presented as investments in unconsolidated joint ventures and are accounted for using the equity method. The classification of each ADC arrangement as either loan receivable or real estate joint venture involves significant judgment and relies on various factors, including market conditions, amount and timing of expected residual profits, credit enhancements in the form of guaranties, estimated fair value of the collateral, and significance of borrower equity in the project, among others. The classification of ADC arrangements is performed at inception, and periodically reassessed when significant changes occur in the circumstances or conditions described above.

Operating Real Estate

Real Estate Acquisitions—Real estate acquired in acquisitions that are deemed to be business combinations is recorded at the fair values of the acquired components at the time of acquisition, allocated among land, buildings, improvements, equipment and lease-related tangible and identifiable intangible assets and liabilities, including forgone leasing costs, in-place lease values and above- or below-market lease values. Real estate acquired in acquisitions that are deemed to be asset acquisitions is recorded at the total value of consideration transferred, including transaction costs, and allocated to the acquired components based upon relative fair value. The estimated fair value of acquired land is derived from recent comparable sales of land and listings within the same local region based on available market data. The estimated fair value of acquired buildings and building improvements is derived from comparable sales, discounted cash flow analysis using market-based assumptions, or replacement cost, as appropriate. The fair value of site and tenant improvements is estimated based upon current market replacement costs and other relevant market rate information.

Real Estate Held for Investment

Real estate held for investment is carried at cost less accumulated depreciation.

Costs Capitalized or Expensed—Expenditures for ordinary repairs and maintenance are expensed as incurred, while expenditures for significant renovations that improve or extend the useful life of the asset are capitalized and depreciated over their estimated useful lives.

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Depreciation—Real estate held for investment, other than land, is depreciated on a straight-line basis over the estimated useful lives of the assets, as follows:


Real Estate Assets						Term
Building (fee interest)						728 to 4840 years
Building leasehold interests						Lesser of remaining term of the lease or remaining life of the building
Building improvements						Lesser of the useful life or remaining life of the building
Land improvements						1 to 15 years
Tenant improvements						Lesser of the useful life or remaining term of the lease
Furniture, fixtures and equipment						2 to 8 years

Impairment—The Company evaluates its real estate held for investment for impairment periodically or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The Company evaluates real estate for impairment generally on an individual property basis. If an impairment indicator exists, the Company evaluates the undiscounted future net cash flows that are expected to be generated by the property, including any estimated proceeds from the eventual disposition of the property. If multiple outcomes are under consideration, the Company may apply a probability-weighted approach to the impairment analysis. Based upon the analysis, if the carrying value of a property exceeds its undiscounted future net cash flows, an impairment loss is recognized for the excess of the carrying value of the property over the estimated fair value of the property. In evaluating and/or measuring impairment, the Company considers, among other things, current and estimated future cash flows associated with each property, market information for each sub-market, including, where applicable, competition levels, foreclosure levels, leasing trends, occupancy trends, lease or room rates, and the market prices of similar properties recently sold or currently being offered for sale, and other quantitative and qualitative factors. Another key consideration in this assessment is the Company’s assumptions about the highest and best use of its real estate investments and its intent and ability to hold them for a reasonable period that would allow for the recovery of their carrying values. If such assumptions change and the Company shortens its expected hold period, this may result in the recognition of impairment losses. See Note 6, “Real Estate, net and Real Estate Held for Sale” and Note 14, “Fair Value” for further detail.

Real Estate Held for Sale

Real estate is classified as held for sale in the period when (i) management approves a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, subject only to usual and customary terms, (iii) a program is initiated to locate a buyer and actively market the asset for sale at a reasonable price, and (iv) completion of the sale is probable within one year. Real estate held for sale is stated at the lower of its carrying amount or estimated fair value less disposal cost, with any write-down to fair value less disposal cost recorded as an impairment loss. For any increase in fair value less disposal cost subsequent to classification as held for sale, the impairment loss may be reversed, but only up to the amount of cumulative loss previously recognized. Depreciation is not recorded on assets classified as held for sale. At the time a sale is consummated, the excess, if any, of sale price less selling costs over carrying value of the real estate is recognized as a gain.

If circumstances arise that were previously considered unlikely and, as a result, the Company decides not to sell the real estate asset previously classified as held for sale, the real estate asset is reclassified as held for investment. Upon reclassification, the real estate asset is measured at the lower of (i) its carrying amount prior to classification as held for sale, adjusted for depreciation expense that would have been recognized had the real estate been continuously classified as held for investment, and (ii) its estimated fair value at the time the Company decides not to sell.

At ~~September 30,~~March 31, 2022, there were no properties held for sale. At December 31, 2021, there were 2 properties held for sale. See Note 6, “Real Estate, net and Real Estate Held for Sale” and Note 17, “Segment Reporting” for further detail.

Foreclosed Properties

The Company receives foreclosed properties in full or partial settlement of loans held for investment by taking legal title or physical possession of the properties. Foreclosed properties are generally recognized at the time the real estate is received at foreclosure sale or upon execution of a deed in lieu of foreclosure. Foreclosed properties are initially measured at fair value. If the fair value of the property is lower than the carrying value of the loan, the difference is recognized as ~~provision for loan~~current expected credit loss reserves and the cumulative ~~loss allowance~~reserve on the loan is charged off. The Company periodically evaluates foreclosed properties for subsequent decrease in fair value, which is recorded as an additional impairment loss. Fair value of foreclosed properties is generally based on third party appraisals, broker price opinions, comparable sales or a combination thereof.

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Real Estate Securities

The Company classifies its CRE securities investments as available for sale on the acquisition date, which are carried at fair value. Unrealized gains (losses) are recorded as a component of accumulated OCI in the consolidated statements of equity. However, the Company has elected the fair value option for the assets and liabilities of its consolidated Investing VIEs, and as a result, any unrealized gains (losses) on the consolidated Investing VIEs are recorded in unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net in the consolidated statements of operations. As of ~~September 30, 2021,~~March 31, 2022, the Company held subordinate tranches of 1 securitization trust, which represent the Company’s retained interest in a securitization trust that the Company consolidates under U.S. GAAP. Refer to Note 5, “Real Estate Securities, Available for Sale” for further discussion.

Impairment

CRE securities for which the fair value option is elected are not evaluated for impairment as any change in fair value is recorded in the consolidated statements of operations. Realized losses on such securities are reclassified to realized loss on mortgage loans and obligations held in securitization trust, net as losses occur.

CRE securities for which the fair value option is not elected are evaluated for impairment quarterly. Impairment of a security is considered when the fair value is below the amortized cost basis, which is then further analyzed when: (i) the holder has the intent to sell the impaired security; (ii) it is more likely than not the holder will be required to sell the security; or (iii) the holder does not expect to recover the entire amortized cost of the security. When a CRE security has been deemed impaired due to (i) or (ii) or (iii), the security is written down to its fair value and an impairment is recognized in the consolidated statements of operations. In all other situations, the unrealized loss is bifurcated into: (a) the amount related to expected credit losses; and (b) the amount related to other factors in excess of expected credit losses. The portion of impairment related to expected credit losses is recognized as an allowance for credit losses. The remaining impairment related to other factors is recognized as a component of accumulated OCI in the consolidated statements of equity. CRE securities which are not high-credit quality are considered to have an impairment if the security has an unrealized loss and there has been an adverse change in expected cash flow. The amount of impairment is then bifurcated as discussed above.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and March 31, 2021, the Company recorded anno impairment ~~loss~~and $1.0 million of ~~$1.0 million~~impairment related to its CRE ~~securities.~~securities, respectively. The impairment loss is included in other gain, net in the Company’s consolidated statements of operations. Refer to Note 5, “Real Estate Securities, Available for Sale” for further discussion.

Investments in Unconsolidated Ventures

A noncontrolling, unconsolidated ownership interest in an entity may be accounted for using one of (i) equity method where applicable; (ii) fair value option if elected; (iii) fair value through earnings if fair value is readily determinable, including election of net asset value (“NAV”) practical expedient where applicable; or (iv) for equity investments without readily determinable fair values, the measurement alternative to measure at cost adjusted for any impairment and observable price changes, as applicable.

Fair value changes of equity method investments under the fair value option are recorded in earnings from investments in unconsolidated ventures. Fair value changes of other equity investments, including adjustments for observable price changes under the measurement alternative, are recorded in other gain, ~~(loss).~~net.

Equity Method Investments

The Company accounts for investments under the equity method of accounting if it has the ability to exercise significant influence over the operating and financial policies of an entity, but does not have a controlling financial interest. The equity method investment is initially recorded at cost and adjusted each period for capital contributions, distributions and the Company’s share of the entity’s net income or loss as well as other comprehensive income or loss. The Company’s share of net income or loss may differ from the stated ownership percentage interest in an entity if the governing documents prescribe a substantive non-proportionate earnings allocation formula or a preferred return to certain investors. For certain equity method investments, the Company records its proportionate share of income on a one to three month lag. Distributions of operating profits from equity method investments are reported as operating activities, while distributions in excess of operating profits are reported as investing activities in the statement of cash flows under the cumulative earnings approach.

At September 30, 2021 and December 31, 2020, the Company’s investments in unconsolidated joint ventures consisted of investments in PE Investments, senior loans, mezzanine loans and preferred equity held in joint ventures, as well as ADC arrangements accounted for as equity method investments.

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Impairment

Evaluation of impairment applies to equity method investments and equity investments under the measurement alternative. If indicators of impairment exist, the Company will first estimate the fair value of its investment. In assessing fair value, the Company generally considers, among others, the estimated fair value of the investee, which is based on significant assumptions including the estimated timing and probabilities of the future cash flows of the unconsolidated joint venture, utilizing discount rates and capitalization rates.

For investments under the measurement alternative, if carrying value of the investment exceeds its fair value, an impairment is deemed to have occurred.

For equity method investments, further consideration is made if a decrease in value of the investment is other-than-temporary to determine if impairment loss should be recognized. Assessment of OTTI involves management judgment, including, but not limited to, consideration of the investee’s financial condition, operating results, business prospects and creditworthiness, the Company’s ability and intent to hold the investment until recovery of its carrying value. If management is unable to reasonably assert that an impairment is temporary or believes that the Company may not fully recover the carrying value of its investment, then the impairment is considered to be other-than-temporary.

Investments that are other-than-temporarily impaired are written down to their estimated fair value. Impairment loss is recorded in earnings from investments in unconsolidated ventures for equity method investments and in other gain, ~~(loss)~~net for investments under the measurement alternative.

Identifiable Intangibles

In a business combination or asset acquisition, the Company may recognize identifiable intangibles that meet either or both the contractual-legal criterion or the separability criterion. An indefinite-lived intangible is not subject to amortization until such time that its useful life is determined to no longer be indefinite, at which point, it will be assessed for impairment and its adjusted carrying amount amortized over its remaining useful life. Finite-lived intangibles are amortized over their useful life in a manner that reflects the pattern in which the intangible is being consumed if readily determinable, such as based upon expected cash flows; otherwise they are amortized on a straight line basis. The useful life of all identified intangibles will be periodically reassessed and if useful life changes, the carrying amount of the intangible will be amortized prospectively over the revised useful life.

Lease Intangibles—Identifiable intangibles recognized in acquisitions of operating real estate properties generally include in-place leases, above- or below-market leases and deferred leasing costs, all of which have finite lives. In-place leases generate value over and above the tangible real estate because a property that is occupied with leased space is typically worth more than a vacant building without an operating lease contract in place. The estimated fair value of acquired in-place leases is derived based on management’s assessment of costs avoided from having tenants in place, including lost rental income, rent concessions and tenant allowances or reimbursements, that hypothetically would be incurred to lease a vacant building to its actual existing occupancy level on the valuation date. The net amount recorded for acquired in-place leases is included in intangible assets and amortized on a straight-line basis as an increase to depreciation and amortization expense over the remaining term of the applicable leases. If an in-place lease is terminated, the unamortized portion is charged to depreciation and amortization expense.

The estimated fair value of the above- or below-market component of acquired leases represents the present value of the difference between contractual rents of acquired leases and market rents at the time of the acquisition for the remaining lease term, discounted for tenant credit risks. Above- or below-market operating lease values are amortized on a straight-line basis as a decrease or increase to rental income, respectively, over the applicable lease terms. This includes fixed rate renewal options in acquired leases that are below-market, which are amortized to decrease rental income over the renewal period. Above- or below-market ground lease obligations are amortized on a straight-line basis as a decrease or increase to rent expense, respectively, over the applicable lease terms. If the above- or below-market operating lease values or above- or below-market ground lease obligations are terminated, the unamortized portion of the lease intangibles are recorded in rental income or rent expense, respectively.

Deferred leasing costs represent management’s estimate of the avoided leasing commissions and legal fees associated with an existing in-place lease. The net amount is included in intangible assets and amortized on a straight-line basis as an increase to depreciation and amortization expense over the remaining term of the applicable lease.

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(Unaudited)

Transfers of Financial Assets

Sale accounting for transfers of financial assets requires the transfer of an entire financial asset, a group of financial assets in its entirety or if a component of the financial asset is transferred, that the component meets the definition of a participating interest with characteristics that mirror the original financial asset.

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. If the Company has any continuing involvement, rights or obligations with the transferred financial asset (outside of standard representations and warranties), sale accounting requires that the transfer meets the following sale conditions: (1) the transferred asset has been legally isolated; (2) the transferee has the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred asset; and (3) the Company does not maintain effective control over the transferred asset through an agreement that provides for (a) both an entitlement and an obligation by the Company to repurchase or redeem the asset before its maturity, (b) the unilateral ability by the Company to reclaim the asset and a more than trivial benefit attributable to that ability, or (c) the transferee requiring the Company to repurchase the asset at a price so favorable to the transferee that it is probable the repurchase will occur.

If sale accounting is met, the transferred financial asset is removed from the balance sheet and a net gain or loss is recognized upon sale, taking into account any retained interests. Transfers of financial assets that do not meet the criteria for sale are accounted for as financing transactions, or secured borrowing.

Derivative Instruments and Hedging Activities

The Company uses derivative instruments to manage its foreign currency risk and interest rate risk. The Company does not use derivative instruments for speculative or trading purposes. All derivative instruments are recorded at fair value and included in other assets or other liabilities on a gross basis on the balance sheet. The accounting for changes in fair value of derivatives depends upon whether or not the Company has elected to designate the derivative in a hedging relationship and the derivative qualifies for hedge accounting. The Company has economic hedges that have not been designated for hedge accounting.

Changes in fair value of derivatives not designated as accounting hedges are recorded in the statement of operations in other gain, ~~(loss),~~ net.

For designated accounting hedges, the relationships between hedging instruments and hedged items, risk management objectives and strategies for undertaking the accounting hedges as well as the methods to assess the effectiveness of the derivative prospectively and retrospectively, are formally documented at inception. Hedge effectiveness relates to the amount by which the gain or loss on the designated derivative instrument exactly offsets the change in the hedged item attributable to the hedged risk. If it is determined that a derivative is not expected to be or has ceased to be highly effective at hedging the designated exposure, hedge accounting is discontinued.

Cash Flow Hedges—The Company uses interest rate caps and swaps to hedge its exposure to interest rate fluctuations in forecasted interest payments on floating rate debt. The effective portion of the change in fair value of the derivative is recorded in accumulated other comprehensive income, while hedge ineffectiveness is recorded in earnings. If the derivative in a cash flow hedge is terminated or the hedge designation is removed, related amounts in accumulated other comprehensive income (loss) are reclassified into earnings.

Net Investment Hedges—The Company uses foreign currency hedges to protect the value of its net investments in foreign subsidiaries or equity method investees whose functional currencies are not U.S. dollars. Changes in the fair value of derivatives used as hedges of net investment in foreign operations, to the extent effective, are recorded in the cumulative translation adjustment account within accumulated other comprehensive income (loss).

At the end of each quarter, the Company reassesses the effectiveness of its net investment hedges and as appropriate, dedesignates the portion of the derivative notional amount that is in excess of the beginning balance of its net investments as undesignated hedges.

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Release of accumulated other comprehensive income related to net investment hedges occurs upon losing a controlling financial interest in an investment or obtaining control over an equity method investment. Upon sale, complete or substantially complete liquidation of an investment in a foreign subsidiary, or partial sale of an equity method investment, the gain or loss on the related net investment hedge is reclassified from accumulated other comprehensive income to earnings. Refer to Note 15, “Derivatives” for further discussion on the Company’s derivative and hedging activity.

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Financing Costs

Financing costs primarily include debt discounts and premiums as well as deferred financing costs. Deferred financing costs represent commitment fees, legal and other third-party costs associated with obtaining financing. Costs related to revolving credit facilities are recorded in other assets and are amortized to interest expense using the straight-line basis over the term of the facility. Costs related to other borrowings are recorded net against the carrying value of such borrowings and are amortized to interest expense using the effective interest method. Unamortized deferred financing costs are expensed to realized gain (loss) when the associated facility is repaid before maturity. Costs incurred in seeking financing transactions, which do not close, are expensed in the period in which it is determined that the financing will not occur.

Revenue Recognition

Property Operating Income

Property operating income includes the following:

Rental Income—Rental income is recognized on a straight-line basis over the non-cancellable term of the related lease which includes the effects of minimum rent increases and rent abatements under the lease. Rents received in advance are deferred.

When it is determined that the Company is the owner of tenant improvements, the cost to construct the tenant improvements, including costs paid for or reimbursed by the tenants, is capitalized. For tenant improvements owned by the Company, the amount funded by or reimbursed by the tenants are recorded as deferred revenue, which is amortized on a straight-line basis as additional rental income over the term of the related lease. Rental income recognition commences when the leased space is substantially ready for its intended use and the tenant takes possession of the leased space.

When it is determined that the tenant is the owner of tenant improvements, the Company’s contribution towards those improvements is recorded as a lease incentive, included in deferred leasing costs and intangible assets on the balance sheet, and amortized as a reduction to rental income on a straight-line basis over the term of the lease. Rental income recognition commences when the tenant takes possession of the lease space.

Tenant Reimbursements—In net lease arrangements, the tenant is generally responsible for operating expenses related to the property, including real estate taxes, property insurance, maintenance, repairs and improvements. Costs reimbursable from tenants and other recoverable costs are recognized as revenue in the period the recoverable costs are incurred. When the Company is the primary obligor with respect to purchasing goods and services for property operations and has discretion in selecting the supplier and retains credit risk, tenant reimbursement revenue and property operating expenses are presented on a gross basis in the statements of operations. For certain triple net leases where the lessee self-manages the property, hires its own service providers and retains credit risk for routine maintenance contracts, no reimbursement revenue and expense are recognized.

Hotel Operating Income—Hotel operating income includes room revenue, food and beverage sales and other ancillary services. Revenue is recognized upon occupancy of rooms, consummation of sales and provision of services.

Real Estate Securities

Interest income is recognized using the effective interest method with any premium or discount amortized or accreted through earnings based on expected cash flow through the expected maturity date of the security. On a quarterly basis, the Company reviews, and if appropriate, adjusts its cash flow projections based on inputs and analyses received from external sources, internal models, and the Company’s judgment about prepayment rates, the timing and amount of credit losses and other factors. Changes in the amount or timing of cash flows from those originally projected, or from those estimated at the last evaluation date, are considered to be either favorable changes or adverse changes.

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Adverse changes in the timing or amount of cash flows on CRE securities could result in the Company recording an increase in the allowance for credit losses. The allowance for credit losses ~~are~~is calculated using a discounted cash flow approach and is measured as the difference between the amortized cost of a CRE security and estimate of cash flows expected to be collected discounted at the effective interest rate used to accrete the CRE security. The allowance for credit losses is recorded as a contra-asset and a reduction in earnings. The allowance for credit losses will be limited to the amount of the unrealized losses on the CRE securities. Any allowance for credit losses in excess of the unrealized losses on the CRE securities are accounted for as a prospective reduction of the effective interest rate. No allowance is recorded for CRE securities in an unrealized gain position. Favorable changes in the discounted cash flow will result in a reduction in the allowance for credit losses, if any. Any reduction

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(Unaudited)

in allowance for credit losses is recorded in earnings. If the allowance for credit losses has been reduced to zero, the remaining favorable changes are reflected as a prospective increase to the effective interest rate.

As of April 1, 2020, the Company placed its investment grade and non-investment grade rated CRE securities on cost recovery and as a result, ceased accretion of any discounts to expected maturity and applied any cash interest received against the CRE securities amortized cost basis. Refer to Note 5, “Real Estate Securities, Available for Sale” for further discussion.

Foreign Currency

Assets and liabilities denominated in a foreign currency for which the functional currency is a foreign currency are translated using the exchange rate in effect at the balance sheet date and the corresponding results of operations for such entities are translated using the average exchange rate in effect during the period. The resulting foreign currency translation adjustments are recorded as a component of accumulated other comprehensive income or loss in stockholders’ equity. Upon sale, complete or substantially complete liquidation of a foreign subsidiary, or upon partial sale of a foreign equity method investment, the translation adjustment associated with the investment, or a proportionate share related to the portion of equity method investment sold, is reclassified from accumulated other comprehensive income or loss into earnings.

Assets and liabilities denominated in a foreign currency for which the functional currency is the U.S. dollar are remeasured using the exchange rate in effect at the balance sheet date and the corresponding results of operations for such entities are remeasured using the average exchange rate in effect during the period. The resulting foreign currency remeasurement adjustments are recorded in other gain, ~~(loss),~~ net on the consolidated statements of operations.

Disclosures of non-U.S. dollar amounts to be recorded in the future are translated using exchange rates in effect at the date of the most recent balance sheet presented.

Equity-Based Compensation

Equity-classified stock awards granted to executive officers and both independent and non-independent directors are based on the closing price of the Class A common stock on the grant date and recognized on a straight-line basis over the requisite service period of the awards for restricted stock awards. For performance stock units (“PSUs”) the fair value is based on a Monte Carlo simulation as of the grant date and expense is recognized on a straight-line basis over the measurement period. See Note 11, “Equity-Based Compensation” for further discussion.

The compensation expense is adjusted for actual forfeitures upon occurrence. Equity-based compensation is classified within ~~administrative expense~~compensation and benefits in the consolidated statement of operations.

Earnings Per Share

The Company presents both basic and diluted earnings per share (“EPS”) using the two-class method. Basic EPS is calculated by dividing earnings allocated to common shareholders, as adjusted for unallocated earnings attributable to certain participating securities, if any, by the weighted-average number of common shares outstanding during the period. Diluted EPS is based on the weighted-average number of common shares and the effect of potentially dilutive common share equivalents outstanding during the period. The two-class method is an allocation formula that determines earnings per share for each share of common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends. The Company has certain share-based payment awards that contain nonforfeitable rights to dividends, which are considered participating securities for the purposes of computing EPS pursuant to the two-class method.

Income Taxes

For U.S. federal income tax purposes, the Company elected to be taxed as a REIT beginning with its taxable year ended December 31, 2018. To qualify as a REIT, the Company must continually satisfy tests concerning, among other things, the real

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estate qualification of sources of its income, the real estate composition and values of its assets, the amounts it distributes to stockholders and the diversity of ownership of its stock.

To the extent that the Company qualifies as a REIT, it generally will not be subject to U.S. federal income tax to the extent of its distributions to stockholders. The Company believes that all of the criteria to maintain the Company’s REIT qualification have been met for the applicable periods, but there can be no assurance that these criteria will continue to be met in subsequent periods. If the Company were to fail to meet these requirements, it would be subject to U.S. federal income tax and potential interest and penalties, which could have a material adverse impact on its results of operations and amounts available for distributions to its stockholders. The Company’s accounting policy with respect to interest and penalties is to classify these amounts as a component of income tax expense, where applicable.

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(Unaudited)

The Company may also be subject to certain state, local and franchise taxes. Under certain circumstances, U.S. federal income and excise taxes may be due on its undistributed taxable income. The Company also holds ~~investments~~an investment in Europe which ~~are~~is subject to tax in each local jurisdiction.

The Company made joint elections to treat certain subsidiaries as taxable REIT subsidiaries (“TRSs”) which may be subject to taxation by U.S. federal, state and local authorities. In general, a TRS of the Company may perform non-customary services for tenants, hold assets that the Company cannot hold directly and engage in most real estate or non-real estate-related business.

Certain subsidiaries of the Company are subject to taxation by U.S. federal, state and local authorities for the periods presented. Income taxes are accounted for by the asset/liability approach in accordance with U.S. GAAP. Deferred taxes, if any, represent the expected future tax consequences when the reported amounts of assets and liabilities are recovered or paid. Such amounts arise from differences between the financial reporting and tax bases of assets and liabilities and are adjusted for changes in tax laws and tax rates in the period during which such changes are enacted. A provision for income tax represents the total of income taxes paid or payable for the current period, plus the change in deferred taxes. Current and deferred taxes are recorded on the portion of earnings (losses) recognized by the Company with respect to its interest in TRSs. Deferred income tax assets and liabilities are calculated based on temporary differences between the Company’s U.S. GAAP consolidated financial statements and the U.S. federal, state and local tax basis of assets and liabilities as of the consolidated balance sheet date. The Company evaluates the realizability of its deferred tax assets (e.g., net operating loss and capital loss carryforwards) and recognizes a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of its deferred tax assets will not be realized. When evaluating the realizability of its deferred tax assets, the Company considers estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available and the general and industry-specific economic outlook. This realizability analysis is inherently subjective, as it requires the Company to forecast its business and general economic environment in future periods. Changes in estimate of deferred tax asset realizability, if any, are included in income tax benefit (expense) in the consolidated statements of operations.

For the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company recorded ana de minimis income ~~tax~~ expense ~~of $2.1 million and an income tax benefit of $15.4 million, respectively. For the nine months ended September 30, 2021 and 2020, the Company recorded an income tax expense of $0.1 million~~ and income tax benefit of ~~$11.5~~$1.8 million, respectively.

Current Expected Credit Losses (“CECL”) reserve

The CECL reserve for the Company’s financial instruments carried at amortized cost and off-balance sheet credit exposures, such as loans, loan commitments and trade receivables represents a lifetime estimate of expected credit losses. Factors considered by the Company when determining the CECL reserve include loan-specific characteristics such as loan-to-value (“LTV”) ratio, vintage year, loan term, property type, occupancy and geographic location, financial performance of the borrower, expected payments of principal and interest, as well as internal or external information relating to past events, current conditions and reasonable and supportable forecasts.

The CECL reserve is measured on a collective (pool) basis when similar risk characteristics exist for multiple financial instruments. If similar risk characteristics do not exist, the Company measures the CECL reserve on an individual instrument basis. The determination of whether a particular financial instrument should be included in a pool can change over time. If a financial asset’s risk characteristics change, the Company evaluates whether it is appropriate to continue to keep the financial instrument in its existing pool or evaluate it individually.

In measuring the CECL reserve for financial instruments that share similar risk characteristics, the Company primarily applies a probability of default (“PD”)/loss given default (“LGD”) model for instruments that are collectively assessed, whereby the CECL reserve is calculated as the product of PD, LGD and exposure at default (“EAD”). The Company’s model principally utilizes historical loss rates derived from a commercial mortgage backed securities database with historical losses from 1998

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~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

through ~~September 2021~~March 2022 provided by a third party, Trepp LLC, forecasting the loss parameters using a scenario-based statistical approach over a reasonable and supportable forecast period of twelve months, followed by a straight-line reversion period of twelve-months back to average historical losses.

For financial instruments assessed outside of the PD/LGD model on an individual basis, including when it is probable that the Company will be unable to collect the full payment of principal and interest on the instrument, the Company applies a discounted cash flow (“DCF”) methodology. For financial instruments where the borrower is experiencing financial difficulty based on the Company’s assessment at the reporting date and the repayment is expected to be provided substantially through the operation or sale of the collateral, the Company may elect to use as a practical expedient to determine the fair value of the collateral at the reporting date when determining the ~~provision for loan losses.~~CECL reserve.

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

In developing the CECL reserve for its loans ~~and preferred equity~~ held for investment, the Company considers the risk ranking of each loan and preferred equity as a key credit quality indicator. The risk rankings are based on a variety of factors, including, without limitation, underlying real estate performance and asset value, values of comparable properties, durability and quality of property cash flows, sponsor experience and financial wherewithal, and the existence of a risk-mitigating loan structure. Additional key considerations include loan-to-value ratios, debt service coverage ratios, loan structure, real estate and credit market dynamics, and risk of default or principal loss. Based on a five-point scale, the Company’s loans ~~and preferred equity~~ held for investment are rated “1” through “5,” from less risk to greater risk, and the ratings are updated quarterly. At the time of origination or purchase, loans ~~and preferred equity~~ held for investment are ranked as a “3” and will move accordingly going forward based on the ratings which are defined as follows:

1.Very Low Risk-The loan is performing as agreed. The underlying property performance has exceeded underwritten expectations with very strong net operating income (“NOI”), debt service coverage ratio, debt yield and occupancy metrics. Sponsor is investment grade, very well capitalized, and employs very experienced management team.

2.Low Risk-The loan is performing as agreed. The underlying property performance has met or exceeds underwritten expectations with high occupancy at market rents, resulting in consistent cash flow to service the debt. Strong sponsor that is well capitalized with experienced management team.

3.Average Risk-The loan is performing as agreed. The underlying property performance is consistent with underwriting expectations. The property generates adequate cash flow to service the debt, and/or there is enough reserve or loan structure to provide time for sponsor to execute the business plan. Sponsor has routinely met its obligations and has experience owning/operating similar real estate.

4.High Risk/Delinquent/Potential for Loss-The loan is in excess of 30 days delinquent and/or has a risk of a principal loss. The underlying property performance is behind underwritten expectations. Loan covenants may require occasional waivers/modifications. Sponsor has been unable to execute its business plan and local market fundamentals have deteriorated. Operating cash flow is not sufficient to service the debt and debt service payments may be coming from sponsor equity/loan reserves.

5.Impaired/Defaulted/Loss Likely-The loan is in default or a default is imminent, and has a high risk of a principal loss, or has incurred a principal loss. The underlying property performance is significantly worse than underwritten expectation and sponsor has failed to execute its business plan. The property has significant vacancy and current cash flow does not support debt service. Local market fundamentals have significantly deteriorated resulting in depressed comparable property valuations versus underwriting.

The Company also considers qualitative and environmental factors, including, but not limited to, economic and business conditions, nature and volume of the loan portfolio, lending terms, volume and severity of past due loans, concentration of credit and changes in the level of such concentrations in its determination of the CECL reserve.

The Company has elected to not measure a CECL reserve for accrued interest receivable as it is reversed against interest income when a loan or preferred equity investment is placed on nonaccrual status. Loans and preferred equity investments are charged off ~~against the provision for loan losses~~ when all or a portion of the principal amount is determined to be uncollectible.

Changes in the CECL reserve for the Company’s financial instruments are recorded in ~~provision for loan losses~~increase/decrease in current expected credit loss reserve on the ~~Statement~~consolidated statement of ~~Operations~~operations with a corresponding offset to the loans ~~and preferred equity~~ held for investment or as a component of other liabilities for future loan fundings recorded on the Company’s consolidated balance sheets. See Note 3, “Loans ~~and Preferred Equity~~ Held for Investment, net” for further detail.

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~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Troubled Debt Restructuring (“TDR”)—The Company classifies an individual financial instrument as a TDR when it has a reasonable expectation that the financial instrument’s contractual terms will be modified in a manner that grants concession to the borrower who is experiencing financial difficulty. Concessions could include term extensions, payment deferrals, interest rate reductions, principal forgiveness, forbearance, or other actions designed to maximize the Company’s collection on the financial instrument. The Company determines the CECL reserve for financial instruments that are TDRs individually.

Accounting Standards ~~adopted~~Adopted in 2021

Income Tax Accounting—In December 2019, the FASB issued ASU No. 2019-12, Simplifying Accounting for Income Taxes. The ASU simplifies accounting for income taxes by eliminating certain exceptions to the general approach in ASC 740, Income Taxes, and clarifies certain aspects of the guidance for more consistent application. The simplifications relate to intraperiod tax

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

allocations when there is a loss in continuing operations and a gain outside of continuing operations, accounting for tax law or tax rate changes and year-to-date losses in interim periods, recognition of deferred tax liability for outside basis difference when investment ownership changes, and accounting for franchise taxes that are partially based on income. The ASU also provides new guidance that clarifies the accounting for transactions resulting in a step-up in tax basis of goodwill, among other changes. Transition is generally prospective, other than the provision related to outside basis difference which is on a modified retrospective basis with the cumulative effect adjusted to retained earnings at the beginning of the period adopted, and franchise tax provision which is on either full or modified retrospective. ASU No. 2019-12 is effective January 1, 2021, with early adoption permitted in an interim period, to be applied to all provisions. The Company adopted this on January 1, 2021, and the impact was not material.

Accounting for Certain Equity Investments—In January 2020, the FASB issued ASU No. 2020-01, Clarifying the Interactions between Topic 321 Investments-Equity Securities, Topic 323-Investments Equity Method and Joint Ventures, and Topic 815-Derivatives and Hedging. The ASU clarifies, that if as a result of an observable transaction, an equity investment under the measurement alternative is transitioned into equity method or an equity method investment is transitioned into measurement alternative, then the investment is to be remeasured immediately before and after the transaction, respectively. The ASU also clarifies that certain forward contracts or purchased options to acquire equity securities that are not deemed to be derivatives or in-substance common stock will generally be measured using the fair value principles of ASC 321 before settlement or exercise, and that an entity should not be considering how it will account for the resulting investments upon eventual settlement or exercise. ASU No. 2020-01 is to be applied prospectively, effective January 1, 2021, with early adoption permitted in an interim period. The Company adopted this on January 1, 2021, and the impact was not material.

~~Future Application of~~ Accounting Standards to be adopted

~~Accounting for Convertible Instruments and Contracts on Entity’s Own Equity—~~ Credit Losses—In ~~August 2020,~~March 2022, the FASB issued ASU No. ~~2020-06, Debt—~~2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt ~~With Conversion~~Restructurings and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU (1) simplifies an issuer’s accounting for convertible instruments as a single unit of account; (2) allows more contracts on an entity’s own equity to qualify for equity classification and more embedded derivatives to meet the derivative scope exception; and (3) simplifies diluted earnings per share (“EPS”) computation.

•Vintage Disclosures, ~~The guidance~~which eliminates the ~~requirement~~Troubled Debt Restructuring model for creditors that have adopted Topic 326, CECL. The general loan modification guidance in Subtopic 310-20 will apply to ~~separate embedded conversion features in convertible instruments, except~~all loan modifications, including modifications for ~~(1) a convertible instrument that contains features requiring bifurcation as a derivative under~~borrowers experiencing financial difficulty. ASU 2022-02 also requires entities within the scope of ASC ~~815 or (2) a convertible debt instrument that was issued at a substantial premium.~~

•~~Under~~326 to provide vintage disclosures which show the new guidance, certain conditions under Subtopic ASC 815-40 that may result in contracts being settled in cash rather than shares and therefore preclude (1) equity classification for contracts on an entity’s own equity; and (2) embedded derivatives from qualifying for the derivative scope exception, have been removed; for example, the requirement that equity contracts permit settlement in unregistered shares unless such contracts explicitly require settlement in cash if registered shares are unavailable. The guidance also clarifies that freestanding contracts on an entity’s own equity that do not qualify for equity classification under the indexation criteria (ASC 815-4015) or settlement criteria (ASC 815-40-25) are to be measured at fair value through earnings, even if they do not meet the definition of a derivative under ASC 815.

•The ASU also amends certain guidance on computation of diluted EPS for convertible instruments and contracts on an entity’s own equity that results in a more dilutive EPS, including (1) requiring the if converted method to be applied for all convertible instruments (the treasury stock method is no longer available), and (2) removing the ability to rebut the presumption of share settlement for contracts that may be settled in cash or stock and that are not liability classified share based payments.

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~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

•Expanded disclosures are required, including but not limited to, (1) terms and features of convertible instruments and contracts on entity’s own equity; and (2) information about events, conditions, and circumstances that could affect amount or timing of future cash flows related to these instruments or contracts; andgross writeoffs recorded in the current period ~~of adoption (3) nature of and reason for the change in accounting principle; and (4) effects of the change on EPS.~~

~~Upon adoption, a one-time election may be made to apply the fair value option for any liability-classified convertible securities.~~

~~Adoption of the new standard may be made either on a full retrospective approach or a modified retrospective approach, with cumulative effect adjustment recorded to beginning retained earnings.~~by origination year. ASU No. ~~2020-06~~2022-02 is effective ~~January 1, 2022, with early adoption permitted~~in reporting periods beginning ~~January 1, 2021.~~after December 15, 2022. The Company is currently evaluating the ~~effects of this new guidance.~~

~~Certain Leases with Variable Lease Payments—~~ ~~In July 2021,~~impact ASU 2022-02 will have on the FASB issued ASU 2021-05. The guidance in ASU 2021-05 amends the lease classification requirements for the lessors under certain leases containing variable payments to align with practice under ASC 840. Under the guidance, the lessor should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met: 1) the lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in ASC 842-10-25-2 through 25-3; and 2) the lessor would have otherwise recognized a day-one loss. The amendments in ASU 2021-05 are effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the effects of this new guidance.

~~Modifications of equity-classified written call options—~~ In May 2021, the FASB issued ASU 2021-04 Modification of equity-classified written call options — Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options — to codify how an issuer should account for modifications made to equity-classified written call options (a warrant to purchase the issuer’s common stock). The guidance in the ASU requires the issuer to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange whether structured as an amendment or reissuance and is effective for all periods beginning after December 15, 2021 with early application permitted. The Company is currently evaluating the effects of this new guidance.consolidated financial statements.

3. Loans ~~and Preferred Equity~~ Held for Investment, net

The following table provides a summary of the Company’s loans ~~and preferred equity~~ held for investment, net (dollars in thousands):


		September 30, 2021							December 31, 2020								March 31, 2022							December 31, 2021
		Unpaid Principal Balance		Carrying Value		Weighted Average Coupon(1)		Weighted Average Maturity in Years	Unpaid Principal Balance		Carrying Value		Weighted Average Coupon(1)		Weighted Average Maturity in Years		Unpaid Principal Balance		Carrying Value		Weighted Average Coupon(1)		Weighted Average Maturity in Years	Unpaid Principal Balance		Carrying Value		Weighted Average Coupon(1)		Weighted Average Maturity in Years
Fixed rate
Mezzanine loans		$	167,219	$	166,876	12.8	%	3.2	$	155,803	$	155,225	12.8	%	4.0
Preferred equity interests		18,953		18,953		15.0	%	1.9	18,680		18,681		15.0	%	2.7

		186,172		185,829					174,483		173,906
Variable rate	Variable rate															Variable rate
Senior loans	Senior loans	1,226,348		1,216,940		5.0	%	3.1	1,029,760		1,026,846		5.4	%	3.4	Senior loans	$	1,906,808	$	1,893,583	4.5	%	3.9	$	1,576,439	$	1,564,940	4.6	%	3.7
Securitized loans(2)	Securitized loans(2)	1,756,472		1,751,348		4.3	%	3.8	1,006,495		1,004,698		5.1	%	3.4	Securitized loans(2)	1,740,299		1,736,398		4.3	%	3.4	1,806,583		1,803,042		4.2	%	3.5
Mezzanine loans	Mezzanine loans	12,000		12,120		11.5	%	0.9	12,000		12,120		11.5	%	1.7	Mezzanine loans	12,000		12,120		11.5	%	0.4	12,000		12,120		11.5	%	0.7
Preferred equity interests		—		—		—	%	0	3,118		3,118		5.3	%	0.0
		2,994,820		2,980,408					2,051,373		2,046,782
Loans and preferred equity held for investment		3,180,992		3,166,236					2,225,856		2,220,688
																	3,659,107		3,642,101					3,395,022		3,380,102
Allowance for loan losses		NA		(42,730)					NA		(37,191)
Loans and preferred equity held for investment, net		$	3,180,992	$	3,123,506				$	2,225,856	$	2,183,497
Fixed rate																Fixed rate
Mezzanine loans																Mezzanine loans	117,994		117,772		12.4	%	2.9	105,636		105,505		12.4	%	3.0
																	117,994		117,772					105,636		105,505
Loans held for investment																Loans held for investment	3,777,101		3,759,873					3,500,658		3,485,607

CECL reserve																CECL reserve	NA		(34,004)					NA		(36,598)
Loans held for investment, net																Loans held for investment, net	$	3,777,101	$	3,725,869				$	3,500,658	$	3,449,009

(1)Calculated based on contractual interest rate.

(2)Represents loans transferred into securitization trusts that are consolidated by the Company.

2926

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The weighted average maturity, including extensions, of loans ~~and preferred equity investments~~ was ~~3.5~~3.6 years at ~~September 30, 2021 and~~March 31, 2022. At December 31, ~~2020.~~2021, the weighted average maturity, including extensions, of loans was 3.6 years.

The Company had ~~$8.7~~$9.8 million and ~~$7.0~~$9.5 million of interest receivable related to its loans ~~and preferred equity~~ held for investment, net as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. This is included in receivables, net on the Company’s consolidated balance sheets.

Activity relating to the Company’s loans ~~and preferred equity~~ held for investment, net was as follows (dollars in thousands):

Carrying Value

Balance at January 1, ~~2021~~2022

~~2,183,497~~3,449,009

Acquisitions/originations/additional funding

~~1,305,599~~498,195

Loan maturities/principal repayments

~~(377,987)~~(227,897)

Discount accretion/premium amortization

~~4,659~~2,999

Capitalized interest

~~13,277~~969

~~Provision for loan losses~~(Increase) decrease of CECL reserve(1)

~~(5,884)~~1,343

Charge-off

~~345~~1,251

Balance at ~~September 30, 2021~~March 31, 2022

~~3,123,506~~3,725,869

(1)~~Provision for loan losses excludes $0.9~~Excludes $0.5 million as of March 31, 2022, determined by the Company’s PD/LGD model for unfunded commitments reported on the consolidated statement of operations, with a corresponding offset to other liabilities recorded on the Company’s consolidated balance sheets.

Nonaccrual and Past Due Loans ~~and Preferred Equity~~

Loans ~~and preferred equity~~ that are 90 days or more past due as to principal or interest, or where reasonable doubt exists as to timely collection, are generally considered nonperforming and placed on nonaccrual status. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company did not have any loans ~~and preferred equity~~ on nonaccrual status.

The following table provides an aging summary of loans ~~and preferred equity~~ held for investment at carrying values before ~~allowance for loan losses, if any~~CECL reserve (dollars in thousands):

Current or Less Than 30 Days Past Due 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Loans
September 30, 2021 $ 3,166,236 $ — $ — $ — $ 3,166,236
December 31, 2020 2,220,688 — — — 2,220,688


	Current or Less Than 30 Days Past Due		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Loans
March 31, 2022	$	3,759,873	$	—	$	—	$	—	$	3,759,873
December 31, 2021	3,485,607		—		—		—		3,485,607

~~San Jose, California Hotel Senior Loan~~Current Expected Credit Loss Reserve

The ~~onset of~~following table provides details on the ~~COVID-19 pandemic~~changes in ~~the spring of 2020 created challenges, which included lower occupancy rates, weaker financial performance~~CECL reserves (dollars in thousands):


	March 31, 2022		December 31, 2021
CECL reserve at beginning of period	$	36,598	$	37,191

Increase (decrease) of CECL reserve(1)	(1,343)		(593)
Charge-offs of CECL reserve(2)	(1,251)		—

CECL reserve at end of period	$	34,004	$	36,598

(1)Excludes $0.5 million and ~~borrower funding of approximately $18.6~~$0.4 million of shortfalls to maintain operations, which ultimately led the borrower to close the San Jose, California hotel and file for Chapter 11 bankruptcy in March 2021. The Company entered into a restructuring support agreement with the borrower with respect to the bankruptcy process, in the Company’s capacity as the sole secured creditor. The bankruptcy court authorized the rejection of the existing hotel management agreement and approved a restructuring plan for the borrower to exit bankruptcy with Signia by Hilton as the new brand and hotel manager at the hotel and a $25 million mezzanine to support re-opening the hotel, property improvement plans, certain operating expenses and all expenses associated with the bankruptcy process.

On May 18, 2021, the bankruptcy court issued a confirmation order approving the amended and restated senior mortgage loan terms and the Company’s right to rely on such order to finalize documents with the Company’s borrower as it emerges from bankruptcy in accordance with the third amended joint Chapter 11 plan of reorganization. In the fourth quarter of 2021, the Company expects to amend and restate the senior mortgage loan, subject to customary closing conditions, in the amount of $184.9 million, an upsize which reflects accrued interest and fees during the non-accrual period, collapsing the prior preferred equity investment into the restated senior mortgage loan and certain other costs and expenses associated with bankruptcy. The San Jose Hotel is scheduled to reopen in the first quarter of 2022. As the bankruptcy plan and loan terms were approved in the second quarter of 2021 and the Company’s senior loan documents were substantively finalized during the third quarter of 2021, for the three months ended ~~September 30,~~March 31, 2022 and year ended December 31, 2021, ~~the Company reinstated the loan investment and recognized $6.1 million of~~

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~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

interest income on the consolidated statement of operations, of which $3.7 million relates to past due interest during the non-accrual period of February 2021 through June 2021 and $2.4 million relates to interest income during the third quarter of 2021. Additionally, the Company recognized $0.7 million of other income on the consolidated statement of operations related to late fees during the three months ended September 30, 2021.

~~Allowance for Loan Losses~~

~~Changes in allowance for loan losses on loans are presented below (dollars in thousands):~~

Nine Months Ended September 30,
2021 2020
Allowance for loan losses at beginning of period $ 37,191 $ 272,624
Effect of CECL adoption(1)
— 21,093
Provision for loan losses(2)
5,884 86,329
Charge-off (345) (38,659)
Transfer to loans held for sale — (300,863)
Allowance for loan losses at end of period(3)
$ 42,730 $ 40,524

~~(1)Calculated by the Company’s PD/LGD model upon CECL adoption on January 1, 2020. See Note 2, “Summary of Significant Accounting Policies” for further details.~~

~~(2)Provision for loan losses excludes $0.9 million and $0.1 million for the nine months ended September 30, 2021 and September 30, 2020,~~ respectively. These amounts were determined ~~by the Company’s PD/LGD model~~ for unfunded commitments reported on the consolidated statement of operations, with a corresponding offset to other liabilities recorded on the Company’s consolidated balance sheets.

~~(3)~~(2)~~Includes $42.7~~During the first quarter of 2022, the Company received a $36.5 million ~~related to the Company’s PD/LGD model at September 30, 2021. At September 30, 2020, includes $38.9 million related to the Company’s PD/LGD model and $1.6 million related to the corporate term~~repayment on 1 senior loan collateralized by a student housing property, which was ~~evaluated individually.~~$1.3 million less than the unpaid principal balance. As such, during the fourth quarter of 2021, the Company had recorded a $1.3 million CECL reserve on the loan, as the loss was probable at that point in time, which was charged off in the first quarter of 2022.

Credit Quality Monitoring

~~Loan and preferred equity investments~~Loans are typically ~~loans~~ secured by direct senior priority liens on real estate properties or by interests in entities that directly own real estate properties, which serve as the primary source of cash for the payment of principal and interest. The Company

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

evaluates its ~~loan and preferred equity investments~~loans at least quarterly and differentiates the relative credit quality principally based on: (i) whether the borrower is currently paying contractual debt service in accordance with its contractual terms; and (ii) whether the Company believes the borrower will be able to perform under its contractual terms in the future, as well as the Company’s expectations as to the ultimate recovery of principal at maturity.

As of ~~September 30, 2021,~~March 31, 2022, all loans were performing in accordance with the contractual terms of their governing documents and were categorized as performing loans. There were no loans held for investment with contractual payments past due as of December 31, ~~2020.~~2021. For the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and March 31, 2021, no debt investment contributed more than 10.0% of interest income.

The following ~~table provides~~tables provide a summary by carrying values before any ~~allowance for loan losses~~CECL reserves of the Company’s loans ~~and preferred equity~~ held for investment by year of origination and credit quality risk ranking (dollars in thousands). as of March 31, 2022 and December 31, 2021, respectively. Refer to Note 2, “Summary of Significant Accounting ~~Policies—Accounting Standards Adopted in 2020—Credit Losses”~~Policies” for loans risk ~~ranking~~rating definitions.


	March 31, 2022
	2022		2021		2020		2019		2018		Total
Senior loans
Risk Rankings:


2	$	—	$	233,748	$	109,400	$	70,916	$	—	$	414,064
3	468,993		1,388,180		72,084		283,208		300,183		2,512,648
4	—		—		—		398,644		304,625		703,269

Total Senior loans	468,993		1,621,928		181,484		752,768		604,808		3,629,981

Mezzanine loans
Risk Rankings:


3	9,986		—		—		74,391		4,480		88,857
4	—		—		—		28,915		—		28,915
5	—		—		—		—		12,120		12,120
Total Mezzanine loans	9,986		—		—		103,306		16,600		129,892










Total Loans held for investment	$	478,979	$	1,621,928	$	181,484	$	856,074	$	621,408	$	3,759,873

As of March 31, 2022, the average risk rating for loans held for investment was 3.1.


	December 31, 2021
	2021		2020		2019		2018		2017		Total
Senior loans
Risk Rankings:
2	$	242,850	$	109,103	$	70,811	$	—	$	—	$	422,764
3	1,393,307		72,359		443,162		262,147		34,036		2,205,011
4	—		—		396,395		304,477		—		700,872
5	—		—		39,335		—		—		39,335
Total Senior loans	1,636,157		181,462		949,703		566,624		34,036		3,367,982

Mezzanine loans
Risk Rankings:


3	—		—		38,796		4,489		—		43,285
4	—		—		62,220		—		12,120		74,340

Total Mezzanine loans	—		—		101,016		4,489		12,120		117,625










Total Loans held for investment	$	1,636,157	$	181,462	$	1,050,719	$	571,113	$	46,156	$	3,485,607

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

2021 2020 2019 2018 2017 Total
Senior loans
Risk Rankings:
2 $ 22,462 $ 42,289 $ 56,505 $ — $ — $ 121,256
3 1,173,645 138,411 468,721 262,147 33,872 2,076,796
4 — — 465,824 304,412 — 770,236
Total Senior loans 1,196,107 180,700 991,050 566,559 33,872 2,968,288
Mezzanine loans
Risk Rankings:
3 — — 37,505 68,125 — 105,630
4 — — 61,245 — 12,120 73,365
Total Mezzanine loans — — 98,750 68,125 12,120 178,995
Preferred equity interests and other
Risk Rankings:
3 — — — 18,953 — 18,953
Total Preferred equity interests and other — — — 18,953 — 18,953
Total Loans and preferred equity held for investment $ 1,196,107 $ 180,700 $ 1,089,800 $ 653,637 $ 45,992 $ 3,166,236

~~The quarter ended September 30,~~As of December 31, 2021, the average risk rating for loans ~~and preferred equity~~ held for investment was ~~3.2.~~3.1.

Lending Commitments

The Company has lending commitments to borrowers pursuant to certain loan agreements in which the borrower may submit a request for funding contingent on achieving certain criteria, which must be approved by the Company as lender, such as leasing, performance of capital expenditures and construction in progress with an approved budget. At ~~September 30,~~March 31, 2022, assuming the terms to qualify for future advances, if any, had been met, total gross unfunded lending commitments were $333.5 million. Refer to Note 16, “Commitments and Contingencies” for further details. At March 31, 2022, the Company recorded a $0.9 million allowance for lending commitments in accrued and other liabilities on its consolidated balance sheets in accordance with the credit losses accounting standard No. 2016-13. At December 31, 2021, assuming the terms to qualify for future advances, if any, had been met, total gross unfunded lending commitments were ~~$233.7~~$264.9 million. ~~Refer to Note 16, “Commitments and Contingencies” for further details.~~ At ~~September 30,~~December 31, 2021, the Company recorded a ~~$0.9~~$0.4 million allowance for lending commitments in accrued and other liabilities on its consolidated balance sheets in accordance with the credit losses accounting standard No. 2016-13. See Note 2, “Summary of Significant Accounting Policies” for further details.

4. Investments in Unconsolidated Ventures

Summary

The Company’s investments in unconsolidated ventures represent noncontrolling equity interests in various entities, as follows (dollars in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Equity method investments	Equity method investments	$	199,580	$	366,481	Equity method investments	$	16,209	$	16,185

Investments under fair value option	Investments under fair value option	4,848		6,883		Investments under fair value option	4,406		4,406
Investments in Unconsolidated Ventures	Investments in Unconsolidated Ventures	$	204,428	$	373,364	Investments in Unconsolidated Ventures	$	20,615	$	20,591

Equity Method Investments

Investment Ventures

Certain of the Company’s equity method investments are structured as joint ventures with one or more private funds or other investment ~~vehicles managed by DigitalBridge with third party joint venture partners.~~vehicles. These investment entities are generally capitalized through equity contributions from the members, although certain investments are leveraged through various financing arrangements.

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

The assets of the equity method investment entities may only be used to settle the liabilities of these entities and there is no recourse to the general credit of the Company nor the other investors for the obligations of these investment entities. Neither the Company nor the other investors are required to provide financial or other support in excess of their capital commitments. The Company’s exposure to the investment entities is limited to its equity method investment balance as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

The Company’s investments accounted for under the equity method are summarized below (dollars in thousands):

Carrying Value
Investments Description September 30, 2021 December 31, 2020
ADC investments(1)(2)(3)
Interests in three acquisition, development and construction loans in which the Company participates in residual profits from the projects, and the risk and rewards of the arrangements are more similar to those associated with investments in joint ventures $ 26,032 $ 57,481
Other investment ventures(1)(4)
Interests in 6 investments, each with less than $95.4 million carrying value at September 30, 2021 173,548 309,000


	Carrying Value
Investment Description(1)	March 31, 2022		December 31, 2021

NaN industrial portfolio and 1 development project which includes a hospitality and retail renovation and condominium tower construction	$	16,209	$	16,185

(1)The Company’s ownership interest in ~~ADC investments and other~~ investment ventures varies and represents capital contributed to date and may not be reflective of the Company’s economic interest in the entity because of provisions in operating agreements governing various matters, such as classes of partner or member interests, allocations of profits and losses, preferential returns and guaranty of debt. Each equity method investment has been determined to be a VIE for which the Company was not deemed to be the primary beneficiary or a voting interest entity in which the Company does not have the power to control through a majority of voting interest or through other arrangements.

~~(2)~~The Company owns varying levels of stated equity interests in certain ADC investments, as well as profit participation interests in real estate ventures without a stated ownership interest in other ADC investments.

~~(3)Includes 2 investments with a carrying value of $25.7 million that were contributed to a preferred financing arrangement. See Note 13, “Noncontrolling Interests,” for further information.~~

~~(4)Includes 4 investments with a carrying value of $157.4 million that were contributed to a preferred financing arrangement. See Note 13, “Noncontrolling Interests,” for further information.~~

Under the fair value option, loans and preferred equity investments are measured each reporting period based on their exit values in an orderly transaction. Fair value adjustments recorded on each of these investments is included in equity in earnings of unconsolidated ventures on the Company’s consolidated statements of operations.

~~Los Angeles, California Mixed-Use Project—Third Party $275 million Construction Mezzanine Loan Upsize and Retained B-Participation Investment~~

~~Risk of Foreclosure and Maturity Default (see Historical Details below)~~

On July 9, 2021, the borrower failed to pay the principal balance of the Upsized Mezzanine Loan (as defined below) and senior mortgage loan or meet other tests for extension of the maturity date. The Senior Mezzanine Lender (as defined below) and senior mortgage lender each delivered reservation of rights letters to the senior mezzanine borrower and borrower, respectively. The lender parties and borrower have engaged in discussions regarding the current status of the sale of the hotel and the completion of the tower condominiums and anticipated tower condominium sales projections. Since the new capital investment of $275 million was made on September 1, 2020, there have been additional hard and soft costs overruns which are not supported by current commitments or reserves at the Mixed-use Project; provided, however, since the borrower maturity default, the Senior Mezzanine Lender has funded an additional approximate $47 million in protective advances ahead of the Company’s junior B-participation position. The hotel is currently open for business and the condominium towers are nearing completion. However, there continue to be delays experienced at the project, which include delays of the sale of the hotel property. In October 2021, in addition to the recent protective advances, the entire senior mortgage loan (with a total funding commitment of approximately $1.0 billion) was acquired at par by an affiliate of the Senior Mezzanine Lender (collectively, the “Senior Lender Group”). Since this acquisition, the senior mortgage commenced bearing interest at the default rate of approximately 11%. Given the Senior Lender Group’s consolidation of indebtedness, needed additional fundings and their preparedness to exercise any and all remedies, the CLNY Mezzanine Lender’s (as defined below) inability to reach a feasible restructuring agreement could result in the Senior Lender Group foreclosing on the Company’s mezzanine B-participation investment.

3329

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The borrower’s maturity default on July 9, 2021, further delays at the project and in sales activities, additional capital requirements, potential restructuring of indebtedness and actions that may be taken by the Senior Lender Group, notwithstanding continuing negotiations with the Senior Lender Group, have negatively impacted the Company’s investment interest. Importantly, the acquisition of the senior mortgage by the Senior Mezzanine Lender increases the likelihood of a mortgage foreclosure of the Company’s interests. As a result during the three months ended September 30, 2021, the Mixed-use Project recorded fair value losses totaling $268.5 million. The Company recognized its proportionate share of fair value losses equaling $97.9 million, which represents the Company’s remaining proportionate share in the investment. The Mixed-use Project did not recognize any interest income for the nine months ended September 30, 2021. For the nine months ended September 30, 2020, the Mixed-use Project’s total interest income was $13.8 million. The Company recognized its proportionate share of interest income for the nine months ended September 30, 2020 of $2.4 million.

~~Historical Details~~

The Company’s mezzanine loan and preferred equity investment in a development project in Los Angeles County, which includes a hospitality and retail renovation and a new condominium tower construction (the “Mixed-use Project”), was converted into a mezzanine participation during the three months ended September 30, 2020. The Company’s investment was made through a joint venture with affiliates of the Company’s Manager (the “CLNY Mezzanine Lender”) in the form of a $574.0 million commitment to the Mixed-use Project, of which the Company’s proportionate share of the commitment is $189.0 million.

In April 2020, the senior mortgage lender notified the borrower developer that the Mixed-use Project loan funding was over budget, due to cost overruns from certain hard and soft costs and senior loan interest reserve shortfalls projected through completion. As a result, during the second quarter of 2020, the Company and its affiliates made 2 protective advances to the senior mortgage lender totaling $69.1 million, of which the Company’s proportionate share was $28.5 million. During the three months ended June 30, 2020, the Company placed the mezzanine loan and preferred equity investment on nonaccrual status.

In June 2020, the senior mortgage lender sought a third protective advance of $15.5 million of which the Company’s proportionate share would have been $7.0 million. While the Company and its affiliates did not fund its proportionate share, the senior mortgage lender funded the full amount of the required June advances. The senior mortgage lenders funding did not relieve the Company and its affiliates from its commitment to fund. As a result during the three months ended June 30, 2020, the Mixed-use Project’s recorded fair value losses totaling $250.0 million. The Company recognized its proportionate share of fair value losses equaling $89.3 million. The Mixed-use Project’s fair value was based on a weighted average probability analysis of potential resolutions based on a number of factors which included the maturity default of the loan, cost overruns, COVID-19 related delays, lack of funding by the borrower and recent negotiations with the senior lender, the borrower and potential sources of additional mezzanine financing.

In September 2020, in cooperation with the borrower and the EB-5 lender, the CLNY Mezzanine Lender and senior mortgage lender secured $275 million of additional mezzanine financing from a third-party mezzanine lender (the “Senior Mezzanine Lender”). To consummate the new mezzanine financing, the CLNY Mezzanine Lender simplified its investment interest by converting its existing preferred equity principal and accrued interest into the existing mezzanine loan, transferred the mezzanine loan to the Senior Mezzanine Lender, who subsequently increased the mezzanine loan amount by $275 million to a $821 million total mezzanine loan (the “Upsized Mezzanine Loan”). The Senior Mezzanine Lender holds a $275 million A-participation and the CLNY Mezzanine Lender (including the Company’s interest) continues to hold a $546 million B-participation interest in the Upsized Mezzanine Loan at the Mixed-use Project.

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~The Co-Invest Portfolio Sale~~

On July 19, 2021, the Company reached an agreement to sell the 5 co-investment assets to managed vehicles of Fortress Investment Group LLC (“Fortress”), for gross proceeds of $223 million (the “Co-Invest Portfolio Sale”). Per generally accepted accounting principles, the Company is required to value these assets at the lower of cost or fair market value. As of June 30, 2021, to reflect the cash the Company expects to receive from the sale, the Company recorded other-than-temporary impairment loss adjustments on 1 senior mortgage loan for a fully entitled land acquisition for a mixed use development project in Dublin, Ireland for $32.8 million, 1 mezzanine loan secured by single family development projects in Rolling Hills, California for $1.4 million and 1 mezzanine loan secured by a mixed use development project in San Rafael, California for $1.3 million, totaling a loss of $35.5 million, of which $32.0 million was allocated to the Company and $3.5 million was allocated to the Company’s partner in the “5-Investment Preferred Financing.” Additionally, the Company expects to record an offsetting gain on the other 2 co-investment assets totaling approximately $27.4 million upon the closing of the transaction, which is subject to customary closing conditions, third-party consents and purchase price adjustments, resulting in an expected total net realized loss of approximately $4.6 million, net of selling costs. We can offer no assurances that the transaction will close as expected or at all or the actual amount of any loss or gain realized by the Company in connection with the sale.

Investments under Fair Value Option

Private Funds

The Company elected to account for its limited partnership interests ~~which range from 1.0% to 15.6%,~~ in PE Investments under the fair value ~~option.~~option, which interests range from 1.0% to 15.6% respectively, for the three months ended March 31, 2022. The Company records equity in earnings for these investments based on a change in fair value of its share of projected future cash flows.

5. Real Estate Securities, Available for Sale

Investments in CRE Securities

CRE securities are composed of CMBS backed by a pool of CRE loans which are typically well-diversified by type and geography. The ~~following table presents CMBS investments as of September 30, 2021~~Company did not hold any CRE securities at March 31, 2022 and December 31, ~~2020 (dollars in thousands):~~2021.

Weighted Average
Principal Amount Total Discount Amortized
Cost Cumulative Unrealized
on Investments Fair
Value
Coupon(1)
Unleveraged
Current
Yield(2)
As of Date: Count Gain (Loss)
September 30, 2021 1 $ 11,820 $ (7,875) $ 3,945 $ — $ — $ 3,945 3.25 % — %
December 31, 2020 2 19,560 (9,371) 10,189 200 — 10,389 3.35 % — %

~~(1)All CMBS are fixed rate.~~

~~(2)The Company placed all of its CRE securities on cost recovery status as of April 1, 2020.~~

Consistent with the overall market, the Company’s CRE securities, which it marks to fair value, lost significant value since the onset of the COVID-19 pandemic. While the Company will evaluate selling its non-investment grade rated CRE security over the next twelve months, it is more likely than not that the Company will sell before recovery. During the ~~nine~~three months ended ~~September 30,~~March 31, 2021, the Company wrote down through earnings the amortized cost basis for securities in which the fair value dropped below the amortized cost basis, realizing a loss of $1.0 million. The loss was recorded in other gain, ~~(loss),~~ net on the Company’s consolidated statements of operations.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2021, the Company sold 1 CRE security for a total gross sales price of $5.1 million and realized a gain of $0.1 million. The gain was recorded in other gain, ~~(loss),~~ net on the Company’s consolidated statements of ~~operations~~.operations. At ~~September 30,~~March 31, 2021, the Company had 1one remaining CRE security, which iswas on cost recovery, and as a result ~~has~~had ceased accretion of any discounts to expected maturity and applied any cash interest received against the CRE security’s carrying value. This decision was made given the inability to project future cash flows. ~~CRE securities serve as collateral for financing transactions for the CMBS Credit Facilities (refer to Note 9, “Debt,” for further detail).~~

~~Subsequent to~~ ~~September 30, 2021, the Company sold~~ 1 ~~CRE security for $5.1 million in gross proceeds and will recognize a gain of approximately $1.2 million. Following the sale, the Company no longer holds any CRE securities.~~

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

During the ~~nine~~three months ended ~~September 30,~~March 31, 2021, the Company recorded an unrealized loss in OCI of $0.2 million. During the three and nine months ended September 30, 2020, the Company recorded an unrealized gain in OCI of $4.3 million and an unrealized loss of $12.2 million, respectively. As of September 30, 2021, the Company did not hold any securities in an unrealized loss position.

~~As of September 30, 2021, the contractual maturity of the one remaining CRE security was 27.6 years with an expected maturity of 4.5 years.~~

Investments in Investing VIEs

The Company is the directing certificate holder of 1 securitization trust and has the ability to appoint and replace the special servicer on all mortgage loans. As such, U.S. GAAP requires the Company to consolidate the assets, liabilities, income and expenses of the securitization trusts as Investing VIEs. Refer to Note 2, “Summary of Significant Accounting Policies” for further discussion on Investing VIEs.

Other than the securities represented by the Company’s subordinate tranches of the securitization trust, the Company does not have any claim to the assets or exposure to the liabilities of the securitization trust. The original issuers, who are unrelated third parties, guarantee the interest and principal payments related to the investment grade securitization bonds in the securitization trust, therefore these obligations do not have any recourse to the general credit of the Company as the consolidator of the securitization trust. The Company’s maximum exposure to loss would not exceed the carrying value of its retained investments in the securitization trusts, or the subordinate tranches of the securitization trust.

As of ~~September 30, 2021,~~March 31, 2022, the mortgage loans and the related mortgage obligations held in the securitization trust had an unpaid principal balance of ~~$840.3~~$770.5 million and ~~$800.8~~$667.9 million, respectively. As of December 31, ~~2020,~~2021, the mortgage loans and the related mortgage obligations held in the securitization trusts had an unpaid principal balance of ~~$1.7 billion~~$783.8 million and ~~$1.6 billion,~~$681.2 million, respectively. As of ~~September 30, 2021,~~March 31, 2022, the underlying collateral of the securitization trust consisted of 6361 underlying commercial mortgage loans, with a weighted average coupon of 4.9% and a weighted average loan to value ratio of ~~60.9%~~60.5%.

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table presents the assets and liabilities recorded on the consolidated balance sheets attributable to the securitization trust as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (dollars in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Assets	Assets					Assets
Mortgage loans held in a securitization trust, at fair value	Mortgage loans held in a securitization trust, at fair value	$	840,341	$	1,768,069	Mortgage loans held in a securitization trust, at fair value	$	754,579	$	813,310
Receivables, net	Receivables, net	3,516		6,644		Receivables, net	3,171		3,325
Total assets	Total assets	$	843,857	$	1,774,713	Total assets	$	757,750	$	816,635
Liabilities	Liabilities					Liabilities
Mortgage obligations issued by a securitization trust, at fair value	Mortgage obligations issued by a securitization trust, at fair value	$	800,831	$	1,708,534	Mortgage obligations issued by a securitization trust, at fair value	$	718,425	$	777,156
Accrued and other liabilities	Accrued and other liabilities	3,211		6,119		Accrued and other liabilities	2,933		3,032
Total liabilities	Total liabilities	$	804,042	$	1,714,653	Total liabilities	$	721,358	$	780,188

The Company elected the fair value option to measure the assets and liabilities of the securitization trusts, which requires that changes in valuations of the securitization trusts be reflected in the Company’s consolidated statements of operations.

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

The difference between the carrying values of the mortgage loans held in securitization trusts and the carrying value of the mortgage obligations issued by securitization trusts was ~~$39.5 million and $59.5~~$36.2 million as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020, respectively,~~2021, and approximates the fair value of the Company’s retained investments in the subordinate tranches of the securitization trusts, which are eliminated in consolidation. Refer to Note 14, “Fair Value” for a description of the valuation techniques used to measure fair value of assets and liabilities of the Investing VIEs.

The below table presents net income attributable to the Company’s common stockholders for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ generated from the Company’s investments in the subordinate tranches of the securitization trusts (dollars in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Statement of Operations
Interest expense $ — $ (75) $ — $ (420)
Interest income on mortgage loans held in securitization trusts 10,806 20,462 41,885 61,556
Interest expense on mortgage obligations issued by securitization trusts (9,508) (18,204) (36,955) (54,627)
Net interest income 1,298 2,183 4,930 6,509
Administrative expense (225) (274) (1,152) (969)
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net 3,867 (13,162) 32,021 (41,589)
Realized loss on mortgage loans and obligations held in securitization trusts, net (3,867) — (23,383) —
Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders $ 1,073 $ (11,253) $ 12,416 $ (36,049)


	Three Months Ended March 31,
	2022		2021
Statement of Operations

Interest income on mortgage loans held in securitization trusts	$	9,375	$	19,689
Interest expense on mortgage obligations issued by securitization trusts	(8,488)		(17,336)
Net interest income	887		2,353
Operating expense	(97)		(766)
Unrealized gain on mortgage loans and obligations held in securitization trusts, net	—		8,638

Net income attributable to BrightSpire Capital, Inc. common stockholders	$	790	$	10,225

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

6. Real Estate, net and Real Estate Held for Sale

The following table presents the Company’s net lease portfolio, net, as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020~~2021 (dollars in thousands):

September 30, 2021 December 31, 2020
Land and improvements $ 135,100 $ 136,184
Buildings, building leaseholds, and improvements 567,746 569,610
Tenant improvements 18,028 16,311
Construction-in-progress 660 3,804
Subtotal $ 721,534 $ 725,909
Less: Accumulated depreciation (66,233) (52,201)
Less: Impairment(1)
(34,104) (34,104)
Net lease portfolio, net(2)
$ 621,197 $ 639,604

~~(1)See Note 14, “Fair Value,” for discussion of impairment of real estate.~~

~~(2)Prior period amounts have been revised to conform to the current year presentation. See Note 17, “Segment Reporting” for further discussion.~~

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~


	March 31, 2022		December 31, 2021
Land and improvements	$	135,139	$	134,453
Buildings, building leaseholds, and improvements	533,814		530,815
Tenant improvements	18,654		17,944
Construction-in-progress	660		660
Subtotal	$	688,267	$	683,872
Less: Accumulated depreciation	(76,366)		(70,861)

Net lease portfolio, net	$	611,901	$	613,011

The following table presents the Company’s portfolio of other real estate ~~including foreclosed properties,~~ as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (dollars in thousands):

September 30, 2021 December 31, 2020
Land and improvements $ 46,269 $ 53,523
Buildings, building leaseholds, and improvements 235,687 262,874
Tenant improvements 24,883 24,931
Furniture, fixtures and equipment 179 4,245
Construction-in-progress 910 738
Subtotal $ 307,928 $ 346,311
Less: Accumulated depreciation (28,772) (29,955)
Less: Impairment(1)
(108,407) (116,703)
Other portfolio, net(2)
$ 170,749 $ 199,653

~~(1)See Note 14, “Fair Value,” for discussion of impairment of real estate.~~

~~(2)Prior period amounts have been revised to conform to the current year presentation. See Note 17, “Segment Reporting” for further discussion.~~


	March 31, 2022		December 31, 2021
Land and improvements	$	29,583	$	29,582
Buildings, building leaseholds, and improvements	152,186		152,180
Tenant improvements	17,239		17,303
Furniture, fixtures and equipment	135		135
Construction-in-progress	1,414		460
Subtotal	$	200,557	$	199,660
Less: Accumulated depreciation	(30,829)		(29,460)

Other portfolio, net	$	169,728	$	170,200

For the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company had 0 ~~properties~~single property with rental and other income equal to or greater than 10.0% of total ~~revenue.~~revenue of the Company.

At ~~September 30,~~December 31, 2021, the Company held 1 foreclosed property which was included in other real estate assets held for sale with a carrying value of ~~$33.4~~$33.5 million. ~~At December 31, 2020, the Company held foreclosed properties which are included in real estate, net with a carrying value of $26.2 million.~~

Depreciation Expense

Depreciation expense on real estate was $6.1 million and ~~$10.6~~$6.9 million for the three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020, respectively. Depreciation expense on real estate was $20.0 million and $32.0 million for the nine months ended September 30, 2021 and 2020,~~ respectively.

Property Operating Income

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the components of property operating income were as follows (dollars in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Lease revenues(1)	Lease revenues(1)									Lease revenues(1)
Minimum lease revenue	Minimum lease revenue	$	20,666	$	35,529	$	63,315	$	114,691	Minimum lease revenue	$	19,734	$	22,409
Variable lease revenue	Variable lease revenue	2,730		5,390		7,959		18,080		Variable lease revenue	2,826		2,780
		$	23,396	$	40,919	$	71,274	$	132,771		$	22,560	$	25,189
Hotel operating income	Hotel operating income	2,937		910		5,540		4,728		Hotel operating income	1,566		701
		$	26,333	$	41,829	$	76,814	$	137,499		$	24,126	$	25,890

(1)~~Excludes de minimis net amortization income related to above and below-market leases for the three and nine months ended September 30, 2021.~~ Excludes net amortization expense related to above and below-market leases of ~~$0.2~~$0.3 million and income of ~~$0.4~~$0.3 million for the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2022, respectively.

~~Table~~ Excludes net amortization expense related to above market leases of ~~Contents~~$0.4 million and below-market leases of $0.2 million for the three months ended March 31, 2021, respectively.

~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Minimum Future Rents

Minimum rental amounts due under leases are generally either subject to scheduled fixed increases or adjustments. The following table presents approximate future minimum rental income under noncancellable operating leases, excluding variable

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

lease revenue of tenant reimbursements, to be received over the next five years and thereafter as of ~~September 30, 2021~~March 31, 2022 (dollars in thousands):

Remainder of 2021 $ 21,993
2022 74,780
2023 68,336
2024 63,627
2025 57,474
2026 and thereafter 417,321
Total(1)
$ 703,531
~~________________________________________~~

~~(1) Excludes minimum future rents that is classified as held for sale totaling $2.1 million through 2026.~~

The following table presents approximate future minimum rental income under noncancellable operating leases, excluding variable lease revenue of tenant reimbursements, to be received over the next five years and thereafter as of December 31, 2020 (dollars in thousands):

2021 $ 77,716
2022 73,760
2023 66,137
2024 60,657
2025 55,152
2026 and thereafter 393,964
Total(1)
$ 727,386
~~________________________________________~~

~~(1) Excludes minimum future rents that is classified as held for sale totaling $103.6 million through 2050.~~


Remainder of 2022	$	57,019
2023	71,616
2024	66,926
2025	60,569
2026	54,092
2027 and thereafter	371,190
Total	$	681,412

The rental properties owned at ~~September 30, 2021~~March 31, 2022 are leased under noncancellable operating leases with current expirations ranging from ~~2021~~2022 to 2038, with certain tenant renewal rights. For certain properties, the tenants pay the Company, in addition to the contractual base rent, their pro rata share of real estate taxes and operating expenses. Certain lease agreements provide for periodic rental increases and others provide for increases based on the consumer price index.

~~Lease Concessions~~

As a result of the COVID-19 crisis, some tenants sought and others may seek more flexible payment terms and the Company has and will engage with affected tenants on a case-by-case basis. For lease concessions resulting directly from the impact of COVID-19 that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee, for example, where total payments required by the modified contract will be substantially the same as or less than the original contract, the Company made a policy election to account for the concessions as though the enforceable rights and obligations for those concessions existed in the lease contracts, under a relief provided by the FASB. Under the relief, the concessions will not be treated as lease modifications that are accounted for over the remaining term of the respective leases, as the Company believes this would not accurately reflect the temporary economic effect of the concessions. Instead, (i) rent deferrals that meet the criteria will be treated as if no changes were made to the lease contract, with continued recognition of lease income and receivables under the original terms of the contract; and (ii) rent forgiveness that meets the criteria will be accounted for as variable lease payments in the affected periods.

Commitments and Contractual Obligations

Ground Lease Obligation

In connection with real estate acquisitions, the Company assumed certain noncancellable operating ground leases as lessee or sublessee with expiration dates through ~~2055.~~2050. Rents on certain ground leases are paid directly by the tenants. Ground rent expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 was $0.8 million, and ~~$2.3~~$0.8 million, respectively. ~~Ground rent expense for the three and nine months ended September 30, 2020 was $0.8 million and $2.4 million, respectively.~~

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Refer to Note 16, “Commitments and Contingencies” for the details of future minimum rental payments on noncancellable ground lease on real estate as of ~~September 30, 2021.~~March 31, 2022.

Real Estate Held for Sale

The following table summarizes the Company’s assets ~~and liabilities related to assets~~ held for sale at ~~September 30, 2021 and~~ December 31, ~~2020~~2021 (dollars in thousands):

September 30, 2021 December 31, 2020
Assets
Real estate, net $ 44,102 $ 314,817
Deferred leasing costs and intangible assets, net 116 8,539
Total assets held for sale $ 44,218 $ 323,356
Liabilities
Intangible liabilities, net $ — $ 323
Total liabilities related to assets held for sale $ — $ 323


	December 31, 2021
Assets
Real estate, net	$	44,229
Deferred leasing costs and intangible assets, net	116
Total assets held for sale	$	44,345

~~During the three months ended September 30, 2021,~~As of March 31, 2022, the Company ~~classified 1 net lease property~~held no properties as held for sale. As of ~~September 30,~~December 31, 2021, the Company held 1 net lease property and 1 hotel as held ~~for sale. As of December 31, 2020, the Company held 1 net lease property and 1 net lease industrial portfolio~~ for sale.

There were no assets held for sale that constituted discontinued operations as of ~~September 30,~~December 31, 2021.

Real Estate Sales

During the ~~nine~~three months ended ~~September 30,~~March 31, 2022, the Company completed the sale of 1 net lease property for a gross sales price of $19.6 million which resulted in a $7.6 million gain on sale, which is included in other gain, net on the consolidated statement of operations. The Company also sold 1 hotel property for a gross sales price of $36.0 million which resulted in a $2.9 million gain on sale, which is included in other gain, net on the consolidated statement of operations.

During the three months ended March 31, 2021, the Company completed the sale of an industrial portfolio for a total gross sales price of $335.0 million and a total net gain ~~on sale~~ of $11.8 million. ~~This sale did not constitute discontinued operations. There were no sales during the three months ended September 30, 2021.~~

~~During three months ended September 30, 2020, the Company completed the sale~~

Table of 5 properties. Sales included 2 offices, 1 hotel, 1 industrial and 1 retail property for a total gross sales price of $143.4 million and a total gain of $10.8 million. During the nine months ended September 30, 2020, the Company completed the sale of 11 properties. Sales included 5 offices, 2 multifamily, 1 hotel, 1 industrial, 1 retail and 1 manufactured housing property for a total gross sales price of $317.1 million and a total net gain of $6.9 million.Contents

~~These sales did not constitute discontinued operations.~~BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

7. Deferred Leasing Costs and Other Intangibles

The Company’s deferred leasing costs, other intangible assets and intangible liabilities, excluding those related to assets held for sale, at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 are as follows (dollars in thousands):


		September 30, 2021							March 31, 2022
		Carrying Amount		Accumulated Amortization		Net Carrying Amount(1)			Carrying Amount		Accumulated Amortization		Net Carrying Amount
Deferred Leasing Costs and Intangible Assets	Deferred Leasing Costs and Intangible Assets							Deferred Leasing Costs and Intangible Assets
In-place lease values	In-place lease values	$	82,585	$	(33,541)	$	49,044	In-place lease values	$	77,911	$	(32,081)	$	45,830
Deferred leasing costs	Deferred leasing costs	29,752		(14,296)		15,456		Deferred leasing costs	28,395		(13,728)		14,667
Above-market lease values	Above-market lease values	10,344		(7,528)		2,816		Above-market lease values	8,359		(6,159)		2,200
		$	122,681	$	(55,365)	$	67,316		$	114,665	$	(51,968)	$	62,697
Intangible Liabilities	Intangible Liabilities							Intangible Liabilities
Below-market lease values	Below-market lease values	$	16,200	$	(9,626)	$	6,574	Below-market lease values	$	16,075	$	(10,197)	$	5,878


	December 31, 2021
	Carrying Amount		Accumulated Amortization		Net Carrying Amount(1)
Deferred Leasing Costs and Intangible Assets
In-place lease values	$	81,869	$	(34,555)	$	47,314
Deferred leasing costs	29,863		(14,701)		15,162
Above-market lease values	10,171		(7,666)		2,505
	$	121,903	$	(56,922)	$	64,981
Intangible Liabilities
Below-market lease values	$	16,166	$	(9,942)	$	6,224

(1)Excludes deferred leasing costs and intangible assets and intangible liabilities related to assets held for sale at ~~September 30, 2021 and~~ December 31, ~~2020.~~

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

December 31, 2020
Carrying Amount Accumulated Amortization
Net Carrying Amount(1)
Deferred Leasing Costs and Intangible Assets
In-place lease values $ 83,239 $ (28,558) $ 54,681
Deferred leasing costs 29,052 (11,860) 17,192
Above-market lease values 10,468 (6,641) 3,827
$ 122,759 $ (47,059) $ 75,700
Intangible Liabilities
Below-market lease values $ 16,149 $ (8,492) $ 7,657

~~(1)Excludes deferred leasing costs and intangible assets and intangible liabilities related to assets held for sale at September 30, 2021 and December 31, 2020.~~2021.

The following table summarizes the amortization of deferred leasing costs, intangible assets and intangible liabilities for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (dollars in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Above-market lease values	Above-market lease values	$	(327)	$	(451)	$	(993)	$	(1,944)		Above-market lease values	$	(288)	$	(404)
Below-market lease values	Below-market lease values	360		294		1,052		2,353			Below-market lease values	330		222
Net increase (decrease) to property operating income	Net increase (decrease) to property operating income	$	33	$	(157)	$	59	$	409		Net increase (decrease) to property operating income	$	42	$	(182)

In-place lease values	In-place lease values	$	1,762	$	2,588	$	5,390	$	9,685		In-place lease values	$	1,602	$	1,765
Deferred leasing costs	Deferred leasing costs	842		1,428		2,398		4,669			Deferred leasing costs	806		620
Other intangibles	Other intangibles	—		118		172		381			Other intangibles	—		43
Amortization expense	Amortization expense	$	2,604	$	4,134	$	7,960	$	14,735		Amortization expense	$	2,408	$	2,428

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table presents the amortization of deferred leasing costs, intangible assets and intangible liabilities, for each of the next five years and thereafter as of ~~September 30, 2021~~March 31, 2022 (dollars in thousands):


		2021		2022		2023		2024		2025		2026 and thereafter		Total			2022		2023		2024		2025		2026		2027 and thereafter		Total
Above-market lease values	Above-market lease values	$	332	$	1,065	$	575	$	447	$	269	$	128	$	2,816	Above-market lease values	$	763	$	578	$	451	$	272	$	93	$	43	$	2,200
Below-market lease values	Below-market lease values	(358)		(1,384)		(1,378)		(1,377)		(1,376)		(701)		(6,574)		Below-market lease values	(1,039)		(1,379)		(1,379)		(1,377)		(704)		—		(5,878)
Net increase (decrease) to property operating income	Net increase (decrease) to property operating income	$	(26)	$	(319)	$	(803)	$	(930)	$	(1,107)	$	(573)	$	(3,758)	Net increase (decrease) to property operating income	$	(276)	$	(801)	$	(928)	$	(1,105)	$	(611)	$	43	$	(3,678)

In-place lease values	In-place lease values	$	1,709	$	6,098	$	5,250	$	4,950	$	4,265	$	26,772	$	49,044	In-place lease values	$	4,526	$	5,275	$	4,975	$	4,290	$	3,456	$	23,308	$	45,830
Deferred leasing costs	Deferred leasing costs	816		2,932		2,390		2,086		1,699		5,533		15,456		Deferred leasing costs	2,225		2,536		2,229		1,823		943		4,911		14,667
Amortization expense	Amortization expense	$	2,525	$	9,030	$	7,640	$	7,036	$	5,964	$	32,305	$	64,500	Amortization expense	$	6,751	$	7,811	$	7,204	$	6,113	$	4,399	$	28,219	$	60,497

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

8. Restricted Cash, Other Assets and Accrued and Other Liabilities

The following table presents a summary of restricted cash as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (dollars in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Restricted cash:	Restricted cash:					Restricted cash:
Borrower escrow deposits	Borrower escrow deposits	$	54,866	$	36,973	Borrower escrow deposits	$	70,004	$	73,344
Capital expenditure reserves	Capital expenditure reserves	8,232		6,949		Capital expenditure reserves	9,426		8,921
Real estate escrow reserves	Real estate escrow reserves	4,736		13,807		Real estate escrow reserves	2,541		2,025
Working capital and other reserves	Working capital and other reserves	2,229		2,561		Working capital and other reserves	2,271		2,310
Tenant lockboxes	Tenant lockboxes	241		4,633		Tenant lockboxes	250		241
Margin pledged as collateral		—		290

Total	Total	$	70,304	$	65,213	Total	$	84,492	$	86,841

The following table presents a summary of other assets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (dollars in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Other assets:	Other assets:					Other assets:
Right-of-use lease asset	Right-of-use lease asset	$	25,891	$	22,056	Right-of-use lease asset	$	27,475	$	24,970
Prepaid taxes and deferred tax assets		24,879		26,294
Tax receivable and deferred tax assets						Tax receivable and deferred tax assets	26,194		26,194
Prepaid expenses	Prepaid expenses	5,898		4,272		Prepaid expenses	4,375		5,069
Derivative asset		4,389		386
Deferred financing costs, net - credit facilities	Deferred financing costs, net - credit facilities	3,899		6,440		Deferred financing costs, net - credit facilities	3,136		2,113
Other	Other	1,095		1,452		Other	2,246		2,141

Derivative asset						Derivative asset	1,105		1,373
Total	Total	$	66,051	$	60,900	Total	$	64,531	$	61,860

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table presents a summary of accrued and other liabilities as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (dollars in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Accrued and other liabilities:	Accrued and other liabilities:					Accrued and other liabilities:
Current and deferred tax liability	Current and deferred tax liability	$	33,757	$	32,569	Current and deferred tax liability	$	35,335	$	34,612
Operating lease liability	Operating lease liability	26,094		22,186		Operating lease liability	27,822		25,205
Accounts payable, accrued expenses and other liabilities						Accounts payable, accrued expenses and other liabilities	14,530		20,168
Interest payable	Interest payable	9,697		14,970		Interest payable	13,214		11,076
Accounts payable, accrued expenses and other liabilities		13,882		15,083
Prepaid rent and unearned revenue	Prepaid rent and unearned revenue	7,341		9,082		Prepaid rent and unearned revenue	11,504		7,669
Unfunded CECL loan allowance		926		1,313
Unfunded CECL Loan Allowance						Unfunded CECL Loan Allowance	909		432
Tenant security deposits	Tenant security deposits	410		1,338		Tenant security deposits	409		424
Other	Other	234		37		Other	208		228
Total	Total	$	92,341	$	96,578	Total	$	103,931	$	99,814

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

9. Debt

The following table presents debt as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (dollars in thousands):


								September 30, 2021				December 31, 2020											March 31, 2022				December 31, 2021
		Capacity ($)		Recourse vs. Non-Recourse(1)	Final Maturity	Contractual Interest Rate		Principal Amount(2)		Carrying Value(2)		Principal Amount(2)		Carrying Value(2)			Capacity ($)		Recourse vs. Non-Recourse(1)	Final Maturity	Contractual Interest Rate		Principal Amount(2)		Carrying Value(2)		Principal Amount(2)		Carrying Value(2)

Securitization bonds payable, net	Securitization bonds payable, net															Securitization bonds payable, net
CLNC 2019-FL1(3)	CLNC 2019-FL1(3)			Non-recourse	Aug-35	SOFR(4) + 1.59%		$	840,423	$	836,464	$	840,423	$	835,153	CLNC 2019-FL1(3)			Non-recourse	Aug-35	SOFR(4) + 1.61%		$	799,687	$	796,669	$	840,423	$	836,812
BRSP 2021-FL1(3)	BRSP 2021-FL1(3)			Non-recourse	Aug-38	LIBOR + 1.49%		670,000		663,759		—		—		BRSP 2021-FL1(3)			Non-recourse	Aug-38	LIBOR + 1.49%		670,000		664,671		670,000		664,087
Subtotal securitization bonds payable, net	Subtotal securitization bonds payable, net							1,510,423		1,500,223		840,423		835,153		Subtotal securitization bonds payable, net							1,469,687		1,461,340		1,510,423		1,500,899

Mortgage and other notes payable, net	Mortgage and other notes payable, net															Mortgage and other notes payable, net
Net lease 6	Net lease 6			Non-recourse	Oct-27	4.45%		23,253		23,253		23,608		23,608		Net lease 6			Non-recourse	Oct-27	4.45%		22,976		22,976		23,117		23,117
Net lease 5	Net lease 5			Non-recourse	Nov-26	4.45%		3,306		3,236		3,351		3,272		Net lease 5			Non-recourse	Nov-26	4.45%		3,264		3,202		3,282		3,216
Net lease 4	Net lease 4			Non-recourse	Nov-26	4.45%		7,132		6,983		7,230		7,059		Net lease 4			Non-recourse	Nov-26	4.45%		7,043		6,907		7,081		6,939
Net lease 3(5)	Net lease 3(5)			Non-recourse	Oct-21	6.00%		11,967		11,907		12,191		12,163		Net lease 3(5)			Non-recourse	Jan-22	6.00%		—		—		11,867		11,807
Net lease 6	Net lease 6			Non-recourse	Jul-23	LIBOR + 2.15%		986		965		1,364		1,333		Net lease 6			Non-recourse	Jul-23	LIBOR + 2.15%		791		775		908		889
Net lease 5	Net lease 5			Non-recourse	Aug-26	4.08%		30,843		30,634		31,244		31,004		Net lease 5			Non-recourse	Aug-26	4.08%		30,530		30,342		30,639		30,442
Net lease 1(6)	Net lease 1(6)			Non-recourse	Nov-26	4.45%		17,950		17,574		18,196		17,765		Net lease 1(6)			Non-recourse	Nov-26	4.45%		17,725		17,385		17,823		17,465
Net lease 1(7)	Net lease 1(7)			Non-recourse	Mar-28	4.38%		11,828		11,391		12,021		11,584		Net lease 1(7)			Non-recourse	Mar-28	4.38%		11,707		11,270		11,769		11,332

Net lease 1				Non-recourse	Jul-25	4.31%		—		—		250,000		247,939

Net lease 2(8)	Net lease 2(8)			Non-recourse	Jun-25	3.91%		183,616		186,220		187,151		189,806		Net lease 2(8)			Non-recourse	Jun-25	3.91%		183,744		186,350		181,504		184,078
Net lease 3	Net lease 3			Non-recourse	Sep-33	4.77%		200,000		198,667		200,000		198,604		Net lease 3			Non-recourse	Sep-33	4.77%		200,000		198,712		200,000		198,689

Other real estate 1	Other real estate 1			Non-recourse	Oct-24	4.47%		105,690		106,115		107,029		107,596		Other real estate 1			Non-recourse	Oct-24	4.47%		104,614		104,928		105,090		105,452
Other real estate 3	Other real estate 3			Non-recourse	Jan-25	4.30%		72,838		72,355		73,905		73,341		Other real estate 3			Non-recourse	Jan-25	4.30%		71,982		71,577		72,359		71,922

Other real estate 6(9)	Other real estate 6(9)			Non-recourse	Apr-24	LIBOR + 2.95%		30,195		30,054		22,788		22,306		Other real estate 6(9)			Non-recourse	Apr-24	LIBOR + 2.95%		—		—		30,000		29,859
Loan 9(10))				Non-recourse	Jun-24	LIBOR + 3.00%		65,377		65,377		75,377		75,377
Loan 9(10)																Loan 9(10)			Non-recourse	Jun-24	LIBOR + 3.00%		65,377		65,377		65,377		65,376
Subtotal mortgage and other notes payable, net	Subtotal mortgage and other notes payable, net							764,981		764,731		1,025,455		1,022,757		Subtotal mortgage and other notes payable, net							719,753		719,801		760,816		760,583

Bank credit facility	Bank credit facility															Bank credit facility
Bank credit facility	Bank credit facility	$	300,000	Recourse	Feb-23 (11)	LIBOR + 2.25%		—		—		—		—		Bank credit facility	$	165,000	Recourse	Jan-27 (11)	SOFR + 2.25%		—		—		—		—
Subtotal bank credit facility	Subtotal bank credit facility							—		—		—		—		Subtotal bank credit facility							—		—		—		—

Master repurchase facilities	Master repurchase facilities															Master repurchase facilities
Bank 1 facility 3	Bank 1 facility 3	$	400,000	Limited Recourse(12)	Apr-26(13)	LIBOR + 1.94%	(14)	94,350		94,350		112,509		112,509		Bank 1 facility 3	$	400,000	Limited Recourse(12)	Apr-26(13)	LIBOR/SOFR + 1.89%	(14)	126,015		126,015		109,915		109,915
Bank 2 facility 3		21,353		Limited Recourse(12)	Oct-22(15)	(16)	(14)	—		—		19,353		19,353

Bank 3 facility 3	Bank 3 facility 3	600,000		Limited Recourse(12)	Apr-23(17)	LIBOR + 1.97%	(14)	97,312		97,312		196,738		196,738		Bank 3 facility 3	600,000		Limited Recourse(12)	Apr-23(15)	LIBOR/SOFR + 1.94%	(14)	371,044		371,044		157,409		157,409
Bank 7 facility 1	Bank 7 facility 1	500,000		Limited Recourse(12)	Apr-25(18)	LIBOR + 1.86%	(14)	163,991		163,991		89,912		89,912		Bank 7 facility 1	500,000		Limited Recourse(12)	Apr-25(16)	LIBOR/SOFR + 1.76%	(14)	382,497		382,497		358,181		358,181
Bank 8 facility 1	Bank 8 facility 1	250,000		Limited Recourse(12)	Jun-23(19)	LIBOR + 1.95%	(14)	148,464		148,464		116,712		116,712		Bank 8 facility 1	250,000		Limited Recourse(12)	Jun-23(17)	LIBOR/SOFR + 2.18%	(14)	158,503		158,503		177,519		177,519
Bank 9 facility 1	Bank 9 facility 1	300,000		(20)	May-26(21)	LIBOR + 2.00%	(14)	54,345		54,345		—		—		Bank 9 facility 1	300,000		(18)	May-26(19)	LIBOR/SOFR + 1.73%	(14)	161,730		161,730		102,098		102,098
Subtotal master repurchase facilities	Subtotal master repurchase facilities	$	2,071,353					558,462		558,462		535,224		535,224		Subtotal master repurchase facilities	$	2,050,000					1,199,789		1,199,789		905,122		905,122

Subtotal credit facilities	Subtotal credit facilities							558,462		558,462		535,224		535,224		Subtotal credit facilities							1,199,789		1,199,789		905,122		905,122

Total	Total							$	2,833,866	$	2,823,416	$	2,401,102	$	2,393,134	Total							$	3,389,229	$	3,380,930	$	3,176,361	$	3,166,604

(1)Subject to customary non-recourse carveouts.

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(2)Difference between principal amount and carrying value of securitization bonds payable, net and mortgage and other notes payable, net is attributable to deferred financing costs, net and premium/discount on mortgage notes payable.

(3)The Company, through indirect Cayman subsidiaries, securitized commercial mortgage loans originated by the Company. Senior notes issued by the securitization trusts were generally sold to third parties and subordinated notes retained by the Company. These securitizations are accounted for as secured financing with the underlying mortgage loans pledged as collateral. Principal payments from underlying collateral loans must be applied to repay the notes until fully paid off, irrespective of the contractual maturities on the notes. Underlying collateral loans have initial terms of two to three years.

(4)As of June 17, 2021, the benchmark index interest rate was converted from ~~LIBOR~~the one-month London Interbank Offered Rates (“LIBOR”) to ~~compounded~~Compounded Secured Overnight Financing Rate (“SOFR”), plus a benchmark adjustment of 11.448 basis points. As of February 19, 2022, the benchmark index interest rate was converted from Compounded SOFR to Term SOFR, plus a benchmark adjustment of 11.448 basis ~~points.~~points, conforming with the indenture agreement.

(5)~~The current maturity date is October 2021~~During the three months ended March 31, 2022, the property was sold and the mortgage payable was ~~subsequently extended to November 2021.~~repaid in full.

(6)Payment terms are periodic payment of principal and interest for debt on 2 properties and periodic payment of interest only with principal at maturity (except for principal repayments to release collateral properties disposed) for debt on 1 property.

(7)Represents a mortgage note collateralized by 3 properties.

(8)As of ~~September 30, 2021,~~March 31, 2022, the outstanding principal of the mortgage payable was NOK 1.6 billion, which translated to ~~$186.2~~$186.4 million.

(9)~~The current maturity of~~During the three months ended March 31, 2022, the property was sold and the mortgage payable ~~is April 2022, with 2 one-year extensions available at the Company’s option, which may be subject to the satisfaction of certain customary conditions set forth~~was repaid in ~~the governing documents.~~full.

(10)The current maturity of the note payable is June 2022, with 2 one-year extensions available at the Company’s option, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents.

(11)~~The ability to borrow additional amounts terminates on February 1,~~On January 28, 2022, ~~at which time~~ the Company, ~~may, at~~through its ~~election, extend~~subsidiaries, including the ~~termination date~~OP, entered into an Amended and Restated Credit Agreement. Refer to Bank Credit Facility within this note for ~~2 additional six-month terms.~~more details.

(12)Recourse solely with respect to 25.0% of the financed amount.

(13)The current maturity date is April 2023, with 3 one-year extensions available at the option of the Company, which may be exercised upon the satisfaction of certain customary conditions set forth in the governing documents.

(14)Represents the weighted average spread as of ~~September 30, 2021.~~March 31, 2022. The contractual interest rate depends upon asset type and characteristics and ranges from one-month ~~London Interbank Offered Rates (“LIBOR”)~~LIBOR or SOFR plus 1.50% to ~~2.60%~~2.70%.

(15)The current maturity date is ~~October 2022. Upon reaching the maturity date the Company did not extend Bank 2 Facility 3 and thus~~April 2023, with no ~~longer has availability.~~

~~(16)The interest rate will be determined by the lender in its sole discretion.~~

~~(17)The current maturity date is April 2022, with a one-year~~ extension currently available at the option of the ~~Company, which may be exercised upon the satisfaction of certain customary conditions set forth in the governing documents.~~Company.

~~(18)~~(16)The current maturity date is April 2024, with a one-year extension available at the option of the Company, which may be exercised upon the satisfaction of certain customary conditions set forth in the governing documents.

~~(19)~~(17)The current maturity date is June 2022, with a one-year extension available at the option of the Company, which may be exercised upon the satisfaction of certain customary conditions set forth in the governing documents.

~~(20)~~(18)Recourse is either 25.0% or 50.0% depending on loan metrics.

~~(21)~~(19)The current maturity date is May 2024, with 2 one-year extensions available at the option of the Company, which may be exercised upon the satisfaction of certain customary conditions set forth in the governing documents.

Future Minimum Principal Payments

The following table summarizes future scheduled minimum principal payments at ~~September 30, 2021~~March 31, 2022 based on initial maturity dates or extended maturity dates to the extent criteria are met and the extension option is at the borrower’s discretion (dollars in thousands):


		Total		Securitization Bonds Payable, Net		Mortgage Notes Payable, Net		Credit Facilities			Total		Securitization Bonds Payable, Net		Mortgage Notes Payable, Net		Credit Facilities
Remainder of 2021		$	12,577	$	—	$	12,577	$	—
2022		2,520		—		2,520		—
Remaining 2022										Remaining 2022	$	1,886	$	—	$	1,886	$	—
2023	2023	248,303		—		2,527		245,776		2023	532,114		—		2,566		529,548
2024	2024	203,481		—		203,481		—		2024	172,210		—		172,210		—
2025	2025	422,721		—		258,730		163,991		2025	640,498		—		258,002		382,496
2026 and thereafter		1,944,264		1,510,423		285,146		148,695
2026										2026	342,341		—		54,596		287,745
2027 and thereafter										2027 and thereafter	1,700,180		1,469,687		230,493		—
Total	Total	$	2,833,866	$	1,510,423	$	764,981	$	558,462	Total	$	3,389,229	$	1,469,687	$	719,753	$	1,199,789

Bank Credit Facility

The Company uses bank credit facilities (including term loans and revolving facilities) to finance the business. These financings may be collateralized or non-collateralized and may involve one or more lenders. Credit facilities typically have maturities ranging from two to five years and may accrue interest at either fixed or floating rates.

On ~~February 1, 2018, the Company, through subsidiaries, including~~January 28, 2022, the OP (together with certain subsidiaries of the OP from time to time party thereto as borrowers, collectively, the “Borrowers”) entered into ~~a credit agreement~~an Amended and Restated Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), and the several lenders from time to time party thereto (the “Lenders”), pursuant to which the Lenders agreed to provide a revolving credit facility in the aggregate principal amount of up to ~~$400.0~~$165.0 million, ~~(the “Bank Credit Facility”). On December 17, 2018, the aggregate amount~~ of revolving commitments was increased to $525.0 million and on February 4, 2019, the aggregate amount of revolving commitments was increased to $560.0 million. On May 6, 2020 these commitments were reduced to $450.0 million and further reduced to $300.0 million on April 4, 2021. The Bank Credit Facility will mature on February 1, 2022, unless the OP elects to extend the maturity date forwhich up to ~~2 additional six-month terms.~~$25.0 million is available as letters of credit. Loans under the Credit Agreement may be advanced in U.S. dollars and certain foreign currencies, including euros, pounds sterling and swiss francs.

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The Credit Agreement amended and restated the OP’s prior $300.0 million revolving credit facility that would have matured on February 1, 2022.

The Credit Agreement also includes an option for the Borrowers to increase the maximum available principal amount to up to $300.0 million, subject to one or more new or existing Lenders agreeing to provide such additional loan commitments and satisfaction of other customary conditions.

Advances under the Credit Agreement accrue interest at a per annum rate equal to, at the applicable Borrower’s election, either (x) an adjusted SOFR rate plus a margin of 2.25%, or (y) a base rate equal to the highest of (i) the Wall Street Journal’s prime rate, (ii) the federal funds rate plus 0.50% and (iii) the adjusted SOFR rate plus 1.00%, plus a margin of 1.25%. An unused commitment fee at a rate of 0.25% or 0.35%, per annum, depending on the amount of facility utilization, applies to un-utilized borrowing capacity under the Credit Agreement. Amounts owed under the Credit Agreement may be prepaid at any time without premium or penalty, subject to customary breakage costs in the case of borrowings with respect to which a SOFR rate election is in effect.

~~Advances~~the entire $165.0 million commitment. If any borrowing is outstanding for more than 180 days after its initial draw, the borrowing base valuation will be reduced by 50% until all outstanding borrowings are repaid in full. The ability to borrow new amounts under the ~~Bank~~ Credit ~~Facility accrue interest~~Agreement terminates on January 31, 2026, at which time the OP may, at its election and by written notice to the Administrative Agent, extend the termination date for 2 additional terms of six months each, subject to the terms and conditions in the Credit Agreement, resulting in a ~~per annum rate equal to, at~~latest termination date of January 31, 2027.

The obligations of the ~~applicable borrower’s election, either a LIBOR rate plus a margin of 2.25%, or a base rate determined according~~Borrowers under the Credit Agreement are guaranteed pursuant to a prime rate or federal funds rate plus a margin of 1.25%. The Company pays a commitment fee of 0.25% or 0.35% per annum of the unused amount (0.35%) at September 30, 2021, depending upon the amount of facility utilization.

~~Substantially~~Guarantee and Collateral Agreement by substantially all material wholly owned subsidiaries of the ~~Company guarantee the obligations~~OP (the “Guarantors”) in favor of the ~~Company~~Administrative Agent (the “Guarantee and ~~any other borrowers under the Bank Credit Facility. As security for the advances under the Bank Credit Facility, the Company pledged~~Collateral Agreement”) and, subject to certain exceptions, secured by a pledge of substantially all equity interests ~~it owns~~owned by the Borrowers and ~~granted~~the Guarantors, as well as by a security interest in deposit accounts of the Borrowers and the Guarantors in which the proceeds of investment asset distributions are maintained.

The ~~Bank~~ Credit ~~Facility~~Agreement contains various affirmative and negative covenants, including, ~~financial covenants that require~~among other things, the obligation of the Company to maintain REIT status and be listed on the New York Stock Exchange, and limitations on debt, liens and restricted payments. In addition, the Credit Agreement includes the following financial covenants applicable to the OP and its consolidated subsidiaries: (a) minimum consolidated tangible net worth ~~liquidity levels and financial ratios, as specified in the Bank Credit Facility.~~

~~On April 5, 2021, the Company entered into a fourth amendment to its Bank Credit Facility to: (i) permit~~of the OP to ~~consummate~~be greater than or equal to the ~~Internalization;~~sum of (i) $1,112,000,000 and (ii) ~~reduce the minimum tangible net worth covenant requirement from $1.5 billion to $1.35 billion upon consummation~~70% of the Internalization; (iii) increase the Company’s ability to make restricted payments including additional dividends and stock buybacks and remove all material restrictions on new investments, in each case, so long as no default exists andnet cash proceeds received by the OP ~~is in compliance with the financial covenants; (iv) increase the maximum amount available for borrowing~~ from ~~90% to 100%~~any offering of ~~borrowing base value; and (v) reduce the aggregate amount of lender commitments from $450.0 million to $300.0 million. At~~its common equity after September 30, 2021 and of the net cash proceeds from any offering by the Company ~~was in compliance with all~~of its common equity to the extent such proceeds are contributed to the OP, excluding any such proceeds that are contributed to the OP within ninety (90) days of receipt and applied to acquire capital stock of the ~~financial covenants.~~OP; (b) the OP’s ratio of EBITDA plus lease expenses to fixed charges for any period of four (4) consecutive fiscal quarters to be not less than 1.50 to 1.00; (c) the OP’s minimum interest coverage ratio to be not less than 3.00 to 1.00; and (d) the OP’s ratio of consolidated total debt to consolidated total assets to be not more than 0.80 to 1.00. The Credit Agreement also includes customary events of default, including, among other things, failure to make payments when due, breach of covenants or representations, cross default to material indebtedness, material judgment defaults, bankruptcy matters involving any Borrower or any Guarantor and certain change of control events. The occurrence of an event of default will limit the ability of the OP and its subsidiaries to make distributions and may result in the termination of the credit facility, acceleration of repayment obligations and the exercise of remedies by the Lenders with respect to the collateral.

Securitization Financing Transactions

Securitization bonds payable, net represent debt issued by securitization vehicles consolidated by the Company. Senior notes issued by these securitization trusts were generally sold to third parties and subordinated notes retained by the Company. Payments from underlying collateral loans must be applied to repay the notes until fully paid off, irrespective of the contractual maturities of the loans.

CLNC 2019-FL1

In October 2019, the Company executed a securitization transaction, through wholly-owned subsidiaries, CLNC 2019-FL1, Ltd. and CLNC 2019-FL1, LLC (collectively, “CLNC 2019-FL1”), which resulted in the sale of ~~$840.4~~$840.0 million of investment grade notes. ~~The~~As of March 31, 2022, the securitization reflects an advance rate of ~~83.5%~~82.8% at a weighted average cost of funds of Adjusted Term SOFR plus ~~1.59%~~1.61% (before transaction expenses), and is collateralized by a pool of 24 senior loan investments.

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On March 5, 2021, the Financial Conduct Authority of the U.K. (the “FCA”) announced that LIBOR tenors relevant to CLNC 2019-FL1 would cease to be published or no longer be representative after June 30, 2023. The Alternative Reference Rates Committee (the “ARRC”) interpreted this announcement to constitute a benchmark transition event. As of June 17, 2021, the benchmark index interest rate was converted from LIBOR to compounded SOFR, plus a benchmark adjustment of 11.448 basis points with a lookback period equal to the number of calendar days in the applicable Interest Accrual Period plus two SOFR business days, conforming with the indenture agreement and recommendations from the ARRC. Compounded SOFR for any interest accrual period shall be the “30-Day Average SOFR” as published by the Federal Reserve Bank of New York on each benchmark determination date.

As of February 19, 2022, the benchmark index interest rate was converted from Compounded SOFR to Term SOFR, plus a benchmark adjustment of 11.448 basis points, conforming with the indenture agreement. Term SOFR for any interest accrual period shall be the one month CME Term SOFR Reference Rate as published by the CME Group Benchmark Administration on each benchmark determination date.

CLNC 2019-FL1 included a two-year reinvestment feature that allowed the Company to contribute existing or newly originated loan investments in exchange for proceeds from repayments or repurchases of loans held in CLNC 2019-FL1, subject to the satisfaction of certain conditions set forth in the indenture. In addition to existing eligible loans available for reinvestment, the continued origination of securitization eligible loans is required to ensure that the Company reinvests the available proceeds within CLNC 2019-FL1. The reinvestment period for CLNC 2019-FL1 expired on October 19, ~~2021 and principal~~2021. During the three months ended March 31, 2022, 2 loans held in CLNC 2019-FL1 were repaid, totaling $54.4 million. Additionally, subsequent to March 31, 2022, 2 loans held in CLNC 2019-FL1 were repaid, totaling $44.9 million. The proceeds from ~~underlying loans will be~~the four loan payoffs were used to amortize the securitization bonds ~~payable going forward.~~in accordance with the securitization priority of payments.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

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outstanding tranche. While the Company continues to closely monitor all loan investments contributed to CLNC 2019-FL1, a deterioration in the performance of an underlying loan could negatively impact its liquidity position.

BRSP 2021-FL1

In July 2021, the Company executed a securitization transaction through wholly-owned subsidiaries, BRSP 2021-FL1, Ltd. and BRSP 2021-FL1, LLC (collectively, “BRSP 2021-FL1”), which resulted in the sale of $670 million of investment grade notes. The securitization reflects an advance rate of 83.75% at a weighted costs of funds of LIBOR plus 1.49% (before transaction costs), and is collateralized by a pool of 33 senior loan investments.

BRSP 2021-FL1 includes a two-year reinvestment feature that allows usthe Company to contribute existing or newly originated loan investments in exchange for proceeds from repayments or repurchases of loans held in BRSP 2021-FL1, subject to the satisfaction of certain conditions set forth in the indenture. In addition to existing eligible loans available for reinvestment, the continued origination of securitization eligible loans is required to ensure that we reinvest the available proceeds within BRSP 2021-FL1.

Additionally, BRSP 2021-FL1 contains note protection tests that can be triggered as a result of contributed loan defaults, losses, and certain other events outlined in the indenture, beyond established thresholds. A note protection test failure that is not remedied can result in the redirection of interest proceeds from the below investment grade tranches to amortize the most senior outstanding tranche. We will continue to closely monitor all loan investments contributed to BRSP 2021-FL1, a deterioration in the performance of an underlying loan could negatively impact our liquidity position.

As of ~~September 30, 2021,~~March 31, 2022, the Company had ~~$1.8~~$1.7 billion carrying value of CRE debt investments and other assets financed with $1.5 billion of securitization bonds payable, net. As of December 31, 2021, the Company had $1.8 billion carrying value of CRE debt investments financed with $1.5 billion of securitization bonds payable, net.

Master Repurchase Facilities

As of ~~September 30, 2021,~~March 31, 2022, the Company, through subsidiaries, had entered into repurchase agreements with multiple global financial institutions to provide an aggregate principal amount of up to $2.1 billion to finance the origination of first mortgage loans and senior loan participations secured by CRE debt investments (“Master Repurchase Facilities”). The Company agreed to guarantee certain obligations under the Master Repurchase Facilities, which contain representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of this type. The Master Repurchase Facilities act as revolving loan facilities that can be paid down as assets are repaid or sold and re-drawn upon for

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new investments. As of ~~September 30, 2021,~~March 31, 2022, the Company was in compliance with all of its financial covenants under the Master Repurchase Facilities.

As of ~~September 30, 2021,~~March 31, 2022, the Company had ~~$752.1 million~~$1.6 billion carrying value of CRE debt investments financed with ~~$558.5~~$1.2 billion under the master repurchase facilities. As of December 31, 2021, the Company had $1.2 billion carrying value of CRE debt investments financed with $905.1 million under the master repurchase facilities.

During the first quarter of ~~2021, the Company entered into an amendment under its Master Repurchase Facility with Bank 3 and Bank 7 to extend the maturity date by two years and three years, respectively.~~

During the second quarter of 2021, the Company entered into an amendment under its Master Repurchase Facility with Bank 1, Bank 8 and Bank 9 to extend the maturity date by three years, two years and two and a half years, respectively.

~~Additionally, during the second quarter of 2021,~~2022, the Company entered into amendments under its 65 Master Repurchase Facilities ~~to: (i) permit the guarantor and the OP~~and/or associated guarantees to ~~consummate the Internalization; and (ii)~~ reduce the minimum tangible net worth covenant requirement from ~~$1.5~~$1.35 billion to ~~$1.35 billion upon consummation~~$1.11 billion.

Additionally, during the first quarter of ~~the Internalization.~~

~~Subsequent to September 30, 2021~~2022, the Company ~~repaid approximately $23.3 million~~entered into amendments under 4 of its ~~master repurchase facilities. Additionally, upon reaching~~Master Repurchase Facilities to expand the ~~maturity date of Bank 2 Facility 3 in October 2021 the Company did not exercise any extension options~~eligibility criteria to allow for loans indexed to SOFR, and ~~thus no longer has availability~~ to ~~draw funds.~~allow for borrowings under those facilities indexed to SOFR.

CMBS Credit Facilities

As of ~~September 30, 2021~~March 31, 2022, the Company had entered into 8 master repurchase agreements (collectively the “CMBS Credit Facilities”) to finance CMBS investments. The CMBS Credit Facilities are on a recourse basis and contain representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of this type. The CMBS Credit Facilities were undrawn as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

10. Related Party Arrangements

~~Management Agreement~~

On January 31, 2018, the Company and the OP entered into a management agreement (the “Management Agreement”) with the Manager, pursuant to which the Manager managed the Company’s assets and its day-to-day operations. The Manager was responsible for, among other matters, (1) the selection, origination, acquisition, management and sale of the Company’s portfolio investments, (2) the Company’s financing activities and (3) providing the Company with investment advisory services. The Manager was also responsible for the Company’s day-to-day operations and performed (or would cause to be performed) such services and activities relating to the Company’s investments and business and affairs as may be appropriate. The Management Agreement required the Manager to manage the Company’s business affairs in conformity with the investment guidelines and other policies that are approved and monitored by the Board of Directors. Each of the Company’s executive officers was also an employee of the Manager or its affiliates. The Manager’s role as Manager was under the supervision and direction of the Company’s Board of Directors.

The initial term of the Management Agreement expired on the third anniversary of the closing date of the Combination, January 31, 2018 (the “Closing Date”), and would be automatically renewed for a one-year term each anniversary date thereafter unless earlier terminated as described below. The Company’s independent directors reviewed the Manager’s performance and the fees that may be payable to the Manager annually and, following the initial term, the Management Agreement could be terminated if there was an affirmative vote of at least two-thirds of the Company’s independent directors determining that (1) there had been unsatisfactory performance by the Manager that is materially detrimental to the Company or (2) the compensation payable to the Manager, in the form of base management fees and incentive fees taken as a whole, or the amount thereof, was not fair to the Company, subject to the Manager’s right to prevent such termination due to unfair fees by accepting reduced compensation as agreed to by at least two-thirds of the Company’s independent directors. The Company was required to provide the Manager 180 days’ prior written notice of any such termination.

The Company could also terminate the Management Agreement for cause (as defined in the Management Agreement) at any time, including during the initial term, without the payment of any termination fee, with at least 30 days’ prior written notice from the Company’s Board of Directors. Unless terminated for cause, the Manager would be paid a termination fee as described below. The Manager could terminate the Management Agreement if the Company was required to register as an investment company under the Investment Company Act with such termination deemed to occur immediately before such event, in which case the Company would not be required to pay a termination fee. The Manager could have declined to renew the Management Agreement by providing the Company with 180 days’ prior written notice, in which case the Company would not be required to pay a termination fee. The Manager could also terminate the Management Agreement with at least 60 days’ prior written notice if the Company breached the Management Agreement in any material respect or otherwise was unable to perform its obligations thereunder and the breach continued for a period of 30 days after written notice to the Company, in which case the Manager would be paid a termination fee as described below.

In November 2019, the Manager, the Company and the OP amended and restated the Management Agreement to modify the “Core Earnings” definition, providing that “unrealized provisions for loan losses and real estate impairments” shall only be applied as exclusions from the definition of Core Earnings if approved by a majority of the independent directors of the Company. Such change became effective during the fourth quarter of 2019 and resulted in a reduction to Core Earnings which thereby reduced the annual management fee and any incentive fee paid by the Company due to accumulated unrealized provisions for loan losses and real estate impairments to date.

Internalization

On April 30, 2021, the Company completed ~~the Internalization, including~~ the internalization of the Company’s management and operating functions and terminated its relationship with its Manager ~~a subsidiary of DigitalBridge,~~ in accordance with the Termination ~~Agreement.~~Agreement (the “Internalization”). The Company paid the Manager a one-time termination fee of $102.3 million and additional closing costs of $0.3 million. The Company will not pay management or incentive fees to the Manager for any post-closing period. Refer to Note 1, “Business and Organization,” for further details.

Fees to Manager

Base Management Fee

Following the Internalization on April 30, 2021, the Company no longer pays a base management fee to the Manager.

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The base management fee payable to the Manager under the Management Agreement was equal to 1.5% of the Company’s stockholders’ equity (as defined in the Management Agreement), per annum (0.375% per quarter), payable quarterly in arrears in cash. For purposes of calculating the base management fee, the Company’s stockholders’ equity means: (a) the sum of (1) the net proceeds received by the Company (or, without duplication, the Company’s direct subsidiaries, such as the OP) from all issuances of the Company’s or such subsidiaries’ common and preferred equity securities since inception (allocated on a pro rata basis for such issuances during the calendar quarter of any such issuance), plus (2) the Company’s cumulative ~~Core Earnings (~~as defined in the Management Agreement) from and after the Closing Date to the end of the most recently completed calendar quarter, less (b)(1) any distributions to the Company’s common stockholders (or owners of common equity of the Company’s direct subsidiaries, such as the OP, other than the Company or any of such subsidiaries), (2) any amount that the Company or any of the Company’s direct subsidiaries, such as the OP, have paid to (x) repurchase for cash the Company’s common stock or common equity securities of such subsidiaries or (y) repurchase or redeem for cash the Company’s preferred equity securities or preferred equity securities of such subsidiaries, in each case since the Closing Date and (3) any incentive fee (as described below) paid to the Manager since the Closing Date.

~~The Company did not incur any management fee expense for~~ the three months ended ~~September 30,~~March 31, 2021, ~~and incurred $9.6 million for the nine months ended September 30, 2021. For the three and nine months ended September 30, 2020,~~ the total management fee expense incurred was ~~$7.1 million and $22.2 million, respectively.~~$7.3 million.

Incentive Fee

Following the Internalization on April 30, 2021, the Company no longer pays an incentive fee to the Manager.

~~The incentive fee payable to the Manager under the Management Agreement was equal to the difference between (i) the product of (a) 20% and (b) the difference between (1) Core Earnings~~ (as defined in the Management Agreement) for the most recent 12-month period (or the Closing Date if it has been less than 12 months since the Closing Date), including the current quarter, and (2) the product of (A) common equity (as defined in the Management Agreement) in the most recent 12-month period (or the Closing Date if it has been less than 12 months since the Closing Date), and (B) 7% per annum and (ii) the sum of any incentive fee paid to the Manager with respect to the first three calendar quarters of the most recent 12-month period (or the Closing Date if it has been less than 12 months since the Closing Date), provided, however, that no incentive fee is payable with respect to any calendar quarter unles~~s Core Earnings (~~as defined in the Management Agreement) is greater than zero for the most recently completed 12 calendar quarters (or the Closing Date if it has been less than 12 calendar quarters since the Closing Date).

The Company did not incur any incentive fees during the three ~~and nine~~ months ended ~~September 30, 2021 and 2020.~~March 31, 2021.

Reimbursements of Expenses

Following the Internalization on April 30, 2021, the Company no longer reimburses expenses incurred by the Manager.

Reimbursement of expenses related to the Company incurred by the Manager, including legal, accounting, financial, due diligence and other services were paid on the Company’s behalf by the OP or its designee(s). The Company reimbursed the Manager for the Company’s allocable share of the salaries and other compensation of the Company’s chief financial officer and certain of its affiliates’ non-investment personnel who spent all or a portion of their time managing the Company’s affairs, and the Company’s share of such costs were based upon the percentage of such time devoted by personnel of the Manager (or its affiliates) to the Company’s affairs. The Company may have been required to pay the Company’s pro rata portion of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Manager and its affiliates required for the Company’s operations.

For the three months ended ~~September 30,~~March 31, 2021, the Manager did not incur any expenses on behalf of the Company that were reimbursable in accordance with the Management Agreement. For the nine months ended September 30, 2021, the total reimbursements of expenses incurred by the Manager on behalf of the Company and reimbursable in accordance with the Management Agreement was $3.1 million, and are included in administrative expense on the consolidated statements of operations. For the three and nine months ended September 30, 2020, the total reimbursements of expenses incurred by the Manager on behalf of the Company and reimbursable in accordance with the Management Agreement was $2.0 million, and ~~$7.1 million, respectively.~~are included in operating expense on the consolidated statements of operations. As of March 31, 2022 and December 31, ~~2020,~~2021, there ~~was $2.7 million of~~were no unpaid expenses included in due to related party in the Company’s consolidated balance sheets.

~~Equity Plan Grants~~

In January 2021, the Company granted 1,420,000 shares of restricted stock and 276,000 PSUs to certain employees of the Manager under the 2018 Equity Incentive Plan (the “2018 Plan”). Following the Internalization, these employees became

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

employees of the Company. In April 2020, the Company granted 143,000 shares to its chief executive officer. In March 2019, the Company granted 800,000 shares to the Manager and/or employees thereof under the 2018 Plan. In March 2018, the Company granted 978,946 shares to its non-independent directors, officers and the Manager and/or employees thereof under the 2018 Plan. 1,550,862 shares remain granted and unvested as of September 30, 2021. See Note 11, “Equity-Based Compensation” for further discussion on the 2018 Plan including shares issued to independent directors of the Company. In connection with these grants, the Company recognized share-based compensation expense of $2.6 million and $12.1 million within administrative expense in the consolidated statements of operations for the three and nine months ended September 30, 2021, respectively. The Company recognized share-based compensation expense of $1.3 million and $3.0 million to its Manager within administrative expense in the consolidated statement of operations for the three and nine months ended September 30, 2020, respectively.

Investment Activity

All investment acquisitions are approved in accordance with the Company’s investment and related party guidelines, which may include approval by either the audit committee or disinterested members of the Company’s Board of Directors. No investment by the Company will require approval under the related party transaction policy solely because such investment constitutes a co-investment made by and between the Company and any of its subsidiaries, on the one hand, and one or more investment vehicles formed, sponsored, or managed by an affiliate of the Manager on the other hand.

In July 2017, NorthStar Real Estate Income II, Inc., a Maryland corporation which merged with and into the Company as part of the Company’s formation transactions (“NorthStar II”), entered into a joint venture with an affiliate of the Manager to make a $60.0 million investment in a $180.0 million mezzanine loan which was originated by such affiliate of the Manager. The transaction was approved by NorthStar II’s board of directors, including all of its independent directors. The investment was purchased by the Company in connection with the Combination. In June 2018, the Company increased its commitment to ~~$101.8~~

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

$101.8 million in connection with the joint venture bifurcating the mezzanine loan into a mezzanine loan and a preferred equity investment. The Company’s interest in both the underlying mezzanine loan and preferred equity investment is 31.8%, and the affiliate entities own the remaining 68.2%. Both the underlying mezzanine loan and preferred equity investment carry a fixed 13.0% interest rate. This investment is recorded in investments in unconsolidated ventures in the Company’s consolidated balance sheets. In July 2019, the Company increased its commitment in the mezzanine loan from $101.8 million to $189.0 million. The Company’s interest in the upsized mezzanine loan is 45.2% and it carries a fixed 13.0% interest rate. During the three months ended June 30, 2020, the Company made its pro-rata share of two protective advances to the senior mortgage lender totaling $28.5 million. The Company placed this investment on nonaccrual status as of April 1, 2020. In September 2020, the Company’s mezzanine loan and preferred equity investment was converted into a mezzanine participation. ~~See Note 4, “Investments~~During the year ended December 31, 2021, the Company recognized its proportionate share of fair value losses in ~~Unconsolidated Ventures,” for further information.~~the mezzanine participation equaling $97.9 million, which represents the Company’s remaining proportionate share in the investment.

In July 2018, the Company acquired a $326.8 million Class A office campus located in Norway from an affiliate of the Company’s Manager. In connection with the purchase, the Company assumed senior mortgage financing from a private bond issuance of ~~$197.7~~$183.7 million. The bonds ~~have a five-year term remaining,~~mature in June 2025 and carry a fixed interest rate of 3.91%.

In July 2018, the Company entered into a joint venture to invest in a development project for land and a Grade A office building in Ireland. The Company agreed to invest up to $69.9 million of the $139.7 million total commitment. The Company co-invested along with two affiliates of the Manager, with the Company owning 50.0% of the joint venture and the affiliate entities owning the remaining 50.0%. The joint venture invested in a senior mortgage loan of $66.7 million with a fixed interest rate of 12.5% and a maturity date of 3.5 years from origination and common equity. This investment is included as part of the Co-Invest Portfolio Sale. See Note 4, “Investments in Unconsolidated Ventures,” for further information.

In October 2018, the Company entered into a joint venture to invest in a mixed-use development project in Ireland. The Company agreed to invest up to $162.4 million of the $266.5 million total commitment. The Company co-invested along with two affiliates of the Manager, with the Company owning 61.0% of the joint venture and the affiliate entities owning the remaining 39.0%. The joint venture invested in a senior mortgage loan with a fixed interest rate of 15.0% and a maturity date of two years from origination. The Company placed this investment on nonaccrual status as of July 1, 2020. This investment is included as part of the Co-Invest Portfolio Sale. See Note 4, “Investments in Unconsolidated Ventures,” for further information.

11. Equity-Based Compensation

On January 29, 2018, the Company’s Board of Directors adopted the 2018 ~~Plan.~~Equity Incentive Plan (the “2018 Plan”). The 2018 Plan permits the grant of awards with respect to 4.0 million shares of the Class A common stock, subject to adjustment pursuant to the terms of the 2018 Plan. Awards may be granted under the 2018 Plan to (x) the Manager or any employee, officer, director, consultant or advisor (who is a natural person) providing services to the Company, the Manager or their affiliates and (y) any other individual whose

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

participation in the 2018 Plan is determined to be in the best interests of the Company. The following types of awards may be made under the 2018 Plan, subject to the limitations set forth in the plan: (i) stock options (which may be either incentive stock options or non-qualified stock options); (ii) stock appreciation rights; (iii) restricted stock awards; (iv) stock units; (v) unrestricted stock awards; (vi) dividend equivalent rights; (vii) performance awards; (viii) annual cash incentive awards; (ix) long-term incentive units; and (x) other equity-based awards.

Shares subject to an award granted under the 2018 Plan will be counted against the maximum number of shares of Class A common stock available for issuance thereunder as one share of Class A common stock for every one share of Class A common stock subject to such an award. Shares subject to an award granted under the 2018 Plan will again become available for issuance under the 2018 Plan if the award terminates by expiration, forfeiture, cancellation, or otherwise without the issuance of such shares (except as set forth in the following sentence). The number of shares of Class A common stock available for issuance under the 2018 Plan will not be increased by (i) any shares tendered or withheld in connection with the purchase of shares upon exercise of a stock option, (ii) any shares deducted or delivered in connection with the Company’s tax withholding obligations, or (iii) any shares purchased by the Company with proceeds from stock option exercises. The shares granted in May 2020 to the independent directors of the Company under the 2018 Plan vested in May 2021. The shares granted in June 2021 to the independent directors, ~~and~~as well as in October and December to the 2 newly appointed independent ~~director,~~directors of the Company under the 2018 Plan vest in May 2022. Shares granted to non-independent directors, officers and the Manager under the 2018 Plan vest ratably in three annual installments.

On February 15, 2022, the Company’s Board of Directors adopted, and at the annual meeting of stockholders held on May 5, 2022, the stockholders approved, the 2022 Equity Incentive Plan (the “2022 Plan”), which was effective as of May 5, 2022 and amends and restates the 2018 Plan. Other than increasing the total number of shares of the class A common stock issuable under the 2018 Plan by 10.0 million shares (subject to adjustment pursuant to the terms of the 2022 Plan) and extending the termination date of the 2018 Plan to May 4, 2032, there were no significant changes from the 2018 Plan.

On February 23, 2022, the Compensation Committee of the Board of Directors approved certain conditional stock grants relating to 1,456,366 shares of common stock (the “conditional grants”) with vesting in one-third increments on March 15, 2023, March 15, 2024 and March 15, 2025. The conditional grant provided that, if stockholder approval was obtained and the applicable grantee remained in service as of the annual meeting of stockholders held on May 5, 2022, then the Company would grant such grantee a restricted stock award under the 2022 Plan as of May 5, 2022 with respect to the number of shares of class A common stock subject to the conditional grant.

Equity-Based Compensation Expense

In connection with the share grants, the Company recognized share-based compensation of $1.9 million within compensation and benefits in the consolidated statement of operations for the three months ended March 31, 2022. The Company recognized

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

share-based compensation expense of $4.3 million to its Manager within compensation and benefits in the consolidated statement of operations for the three months ended March 31, 2021.

Restricted Stock—Restricted stock awards relating to the Company’s class A common stock are granted to independent directors of the Company and generally vest within one year and restricted stock awards were granted to certain employees of the Manager, ~~and independent directors of the Company,~~ with a service condition only and are generally subject to annual time-based vesting in equal tranches over a three-year period. Restricted stock is entitled to dividends declared and paid on the Company’s class A common stock and such dividends are not forfeitable prior to vesting of the award. Restricted stock awards are valued based on the Company’s class A common stock price on grant date and equity-based compensation expense is recognized on a straight-line basis over the requisite three-year service period. Some employees of the Manager who were granted restricted stock under the 2018 Plan became employees of the Company following the Internalization on April 30, 2021. The shares held by substantially all remaining employees of the Manager vested following the Internalization.

Performance Stock Units (“PSU”)—PSUs are granted to certain employees of the Company and are subject to both a service condition and a performance condition. Following the end of the measurement period for the PSUs, the recipients of PSUs may be eligible to vest in all or a portion of PSUs granted, and be issued a number of shares of the Company’s class A common stock, ranging from 0% to 200% of the number of PSUs granted and eligible to vest, to be determined based upon the performance of the ~~Company's~~Company’s class A common stock relative to the Company’s GAAP book value at the end of a two-year measurement period. PSUs also contain dividend equivalent rights which entitle the recipients to a payment equal to the amount of dividends that would have been paid on the shares that are ultimately issued at the end of the measurement period.

Fair value of PSUs, including dividend equivalent rights, was determined using a Monte Carlo simulation, with the following assumptions:


	2021 Grant
Expected volatility(1)	86.6	%
Risk free rate(2)	0.1	%
Expected dividend yield(3)	—

(1)Based upon the Company’s historical stock volatility.

(2)Based upon the continuously compounded zero-coupon U.S. Treasury yield for the term coinciding with the measurement period of the award as of valuation date.

(3)Based upon the dividend yield in place as of the grant date.

Fair value of PSU awards, excluding dividend equivalent rights, is recognized on a straight-line basis over their measurement period as compensation expense, and is subject to reversal if the performance condition is not achieved.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

The table below summarizes the Company’s awards granted, forfeited or vested under the 2018 Plan during the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:

Number of Shares Weighted Average Grant Date Fair Value
Restricted Stock PSUs Total Restricted Stock PSUs
Unvested shares at December 31, 2020 885,070 — 885,070 $ 16.16 $ —
Granted 1,458,060 276,000 1,734,060 8.35 11.96
Vested (792,268) (4,000) (796,268) 15.64 11.96
Unvested shares at September 30, 2021 1,550,862 272,000 1,822,862 12.40 11.96


	Number of Shares			Weighted Average Grant Date Fair Value
	Restricted Stock	PSUs	Total	Restricted Stock		PSUs












Unvested shares at December 31, 2021	1,482,094	272,000	1,754,094	$	12.35	$	11.96

Vested	(500,462)	—	(500,462)	9.14		—

Unvested shares at March 31, 2022	981,632	272,000	1,253,632	11.54		11.96

Fair value of equity awards that vested during the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and March 31, 2021, ~~and September 30, 2020,~~ determined based on their respective fair values at vesting date, was ~~$3.9~~$3.2 million and ~~$2.7~~$2.3 million, respectively. Fair value of granted awards is determined based on the closing price of the Class A common stock on the date of grant of the awards. Equity-based compensation is classified within ~~administrative expense~~compensation and benefits in the consolidated statement of operations.

At ~~September 30, 2021,~~March 31, 2022, aggregate unrecognized compensation cost for all unvested equity awards was ~~$10.0~~$7.0 million, which is expected to be recognized over a weighted-average period of ~~2.1~~1.79 years. At March 31, 2021, aggregate unrecognized compensation cost for all unvested equity awards was $14.2 million, expected to be recognized over a weighted-average period of 2.57 years.

Subsequent to March 31, 2022, the Company granted 1,456,366 shares of class A common stock to certain employees of the Company, including restricted shares in connection with the settlement of conditional grants.

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(Unaudited)

12. Stockholders’ Equity

Authorized Capital

As of ~~September 30, 2021,~~March 31, 2022, the Company had the authority to issue up to 1.0 billion shares of stock, at $0.01 par value per share, consisting of 950.0 million shares of Class A common stock and 50.0 million shares of preferred stock.

The Company had no shares of preferred stock issued and outstanding as of ~~September 30, 2021.~~March 31, 2022.

Dividends

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, the Company declared the following ~~dividends~~dividend on its common stock:

Declaration Date

Record Date

Payment Date

Per Share

~~February 24, 2021~~March 15, 2022

March 31, ~~2021~~2022

April 15, ~~2021~~2022

$~~0.10~~0.19

~~April 30, 2021~~

~~June 30, 2021~~

~~July 15, 2021~~

~~$0.14~~

~~August 4, 2021~~

~~September 30, 2021~~

~~October 15, 2021~~

~~$0.16~~

Subsequent to September 30, 2021, the Board of Directors approved a quarterly cash dividend of $0.18 per share for the fourth quarter of 2021, payable on January 14, 2022 to stockholders of record on December 31, 2021.

Accumulated Other Comprehensive Income (Loss)

The following tables present the changes in each component of Accumulated Other Comprehensive Income (Loss) (“AOCI”) attributable to stockholders and noncontrolling interests in the OP, net of immaterial tax effect.

Changes in Components of AOCI - Stockholders


(in thousands)	Unrealized gain on net investment hedges		Foreign currency translation gain (loss)		Total














AOCI at December 31, 2021	$	17,893	$	(9,107)	$	8,786
Other comprehensive income	—		660		660


AOCI at March 31, 2022	$	17,893	$	(8,447)	$	9,446


(in thousands)	Unrealized gain (loss) on real estate securities, available for sale		Unrealized gain on net investment hedges		Foreign currency translation gain (loss)		Total










AOCI at December 31, 2020	$	275	$	47,127	$	7,186	$	54,588
Other comprehensive income (loss) before reclassification	(1,035)		—		(7,467)		(8,502)
Amounts reclassified from AOCI	760		—		—		760
Net current period OCI	(275)		—		(7,467)		(7,742)
AOCI at March 31, 2021	$	—	$	47,127	$	(281)	$	46,846

Changes in Components of AOCI - Noncontrolling Interests in the OP


(in thousands)	Unrealized gain on net investment hedges		Foreign currency translation gain (loss)		Total














AOCI at December 31, 2021	$	710	$	(872)	$	(162)
Other comprehensive income	—		16		16


AOCI at March 31, 2022	$	710	$	(856)	$	(146)

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(Unaudited)

~~Changes in Components of AOCI - Stockholders~~

(in thousands) Unrealized gain (loss) on real estate securities, available for sale Unrealized gain on net investment hedges Foreign currency translation gain (loss) Total
AOCI at December 31, 2020 $ 275 $ 47,127 $ 7,186 $ 54,588
Other comprehensive loss before reclassification (1,035) — (7,547) (8,582)
Amounts reclassified from AOCI 760 — — 760
Net current period OCI (275) — (7,547) (7,822)
AOCI at March 31, 2021 $ — $ 47,127 $ (361) $ 46,766
Other comprehensive income before reclassification — — 1,966 1,966
Amounts reclassified from AOCI — — — —
Net current period OCI — — 1,966 1,966
AOCI at June 30, 2021 $ — $ 47,127 $ 1,605 $ 48,732
Other comprehensive loss before reclassification — — (3,926) (3,926)
Amounts reclassified from AOCI — — — —
Net current period OCI — — (3,926) (3,926)
AOCI at September 30, 2021 $ — $ 47,127 $ (2,321) $ 44,806

(in thousands) Unrealized gain (loss) on real estate securities, available for sale Unrealized gain on net investment hedges Foreign currency translation gain (loss) Total
AOCI at December 31, 2019 $ 15,909 $ 25,872 $ (13,487) $ 28,294
Other comprehensive income (loss) (73,273) 21,255 (18,981) (70,999)
AOCI at March 31, 2020 $ (57,364) $ 47,127 $ (32,468) $ (42,705)
Other comprehensive loss before reclassification (26,905) — 10,581 (16,324)
Amounts reclassified from AOCI 84,269 — — 84,269
Net current period OCI 57,364 — 10,581 67,945
AOCI at June 30, 2020 $ — $ 47,127 $ (21,887) $ 25,240
Other comprehensive income before reclassification 6,018 — 11,443 17,461
Amounts reclassified from AOCI (1,748) — — (1,748)
Net current period OCI 4,270 — 11,443 15,713
AOCI at September 30, 2020 $ 4,270 $ 47,127 $ (10,444) $ 40,953

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Changes in Components of AOCI - Noncontrolling Interests in the OP~~

(in thousands) Unrealized gain (loss) on real estate securities, available for sale Unrealized gain on net investment hedges Foreign currency translation loss Total
AOCI at December 31, 2020 $ (73) $ 1,403 $ (272) $ 1,058
Other comprehensive income (loss) before reclassification 98 — (210) (112)
Amounts reclassified from AOCI (25) — — (25)
Net current period OCI 73 — (210) (137)
AOCI at March 31, 2021 $ — $ 1,403 $ (482) $ 921
Other comprehensive loss before reclassification — — (89) (89)
Amounts reclassified from AOCI — — — —
Net current period OCI — — (89) (89)
AOCI at June 30, 2021 $ — $ 1,403 $ (571) $ 832
Other comprehensive loss before reclassification — — (93) (93)
Amounts reclassified from AOCI — — — —
Net current period OCI — — (93) (93)
AOCI at September 30, 2021 $ — $ 1,403 $ (664) $ 739

(in thousands) Unrealized gain (loss) on real estate securities, available for sale Unrealized gain on net investment hedges Foreign currency translation gain (loss) Total
AOCI at December 31, 2019 $ 612 $ 893 $ (801) $ 704
Other comprehensive income (loss) (1,756) 509 (455) (1,702)
AOCI at March 31, 2020 $ (1,144) $ 1,402 $ (1,256) $ (998)
Other comprehensive income (loss) before reclassification (872) — 259 (613)
Amounts reclassified from AOCI 2,016 — — 2,016
Net current period OCI 1,144 — 259 1,403
AOCI at June 30, 2020 $ — $ 1,402 $ (997) $ 405
Other comprehensive income before reclassification 63 — 298 361
Amounts reclassified from AOCI (42) — — (42)
Net current period OCI 21 — 298 319
AOCI at September 30, 2020 $ 21 $ 1,402 $ (699) $ 724


(in thousands)	Unrealized gain (loss) on real estate securities, available for sale		Unrealized gain (loss) on net investment hedges		Foreign currency translation loss		Total










AOCI at December 31, 2020	$	(73)	$	1,403	$	(272)	$	1,058
Other comprehensive income (loss)	98		—		(288)		(190)
Amounts reclassified from AOCI	(25)		—		—		(25)
Net current period OCI	73		—		(288)		(215)
AOCI at March 31, 2021	$	—	$	1,403	$	(560)	$	843

Changes in Components of AOCI - Noncontrolling Interests in investment entities

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

(in thousands) Unrealized gain (loss) on real estate securities, available for sale Unrealized gain (loss) on net investment hedges Foreign currency translation gain (loss) Total
AOCI at December 31, 2020 $ — $ — $ 2,193 $ 2,193
Other comprehensive income — — (776) (776)
AOCI at March 31, 2021 $ — $ — $ 1,417 $ 1,417
Other comprehensive income (loss) before reclassification — — 336 336
Amounts reclassified from OCI — — — —
Net current period OCI — — 336 336
AOCI at June 30, 2021 $ — $ — $ 1,753 $ 1,753
Other comprehensive income — — 119 119
Amounts reclassified from OCI — — — —
Net current period OCI — — 119 119
AOCI at September 30, 2021 $ — $ — $ 1,872 $ 1,872


(in thousands)	Foreign currency translation gain (loss)		Total










AOCI at December 31, 2021	$	1,872	$	1,872
Other comprehensive income before reclassification	—		—
Amounts reclassified from AOCI	(1,872)		(1,872)
Net current period OCI	(1,872)		(1,872)
AOCI at March 31, 2022	$	—	$	—

(in thousands) Unrealized gain (loss) on real estate securities, available for sale Unrealized gain (loss) on net investment hedges Foreign currency translation gain Total
AOCI at December 31, 2019 $ — $ — $ — $ —
Other comprehensive income (loss) — — — —
AOCI at March 31, 2020 $ — $ — $ — $ —
Other comprehensive income — — 257 257
AOCI at June 30, 2020 $ — $ — $ 257 $ 257
Other comprehensive income — — 915 915
AOCI at September 30, 2020 $ — $ — $ 1,172 $ 1,172


(in thousands)	Foreign currency translation gain (loss)		Total
AOCI at December 31, 2020	$	2,193	$	2,193
Other comprehensive income (loss)	(776)		(776)
AOCI at March 31, 2021	$	1,417	$	1,417

The following table presents the details of the reclassifications from AOCI for the ~~nine~~three months ended ~~September 30,~~March 31, 2021:

(in thousands)

Component of AOCI reclassified into earnings

~~Nine~~Three Months Ended ~~September 30,~~March 31, 2021

Affected Line Item in the Consolidated Statements of Operations

Realized gain on sale of real estate securities

104

Other gain, ~~(loss),~~ net

Impairment of real estate securities

(967)

Other gain, ~~(loss),~~ net

13. Noncontrolling Interests

Operating Partnership

Noncontrolling interests include the aggregate limited ~~partnership~~liability interests in the OP, which were held by an affiliate of ~~DigitalBridge.~~DigitalBridge through February 2022 which such entity was sold to an unaffiliated third party. Net income (loss) attributable to the noncontrolling interests is based on ~~the limited partners’~~such members ownership percentage of the OP. Net income attributable to the noncontrolling interests of the OP was $0.7 million for the three months ended March 31, 2022 and net loss attributable to the noncontrolling interests of the OP was ~~$1.6 million and $4.0~~$2.0 million for the three ~~and nine~~ months ended September 30, 2021, respectively. Net income attributable to noncontrolling interest of the OP for three months ended September 30, 2020 was $0.2 million and net loss attributable to noncontrolling interests in the operating partnership was $7.1 million for the nine months ended September 30, 2020, respectively.March 31, 2021.

Investment Entities

Noncontrolling interests in investment entities represent third-party equity interests in ventures that are consolidated with the Company’s financial statements. Net income attributable to noncontrolling interests in the investment entities was de minimis for the three months ended March 31, 2022 and net loss attributable to noncontrolling interests in the investment entities was ~~$0.1 million and $3.7~~$0.2 million for the three ~~and nine~~ months ended ~~September 30, 2021, respectively. Net income attributable to noncontrolling~~March 31, 2021.

5445

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(Unaudited)

interests in the investment entities for three months ended September 30, 2020 was $1.2 million and net loss attributable to noncontrolling interests in the investments entities was $6.4 million for the nine months ended September 30, 2020.

~~5-Investment Preferred Financing~~

On June 5, 2020, subsidiaries of the Company entered into a preferred financing arrangement (on a portfolio of 5 underlying Company investment interests) (the “5-Investment Preferred Financing”) from investment vehicles managed by Goldman Sachs (“GS”). The preferred financing provided $200 million of proceeds at closing.

The preferred financing is limited to (i) the Company’s interests in 4 co-investments alongside investment funds managed by affiliates of the Company’s former Manager, each of which are financings on underlying development projects (including residential, office and/or mixed-use components), and (ii) a wholly-owned triple-net industrial distribution center investment leased to a national grocery chain. The preferred financing provides GS a 10% preferred return and certain other minimum returns, as well as a minority interest in future cash flows.

The preferred financing resulted in a reallocation of a portion of stockholders equity to noncontrolling interest, resulting in a $69 million day-one reduction in stockholders equity. The transaction resulted in the Company receiving net liquidity of approximately $170 million, net of approximately $30 million in paydowns under the Company’s Bank Credit Facility. The preferred financing provides the ability to draw down up to $29 million additional commitments from GS for future advances to the portfolio, if any, at the Company’s same advance rate.

The preferred financing provides for a disproportionate allocation of profits and losses, and thus each party’s share of earnings or loss is determined using a balance sheet approach known as the HLBV method. Under the HLBV method, earnings and losses are recognized based on the change in each party’s capital account from the beginning of the period in question to the end of the period, adjusting for the effects of distributions and new investments. The entity measures each party’s capital account assuming that the subsidiary was liquidated or sold at book value.

For the three months ended September 30, 2021, the Company has drawn-down additional funds of $2.1 million from GS and completed $16.3 million in cash distributions to GS. The noncontrolling interest in investment entities on the Company’s consolidated balance sheet includes $219.6 million representing GS’s investment at September 30, 2021 under the HLBV method.

In July 2021, the Company agreed to sell the 4 co-investments within the 5-Investment Preferred Financing. Refer to Note 4, “Investments in Unconsolidated Ventures” for more details on this transaction.

14. Fair Value

Determination of Fair Value

The following is a description of the valuation techniques used to measure fair value of assets accounted for at fair value on a recurring basis and the general classification of these instruments pursuant to the fair value hierarchy.

PE Investments

The Company accounts for PE Investments at fair value which is determined based on either a valuation model using assumptions for the timing and amount of expected future cash flow for income and realization events for the underlying assets in the funds and discount rate, or pending sales prices, if applicable. This fair value measurement is generally based on unobservable inputs and, as such, is classified as Level 3 of the fair value hierarchy, unless the PE Investments are valued based on pending sales prices, which are classified as Level 2 of the fair value hierarchy. The Company considers cash flow and NAV information provided by general partners of the underlying funds (“GP NAV”) and the implied yields of those funds in valuing its PE Investments. The Company also considers the values derived from the valuation model as a percentage of GP NAV, and compares the resulting percentage of GP NAV to precedent transactions, independent research, industry reports as well as pricing from executed purchase and sale agreements related to the disposition of its PE Investments. The Company may, as a result of that comparison, apply a mark-to-market adjustment. The Company has not elected the practical expedient to measure the fair value of its PE Investments using the NAV of the underlying funds.

Real Estate Securities

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

management applies adjustments based on or using unobservable inputs ~~and~~ would be classified as Level 3 of the fair value hierarchy. Management determines the prices are representative of fair value through a review of available data, including observable inputs, recent transactions as well as its knowledge of and experience in the market.

Investing VIEs

As discussed in Note 5, “Real Estate Securities, Available for Sale,” the Company has elected the fair value option for the financial assets and liabilities of the consolidated Investing VIEs. The Investing VIEs are “static,” that is no reinvestment is permitted and there is very limited active management of the underlying assets. The Company is required to determine whether the fair value of the financial assets or the fair value of the financial liabilities of the Investing VIEs are more observable, but in either case, the methodology results in the fair value of the assets of the securitization trust being equal to the fair value of their liabilities. The Company has determined that the fair value of the liabilities of the securitization trust is more observable, since market prices for the liabilities are available from a third-party pricing service or are based on quoted prices provided by dealers who make markets in similar financial instruments. The financial assets of the securitization trust isare not readily marketable and their fair value measurement requires information that may be limited in availability.

In determining the fair value of the trust’s financial liabilities, the dealers will consider contractual cash payments and yields expected by market participants. Dealers also incorporate common market pricing methods, including a spread measurement to the treasury curve or interest rate swap curve as well as underlying characteristics of the particular security including coupon, periodic and life caps, collateral type, rate reset period and seasoning or age of the security. The Company’s collateralized mortgage obligations are classified as Level 2 of the fair value hierarchy, where a third-party pricing service or broker quotations are available and are based on observable valuation inputs, and as Level 3 of the fair value hierarchy, where internal price is utilized based on or using unobservable inputs. In accordance with ASC 810, Consolidation, the assets of the securitization trust are an aggregate value derived from the fair value of the trust’s liabilities, and the Company has determined that the valuation of the trust’s assets in their entirety including its retained interests from the securitizations (eliminated in consolidation in accordance with U.S. GAAP) should be classified as Level 3 of the fair value hierarchy.

Derivatives

Derivative instruments consist of interest rate contracts and foreign exchange contracts that are generally traded over-the-counter, and are valued using a third-party service provider. Quotations on over-the counter derivatives are not adjusted and are generally valued using observable inputs such as contractual cash flows, yield curve, foreign currency rates and credit spreads, and are classified as Level 2 of the fair value hierarchy. Although credit valuation adjustments, such as the risk of default, rely

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(Unaudited)

on Level 3 inputs, these inputs are not significant to the overall valuation of its derivatives. As a result, derivative valuations in their entirety are classified as Level 2 of the fair value hierarchy.

Fair Value Hierarchy

Financial assets recorded at fair value on a recurring basis are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table presents financial assets that were accounted for at fair value on a recurring basis as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 by level within the fair value hierarchy (dollars in thousands):

September 30, 2021 December 31, 2020
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets:
Investments in unconsolidated ventures - PE Investments $ — $ — $ 4,848 $ 4,848 $ — $ 5 $ 6,878 $ 6,883
Real estate securities, available for sale — 3,945 — 3,945 — 10,389 — 10,389
Mortgage loans held in securitization trusts, at fair value — — 840,341 840,341 — — 1,768,069 1,768,069
Other assets - derivative assets — 4,389 — 4,389 — 386 — 386
Liabilities:
Mortgage obligations issued by securitization trusts, at fair value $ — $ 800,831 $ — $ 800,831 $ — $ 1,708,534 $ — $ 1,708,534
Other liabilities - derivative liabilities — 15 — 15 — 37 — 37

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~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~


	March 31, 2022								December 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Investments in unconsolidated ventures - PE Investments	$	—	$	—	$	4,406	$	4,406	$	—	$	—	$	4,406	$	4,406

Mortgage loans held in securitization trusts, at fair value	—		—		754,579		754,579		—		—		813,310		813,310
Other assets - derivative assets	—		1,105		—		1,105		—		1,373		—		1,373
Liabilities:
Mortgage obligations issued by securitization trusts, at fair value	$	—	$	718,425	$	—	$	718,425	$	—	$	777,156	$	—	$	777,156
Other liabilities - derivative liabilities	—		2		—		2		—		9		—		9

The following table presents the changes in fair value of financial assets which are measured at fair value on a recurring basis using Level 3 inputs to determine fair value for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and year ended December 31, ~~2020~~2021 (dollars in thousands):


		Nine Months Ended September 30, 2021				Year Ended December 31, 2020					Three Months Ended March 31, 2022				Year Ended December 31, 2021
		Investments in unconsolidated ventures - PE Investments		Mortgage loans held in securitization trusts(1)		Investments in unconsolidated ventures - PE Investments		Mortgage loans held in securitization trusts(1)			Investments in unconsolidated ventures - PE Investments		Mortgage loans held in securitization trusts(1)		Investments in unconsolidated ventures - PE Investments		Mortgage loans held in securitization trusts
Beginning balance	Beginning balance	$	6,878	$	1,768,069	$	8,858	$	1,872,970	Beginning balance	$	4,406	$	813,310	$	6,878	$	1,768,069

Distributions/paydowns	Distributions/paydowns	(1,957)		(70,838)		(2,649)		(76,719)		Distributions/paydowns	—		(13,300)		(2,380)		(78,903)
Sale of investments	Sale of investments	—		(28,662)		—		—		Sale of investments	—		—		—		(28,662)
Deconsolidation of securitization trust(2)	Deconsolidation of securitization trust(2)	—		(802,196)		—		—		Deconsolidation of securitization trust(2)	—		—		—		(802,196)
Equity in earnings	Equity in earnings	(73)		—		669		—		Equity in earnings	—		—		(92)		—

Unrealized loss in earnings	Unrealized loss in earnings	—		(2,649)		—		(28,182)		Unrealized loss in earnings	—		(45,431)		—		(8,375)
Realized loss in earnings	Realized loss in earnings	—		(23,383)		—		—		Realized loss in earnings	—		—		—		(36,623)
Ending balance	Ending balance	$	4,848	$	840,341	$	6,878	$	1,768,069	Ending balance	$	4,406	$	754,579	$	4,406	$	813,310

(1)For the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, the Company recorded an unrealized loss of ~~$2.6~~$45.4 million related to mortgage loans held in securitization trusts, at fair value and an unrealized gain of ~~$34.6~~$45.4 million related to mortgage obligations ~~issued by~~held in securitization trusts, at fair value.

(2)In April 2021, the Company sold its retained investments in the subordinate tranches of one securitization trust. As a ~~results~~result of the sale, the Company deconsolidated one of the securitization trusts. ~~See Note 5, “Real Estate Securities, Available for Sale” for further information.~~

As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company utilized a discounted cash flow model, comparable precedent transactions and other market information to quantify Level 3 fair value measurements on a recurring basis. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the key unobservable inputs used in the analysis of PE Investments included discount rates with a range of 11.0% to 12.0% and timing and amount of expected future cash flows. As of ~~September 30,~~March 31, 2022, the key unobservable inputs used in the valuation of mortgage obligations issued by securitization trusts included a blended yield of 20.0% and a weighted average life of 5.2 years. As of December 31, 2021, the key unobservable inputs used in the valuation of mortgage obligations issued by securitization trusts included a blended yield of ~~22.2%~~17.5% and a weighted average life of ~~5.7 years. As of December 31, 2020, the key unobservable inputs included yields ranging from 21.1% to 53.7%, respectively, and a weighted average life of 5.0~~5.4 years. Significant increases or decreases in any one of the inputs described above in isolation may result in significantly different fair value of the financial assets and liabilities using such Level 3 inputs.

~~During~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

For the ~~nine~~three months ended ~~September 30,~~March 31, 2022, the Company did not record a net unrealized gain (loss) related to mortgage loans held in and mortgage obligations issued by securitization trusts, at fair value. For the three months ended March 31, 2021, the Company recorded a ~~$23.4~~net unrealized gain of $8.6 million ~~realized loss on~~related to mortgage loans held in and mortgage obligations issued by securitization trusts, at fair ~~value, which is comprised of a $19.5 million loss upon the sale of the Company’s retained interests~~value. These amounts, when incurred, are recorded as unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net in the ~~subordinate tranches~~consolidated statement of one securitization trust. Additionally, the Company recorded a realized loss of $3.9 million related to the sale of an underlying loan held within one of its retained investments in the subordinate tranches of another securitization trust, of which the realized loss was previously included in the Company’s loss projections and therefore no fair value write down was required in the third quarter of 2021.operations.

Fair Value Option

The Company may elect to apply the fair value option of accounting for certain of its financial assets or liabilities due to the nature of the instrument at the time of the initial recognition of the investment. The Company elected the fair value option for PE Investments and eligible financial assets and liabilities of its consolidated Investing VIEs because management believes it is a more useful presentation for such investments. The Company determined recording the PE Investments based on the change in fair value of projected future cash flow from one period to another better represents the underlying economics of the respective investment. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company has elected not to apply the fair value option for any other eligible financial assets or liabilities.

~~Fair Value~~Master Repurchase Facilities

As of ~~Financial Instruments~~

In addition to the above disclosures regarding financial assets or liabilities which are recorded at fair value, U.S. GAAP requires disclosure of fair value about all financial instruments. The following disclosure of estimated fair value of financial instruments was determined byMarch 31, 2022, the Company, ~~using available market information~~through subsidiaries, had entered into repurchase agreements with multiple global financial institutions to provide an aggregate principal amount of up to $2.1 billion to finance the origination of first mortgage loans and ~~appropriate valuation methodologies. Considerable judgment is necessary~~senior loan participations secured by CRE debt investments (“Master Repurchase Facilities”). The Company agreed to ~~interpret market data~~guarantee certain obligations under the Master Repurchase Facilities, which contain representations, warranties, covenants, conditions precedent to funding, events of default and ~~develop estimated fair value. Accordingly, the estimates presented herein~~indemnities that are ~~not necessarily indicative~~customary for agreements of ~~the amounts the Company could realize on disposition of the financial instruments.~~this type. The ~~use of different market assumptions and/~~Master Repurchase Facilities act as revolving loan facilities that can be paid down as assets are repaid or ~~estimation methodologies may have a material effect on estimated fair value.~~sold and re-drawn upon for

5740

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

new investments. As of March 31, 2022, the Company was in compliance with all of its financial covenants under the Master Repurchase Facilities.

As of March 31, 2022, the Company had $1.6 billion carrying value of CRE debt investments financed with $1.2 billion under the master repurchase facilities. As of December 31, 2021, the Company had $1.2 billion carrying value of CRE debt investments financed with $905.1 million under the master repurchase facilities.

During the first quarter of 2022, the Company entered into amendments under its 5 Master Repurchase Facilities and/or associated guarantees to reduce the minimum tangible net worth covenant requirement from $1.35 billion to $1.11 billion.

Additionally, during the first quarter of 2022, the Company entered into amendments under 4 of its Master Repurchase Facilities to expand the eligibility criteria to allow for loans indexed to SOFR, and to allow for borrowings under those facilities indexed to SOFR.

CMBS Credit Facilities

As of March 31, 2022, the Company had entered into 8 master repurchase agreements (collectively the “CMBS Credit Facilities”) to finance CMBS investments. The CMBS Credit Facilities are on a recourse basis and contain representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of this type. The CMBS Credit Facilities were undrawn as of March 31, 2022 and December 31, 2021.

10. Related Party Arrangements

Internalization

On April 30, 2021, the Company completed the internalization of the Company’s management and operating functions and terminated its relationship with its Manager in accordance with the Termination Agreement (the “Internalization”). The Company paid the Manager a one-time termination fee of $102.3 million and additional closing costs of $0.3 million. The Company will not pay management or incentive fees to the Manager for any post-closing period. Refer to Note 1, “Business and Organization,” for further details.

Fees to Manager

Base Management Fee

Following the Internalization on April 30, 2021, the Company no longer pays a base management fee to the Manager.

For the three months ended March 31, 2021, the total management fee expense incurred was $7.3 million.

Incentive Fee

Following the Internalization on April 30, 2021, the Company no longer pays an incentive fee to the Manager. The Company did not incur any incentive fees during the three months ended March 31, 2021.

Reimbursements of Expenses

Following the Internalization on April 30, 2021, the Company no longer reimburses expenses incurred by the Manager.

For the three months ended March 31, 2021, the total reimbursements of expenses incurred by the Manager on behalf of the Company and reimbursable in accordance with the Management Agreement was $2.0 million, and are included in operating expense on the consolidated statements of operations. As of March 31, 2022 and December 31, 2021, there were no unpaid expenses included in due to related party in the Company’s consolidated balance sheets.

Investment Activity

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

$101.8 million in connection with the joint venture bifurcating the mezzanine loan into a mezzanine loan and a preferred equity investment. The Company’s interest in both the underlying mezzanine loan and preferred equity investment is 31.8%, and the affiliate entities own the remaining 68.2%. Both the underlying mezzanine loan and preferred equity investment carry a fixed 13.0% interest rate. This investment is recorded in investments in unconsolidated ventures in the Company’s consolidated balance sheets. In July 2019, the Company increased its commitment in the mezzanine loan from $101.8 million to $189.0 million. The Company’s interest in the upsized mezzanine loan is 45.2% and it carries a fixed 13.0% interest rate. During the three months ended June 30, 2020, the Company made its pro-rata share of two protective advances to the senior mortgage lender totaling $28.5 million. The Company placed this investment on nonaccrual status as of April 1, 2020. In September 2020, the Company’s mezzanine loan and preferred equity investment was converted into a mezzanine participation. During the year ended December 31, 2021, the Company recognized its proportionate share of fair value losses in the mezzanine participation equaling $97.9 million, which represents the Company’s remaining proportionate share in the investment.

In July 2018, the Company acquired a $326.8 million Class A office campus located in Norway from an affiliate of the Company’s Manager. In connection with the purchase, the Company assumed senior mortgage financing from a private bond issuance of $183.7 million. The bonds mature in June 2025 and carry a fixed interest rate of 3.91%.

11. Equity-Based Compensation

On January 29, 2018, the Company’s Board of Directors adopted the 2018 Equity Incentive Plan (the “2018 Plan”). The 2018 Plan permits the grant of awards with respect to 4.0 million shares of the Class A common stock, subject to adjustment pursuant to the terms of the 2018 Plan. Awards may be granted under the 2018 Plan to (x) the Manager or any employee, officer, director, consultant or advisor (who is a natural person) providing services to the Company, the Manager or their affiliates and (y) any other individual whose participation in the 2018 Plan is determined to be in the best interests of the Company. The following types of awards may be made under the 2018 Plan, subject to the limitations set forth in the plan: (i) stock options (which may be either incentive stock options or non-qualified stock options); (ii) stock appreciation rights; (iii) restricted stock awards; (iv) stock units; (v) unrestricted stock awards; (vi) dividend equivalent rights; (vii) performance awards; (viii) annual cash incentive awards; (ix) long-term incentive units; and (x) other equity-based awards.

Shares subject to an award granted under the 2018 Plan will be counted against the maximum number of shares of Class A common stock available for issuance thereunder as one share of Class A common stock for every one share of Class A common stock subject to such an award. Shares subject to an award granted under the 2018 Plan will again become available for issuance under the 2018 Plan if the award terminates by expiration, forfeiture, cancellation, or otherwise without the issuance of such shares (except as set forth in the following sentence). The number of shares of Class A common stock available for issuance under the 2018 Plan will not be increased by (i) any shares tendered or withheld in connection with the purchase of shares upon exercise of a stock option, (ii) any shares deducted or delivered in connection with the Company’s tax withholding obligations, or (iii) any shares purchased by the Company with proceeds from stock option exercises. The shares granted in May 2020 to the independent directors of the Company under the 2018 Plan vested in May 2021. The shares granted in June 2021 to the independent directors, as well as in October and December to the 2 newly appointed independent directors of the Company under the 2018 Plan vest in May 2022. Shares granted to non-independent directors, officers and the Manager under the 2018 Plan vest ratably in three annual installments.

Equity-Based Compensation Expense

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

share-based compensation expense of $4.3 million to its Manager within compensation and benefits in the consolidated statement of operations for the three months ended March 31, 2021.

Restricted Stock—Restricted stock awards relating to the Company’s class A common stock are granted to independent directors of the Company and generally vest within one year and restricted stock awards were granted to certain employees of the Manager, with a service condition only and are generally subject to annual time-based vesting in equal tranches over a three-year period. Restricted stock is entitled to dividends declared and paid on the Company’s class A common stock and such dividends are not forfeitable prior to vesting of the award. Restricted stock awards are valued based on the Company’s class A common stock price on grant date and equity-based compensation expense is recognized on a straight-line basis over the requisite three-year service period. Some employees of the Manager who were granted restricted stock under the 2018 Plan became employees of the Company following the Internalization on April 30, 2021. The shares held by substantially all remaining employees of the Manager vested following the Internalization.

Performance Stock Units (“PSU”)—PSUs are granted to certain employees of the Company and are subject to both a service condition and a performance condition. Following the end of the measurement period for the PSUs, the recipients of PSUs may be eligible to vest in all or a portion of PSUs granted, and be issued a number of shares of the Company’s class A common stock, ranging from 0% to 200% of the number of PSUs granted and eligible to vest, to be determined based upon the performance of the Company’s class A common stock relative to the Company’s GAAP book value at the end of a two-year measurement period. PSUs also contain dividend equivalent rights which entitle the recipients to a payment equal to the amount of dividends that would have been paid on the shares that are ultimately issued at the end of the measurement period.

Fair value of PSUs, including dividend equivalent rights, was determined using a Monte Carlo simulation, with the following assumptions:


	2021 Grant
Expected volatility(1)	86.6	%
Risk free rate(2)	0.1	%
Expected dividend yield(3)	—

(1)Based upon the Company’s historical stock volatility.

(2)Based upon the continuously compounded zero-coupon U.S. Treasury yield for the term coinciding with the measurement period of the award as of valuation date.

(3)Based upon the dividend yield in place as of the grant date.

The table below summarizes the Company’s awards granted, forfeited or vested under the 2018 Plan during the three months ended March 31, 2022:


	Number of Shares			Weighted Average Grant Date Fair Value
	Restricted Stock	PSUs	Total	Restricted Stock		PSUs












Unvested shares at December 31, 2021	1,482,094	272,000	1,754,094	$	12.35	$	11.96

Vested	(500,462)	—	(500,462)	9.14		—

Unvested shares at March 31, 2022	981,632	272,000	1,253,632	11.54		11.96

Fair value of equity awards that vested during the three months ended March 31, 2022 and March 31, 2021, determined based on their respective fair values at vesting date, was $3.2 million and $2.3 million, respectively. Fair value of granted awards is determined based on the closing price of the Class A common stock on the date of grant of the awards. Equity-based compensation is classified within compensation and benefits in the consolidated statement of operations.

At March 31, 2022, aggregate unrecognized compensation cost for all unvested equity awards was $7.0 million, which is expected to be recognized over a weighted-average period of 1.79 years. At March 31, 2021, aggregate unrecognized compensation cost for all unvested equity awards was $14.2 million, expected to be recognized over a weighted-average period of 2.57 years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

12. Stockholders’ Equity

Authorized Capital

As of March 31, 2022, the Company had the authority to issue up to 1.0 billion shares of stock, at $0.01 par value per share, consisting of 950.0 million shares of Class A common stock and 50.0 million shares of preferred stock.

The Company had no shares of preferred stock issued and outstanding as of March 31, 2022.

Dividends

During the three months ended March 31, 2022, the Company declared the following dividend on its common stock:

Declaration Date

Record Date

Payment Date

Per Share

March 15, 2022

March 31, 2022

April 15, 2022

$0.19

Accumulated Other Comprehensive Income (Loss)

Changes in Components of AOCI - Stockholders


(in thousands)	Unrealized gain on net investment hedges		Foreign currency translation gain (loss)		Total














AOCI at December 31, 2021	$	17,893	$	(9,107)	$	8,786
Other comprehensive income	—		660		660


AOCI at March 31, 2022	$	17,893	$	(8,447)	$	9,446


(in thousands)	Unrealized gain (loss) on real estate securities, available for sale		Unrealized gain on net investment hedges		Foreign currency translation gain (loss)		Total










AOCI at December 31, 2020	$	275	$	47,127	$	7,186	$	54,588
Other comprehensive income (loss) before reclassification	(1,035)		—		(7,467)		(8,502)
Amounts reclassified from AOCI	760		—		—		760
Net current period OCI	(275)		—		(7,467)		(7,742)
AOCI at March 31, 2021	$	—	$	47,127	$	(281)	$	46,846

Changes in Components of AOCI - Noncontrolling Interests in the OP


(in thousands)	Unrealized gain on net investment hedges		Foreign currency translation gain (loss)		Total














AOCI at December 31, 2021	$	710	$	(872)	$	(162)
Other comprehensive income	—		16		16


AOCI at March 31, 2022	$	710	$	(856)	$	(146)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


(in thousands)	Unrealized gain (loss) on real estate securities, available for sale		Unrealized gain (loss) on net investment hedges		Foreign currency translation loss		Total










AOCI at December 31, 2020	$	(73)	$	1,403	$	(272)	$	1,058
Other comprehensive income (loss)	98		—		(288)		(190)
Amounts reclassified from AOCI	(25)		—		—		(25)
Net current period OCI	73		—		(288)		(215)
AOCI at March 31, 2021	$	—	$	1,403	$	(560)	$	843

Changes in Components of AOCI - Noncontrolling Interests in investment entities


(in thousands)	Foreign currency translation gain (loss)		Total










AOCI at December 31, 2021	$	1,872	$	1,872
Other comprehensive income before reclassification	—		—
Amounts reclassified from AOCI	(1,872)		(1,872)
Net current period OCI	(1,872)		(1,872)
AOCI at March 31, 2022	$	—	$	—


(in thousands)	Foreign currency translation gain (loss)		Total
AOCI at December 31, 2020	$	2,193	$	2,193
Other comprehensive income (loss)	(776)		(776)
AOCI at March 31, 2021	$	1,417	$	1,417

The following table presents the ~~principal amount, carrying value~~details of the reclassifications from AOCI for the three months ended March 31, 2021:

(in thousands)

Component of AOCI reclassified into earnings

Three Months Ended March 31, 2021

Affected Line Item in the Consolidated Statements of Operations

Realized gain on sale of real estate securities

104

Other gain, net

Impairment of real estate securities

(967)

Other gain, net

13. Noncontrolling Interests

Operating Partnership

Noncontrolling interests include the aggregate limited liability interests in the OP, which were held by an affiliate of DigitalBridge through February 2022 which such entity was sold to an unaffiliated third party. Net income (loss) attributable to the noncontrolling interests is based on such members ownership percentage of the OP. Net income attributable to the noncontrolling interests of the OP was $0.7 million for the three months ended March 31, 2022 and net loss attributable to the noncontrolling interests of the OP was $2.0 million for the three months ended March 31, 2021.

Investment Entities

Noncontrolling interests in investment entities represent third-party equity interests in ventures that are consolidated with the Company’s financial statements. Net income attributable to noncontrolling interests in the investment entities was de minimis for the three months ended March 31, 2022 and net loss attributable to noncontrolling interests in the investment entities was $0.2 million for the three months ended March 31, 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

14. Fair Value

Determination of Fair Value

The following is a description of the valuation techniques used to measure fair value of ~~certain financial~~ assets ~~and liabilities as of September 30, 2021 and December 31, 2020 (dollars in thousands):~~

September 30, 2021 December 31, 2020
Principal Amount Carrying Value Fair Value Principal Amount Carrying Value Fair Value
Financial assets:(1)
Loans and preferred equity held for investment, net $ 3,180,992 $ 3,123,506 (2) $ 3,138,262 $ 2,225,856 (2) $ 2,183,497 $ 2,189,006
Financial liabilities:(1)
Securitization bonds payable, net $ 1,510,423 $ 1,500,223 $ 1,510,423 $ 840,423 $ 835,153 $ 840,423
Mortgage and other notes payable, net 764,981 764,731 764,981 1,025,455 1,022,757 1,025,455
Master repurchase facilities 558,462 558,462 558,462 535,224 535,224 535,224

~~(1)The~~accounted for at fair value on a recurring basis and the general classification of ~~other financial~~these instruments ~~not included in this table is estimated~~pursuant to ~~approximate their carrying value.~~

~~(2)Excludes future funding commitments of$233.7 million and $163.0 million as of September 30, 2021 and December 31, 2020, respectively.~~

~~Disclosure about~~the fair value ~~of financial instruments~~hierarchy.

PE Investments

The Company accounts for PE Investments at fair value which is determined based on ~~pertinent information available to management as~~either a valuation model using assumptions for the timing and amount of ~~September 30, 2021. Although management is not aware of any factors that would significantly affect~~expected future cash flow for income and realization events for the underlying assets in the funds and discount rate, or pending sales prices, if applicable. This fair value such amounts have not been comprehensively revalued for purposes of these consolidated financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

~~Loans and Preferred Equity Held for Investment, Net~~

For loans and preferred equity held for investment, net, fair values were determined: (i) by comparing the current yield to the estimated yield for newly originated loans with similar credit risk or the market yield at which a third party might expect to purchase such investment; or (ii) based on discounted cash flow projections of principal and interest expected to be collected, which includes consideration of the financial standing of the borrower or sponsor as well as operating results of the underlying collateral. These fair value measurements of CRE debt aremeasurement is generally based on unobservable inputs and, as such, ~~are~~is classified as Level 3 of the fair value ~~hierarchy. Carrying values~~hierarchy, unless the PE Investments are valued based on pending sales prices, which are classified as Level 2 of ~~loans and preferred equity held for investment are presented net of allowance for loan losses, where applicable.~~

~~Securitization Bonds Payable, Net~~

~~The Company’s securitization bonds payable, net bear floating rates of interest. As of September 30, 2021,~~ the ~~Company believes the carrying value approximates fair value. These~~ fair value ~~measurements~~hierarchy. The Company considers cash flow and NAV information provided by general partners of the underlying funds (“GP NAV”) and the implied yields of those funds in valuing its PE Investments. The Company also considers the values derived from the valuation model as a percentage of GP NAV, and compares the resulting percentage of GP NAV to precedent transactions, independent research, industry reports as well as pricing from executed purchase and sale agreements related to the disposition of its PE Investments. The Company may, as a result of that comparison, apply a mark-to-market adjustment. The Company has not elected the practical expedient to measure the fair value of its PE Investments using the NAV of the underlying funds.

Real Estate Securities

CRE securities are generally valued using a third-party pricing service or broker quotations. These quotations are not adjusted and are based on observable inputs that can be validated, and as such, are classified as Level 2 of the fair value hierarchy. Certain CRE securities may be valued based on a single broker quote, dealer bid or an internal price. Situations where management applies adjustments based on or using unobservable inputs would be classified as Level 3 of the fair value hierarchy. Management determines the prices are representative of fair value through a review of available data, including observable inputs, recent transactions as well as its knowledge of and experience in the market.

~~Mortgage and Other Notes Payable, Net~~Investing VIEs

~~For mortgage and other notes payable, net,~~As discussed in Note 5, “Real Estate Securities, Available for Sale,” the Company ~~primarily uses rates currently available with similar terms~~has elected the fair value option for the financial assets and ~~remaining maturities to estimate fair value. These measurements are determined using comparable U.S. Treasury rates as~~liabilities of the ~~end~~consolidated Investing VIEs. The Investing VIEs are “static,” that is no reinvestment is permitted and there is very limited active management of the ~~reporting period. These~~underlying assets. The Company is required to determine whether the fair value ~~measurements~~of the financial assets or the fair value of the financial liabilities of the Investing VIEs are more observable, but in either case, the methodology results in the fair value of the assets of the securitization trust being equal to the fair value of their liabilities. The Company has determined that the fair value of the liabilities of the securitization trust is more observable, since market prices for the liabilities are available from a third-party pricing service or are based on quoted prices provided by dealers who make markets in similar financial instruments. The financial assets of the securitization trust are not readily marketable and their fair value measurement requires information that may be limited in availability.

Derivatives

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Fair Value Hierarchy

Financial assets recorded at fair value on a recurring basis are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table presents financial assets that were accounted for at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 by level within the fair value hierarchy (dollars in thousands):


	March 31, 2022								December 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Investments in unconsolidated ventures - PE Investments	$	—	$	—	$	4,406	$	4,406	$	—	$	—	$	4,406	$	4,406

Mortgage loans held in securitization trusts, at fair value	—		—		754,579		754,579		—		—		813,310		813,310
Other assets - derivative assets	—		1,105		—		1,105		—		1,373		—		1,373
Liabilities:
Mortgage obligations issued by securitization trusts, at fair value	$	—	$	718,425	$	—	$	718,425	$	—	$	777,156	$	—	$	777,156
Other liabilities - derivative liabilities	—		2		—		2		—		9		—		9

The following table presents the changes in fair value of financial assets which are measured at fair value on a recurring basis using Level 3 inputs to determine fair value for the three months ended March 31, 2022 and year ended December 31, 2021 (dollars in thousands):


	Three Months Ended March 31, 2022				Year Ended December 31, 2021
	Investments in unconsolidated ventures - PE Investments		Mortgage loans held in securitization trusts(1)		Investments in unconsolidated ventures - PE Investments		Mortgage loans held in securitization trusts
Beginning balance	$	4,406	$	813,310	$	6,878	$	1,768,069

Distributions/paydowns	—		(13,300)		(2,380)		(78,903)
Sale of investments	—		—		—		(28,662)
Deconsolidation of securitization trust(2)	—		—		—		(802,196)
Equity in earnings	—		—		(92)		—


Unrealized loss in earnings	—		(45,431)		—		(8,375)
Realized loss in earnings	—		—		—		(36,623)
Ending balance	$	4,406	$	754,579	$	4,406	$	813,310

(1)For the three months ended March 31, 2022, the Company recorded an unrealized loss of $45.4 million related to mortgage loans held in securitization trusts, at fair value and an unrealized gain of $45.4 million related to mortgage obligations held in securitization trusts, at fair value.

(2)In April 2021, the Company sold its retained investments in the subordinate tranches of one securitization trust. As a result of the sale, the Company deconsolidated one of the securitization trusts.

As of March 31, 2022 and December 31, 2021, the Company utilized a discounted cash flow model, comparable precedent transactions and other market information to quantify Level 3 fair value measurements on a recurring basis. As of March 31, 2022 and December 31, 2021, the key unobservable inputs used in the analysis of PE Investments included discount rates with a range of 11.0% to 12.0% and timing and amount of expected future cash flows. As of March 31, 2022, the key unobservable inputs used in the valuation of mortgage obligations issued by securitization trusts included a blended yield of 20.0% and a weighted average life of 5.2 years. As of December 31, 2021, the key unobservable inputs used in the valuation of mortgage obligations issued by securitization trusts included a blended yield of 17.5% and a weighted average life of 5.4 years. Significant increases or decreases in any one of the inputs described above in isolation may result in significantly different fair value of the financial assets and liabilities using such Level 3 inputs.

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

For the three months ended March 31, 2022, the Company did not record a net unrealized gain (loss) related to mortgage loans held in and mortgage obligations issued by securitization trusts, at fair value. For the three months ended March 31, 2021, the Company recorded a net unrealized gain of $8.6 million related to mortgage loans held in and mortgage obligations issued by securitization trusts, at fair value. These amounts, when incurred, are recorded as unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net in the consolidated statement of operations.

Fair Value Option

The Company may elect to apply the fair value option of accounting for certain of its financial assets or liabilities due to the nature of the instrument at the time of the initial recognition of the investment. The Company elected the fair value option for PE Investments and eligible financial assets and liabilities of its consolidated Investing VIEs because management believes it is a more useful presentation for such investments. The Company determined recording the PE Investments based on the change in fair value of projected future cash flow from one period to another better represents the underlying economics of the respective investment. As of March 31, 2022 and December 31, 2021, the Company has elected not to apply the fair value option for any other eligible financial assets or liabilities.

Master Repurchase Facilities

As of March 31, 2022, the Company, through subsidiaries, had entered into repurchase agreements with multiple global financial institutions to provide an aggregate principal amount of up to $2.1 billion to finance the origination of first mortgage loans and senior loan participations secured by CRE debt investments (“Master Repurchase Facilities”). The Company agreed to guarantee certain obligations under the Master Repurchase Facilities, which contain representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of this type. The Master Repurchase Facilities act as revolving loan facilities that can be paid down as assets are repaid or sold and re-drawn upon for

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

new investments. As of March 31, 2022, the Company was in compliance with all of its financial covenants under the Master Repurchase Facilities.

CMBS Credit Facilities

10. Related Party Arrangements

Internalization

Fees to Manager

Base Management Fee

Following the Internalization on April 30, 2021, the Company no longer pays a base management fee to the Manager.

For the three months ended March 31, 2021, the total management fee expense incurred was $7.3 million.

Incentive Fee

Following the Internalization on April 30, 2021, the Company no longer pays an incentive fee to the Manager. The Company did not incur any incentive fees during the three months ended March 31, 2021.

Reimbursements of Expenses

Following the Internalization on April 30, 2021, the Company no longer reimburses expenses incurred by the Manager.

Investment Activity

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

$101.8 million in connection with the joint venture bifurcating the mezzanine loan into a mezzanine loan and a preferred equity investment. The Company’s interest in both the underlying mezzanine loan and preferred equity investment is 31.8%, and the affiliate entities own the remaining 68.2%. Both the underlying mezzanine loan and preferred equity investment carry a fixed 13.0% interest rate. This investment is recorded in investments in unconsolidated ventures in the Company’s consolidated balance sheets. In July 2019, the Company increased its commitment in the mezzanine loan from $101.8 million to $189.0 million. The Company’s interest in the upsized mezzanine loan is 45.2% and it carries a fixed 13.0% interest rate. During the three months ended June 30, 2020, the Company made its pro-rata share of two protective advances to the senior mortgage lender totaling $28.5 million. The Company placed this investment on nonaccrual status as of April 1, 2020. In September 2020, the Company’s mezzanine loan and preferred equity investment was converted into a mezzanine participation. During the year ended December 31, 2021, the Company recognized its proportionate share of fair value losses in the mezzanine participation equaling $97.9 million, which represents the Company’s remaining proportionate share in the investment.

In July 2018, the Company acquired a $326.8 million Class A office campus located in Norway from an affiliate of the Company’s Manager. In connection with the purchase, the Company assumed senior mortgage financing from a private bond issuance of $183.7 million. The bonds mature in June 2025 and carry a fixed interest rate of 3.91%.

11. Equity-Based Compensation

Shares subject to an award granted under the 2018 Plan will be counted against the maximum number of shares of Class A common stock available for issuance thereunder as one share of Class A common stock for every one share of Class A common stock subject to such an award. Shares subject to an award granted under the 2018 Plan will again become available for issuance under the 2018 Plan if the award terminates by expiration, forfeiture, cancellation, or otherwise without the issuance of such shares (except as set forth in the following sentence). The number of shares of Class A common stock available for issuance under the 2018 Plan will not be increased by (i) any shares tendered or withheld in connection with the purchase of shares upon exercise of a stock option, (ii) any shares deducted or delivered in connection with the Company’s tax withholding obligations, or (iii) any shares purchased by the Company with proceeds from stock option exercises. The shares granted in May 2020 to the independent directors of the Company under the 2018 Plan vested in May 2021. The shares granted in June 2021 to the independent directors, as well as in October and December to the 2 newly appointed independent directors of the Company under the 2018 Plan vest in May 2022. Shares granted to non-independent directors, officers and the Manager under the 2018 Plan vest ratably in three annual installments.

Equity-Based Compensation Expense

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

share-based compensation expense of $4.3 million to its Manager within compensation and benefits in the consolidated statement of operations for the three months ended March 31, 2021.

Restricted Stock—Restricted stock awards relating to the Company’s class A common stock are granted to independent directors of the Company and generally vest within one year and restricted stock awards were granted to certain employees of the Manager, with a service condition only and are generally subject to annual time-based vesting in equal tranches over a three-year period. Restricted stock is entitled to dividends declared and paid on the Company’s class A common stock and such dividends are not forfeitable prior to vesting of the award. Restricted stock awards are valued based on the Company’s class A common stock price on grant date and equity-based compensation expense is recognized on a straight-line basis over the requisite three-year service period. Some employees of the Manager who were granted restricted stock under the 2018 Plan became employees of the Company following the Internalization on April 30, 2021. The shares held by substantially all remaining employees of the Manager vested following the Internalization.

Performance Stock Units (“PSU”)—PSUs are granted to certain employees of the Company and are subject to both a service condition and a performance condition. Following the end of the measurement period for the PSUs, the recipients of PSUs may be eligible to vest in all or a portion of PSUs granted, and be issued a number of shares of the Company’s class A common stock, ranging from 0% to 200% of the number of PSUs granted and eligible to vest, to be determined based upon the performance of the Company’s class A common stock relative to the Company’s GAAP book value at the end of a two-year measurement period. PSUs also contain dividend equivalent rights which entitle the recipients to a payment equal to the amount of dividends that would have been paid on the shares that are ultimately issued at the end of the measurement period.

Fair value of PSUs, including dividend equivalent rights, was determined using a Monte Carlo simulation, with the following assumptions:


	2021 Grant
Expected volatility(1)	86.6	%
Risk free rate(2)	0.1	%
Expected dividend yield(3)	—

(1)Based upon the Company’s historical stock volatility.

(2)Based upon the continuously compounded zero-coupon U.S. Treasury yield for the term coinciding with the measurement period of the award as of valuation date.

(3)Based upon the dividend yield in place as of the grant date.

The table below summarizes the Company’s awards granted, forfeited or vested under the 2018 Plan during the three months ended March 31, 2022:


	Number of Shares			Weighted Average Grant Date Fair Value
	Restricted Stock	PSUs	Total	Restricted Stock		PSUs












Unvested shares at December 31, 2021	1,482,094	272,000	1,754,094	$	12.35	$	11.96

Vested	(500,462)	—	(500,462)	9.14		—

Unvested shares at March 31, 2022	981,632	272,000	1,253,632	11.54		11.96

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

12. Stockholders’ Equity

Authorized Capital

The Company had no shares of preferred stock issued and outstanding as of March 31, 2022.

Dividends

During the three months ended March 31, 2022, the Company declared the following dividend on its common stock:

Declaration Date

Record Date

Payment Date

Per Share

March 15, 2022

March 31, 2022

April 15, 2022

$0.19

Accumulated Other Comprehensive Income (Loss)

Changes in Components of AOCI - Stockholders


(in thousands)	Unrealized gain on net investment hedges		Foreign currency translation gain (loss)		Total














AOCI at December 31, 2021	$	17,893	$	(9,107)	$	8,786
Other comprehensive income	—		660		660


AOCI at March 31, 2022	$	17,893	$	(8,447)	$	9,446


(in thousands)	Unrealized gain (loss) on real estate securities, available for sale		Unrealized gain on net investment hedges		Foreign currency translation gain (loss)		Total










AOCI at December 31, 2020	$	275	$	47,127	$	7,186	$	54,588
Other comprehensive income (loss) before reclassification	(1,035)		—		(7,467)		(8,502)
Amounts reclassified from AOCI	760		—		—		760
Net current period OCI	(275)		—		(7,467)		(7,742)
AOCI at March 31, 2021	$	—	$	47,127	$	(281)	$	46,846

Changes in Components of AOCI - Noncontrolling Interests in the OP


(in thousands)	Unrealized gain on net investment hedges		Foreign currency translation gain (loss)		Total














AOCI at December 31, 2021	$	710	$	(872)	$	(162)
Other comprehensive income	—		16		16


AOCI at March 31, 2022	$	710	$	(856)	$	(146)

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


(in thousands)	Unrealized gain (loss) on real estate securities, available for sale		Unrealized gain (loss) on net investment hedges		Foreign currency translation loss		Total










AOCI at December 31, 2020	$	(73)	$	1,403	$	(272)	$	1,058
Other comprehensive income (loss)	98		—		(288)		(190)
Amounts reclassified from AOCI	(25)		—		—		(25)
Net current period OCI	73		—		(288)		(215)
AOCI at March 31, 2021	$	—	$	1,403	$	(560)	$	843

Changes in Components of AOCI - Noncontrolling Interests in investment entities


(in thousands)	Foreign currency translation gain (loss)		Total










AOCI at December 31, 2021	$	1,872	$	1,872
Other comprehensive income before reclassification	—		—
Amounts reclassified from AOCI	(1,872)		(1,872)
Net current period OCI	(1,872)		(1,872)
AOCI at March 31, 2022	$	—	$	—


(in thousands)	Foreign currency translation gain (loss)		Total
AOCI at December 31, 2020	$	2,193	$	2,193
Other comprehensive income (loss)	(776)		(776)
AOCI at March 31, 2021	$	1,417	$	1,417

The following table presents the details of the reclassifications from AOCI for the three months ended March 31, 2021:

(in thousands)

Component of AOCI reclassified into earnings

Three Months Ended March 31, 2021

Affected Line Item in the Consolidated Statements of Operations

Realized gain on sale of real estate securities

104

Other gain, net

Impairment of real estate securities

(967)

Other gain, net

13. Noncontrolling Interests

Operating Partnership

Investment Entities

Noncontrolling interests in investment entities represent third-party equity interests in ventures that are consolidated with the Company’s financial statements. Net income attributable to noncontrolling interests in the investment entities was de minimis for the three months ended March 31, 2022 and net loss attributable to noncontrolling interests in the investment entities was $0.2 million for the three months ended March 31, 2021.

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

14. Fair Value

Determination of Fair Value

PE Investments

Real Estate Securities

Investing VIEs

As discussed in Note 5, “Real Estate Securities, Available for Sale,” the Company has elected the fair value option for the financial assets and liabilities of the consolidated Investing VIEs. The Investing VIEs are “static,” that is no reinvestment is permitted and there is very limited active management of the underlying assets. The Company is required to determine whether the fair value of the financial assets or the fair value of the financial liabilities of the Investing VIEs are more observable, but in either case, the methodology results in the fair value of the assets of the securitization trust being equal to the fair value of their liabilities. The Company has determined that the fair value of the liabilities of the securitization trust is more observable, since market prices for the liabilities are available from a third-party pricing service or are based on quoted prices provided by dealers who make markets in similar financial instruments. The financial assets of the securitization trust are not readily marketable and their fair value measurement requires information that may be limited in availability.

Derivatives

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Fair Value Hierarchy

Financial assets recorded at fair value on a recurring basis are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table presents financial assets that were accounted for at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 by level within the fair value hierarchy (dollars in thousands):


	March 31, 2022								December 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Investments in unconsolidated ventures - PE Investments	$	—	$	—	$	4,406	$	4,406	$	—	$	—	$	4,406	$	4,406

Mortgage loans held in securitization trusts, at fair value	—		—		754,579		754,579		—		—		813,310		813,310
Other assets - derivative assets	—		1,105		—		1,105		—		1,373		—		1,373
Liabilities:
Mortgage obligations issued by securitization trusts, at fair value	$	—	$	718,425	$	—	$	718,425	$	—	$	777,156	$	—	$	777,156
Other liabilities - derivative liabilities	—		2		—		2		—		9		—		9

The following table presents the changes in fair value of financial assets which are measured at fair value on a recurring basis using Level 3 inputs to determine fair value for the three months ended March 31, 2022 and year ended December 31, 2021 (dollars in thousands):


	Three Months Ended March 31, 2022				Year Ended December 31, 2021
	Investments in unconsolidated ventures - PE Investments		Mortgage loans held in securitization trusts(1)		Investments in unconsolidated ventures - PE Investments		Mortgage loans held in securitization trusts
Beginning balance	$	4,406	$	813,310	$	6,878	$	1,768,069

Distributions/paydowns	—		(13,300)		(2,380)		(78,903)
Sale of investments	—		—		—		(28,662)
Deconsolidation of securitization trust(2)	—		—		—		(802,196)
Equity in earnings	—		—		(92)		—


Unrealized loss in earnings	—		(45,431)		—		(8,375)
Realized loss in earnings	—		—		—		(36,623)
Ending balance	$	4,406	$	754,579	$	4,406	$	813,310

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Fair Value Option

The Company may elect to apply the fair value option of accounting for certain of its financial assets or liabilities due to the nature of the instrument at the time of the initial recognition of the investment. The Company elected the fair value option for PE Investments and eligible financial assets and liabilities of its consolidated Investing VIEs because management believes it is a more useful presentation for such investments. The Company determined recording the PE Investments based on the change in fair value of projected future cash flow from one period to another better represents the underlying economics of the respective investment. As of March 31, 2022 and December 31, 2021, the Company has elected not to apply the fair value option for any other eligible financial assets or liabilities.

Fair Value of Financial Instruments

The following table presents the principal amount, carrying value and fair value of certain financial assets and liabilities as of March 31, 2022 and December 31, 2021 (dollars in thousands):


	March 31, 2022							December 31, 2021
	Principal Amount		Carrying Value			Fair Value		Principal Amount			Carrying Value		Fair Value
Financial assets:(1)
Loans held for investment, net	$	3,777,101	$	3,725,869	(2)	$	3,743,097	$	3,500,658	(2)	$	3,449,009	$	3,464,060
Financial liabilities:(1)
Securitization bonds payable, net	$	1,469,687	$	1,461,340		$	1,469,687	$	1,510,423		$	1,500,899	$	1,510,423
Mortgage and other notes payable, net	719,753		719,801			719,753		760,816			760,583		760,816
Master repurchase facilities	1,199,789		1,199,789			1,199,789		905,122			905,122		905,122

(1)The fair value of other financial instruments not included in this table is estimated to approximate their carrying value.

(2)Excludes future funding commitments of $333.5 million and $264.9 million as of March 31, 2022 and December 31, 2021, respectively.

Disclosure about fair value of financial instruments is based on pertinent information available to management as of March 31, 2022. Although management is not aware of any factors that would significantly affect fair value, such amounts have not been comprehensively revalued for purposes of these consolidated financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

Loans Held for Investment, Net

For loans held for investment, net, fair values were determined: (i) by comparing the current yield to the estimated yield for newly originated loans with similar credit risk or the market yield at which a third party might expect to purchase such investment; or (ii) based on discounted cash flow projections of principal and interest expected to be collected, which includes consideration of the financial standing of the borrower or sponsor as well as operating results of the underlying collateral. These fair value measurements of CRE debt are generally based on unobservable inputs and, as such, are classified as Level 3 of the fair value hierarchy. Carrying values of loans held for investment are presented net of allowance for loan losses, where applicable.

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Securitization Bonds Payable, Net

The Company’s securitization bonds payable, net bear floating rates of interest. As of March 31, 2022, the Company believes the carrying value approximates fair value. These fair value measurements are based on observable inputs, and as such, are classified as Level 2 of the fair value hierarchy.

Mortgage and Other Notes Payable, Net

For mortgage and other notes payable, net, the Company primarily uses rates currently available with similar terms and remaining maturities to estimate fair value. These measurements are determined using comparable U.S. Treasury rates as of the end of the reporting period. These fair value measurements are based on observable inputs, and as such, are classified as Level 2 of the fair value hierarchy.

Master Repurchase Facilities

The Company has amounts outstanding under Master Repurchase Facilities. The Master Repurchase Facilities bear floating rates of interest. As of ~~September 30, 2021,~~March 31, 2022, the Company believes the carrying value approximates fair value. These fair value measurements are based on observable inputs, and as such, are classified as Level 2 of the fair value hierarchy.

Other

The carrying values of cash and cash equivalents, receivables, and accrued and other liabilities approximate fair value due to their short term nature and credit risk, if any, are negligible.

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~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Nonrecurring Fair Values

The Company measures fair value of certain assets on a nonrecurring basis when events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Adjustments to fair value generally result from the application of lower of amortized cost or fair value accounting for assets held for sale or write-down of asset values due to impairment.

The ~~following table summarizes assets carried at fair value on a nonrecurring basis as of September 30, 2021 (dollars in thousands):~~

September 30, 2021
Level 1 Level 2 Level 3 Total
Investments in unconsolidated ventures(1)
$ — $ — $ 123,301 $ 123,301

~~(1)See Note 4 “Investments in Unconsolidated Ventures” for further details.~~

~~The~~ Company did not hold any assets carried at fair value on a nonrecurring basis as of March 31, 2022.

The following table summarizes assets carried at fair value on a nonrecurring basis as of December 31, ~~2020.~~2021 (dollars in thousands):


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Loans held for investment, net(1)	$	—	$	—	$	38,083	$	38,083

(1)See Note 3 “Loans Held for Investment, net” for further details.

15. Derivatives

The Company uses derivative instruments to manage the risk of changes in interest rates and foreign exchange rates, arising from both its business operations and economic conditions. Specifically, the Company enters into derivative instruments to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and cash payments, the values of which are driven by interest rates, principally relating to the Company’s investments. Additionally, the Company’s foreign operations expose the Company to fluctuations in foreign exchange rates. The Company enters into derivative instruments to protect the value or fix certain of these foreign-denominated amounts in terms of its functional currency, the U.S. dollar. Derivative instruments used in the ~~Company’s~~Company��s risk management activities may be designated as qualifying hedge accounting relationships, designated hedges, or non-designated hedges.

~~As of September 30, 2021 and December 31, 2020, fair value of derivative assets and derivative liabilities were as follows (dollars in thousands):~~

Non-Designated Hedges
September 30, 2021 December 31, 2020
Derivative Assets
Foreign exchange contracts $ 4,389 $ 386
Included in other assets $ 4,389 $ 386
Derivative Liabilities
Interest rate contracts $ (15) $ (37)
Included in accrued and other liabilities $ (15) $ (37)

~~As of September 30, 2021, the Company’s counterparties held $0.1 million in cash collateral.~~

5949

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As of March 31, 2022 and December 31, 2021, fair value of derivative assets and derivative liabilities were as follows (dollars in thousands):


	Non-Designated Hedges
	March 31, 2022		December 31, 2021
Derivative Assets
Foreign exchange contracts	$	1,105	$	1,373

Included in other assets	$	1,105	$	1,373
Derivative Liabilities

Interest rate contracts	$	(2)	$	(9)
Included in accrued and other liabilities	$	(2)	$	(9)

As of March 31, 2022, the Company’s counterparties do not hold any cash collateral.

The following table summarizes the Company’s interest rate contracts as of ~~September 30,~~March 31, 2022 and December 31, 2021:

Type of Derivatives

Notional Currency

Notional Amount (in thousands)

Range of Maturity Dates

Non-Designated

March 31, 2022

FX Forward

NOK

~~231,317~~185,576

~~November 2021~~May 2022 - May 2024

~~FX Forward~~

~~EUR~~

~~120,000~~

~~December 2021~~

Interest Rate Swap

USD

~~30,879~~$

30,644

April 2022 - July 2023

December 31, 2021

FX Forward

NOK

190,772

February 2022 - May 2024

Interest Rate Swap

USD

30,762

April 2022 - July 2023

The table below represents the effect of the derivative financial instruments on the consolidated statements of operations and of comprehensive income (loss) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (dollars in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Other gain (loss), net
Non-designated foreign exchange contracts $ 3,304 $ 99 $ 4,257 $ 4,573
Non-designated interest rate contracts 4 7 22 (17,084)
$ 3,308 $ 106 $ 4,279 $ (12,511)
Other income
Non-designated foreign exchange contracts $ — $ — $ — $ 178
$ — $ — $ — $ 178
Accumulated other comprehensive income (loss)
Designated foreign exchange contracts $ — $ — $ — $ 21,764
$ — $ — $ — $ 21,764


	Three Months Ended March 31,
	2022		2021
Other gain, net
Non-designated foreign exchange contracts	$	(221)	$	(279)
Non-designated interest rate contracts	8		13
	$	(213)	$	(266)

At the end of each quarter, the Company reassesses the effectiveness of its net investment hedges and as appropriate, dedesignates the portion of the derivative notional that is in excess of the beginning balance of its net investments as non-designated hedges. Any unrealized gain or loss on the dedesignated portion of net investment hedges is transferred into earnings, recorded in other gain, ~~(loss),~~ net. During the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ no gain (loss) was transferred from accumulated other comprehensive income (loss).

Offsetting Assets and Liabilities

The Company enters into agreements subject to enforceable netting arrangements with its derivative counterparties that allow the Company to offset the settlement of derivative assets and liabilities in the same currency by derivative instrument type or, in the event of default by the counterparty, to offset all derivative assets and liabilities with the same counterparty. The Company has elected not to net derivative asset and liability positions, notwithstanding the conditions for right of offset may have been met. The Company presents derivative assets and liabilities with the same counterparty on a gross basis on the consolidated balance sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table sets forth derivative positions where the Company has a right of offset under netting arrangements with the same counterparty as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (dollars in thousands):


		Gross Amounts of Assets (Liabilities) Included on Consolidated Balance Sheets		Net Amounts of Assets (Liabilities)			Gross Amounts of Assets (Liabilities) Included on Consolidated Balance Sheets				Net Amounts of Assets (Liabilities)
												Net Amounts of Assets (Liabilities)
September 30, 2021
March 31, 2022								March 31, 2022
Derivative Assets	Derivative Assets							Derivative Assets
Foreign exchange contracts	Foreign exchange contracts	$	4,389		$	4,389		Foreign exchange contracts	$	1,105			$	1,105

		$	4,389		$	4,389			$	1,105			$	1,105
Derivative Liabilities	Derivative Liabilities							Derivative Liabilities

Interest rate contracts	Interest rate contracts	$	(15)		$	(15)		Interest rate contracts	$	(2)			$	(2)
		$	(15)		$	(15)			$	(2)			$	(2)

December 31, 2020
December 31, 2021								December 31, 2021
Derivative Assets	Derivative Assets							Derivative Assets
Foreign exchange contracts	Foreign exchange contracts	$	386		$	386		Foreign exchange contracts	$	1,373			$	1,373

		$	386		$	386			$	1,373			$	1,373
Derivative Liabilities	Derivative Liabilities							Derivative Liabilities

Interest rate contracts	Interest rate contracts	$	(37)		$	(37)		Interest rate contracts	$	(9)			$	(9)
		$	(37)		$	(37)			$	(9)			$	(9)

The Company did not offset any of its derivatives positions as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~

During the third quarter of 2021, the Company entered into 3 USD-EUR forward swaps for a total notional amount of 120 million EUR in order to minimize foreign currency cash flow risk on the Company’s European denominated assets. These forward swaps mature on December 31, 2021, where the Company has agreed to sell EUR and buy USD at a locked in forward curve rate.2021.

16. Commitments and Contingencies

Lending Commitments

Ground Lease Obligation

The Company’s operating leases are ground leases acquired with real estate.

At ~~September 30,~~March 31, 2022 and December 31, 2021 the weighted average remaining lease term was 13.9 years for ground leases.

The following table presents ground lease expense, included in property operating expense, for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (dollars in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			Three Months Ended March 31, 2022		Three Months Ended March 31, 2021
Operating lease expense:	Operating lease expense:									Operating lease expense:
Minimum lease expense	Minimum lease expense	$	761	$	805	$	2,290	$	2,407	Minimum lease expense	$	768	$	768
Variable lease expense										Variable lease expense	—		—
											$	768	$	768
		$	761	$	805	$	2,290	$	2,407

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The operating lease liability for ground leases was determined using a weighted average discount rate of 5.3%. The following table presents future minimum rental payments, excluding contingent rents, on noncancellable ground leases on real estate as of ~~September 30, 2021~~March 31, 2022 (dollars in thousands):

Remainder of 2021 $ 768
2022 3,099
2023 3,110
2024 2,213
2025 2,148
2026 and thereafter 19,327
Total lease payments 30,665
Less: Present value discount 9,759
Operating lease liability (Note 8) $ 20,906

~~The following table presents future minimum rental payments, excluding contingent rents, on noncancellable ground leases on real estate as of December 31, 2020 (dollars in thousands):~~


2021		$	3,071
2022		3,099
Remainder of 2022				Remainder of 2022	$	2,327
2023	2023	3,110		2023	3,110
2024	2024	2,213		2024	2,213
2025	2025	2,148		2025	2,148
2026 and thereafter		19,327
2026				2026	2,073
2027 and thereafter				2027 and thereafter	17,254
Total lease payments	Total lease payments	32,968		Total lease payments	29,125
Less: Present value discount	Less: Present value discount	10,782		Less: Present value discount	9,391
Operating lease liability (Note 8)	Operating lease liability (Note 8)	$	22,186	Operating lease liability (Note 8)	$	19,734

Office Lease

During the ~~second~~first quarter of ~~2021,~~2022, the Company entered into an office lease in ~~New York.~~Los Angeles. There were no office leases as of March 31, 2021.

At ~~September 30, 2021,~~March 31, 2022, the weighted average remaining lease term was ~~7.0~~6.9 years for the ~~New York~~ office ~~lease.~~leases.

For the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, the following table summarizes lease expense, included in ~~administrative~~operating expense (dollars in thousands):


	~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022
	Corporate ~~Office~~Offices
Operating lease expense:
Fixed lease expense	$	~~333~~200

	$	~~333~~200

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~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

The operating lease liability for the office ~~lease was~~leases were determined using a weighted average discount rate of 2.36%. As of ~~September 30, 2021,~~March 31, 2022, the Company’s future operating lease commitments for the corporate office ~~was~~leases were as follows (dollars in thousands):


		Corporate Offices			Corporate Offices
Remainder of 2021		$	200
2022		798
Remainder of 2022(1)				Remainder of 2022(1)	$	598
2023	2023	798		2023	1,239
2024	2024	798		2024	1,293
2025	2025	798		2025	1,308
2026 and thereafter		2,195
2026				2026	1,323
2027 and thereafter				2027 and thereafter	3,068
Total lease payments	Total lease payments	5,587		Total lease payments	8,829
Less: Present value discount	Less: Present value discount	$	386	Less: Present value discount	741
Operating lease liability (Note 8)	Operating lease liability (Note 8)	$	5,201	Operating lease liability (Note 8)	$	8,088

__________________________________________

(1)The Company entered into a Los Angeles office lease in the first quarter of 2022, with rent payments beginning in 2023.

Litigation and Claims

The Company may be involved in litigation and claims in the ordinary course of the business. As of ~~September 30, 2021,~~March 31, 2022, the Company was not involved in any legal proceedings that are expected to have a material adverse effect on the Company’s results of operations, financial position, or liquidity.

~~Internalization~~

Table of Contents

During the second quarter of 2021, the Company finalized the internalization with its Manager. The Company entered into the Termination Agreement with its Manager pursuant to which the Management Agreement terminated effective April 30, 2021, and the Company will no longer pay base management fees or incentive fees with respect to any period thereafter and made a one-time cash payment of $102.3 million to the Manager.BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Employment contracts

At March 31, 2021, the Company did not employ any personnel. Instead, the Company relied on the resources of its Manager and affiliates to conduct the Company’s operations. On April 30, 2021, the Company entered into employment agreements with the Company’s Chief Executive Officer and certain of the Company’s senior management team, and in accordance with the terms of the Termination Agreement, the Company extended offers of employment to certain employees that ~~have~~had contributed substantially to the Company’s investment, underwriting, portfolio and asset management, loan servicing, financial reporting, treasury, legal, tax, credit, risk and compliance responsibilities employment, which have been accepted.

17. Segment Reporting

Since the third quarter of 2019, the Company conducted its business through the following 2 portfolios and accompanying operating segments: the Core Portfolio, which consisted of the loan portfolio, CRE debt securities, net leased real estate and corporate; and the Legacy, Non-Strategic Portfolio segment, which consisted of direct investments in operating real estate, private equity investments, certain retail and other loans, as well as corporate-level asset management and other fees. Since then, the Company has resolved 56 investments in the Legacy, Non-Strategic Portfolio and the remaining Legacy, Non-Strategic Portfolio net asset value represented less than 1% of the total net book value at the end of 2020. As such, the Company has dissolved the separate segment reporting of the Legacy, Non-Strategic Portfolio segment as of the beginning of the first quarter of 2021. Prior periods have been recast to reflect these reportable segments for all periods presented.

~~During the first quarter of 2021, the Company realigned the business and reportable segment information to reflect how the CODM regularly review and manage the business. As a result, the~~The Company presents its business ~~as one portfolio and~~within the following business segments:

•Senior and Mezzanine Loans and Preferred Equity—CRE debt investments including senior mortgage loans, mezzanine loans, and preferred equity interests as well as participations in such loans. The segment also includes ADC loan arrangements accounted for as equity method investments.

•Net Leased and Other Real Estate—direct investments in CRE with long-term leases to tenants on a net lease basis,

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~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

where such tenants generally will be responsible for property operating expenses such as insurance, utilities, maintenance, capital expenditures and real estate taxes. It also includes other real estate, currently consisting of three investments with direct ownership in commercial real estate with an emphasis on properties with stable cash flow.

•CRE Debt Securities—investments currently consisting of BBB and some BB rated CMBS (including Non-Investment Grade “B-pieces” of a CMBS securitization pool), or CRE CLOs (including the junior tranches thereof, collateralized by pools of CRE debt investments). It also includes ~~two sub-portfolios~~a sub-portfolio of private equity funds.

•Corporate—includes corporate-level asset management and other fees including operating expenses, ~~related to the Bank Credit Facility, related party~~compensation and ~~general~~benefits and ~~administrative expenses.~~restructuring charges.

There were no changes in the structure of the Company’s internal organization that prompted the change in reportable segments. Prior period amounts have been revised to conform to the current year presentation. Accordingly, the Company realigned the discussion and analysis of its portfolio and results of operations to reflect these reportable segments.

The Company primarily generates revenue from net interest income on the loan, preferred equity and securities portfolios, rental and other income from its net leased ~~hotel,~~and multi-tenant office ~~and multifamily real estate~~ assets, as well as equity in earnings of unconsolidated ventures. CRE debt securities include the Company’s investment in the subordinate tranches of the securitization trusts which are eliminated in consolidation. The Company’s income is primarily derived through the difference between revenue and the cost at which the Company is able to finance its investments. The Company may also acquire investments which generate attractive returns without any leverage.

The following tables present segment reporting for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (dollars in thousands):


		Senior and Mezzanine Loans and Preferred Equity		CRE Debt Securities		Net Leased and Other Real Estate		Corporate(1)		Total			Senior and Mezzanine Loans and Preferred Equity		CRE Debt Securities		Net Leased and Other Real Estate		Corporate(1)		Total
Three Months Ended September 30, 2021
Three Months Ended March 31, 2022												Three Months Ended March 31, 2022
Net interest income (expense)	Net interest income (expense)	$	33,110	$	1,296	$	—	$	(988)	$	33,418	Net interest income (expense)	$	29,365	$	886	$	—	$	(866)	$	29,385
Property and other income	Property and other income	760		(189)		26,367		384		27,322		Property and other income	121		133		24,168		22		24,444

Property operating expense	Property operating expense	—		—		(7,266)		—		(7,266)		Property operating expense	—		—		(6,724)		—		(6,724)
Transaction, investment and servicing expense	Transaction, investment and servicing expense	(548)		(4)		(106)		(428)		(1,086)		Transaction, investment and servicing expense	(1,051)		—		(100)		27		(1,124)
Interest expense on real estate	Interest expense on real estate	—		—		(7,968)		—		(7,968)		Interest expense on real estate	—		—		(7,556)		—		(7,556)
Depreciation and amortization	Depreciation and amortization	—		—		(8,697)		(153)		(8,850)		Depreciation and amortization	—		—		(8,551)		(43)		(8,594)
Provision for loan losses		(769)		—		—		—		(769)
Administrative expense		(53)		(229)		—		(11,530)		(11,812)
Unrealized gain on mortgage loans and obligations held in securitization trusts, net		—		3,867		—		—		3,867
Realized loss on mortgage loans and obligations held in securitization trusts, net		—		(3,867)		—		—		(3,867)
Other gain, net		—		—		275		3,034		3,309
Decrease of current expected credit loss reserve												Decrease of current expected credit loss reserve	866		—		—		—		866

Compensation and benefits												Compensation and benefits	—		—		—		(8,225)		(8,225)
Operating expense												Operating expense	(152)		(40)		(32)		(4,125)		(4,349)

Other gain (loss), net												Other gain (loss), net	(129)		—		10,369		48		10,288
Income (loss) before equity in earnings of unconsolidated ventures and income taxes	Income (loss) before equity in earnings of unconsolidated ventures and income taxes	32,500		874		2,605		(9,681)		26,298		Income (loss) before equity in earnings of unconsolidated ventures and income taxes	29,020		979		11,574		(13,162)		28,411
Equity in earnings (loss) of unconsolidated ventures	Equity in earnings (loss) of unconsolidated ventures	(95,977)		—		—		—		(95,977)		Equity in earnings (loss) of unconsolidated ventures	25		—		—		—		25
Income tax expense		—		(2,058)		(7)		—		(2,065)
Income tax benefit (expense)												Income tax benefit (expense)	63		—		(99)		—		(36)
Net income (loss)	Net income (loss)	$	(63,477)	$	(1,184)	$	2,598	$	(9,681)	$	(71,744)	Net income (loss)	$	29,108	$	979	$	11,475	$	(13,162)	$	28,400

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Senior and Mezzanine Loans and Preferred Equity CRE Debt Securities Net Leased and Other Real Estate
Corporate(1)
Total
Three Months Ended September 30, 2020
Net interest income (expense) $ 24,677 $ 2,338 $ 6 $ (1,798) $ 25,223
Property and other income (14) 225 41,421 76 41,708
Management fee expense — — — (7,083) (7,083)
Property operating expense — — (15,277) — (15,277)
Transaction, investment and servicing expense (226) (12) (440) (949) (1,627)
Interest expense on real estate — — (12,205) — (12,205)
Depreciation and amortization — — (14,770) — (14,770)
Provision for loan losses (10,404) — — — (10,404)
Impairment of operating real estate — — (3,451) — (3,451)
Administrative expense (41) (285) (69) (5,385) (5,780)
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net — (13,750) — 588 (13,162)
Other gain (loss), net (1,457) 1,790 9,347 — 9,680
Income (loss) before equity in earnings of unconsolidated ventures and income taxes 12,535 (9,694) 4,562 (14,551) (7,148)
Equity in earnings (loss) of unconsolidated ventures (1,779) — — — (1,779)
Income tax benefit 1,915 12,822 620 — 15,357
Net income (loss) $ 12,671 $ 3,128 $ 5,182 $ (14,551) $ 6,430


	Senior and Mezzanine Loans and Preferred Equity		CRE Debt Securities		Net Leased and Other Real Estate		Corporate(1)		Total
Three Months Ended March 31, 2021
Net interest income (expense)	$	22,919	$	2,353	$	—	$	(1,040)	$	24,232
Property and other income	(1)		53		25,796		(81)		25,767
Management fee expense	—		—		—		(7,258)		(7,258)
Property operating expense	—		—		(8,111)		—		(8,111)
Transaction, investment and servicing expense	(689)		(167)		(114)		(1,318)		(2,288)
Interest expense on real estate	—		—		(8,633)		—		(8,633)
Depreciation and amortization	—		—		(9,539)		—		(9,539)
Increase of current expected credit loss reserve	(3,225)		—		—		—		(3,225)
Compensation and benefits	—		—		—		(6,786)		(6,786)
Operating expense	(248)		(780)		(31)		(4,750)		(5,809)
Restructuring Charges	—		—		—		(109,171)		(109,171)
Unrealized gain on mortgage loans and obligations held in securitization trusts, net	—		8,638		—		—		8,638

Other gain (loss), net	—		(859)		9,226		—		8,367
Income (loss) before equity in earnings of unconsolidated ventures and income taxes	18,756		9,238		8,594		(130,404)		(93,816)
Equity in earnings (loss) of unconsolidated ventures	(2,400)		(78)		—		—		(2,478)
Income tax benefit	—		1,777		24		—		1,801
Net income (loss)	$	16,356	$	10,937	$	8,618	$	(130,404)	$	(94,493)

_________________________________________

(1)Includes ~~losses incurred~~income earned from ~~the~~ CRE securities purchased at a discount, recognized using the effective interest method had the transaction been recorded as an available for sale security, at amortized cost. During the three months ended September 30, 2020, $0.6 million was attributable to discount accretion income and was eliminated in consolidation in the corporate segment. The corresponding interest expense is recorded in net interest income in the Corporate column.

Senior and Mezzanine Loans and Preferred Equity CRE Debt Securities Net Leased and Other Real Estate
Corporate(1)
Total
Nine Months Ended September 30, 2021
Net interest income (expense) $ 81,954 $ 4,930 $ — $ (3,027) $ 83,857
Property and other income 941 (136) 76,972 1,221 78,998
Management fee expense — — — (9,596) (9,596)
Property operating expense — — (22,135) — (22,135)
Transaction, investment and servicing expense (1,800) (171) (283) (1,764) (4,018)
Interest expense on real estate — — (24,378) — (24,378)
Depreciation and amortization — — (28,185) (198) (28,383)
Provision for loan losses (5,194) — — — (5,194)
Administrative expense (593) (1,175) — (36,692) (38,460)
Restructuring charges — — — (109,321) (109,321)
Unrealized gain on mortgage loans and obligations held in securitization trusts, net — 32,021 — — 32,021
Realized loss on mortgage loans and obligations held in securitization trusts, net — (23,383) — — (23,383)
Other gain (loss), net (400) (859) 10,737 3,034 12,512
Income (loss) before equity in earnings of unconsolidated ventures and income taxes 74,908 11,227 12,728 (156,343) (57,480)
Equity in earnings (loss) of unconsolidated ventures (132,043) (200) — — (132,243)
Income tax benefit (expense) — (232) 102 — (130)
Net income (loss) $ (57,135) $ 10,795 $ 12,830 $ (156,343) $ (189,853)

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Senior and Mezzanine Loans and Preferred Equity CRE Debt Securities Net Leased and Other Real Estate
Corporate(1)
Total
Nine Months Ended September 30, 2020
Net interest income (expense) $ 76,794 $ 8,929 $ 15 $ (7,721) $ 78,017
Property and other income 118 297 138,379 198 138,992
Management fee expense — — — (22,235) (22,235)
Property operating expense — — (54,119) — (54,119)
Transaction, investment and servicing expense (3,060) (93) (787) (3,728) (7,668)
Interest expense on real estate — — (37,101) — (37,101)
Depreciation and amortization — — (46,766) — (46,766)
Provision for loan losses (80,285) — — — (80,285)
Impairment of operating real estate — — (33,512) — (33,512)
Administrative expense (790) (1,020) (297) (17,462) (19,569)
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net — (43,154) — 1,565 (41,589)
Other gain (loss), net (38,638) (101,552) 10,169 (94) (130,115)
Income (loss) before equity in earnings of unconsolidated ventures and income taxes (45,861) (136,593) (24,019) (49,477) (255,950)
Equity in earnings (loss) of unconsolidated ventures (71,102) 1,213 — — (69,889)
Income tax benefit (expense) (646) 11,274 916 — 11,544
Net income (loss) $ (117,609) $ (124,106) $ (23,103) $ (49,477) $ (314,295)

~~(1)~~Includes losses incurred from the CRE securities purchased at a discount, recognized using the effective interest method had the transaction been recorded as an available for sale security, at amortized cost. During the nine months ended September 30, 2020, $1.6 million was attributable to discount accretion income and was eliminated in consolidation in the corporate segment. The corresponding interest expense is recorded in net interest income in the Corporate column.

The following table presents total assets by segment as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (dollars in thousands):

Total Assets
Senior and Mezzanine Loans and Preferred Equity(1)
CRE Debt Securities(2)
Net Leased and Other Real Estate
Corporate(3)
Total
September 30, 2021 $ 2,288,717 $ 754,562 $ 894,675 $ 1,540,601 $ 5,478,555
December 31, 2020 1,929,937 1,720,624 1,261,137 1,300,239 6,211,937


Total Assets	Senior and Mezzanine Loans and Preferred Equity(1)		CRE Debt Securities(2)		Net Leased and Other Real Estate		Corporate(3)		Total
March 31, 2022	$	3,867,427	$	780,635	$	922,488	$	230,063	$	5,800,613
December 31, 2021	3,589,325		840,215		963,369		245,460		5,638,369

(1)Includes investments in unconsolidated ventures totaling ~~$199.6 million and$366.5~~$16.2 million as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020, respectively.~~2021.

(2)Includes PE Investments totaling ~~$4.8 million and $6.9~~$4.4 million as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020, respectively.~~2021.

(3)Includes cash, unallocated receivables, deferred costs and other assets, net and the elimination of the subordinate tranches of ~~the~~a securitization ~~trusts~~trust in consolidation.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Geography

Geography is generally defined as the location in which the income producing assets reside or the location in which income generating services are performed. Geography information on total income includes equity in earnings of unconsolidated ventures. Geography information on total income and long lived assets are presented as follows (dollars in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Total income by geography:	Total income by geography:									Total income by geography:
United States	United States	$	(17,238)	$	90,814	$	121,275	$	222,547	United States	$	73,445	$	70,951
Europe	Europe	6,471		5,968		(13,259)		30,115		Europe	4,969		6,401

Total(1)	Total(1)	$	(10,767)	$	96,782	$	108,016	$	252,662	Total(1)	$	78,414	$	77,352


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Long-lived assets by geography:	Long-lived assets by geography:					Long-lived assets by geography:
United States	United States	$	558,507	$	600,767	United States	$	548,749	$	553,368
Europe	Europe	300,755		314,190		Europe	295,577		294,824
Total(2)	Total(2)	$	859,262	$	914,957	Total(2)	$	844,326	$	848,192

(1)Includes interest income, interest income on mortgage loans held in securitization trusts, property and other income and equity in earnings of unconsolidated ventures.

(2)Long-lived assets are comprised of real estate and real estate related intangible assets, and excludes financial instruments and assets held for sale.

18. Earnings Per Share

The Company’s net income (loss) and weighted average shares outstanding for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ consist of the following (dollars in thousands, except per share data):


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Net income (loss)	Net income (loss)	$	(71,744)	$	6,430	$	(189,853)	$	(314,295)		Net income (loss)	$	28,400	$	(94,493)
Net (income) loss attributable to noncontrolling interests:	Net (income) loss attributable to noncontrolling interests:										Net (income) loss attributable to noncontrolling interests:
Investment Entities	Investment Entities	61		(1,222)		3,746		6,362			Investment Entities	(22)		226
Operating Partnership	Operating Partnership	1,626		(201)		4,016		7,109			Operating Partnership	(654)		1,953
Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	$	(70,057)	$	5,007	$	(182,091)	$	(300,824)		Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	$	27,724	$	(92,314)

Numerator:	Numerator:										Numerator:
Net loss allocated to participating securities (non-vested shares)	Net loss allocated to participating securities (non-vested shares)	$	—	$	—	$	—	$	(322)		Net loss allocated to participating securities (non-vested shares)	$	(110)	$	(192)
Net loss attributable to common stockholders		$	(70,057)	$	5,007	$	(182,091)	$	(301,146)
Net income (loss) attributable to common stockholders											Net income (loss) attributable to common stockholders	$	27,614	$	(92,506)

Denominator:	Denominator:										Denominator:
Weighted average shares outstanding(1)		128,693		128,583		128,430		128,537
Weighted average shares outstanding - basic(1)											Weighted average shares outstanding - basic(1)	128,758		129,781
Weighted average shares outstanding - diluted											Weighted average shares outstanding - diluted	129,745		129,781

Net loss per common share - basic and diluted		$	(0.54)	$	0.04	$	(1.42)	$	(2.34)
Net income (loss) per common share - basic and diluted											Net income (loss) per common share - basic and diluted	$	0.21	$	(0.71)

(1)The outstanding shares used to calculate the weighted average basic shares outstanding exclude ~~1,550,862~~981,632 and ~~867,956~~1,924,568 of restricted stock awards as of ~~September 30,~~March 31, 2022 and March 31, 2021, ~~and 2020~~ net of forfeitures, respectively, as those shares were issued but were not vested and therefore, not considered outstanding for purposes of computing basic income (loss) per common ~~share for the three and nine months ended September 30, 2021.~~

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~~COLONY CREDIT REAL ESTATE,~~BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

19. ~~Restructuring Charges~~

In April 2021, the Company entered into the Termination Agreement with its Manager pursuant to which the Company internalized its management function and made a one-time cash payment of $102.3 million to the Manager. The Company will no longer pay base management fees or incentive fees with respect to any period after April 30, 2021. The Company did not incur any restructuring costs for the three months ended September 30, 2021 and incurred $109.3 million of restructuring costs for the nine months ended September 30, 2021, which were paid by the Company in the second quarter of 2021. The additional restructuring costs of $7.0 million consist primarily of fees paid for legal and investment banking advisory services. Refer to Note 1, “Business and Organization,” for further detail.

~~20.~~ Subsequent Events

Dividends

~~On October 15, 2021,~~In April 2022, the Company paid a quarterly cash dividend of ~~$0.16~~$0.19 per share of Class A common stock for the quarter ending ~~September 30, 2021, to stockholders of record on September 30, 2021.~~

~~Subsequent to September 30, 2021, the Board of Directors approved a quarterly cash dividend of $0.18 per share for the fourth quarter of 2021, payable on January 14,~~March 31, 2022, to stockholders of record on ~~December~~March 31, ~~2021.~~2022.

Loan Originations

Subsequent to ~~September 30, 2021~~March 31, 2022, the Company funded 46 senior mortgage loans with a total commitment of $~~85.8~~177.2 million. The average initial funded amount was ~~$19.9~~$27.3 million and had a weighted average spread of ~~3.59%~~3.86% plus ~~LIBOR.~~SOFR.

~~Investment Sales~~Stock Grant

Subsequent to ~~September 30, 2021~~,March 31, 2022, the Company ~~sold 1 CRE security for $5.1 million in gross proceeds and will recognize a gain~~granted 1,456,366 shares of ~~approximately $1.2 million. Following~~common stock to certain employees of the ~~sale, the Company no longer holds any CRE securities.~~

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes thereto, which are included in Item 1 of this Quarterly Report, as well as the information contained in our Form 10-K for the year ended December 31, ~~2020,~~2021, which is accessible on the SEC’s website at www.sec.gov.

Introduction

We are 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 we expect to be our primary investment strategy. Additionally, we may also selectively originate mezzanine loans and preferred equity investments, which may include profit participations. The mezzanine loans and preferred equity investments may be in conjunction with our 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. We will continue to target net leased equity investments on a selective basis. Additionally, we ~~currently have~~hold investments in CRE debt securities ~~primarily~~ consisting of commercial mortgage-backed securities (“CMBS”) (including “B-pieces” of a CMBS securitization pool) or CRE collateralized loan obligations (“CLOs”) (including the junior tranches collateralized by pools of CRE debt investments). We have continued to reduce our CMBS holdings since the second quarter of 2020, and have one CMBS security available for sale in addition to ourthat are “B-pieces” of a CMBS securitization pool ~~at September 30, 2021. Any future investments in CRE debt securities would be selective and opportunistic.~~which are subject to risk retention provisions through June 2022.

We were organized in the state of Maryland on August 23, 2017 and maintain key offices in New York, New York and Los Angeles, California. We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, beginning with our taxable year ended December 31, 2018. We conduct all our activities and hold substantially all our assets and liabilities through our operating subsidiary, BrightSpire Capital Operating Company, LLC ~~(formerly known as Credit RE Operating Company, LLC, the~~(the “OP”). At ~~September 30, 2021,~~March 31, 2022, we owned 97.7% of the OP, as its sole managing member. The remaining 2.3% is owned as noncontrolling interests.

~~The Internalization~~

On April 30, 2021, we completed the internalization of the Company’s management and operating functions and terminated our relationship with CLNC Manager, LLC (the “Manager”), a subsidiary of DigitalBridge Group, Inc. (“DigitalBridge”), formerly known as Colony Capital, Inc., in accordance with that termination agreement dated April 4, 2021 between the Company, the OP, the Manager and Colony Capital Investment Advisors, LLC (the “Termination Agreement,” and the transactions contemplated thereunder, the “Internalization”). We have paid the Manager a one-time termination fee of $102.3 million. Therefore, we will no longer pay management or incentive fees to the Manager for any post-closing period and we have assumed general and administrative expenses directly. We anticipate a savings in operating costs as a result of the Internalization. Further, in connection with the Internalization, certain affiliates of ours and the Manager entered into a transition services agreement to facilitate an orderly internalization transition of the management of our operations and, in addition, we will provide affiliates of the Manager with certain limited transition services.

Our executive team remains unchanged, including Michael J. Mazzei, Chief Executive Officer and President; Andrew E. Witt, Chief Operating Officer and Executive Vice President; Frank V. Saracino, Chief Financial Officer and Executive Vice President; David A. Palamé, General Counsel, Secretary and Executive Vice President; George Kok, Chief Credit Officer; and Daniel Katz, Head of Originations. As a result of the Company’s 2021 Annual Meeting of Stockholders, DigitalBridge no longer has affiliated representatives on our board of directors. The Company’s board of directors is comprised of six members, including our five incumbent independent directors, led by Catherine D. Rice, our Independent Chairperson, Vernon Schwartz, John Westerfield, Winston W. Wilson and Kim S. Diamond who was recently appointed during the fourth quarter of 2021, and Michael J. Mazzei, the Company’s Chief Executive Officer and President. Additionally, certain professionals that have contributed substantially to our investment, underwriting, portfolio and asset management, loan servicing, financial reporting, treasury, legal, tax, credit, risk and compliance responsibilities seamlessly moved forward as direct employees of the Company.

Our senior management team has extensive experience managing and investing in our target assets and other real estate-related investments through a variety of credit cycles and market conditions. The clarity in organizational structure and dedicated management and employee base achieved through the Internalization solidifies the footprint and corresponding network developed by our investment and asset management teams, with proprietary market knowledge, sourcing capabilities and the local presence required to identify, execute and manage new originations and existing investments on behalf of the Company. Our real estate investment platform and relationships allow us to source, underwrite, structure and manage investment opportunities as well as to access debt and equity capital to fund our operations. We have fully integrated investment and

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portfolio management, finance and administration functions, including legal, compliance, human resources, investor relations, asset valuation, credit and risk management and information technology services. The Company has a captive, fully functional, asset management company that engages primarily in loan servicing for performing, sub-performing and non-performing commercial loans, including senior secured loans, revolving lines of credit, loan participations, subordinated loans, unsecured loans and mezzanine debt. Our asset management company is a commercial special servicer rated by both Standard & Poor’s and Fitch’s rating services.

On June 24, 2021, BrightSpire Capital, Inc. changed its name from Colony Credit Real Estate, Inc. We also changed our principal place of business and corporate headquarters from Los Angeles to New York City, now located at 590 Madison Avenue, 33rd Floor, New York, NY 10022. We continue to be publicly traded on the New York Stock Exchange. However, concurrent with our name change, we changed our ticker symbol to BRSP.

Our Target Assets

During the third quarter of 2021, we have continued to selectively pursue new investments. These new investments were entirely first mortgage loans eligible for collateralized loan obligation securitizations.

Our investment strategy is to originate and selectively acquire our target assets, which consist of the following:

•~~CRE Debt Investments:~~

–Senior Mortgage Loans. Our primary focus is originating and selectively acquiring senior mortgage loans that are backed by CRE assets. These loans are secured by a first mortgage lien on a commercial property and provide mortgage financing to a commercial property developer or owner. The loans may vary in duration, bear interest at a fixed or floating rate and amortize, if at all, over varying periods, often with a balloon payment of principal at maturity. Senior mortgage loans may include junior participations in our originated senior loans for which we have syndicated the senior participations to other investors and retained the junior participations for our portfolio. We believe these junior participations are more like the senior mortgage loans we originate than other loan types given their credit quality and risk profile.

•Mezzanine ~~Loans and Preferred Equity:~~

–~~Mezzanine~~ Loans. We may originate or acquire mezzanine loans, which are structurally subordinate to senior loans, but senior to the borrower’s equity position. Generally, we will originate or acquire these loans if we believe we have the ability to protect our position and fund the first mortgage, if necessary. Mezzanine loans may be structured such that our return accrues and is added to the principal amount rather than paid on a current basis. We may also pursue equity participation opportunities in instances when the risk-reward characteristics of the investment warrant additional upside participation in the possible appreciation in value of the underlying assets securing the investment.

–•Preferred Equity. We may make investments that are subordinate to senior and mezzanine loans, but senior to the common equity in the mortgage borrower. Preferred equity investments may be structured such that our return accrues and is added to the principal amount rather than paid on a current basis. We also may pursue equity participation opportunities in preferred equity investments, like such participations in mezzanine loans.

•Net Leased and Other Real Estate. We may ~~also~~occasionally invest directly in well-located commercial real estate 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. In addition, tenants of our properties typically pay rent increases based on: (1) increases in the consumer price index (typically subject to ceilings), (2) fixed increases, or (3) additional rent calculated as a percentage of the tenants’ gross sales above a specified level. We believe that a portfolio of properties under long-term, net lease agreements generally produces a more predictable income stream than many other types of real estate portfolios, while continuing to offer the potential for growth in rental income.

Our operating segments include senior and mezzanine loans and preferred equity, net leased and other real estate, all of which are included in our target assets, and CRE debt securities and corporate.

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The allocation of our capital among our target assets will depend on prevailing market conditions at the time we invest and may change over time in response to different prevailing market conditions. In addition, in the future, we may invest in assets other than our target assets or change our target assets. With respect to all our investments, we invest so as to maintain our qualification as a REIT for U.S. federal income tax purposes and our exclusion or exemption from regulation under the Investment Company Act of 1940, as amended (the “Investment Company Act”).

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We believe that events in the financial markets from time to time, including the current and potential impacts of the COVID-19 pandemic, have created and will continue to create ~~significant~~ dislocation between price and intrinsic value in certain asset classes as well as a supply and demand imbalance of available credit to finance these assets. We believe that our in-depth understanding of CRE and real estate-related investments, in-house underwriting, asset management and resolution capabilities, provides an extensive platform to regularly evaluate our investments and determine primary, secondary or alternative disposition strategies. This includes intermediate servicing and negotiating, restructuring of non-performing investments, foreclosure considerations, management or development of owned real estate, in each case to reposition and achieve optimal value realization for the ~~Company~~us and ~~its~~our stockholders. Depending on the nature of the underlying investment, we may pursue repositioning strategies through judicious capital investment in order to extract maximum value from the investment or recognize unanticipated losses to reinvest resulting liquidity in higher-yielding performing investments.

Our Business Segments

During the first quarter of 2021, we realigned the business and reportable segment information to reflect how the Chief Operating Decision Makers (“CODM”) regularly review and manage the business. As a result, we present our business as one portfolio and the following business segments:

•Senior and Mezzanine Loans and Preferred ~~Equity~~—Equity—CRE debt investments including senior mortgage loans, mezzanine loans, and preferred equity interests as well as participations in such loans. The segment also includes acquisition, development and construction (“ADC”) arrangements accounted for as equity method investments.

•Net Leased and Other Real ~~Estate~~—Estate—direct investments in commercial real estate 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. It also includes other real estate, currently consisting of three investments with direct ownership in commercial real estate, with an emphasis on properties with stable cash flow.

•CRE Debt ~~Securities~~—Securities— securities investments currently consisting of BBB and some BB rated CMBS (including Non-Investment Grade “B-pieces” of a CMBS securitization pool) or CRE CLOs (including the junior tranches thereof, collateralized by pools of CRE debt investments). It also includes two sub-portfolios of private equity funds.

•~~Corporate~~—Corporate—includes corporate-level asset management and other fees including expenses related to our secured revolving credit facility (the “Bank Credit Facility”), ~~related party~~compensation and ~~general~~benefits and ~~administrative expenses.~~restructuring charges.

~~There were no changes~~Our target assets are included in the structure of our internal organization that prompted the change in reportable segments. Prior year amounts have been revised to conform to the current year presentation. Accordingly, we realigned the discussion and analysis of our portfolio and results of operations to reflect these reportabledifferent business segments.

Significant Developments

During the three months ended ~~September 30, 2021~~March 31, 2022, and through ~~November 2, 2021,~~May 5, 2022, significant developments affecting our business and results of operations of our portfolio included the following:

Capital Resources

•During the third quarter of 2021, we executed a securitization transaction through BRSP 2021-FL1, contributing 31 floating rate mortgages secured by 42 properties, totaling $800 million, which resulted in the sale of $670 million of investment grade notes. The securitization reflects an advance rate of 83.75% at a weighted cost of funds of LIBOR plus 1.49% (before transaction expenses). In connection with this transaction, we repaid $701.4 million under our master repurchase facilities during the third quarter of 2021. See “Liquidity and Capital Resources” below for further discussion;

•Declared and paid a ~~third~~first quarter ~~$0.16~~$0.19 per share dividend on ~~October~~April 15, ~~2021;~~2022;

•~~In October 2021,~~Amended our ~~board~~Bank Credit Facility to reduce the aggregate amount of ~~directors declared a fourth quarter dividend~~lender commitments from $300 million to $165 million. We also amended five of ~~$0.18 per share, payable on January 14, 2022~~our Master Repurchase Facilities to ~~stockholders of record as of December 31, 2021;~~reduce the minimum tangible net worth covenant requirement from $1.4 billion to $1.1 billion; and

•As of the date of this report, we have approximately ~~$367~~$428 million of liquidity, consisting of ~~$209~~$263 million cash on hand and ~~$158~~$165 million available on our Bank Credit Facility.

Our Portfolio

•~~During~~Generated U.S. GAAP net income of $27.7 million, or $0.21 per share and Distributable Earnings and Adjusted Distributable Earnings of $28.8 million, or $0.22 per share for the ~~third quarter~~three months ended March 31, 2022;

•Funded 16 senior mortgage loans with a total commitment of ~~2021, as~~$560.7 million. The average initial funded amount was $29.6 million and had a ~~result~~weighted average spread of ~~maturity default,~~SOFR plus 3.54%. We also funded one mezzanine loan with a ~~consolidation~~total commitment of ~~all indebtedness senior to our position~~$28.2 million and ~~other factors, we recorded~~an initial funded amount of $7.4 million. The mezzanine loan has a ~~fair value loss adjustment~~fixed interest rate of ~~$97.9~~12.00%;

•Received loan repayment proceeds of $223.7 million onfrom five loans;

•Sold a ~~mezzanine B-participation investment in~~net lease property and hotel property for a ~~development project in Los Angeles, California. See “Los Angeles, California Mixed-Use Project” in “Our Portfolio” below;~~gross sales price of $19.6 million and $36.0 million, respectively, generating net proceeds of $10.7 million from the combined sales;

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•~~In the fourth quarter of 2021, we expect~~Subsequent to amend and restate the senior mortgage loan in a hotel located in San Jose, California, subject to customary closing conditions, in the amount of $184.9 million. As terms were approved in the second quarter of 2021 and our senior loan documents were substantively finalized during the third quarter of 2021, for the three months ended September 30, 2021 we reinstated the loan investment and recognized interest income of $6.1 million and $0.7 million of other income related to late fees on the consolidated statement of operations. See “San Jose, California Hotel Senior Loan” in “Our Portfolio” below;

•~~During the third quarter of 2021,~~March 31, 2022, we funded 18six senior mortgage loans with a total commitment of ~~$518.5~~$177.2 million. The average initial funded amount was ~~$25.5~~$27.3 million and had a weighted average spread of ~~3.35%~~SOFR plus ~~LIBOR;~~3.86%;

•Subsequent to ~~September 30, 2021,~~March 31, 2022, we ~~funded~~received loan repayment proceeds of $98.2 million from four ~~senior mortgage loans with a total commitment of $85.8 million. The average initial funded amount was $19.9 million and had a weighted average spread of 3.59% plus LIBOR;~~loans.

•During the third quarter of 2021, we entered into three USD-EUR forward swaps for a total notional amount of 120 million EUR. In order to minimize foreign currency cash flow risk on our European denominated assets, we have agreed to sell EUR and buy USD at a locked in forward curve rate pursuant to the forward swaps. These forward swaps mature on December 31, 2021;

•Subsequent to September 30, 2021, we sold one CRE security for $5.1 million in gross proceeds and will recognize a gain of approximately $1.2 million. Following the sale, we no longer hold any CRE securities.

~~Results of Operations~~

Factors Impacting Our ~~Portfolio~~

•Generated U.S. GAAP net loss of $70.1 million, or $(0.54) per share, Distributable Earnings (Loss) of $68.4 million, or $(0.51) per share and Adjusted Distributable Earnings of $35.0 million, or $0.26 per share during the three months ended September 30, 2021.Operating Results

Impact of COVID-19

~~Considerable uncertainty still surrounds COVID-19 and its potential effects, and the extent of and effectiveness of any responses taken on a national and local level. Accordingly, the~~The COVID-19 pandemic has negatively impacted CRE credit REITs across the industry, as well as other companies that own and operate commercial real estate investments, including our company. As we manage the impact and uncertainties of the COVID-19 pandemic, cash preservation, liquidity and investment and portfolio management ~~remain~~are our key priorities.

We continue to work closely with our borrowers and tenants to address the impact of COVID-19 on their ~~business.~~businesses. To the extent that certain borrowers are experiencing significant financial dislocation we have and may continue to consider the use of interest and other reserves and/or replenishment obligations of the borrower and/or guarantors to meet current interest payment obligations, for a limited period. Similarly, we have and may in the future evaluate converting certain current interest payment obligations to payment-in-kind as a potential bridge period solution. We have in limited cases allowed some portions of current interest to convert to payment-in-kind.

The COVID-19 pandemic has created uncertainties that have and may continue to negatively impact our future operating results, liquidity and financial condition. However, we believe there are too many uncertainties to predict and quantify the continuing impact. The potential concerns and risks include, but are not limited to, mortgage ~~borrowers~~borrowers’ ability to make monthly payments, lessees’ capacity to pay their rent, and the resulting impact on us to meet our obligations. Therefore, there can be no assurances that we will not need to take impairment charges in future quarters or experience further declines in revenues and net income, which could be material.

Impact of the Russia-Ukraine conflict and increases in market interest rates

In February 2022, conflict escalated between Russia and Ukraine. In response, the U.S., the U.K., and the European Union governments, among others, imposed financial and economic sanctions targeting Russia that, among other things, restrict transactions with Russian entities and individuals and trade and financing to, from, or in Russia and certain regions of Ukraine. Although we do not conduct any business, and have not originated any loans secured by assets, in Russia or Ukraine, the conflict may cause continued volatility in the capital markets, other adverse economic impacts due to additional sanctions, embargoes, regional instability and geopolitical shifts, and increased commodities prices and supply chain disruptions, any of which may negatively impact the business or operations of our borrowers and tenants and our business and results of operations.

On March 16, 2022, the Federal Open Market Committee (“FOMC”) of the Federal Reserve raised the target range for the federal funds rate by 0.25% to a range of 0.25% to 0.50%, the first rate increase since December 2018, stating the conflict is likely to create additional upward pressure on inflation and weigh on economic activity. The FOMC further signaled an expectation of ongoing increases in the federal funds rate at its future meetings in 2022. An increase in interest rates may result in the following impacts to our business operations:

–the value of fixed-rate investments may decrease;

–prepayments on certain assets in our portfolio may slow;

–coupons on our floating and adjustable-rate mortgage loans and CMBS may reset, although on a delayed basis, to higher interest rates;

–to the extent we use leverage to finance our assets, the interest expense associated with our borrowings may increase;

–to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements may increase; and

–disruptions to our borrowers’ and tenants’ ability to finance their activities, which could adversely impact their ability to make their monthly mortgage payments and meet their loan obligations.

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Our Portfolio

As of ~~September 30, 2021,~~March 31, 2022, our portfolio consisted of ~~108~~125 investments representing approximately ~~$3.9~~$4.6 billion in book value (based on our share of ownership and excluding cash, cash equivalents and certain other assets). Our senior and mezzanine loans and preferred equity consisted of 90110 senior mortgage loans, mezzanine loans and preferred equity investments ~~and other loans~~ and had a weighted average cash coupon of ~~3.8%~~3.7% and a weighted average all-in unlevered yield of ~~5.4%~~5.0%. Our net leased and other real estate consisted of approximately ~~3.2~~6.4 million total square feet of space and total ~~third~~first quarter ~~2021~~2022 net operating income (“NOI”) of that portfolio was approximately ~~$9.4~~$17.1 million. Refer to “Non-GAAP Supplemental Financial Measures” below for further information on NOI.

As of ~~September 30, 2021,~~March 31, 2022, our portfolio consisted of the following investments (dollars in thousands):


		Count(1)	Book value (Consolidated)		Book value (at BRSP share)(2)		Net book value (Consolidated)(3)		Net book value (at BRSP share)(4)			Count(1)	Book value (Consolidated)		Book value (at BRSP share)(2)		Net book value (Consolidated)(3)		Net book value (at BRSP share)(4)
Our Portfolio	Our Portfolio										Our Portfolio
Senior mortgage loans~~(5)~~	Senior mortgage loans~~(5)~~	75	$	3,063,361	$	2,976,118	$	929,096	$	841,852	Senior mortgage loans~~(5)~~	102	$	3,629,415	$	3,629,415	$	894,559	$	894,559
Mezzanine loans(5)	Mezzanine loans(5)	10	262,435		185,631		262,435		185,631		Mezzanine loans(5)	7	129,565		129,565		129,565		129,565
Preferred equity(5)(6)	Preferred equity(5)(6)	5	39,167		35,781		39,167		35,781		Preferred equity(5)(6)	1	16,200		16,200		16,200		16,200
Subtotal	Subtotal	90	3,364,963		3,197,530		1,230,698		1,063,264		Subtotal	110	3,775,180		3,775,180		1,040,324		1,040,324
Net leased real estate	Net leased real estate	9	683,439		495,790		192,562		149,113		Net leased real estate	8	660,561		660,561		182,781		182,781
Other real estate	Other real estate	3	213,467		199,784		4,743		4,358		Other real estate	2	177,886		164,380		1,290		933
CRE debt securities	CRE debt securities	5	43,069		43,069		43,069		43,069		CRE debt securities	4	36,154		36,154		36,154		36,154
Private equity interests	Private equity interests	1	4,848		4,848		4,848		4,848		Private equity interests	1	4,406		4,406		4,406		4,406
Total/Weighted average Our Portfolio	Total/Weighted average Our Portfolio	108	$	4,309,786	$	3,941,021	$	1,475,920	$	1,264,652	Total/Weighted average Our Portfolio	125	$	4,654,187	$	4,640,681	$	1,264,955	$	1,264,598

(1)Count for net leased real estate and other real estate represents number of investments.

(2)Book value at our share represents the proportionate book value based on ownership by asset as of ~~September 30, 2021.~~March 31, 2022.

(3)Net book value represents book value less any associated financing as of ~~September 30, 2021.~~March 31, 2022.

(4)Net book value at our share represents the proportionate book value based on asset ownership less any associated financing based on ownership as of ~~September 30, 2021~~March 31, 2022.

(5)~~Senior mortgage loans, mezzanine~~Mezzanine loans and preferred equity include investments in joint ventures whose underlying interest is in a loan or preferred equity.

(6)Preferred equity balances include ~~$16.9~~$16.2 million of book value at our share attributable to related equity participation interests.

Underwriting Process

We use an investment and underwriting process that has been developed by our senior management team leveraging their extensive commercial real estate expertise over many years and real estate cycles. The underwriting process focuses on some or all of the following factors designed to ensure each investment is evaluated appropriately: (i) macroeconomic conditions that may influence operating performance; (ii) fundamental analysis of underlying real estate, including tenant rosters, lease terms, zoning, necessary licensing, operating costs and the asset’s overall competitive position in its market; (iii) real estate market factors that may influence the economic performance of the investment, including leasing conditions and overall competition; (iv) the operating expertise and financial strength and reputation of a tenant, operator, partner or borrower; (v) the cash flow in place and projected to be in place over the term of the investment and potential return; (vi) the appropriateness of the business plan and estimated costs associated with tenant buildout, repositioning or capital improvements; (vii) an internal and third-party valuation of a property, investment basis relative to the competitive set and the ability to liquidate an investment through a sale or refinancing; (viii) review of third-party reports including appraisals, engineering and environmental reports; (ix) physical inspections of properties and markets; (x) the overall legal structure of the investment, contractual implications and the lenders’ rights; and (xi) the tax and accounting impact.

Loan Risk Rankings

In addition to reviewing loans ~~and preferred equity~~ held for investment for impairment quarterly, we evaluate loans ~~and preferred equity~~ held for investment to determine if ~~an allowance for loan loss~~a current expected credit losses reserve should be established. In conjunction with this review, we assess the risk factors of each senior and mezzanine loans and preferred equity and assign a risk ranking based on a variety of factors, including, without limitation, underlying real estate performance and asset value, values of comparable properties, durability and quality of property cash flows, sponsor experience and financial wherewithal, and the existence of a risk-mitigating loan structure. Additional key considerations include loan-to-value ratios, debt service coverage ratios, loan structure, real estate and credit market dynamics, and risk of default or principal loss. Based on a five-point scale, our loans ~~and preferred equity~~ held for investment are rated “1” through “5,” from less risk to greater risk. At the time of origination or

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purchase, loans ~~and preferred equity~~ held for investment are ranked as a “3” and will move accordingly going forward based on the ratings which are defined as follows:

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1.Very Low Risk—The loan is performing as agreed. The underlying property performance has exceeded underwritten expectations with very strong NOI, debt service coverage ratio, debt yield and occupancy metrics. Sponsor is investment grade, very well capitalized, and employs a very experienced management team.

2.Low Risk—The loan is performing as agreed. The underlying property performance has met or exceeds underwritten expectations with high occupancy at market rents, resulting in consistent cash flow to service the debt. Strong sponsor that is well capitalized with experienced management team.

3.Average Risk—The loan is performing as agreed. The underlying property performance is consistent with underwriting expectations. The property generates adequate cash flow to service the debt, and/or there is enough reserve or loan structure to provide time for sponsor to execute the business plan. Sponsor has routinely met its obligations and has experience owning/operating similar real estate.

4.High Risk/Delinquent/Potential for Loss—The loan is in excess of 30 days delinquent and/or has a risk of a principal loss. The underlying property performance is behind underwritten expectations. Loan covenants may require occasional waivers/modifications. Sponsor has been unable to execute its business plan and local market fundamentals have deteriorated. Operating cash flow is not sufficient to service the debt and debt service payments may be coming from sponsor equity/loan reserves.

5.Impaired/Defaulted/Loss Likely—The loan is in default, or a default is imminent, and has a high risk of a principal loss, or has incurred a principal loss. The underlying property performance is significantly worse than underwritten expectation and sponsor has failed to execute its business plan. The property has significant vacancy and current cash flow does not support debt service. Local market fundamentals have significantly deteriorated resulting in depressed comparable property valuations versus underwriting.

As mentioned above, management considers several risk factors when assigning our risk ~~ranking~~rankings each quarter. ~~For~~We believe the ~~quarter ended September 30, 2021, management believes the extended impact~~long-term impacts of the COVID-19 pandemic ~~remains~~remain uncertain, and therefore ~~continues~~continue to represent a ~~significant~~ risk to our portfolio. ~~However,~~During the ~~origination~~first quarter of 182022, we added 17 new loans ~~during the quarter~~to our portfolio with a risk ranking of 3. Additionally, one loan improved from a risk ranking of 4 to a risk ranking of 3 and ~~improved outlook in others, such as~~separately another loan declined from a 4 risk ranking to a 5 risk ranking. However, our ~~San Jose, California Hotel Senior Loan (discussed in further detail below), resulted in a quarter-end average risk rating of 3.2. This is a slight improvement as compared to an~~weighted average risk ranking ~~of 3.5 for the quarter ended June 30, 2021.~~at March 31, 2022 is unchanged from December 31, 2021 at 3.1.

Senior and Mezzanine Loans and Preferred Equity

Our senior and mezzanine loans and preferred equity consists of senior mortgage loans, mezzanine loans and preferred equity interests, some of which have equity participation interests.

The following table provides a summary of our senior and mezzanine loans and preferred equity based on our internal risk rankings as of ~~September 30, 2021~~March 31, 2022 (dollars in thousands):


			Carrying Value (at BRSP share)(1)												Carrying Value (at BRSP share)(1)
Risk Ranking	Risk Ranking	Count(2)	Senior mortgage loans(3)		Mezzanine loans		Preferred equity		Total		% of Our Portfolio		Risk Ranking	Count	Senior mortgage loans(2)		Mezzanine loans		Preferred equity		Total		% of Our Portfolio

2	2	4	$	121,234	$	—	$	—	$	121,234	3.8	%	2	15	$	414,035	$	—	$	—	$	414,035	11.0	%
3	3	67	2,076,455		110,269		19,267		2,205,991		69.0	%	3	80	2,489,198		48,432		—		2,537,630		67.2	%
4	4	13	799,434		43,748		16,200		859,382		26.9	%	4	13	755,097		40,098		16,200		811,395		21.5	%
5	5	5	8,153		2,449		—		10,602		0.3	%	5	2	—		12,120		—		12,120		0.3	%
		89	$	3,005,276	$	156,466	$	35,467	$	3,197,209	100.0	%		110	$	3,658,330	$	100,650	$	16,200	$	3,775,180	100.0	%

Weighted average risk ranking	Weighted average risk ranking										3.2		Weighted average risk ranking										3.1

(1)Carrying value at our share represents the proportionate book value based on ownership by asset as of ~~September 30, 2021.~~March 31, 2022.

(2)~~Count excludes one equity method participation held in a joint venture with a $0.3 million carry value (at BRSP share) which was not assigned a risk ranking.~~

~~(3)~~Includes one mezzanine loan totaling ~~$29.2~~$28.9 million where we are also the senior lender.

~~Table of Contents~~

The following table provides asset level detail for our senior and mezzanine loans and preferred equity as of ~~September 30, 2021~~March 31, 2022 (dollars in thousands):

Collateral type Origination Date City, State
Carrying value(1)
Principal balance Coupon type
Cash Coupon(2)
Unlevered all-in yield(3)
Extended maturity date
Loan-to-value(4)
Q3 Risk ranking(5)
Senior loans
Loan 1 Hotel 1/2/2018 San Jose, CA $ 184,959 $ 184,959 Floating 4.8% 5.3% 1/9/2023 62% 4
Loan 2 Multifamily 6/21/2019 Milpitas, CA 180,408 180,319 Floating 3.1% 5.5% 7/9/2024 72% 3
Loan 3 Hotel 6/28/2018 Berkeley, CA 119,543 120,000 Floating 3.2% 5.2% 7/9/2025 66% 4
Loan 4 Office 12/7/2018 Carlsbad, CA 116,000 116,000 Floating 3.7% 6.0% 12/9/2023 73% 3
Loan 5 Office 5/31/2019 Stamford, CT 114,537 114,992 Floating 3.5% 5.8% 6/9/2025 71% 3
Loan 6(6)
Multifamily 6/18/2019 Santa Clara, CA 106,399 106,415 Floating 4.4% 7.1% 6/18/2024 70% 4
Loan 7 Multifamily 4/11/2019 Various - U.S. 92,000 92,000 Floating 3.0% 5.8% 4/9/2024 65% 4
Loan 8 Other (Mixed-use) 10/24/2019 Brooklyn, NY 75,105 75,179 Floating 4.0% 4.8% 11/9/2024 70% 3
Loan 9 Office 8/28/2018 San Jose, CA 73,147 73,147 Floating 2.5% 4.3% 8/28/2025 75% 3
Loan 10 Hotel 6/25/2018 Englewood, CO 73,000 73,000 Floating 3.5% 5.1% 2/9/2025 69% 3
Loan 11 Office 1/19/2021 Phoenix, AZ 71,817 72,460 Floating 3.6% 4.4% 2/9/2026 70% 3
Loan 12 Office 5/29/2019 Long Island City, NY 66,059 66,086 Floating 3.5% 5.9% 6/9/2024 59% 4
Loan 13 Office 4/5/2019 Long Island City, NY 64,746 64,746 Floating 3.3% 5.7% 4/9/2024 58% 4
Loan 14 Office 2/3/2019 Baltimore, MD 56,504 56,589 Floating 3.5% 6.2% 2/9/2024 74% 4
Loan 15 Office 7/12/2019 Washington, D.C. 56,080 56,081 Floating 2.8% 5.5% 8/9/2024 68% 4
Loan 16 Multifamily 12/23/2020 Salt Lake City, UT 50,848 51,100 Floating 3.2% 4.0% 1/9/2026 68% 3
Loan 17 Multifamily 7/19/2021 Dallas, TX 47,598 47,950 Floating 3.3% 3.9% 8/9/2026 74% 3
Loan 18 Multifamily 5/26/2021 Las Vegas, NV 44,026 44,330 Floating 3.4% 3.9% 6/9/2026 80% 3
Loan 19 Multifamily 3/1/2021 Richardson, TX 42,869 43,227 Floating 3.4% 3.8% 3/9/2026 75% 3
Loan 20 Multifamily 7/15/2021 Jersey City, NJ 42,707 43,000 Floating 3.0% 3.5% 8/9/2026 66% 3
Loan 21 Multifamily 12/21/2020 Austin, TX 42,286 42,601 Floating 3.7% 5.0% 1/9/2026 54% 2
Loan 22 Multifamily 2/8/2019 Las Vegas, NV 40,944 40,944 Floating 3.2% 5.7% 2/9/2024 71% 3
Loan 23 Multifamily 2/3/2021 Arlington, TX 40,571 40,707 Floating 3.6% 4.9% 2/9/2026 81% 3
Loan 24 Multifamily 3/22/2021 Fort Worth, TX 37,969 38,221 Floating 3.5% 4.1% 4/9/2026 83% 3
Loan 25 Multifamily 3/25/2021 Fort Worth, TX 36,756 37,044 Floating 3.3% 3.9% 4/9/2026 82% 3
Loan 26 Office 9/28/2021 Reston, VA 35,169 35,606 Floating 4.0% 4.6% 10/9/2026 68% 3
Loan 27 Multifamily 12/29/2020 Fullerton, CA 34,609 34,860 Floating 3.8% 4.8% 1/9/2026 70% 3
Loan 28 Office 6/16/2017 Miami, FL 33,872 33,532 Floating 4.9% 5.6% 7/9/2022 68% 3
Loan 29 Multifamily 9/28/2021 Carrollton, TX 33,529 33,908 Floating 3.1% 3.5% 10/9/2025 73% 3
Loan 30 Multifamily 7/15/2021 Dallas, TX 32,845 33,236 Floating 3.1% 3.5% 8/9/2026 77% 3
Loan 31 Multifamily 3/16/2021 Fremont, CA 32,480 32,757 Floating 3.5% 4.3% 4/9/2026 76% 3
Loan 32 Office 6/2/2021 South Pasadena, CA 31,836 32,037 Floating 4.9% 5.6% 6/9/2026 69% 3
Loan 33 Multifamily 7/29/2021 Phoenix, AZ 30,866 31,200 Floating 3.3% 3.8% 8/9/2026 75% 3
Loan 34 Office 3/28/2019 San Jose, CA 30,762 30,762 Floating 3.0% 5.7% 4/9/2024 64% 2
Loan 35 Office 4/30/2021 San Diego, CA 30,383 30,700 Floating 3.6% 4.1% 5/9/2026 55% 3
Loan 36 Multifamily 3/31/2021 Mesa, AZ 30,073 30,287 Floating 3.7% 4.4% 4/9/2026 83% 3
Loan 37 Multifamily 5/5/2021 Dallas. TX 29,322 29,561 Floating 3.4% 4.0% 5/9/2026 68% 3
Loan 38 Multifamily 4/29/2021 Las Vegas, NV 28,199 28,402 Floating 3.1% 3.6% 5/9/2026 76% 3
Loan 39 Multifamily 5/27/2021 Houston, TX 27,768 28,000 Floating 3.0% 3.7% 6/9/2026 67% 3
Loan 40 Multifamily 7/13/2021 Plano, TX 27,510 27,715 Floating 3.1% 3.5% 2/9/2025 82% 3
Loan 41 Office 2/26/2019 Charlotte, NC 25,724 26,052 Floating 3.4% 6.0% 3/9/2024 56% 2
Loan 42 Multifamily 8/31/2021 Glendale, AZ 25,183 25,482 Floating 3.2% 3.6% 9/9/2026 75% 3
Loan 43 Office 9/26/2019 Salt Lake City, UT 23,985 24,134 Floating 2.7% 5.0% 10/9/2024 72% 4
Loan 44 Multifamily 5/13/2021 Phoenix, AZ 23,961 24,195 Floating 3.1% 3.5% 6/9/2026 76% 3
Loan 45 Multifamily 1/29/2021 Charlotte, NC 23,314 23,500 Floating 3.5% 4.1% 2/9/2026 76% 3
Loan 46 Office 9/16/2019 San Francisco, CA 22,948 22,951 Floating 3.2% 5.7% 10/9/2024 72% 3
Loan 47 Multifamily 7/1/2021 Aurora, CO 22,649 22,882 Floating 3.1% 3.6% 7/9/2026 73% 3
Loan 48 Multifamily 3/25/2021 San Jose, CA 22,462 22,650 Floating 3.7% 4.1% 4/9/2026 70% 2
Loan 49 Office 7/30/2021 Denver, CO 21,426 21,705 Floating 4.3% 4.7% 8/9/2026 72% 3


	Collateral type	Origination Date	City, State	Carrying value(1)		Principal balance		Coupon type	Cash Coupon(2)	Unlevered all-in yield(3)	Extended maturity date	Loan-to-value(4)	Q1 Risk ranking(5)

Senior loans
Loan 1	Hotel	1/2/2018	San Jose, CA	$	184,959	$	184,959	Floating	4.8%	5.3%	11/9/2026	74%	4
Loan 2	Multifamily	6/21/2019	Milpitas, CA	184,565		184,234		Floating	3.1%	5.5%	7/9/2024	72%	3
Loan 3	Office	12/7/2018	Carlsbad, CA	120,000		120,000		Floating	4.3%	4.9%	12/9/2023	73%	3

7561

Table of Contents

Collateral type Origination Date City, State
Carrying value(1)
Principal balance Coupon type
Cash Coupon(2)
Unlevered all-in yield(3)
Extended maturity date
Loan-to-value(4)
Q3 Risk ranking(5)
Loan 50 Multifamily 7/13/2021 Oregon City, OR 21,189 21,353 Floating 3.3% 3.7% 8/9/2026 73% 3
Loan 51 Multifamily 2/25/2021 Raleigh, NC 20,745 20,943 Floating 3.3% 4.0% 3/9/2026 76% 3
Loan 52 Office 8/27/2019 San Francisco, CA 20,623 20,623 Floating 2.8% 5.4% 9/9/2024 73% 3
Loan 53 Multifamily 6/22/2021 Phoenix, AZ 20,028 20,251 Floating 3.2% 3.6% 7/9/2026 75% 3
Loan 54 Hotel 7/30/2020 Bloomington, MN 19,252 19,252 Floating 4.0% 5.0% 11/9/2021 64% 3
Loan 55 Multifamily 9/22/2021 Denton, TX 19,192 19,351 Floating 3.2% 3.6% 10/9/2025 70% 3
Loan 56 Multifamily 3/31/2021 San Antonio, TX 18,650 18,824 Floating 3.1% 3.6% 4/9/2026 77% 3
Loan 57 Multifamily 8/6/2021 La Mesa, CA 18,639 18,824 Floating 2.9% 3.5% 8/9/2025 70% 3
Loan 58 Office 10/29/2020 Denver, CO 18,541 18,708 Floating 3.6% 4.7% 11/9/2025 64% 3
Loan 59 Multifamily 6/24/2021 Phoenix, AZ 18,350 18,548 Floating 3.4% 4.0% 7/9/2026 74% 3
Loan 60 Multifamily 7/14/2021 Salt Lake City, UT 17,602 17,733 Floating 3.3% 3.7% 8/9/2026 73% 3
Loan 61 Multifamily 9/1/2021 Bellevue, WA 17,283 17,500 Floating 2.9% 3.5% 9/9/2025 64% 3
Loan 62 Multifamily 6/25/2021 Phoenix, AZ 16,259 16,428 Floating 3.2% 3.6% 7/9/2026 75% 3
Loan 63 Multifamily 6/15/2021 Phoenix, AZ 15,285 15,392 Floating 3.3% 3.7% 7/9/2026 74% 3
Loan 64 Multifamily 11/24/2020 Tucson, AZ 15,150 15,191 Floating 3.6% 4.7% 12/9/2025 75% 3
Loan 65 Multifamily 3/5/2021 Tucson, AZ 14,761 14,832 Floating 3.7% 4.2% 3/9/2026 72% 3
Loan 66 Office 8/31/2021 Los Angeles, CA 14,331 14,570 Floating 5.0% 5.7% 9/9/2026 66% 3
Loan 67 Multifamily 2/8/2019 Las Vegas, NV 14,138 14,138 Floating 3.2% 5.7% 2/9/2024 71% 3
Loan 68 Multifamily 5/27/2021 Phoenix, AZ 13,845 13,980 Floating 3.1% 3.5% 6/9/2026 72% 3
Loan 69 Multifamily 3/31/2021 Albuquerque, NM 13,789 13,928 Floating 3.4% 3.9% 4/9/2026 76% 3
Loan 70 Multifamily 7/21/2021 Durham, NC 13,580 13,728 Floating 3.3% 3.7% 8/9/2026 72% 3
Loan 71 Multifamily 7/28/2021 San Antonio, TX 13,232 13,369 Floating 3.3% 4.0% 8/9/2024 76% 3
Loan 72 Multifamily 2/11/2021 Provo, UT 13,040 13,152 Floating 3.8% 4.6% 3/9/2026 71% 3
Loan 73 Multifamily 2/25/2021 Louisville, KY 11,792 11,893 Floating 3.9% 4.4% 3/9/2026 74% 3
Loan 74 Multifamily 4/9/2021 Phoenix, AZ 10,916 11,017 Floating 3.6% 4.1% 4/9/2026 75% 3
Loan 75(6)(7)
Other (Mixed-use) 10/17/2018 Dublin, Ireland 8,153 16,013
n/a (7)
n/a (7)
n/a (7)
12/31/2023 n/a 5
Total/Weighted average senior loans $ 2,976,118 $ 2,996,752 4.9% 4/2/2025 70% 3.2
Mezzanine loans
Loan 76(6)
Multifamily 12/26/2018 Santa Clarita, CA $ 63,552 $ 63,797 Fixed 7.0% 13.8% 12/26/2024 56% – 84% 3
Loan 77(6)
Multifamily 12/3/2019 Milpitas, CA 37,505 37,619 Fixed 8.0% 13.3% 12/3/2024 49% – 71% 3
Loan 78(6)
Multifamily 7/11/2019 Placentia, CA 31,628 32,142 Fixed 8.0% 13.3% 7/11/2024 51% – 84% 4
Loan 79 Hotel 9/23/2019 Berkeley, CA 29,165 29,165 Fixed 11.5% 11.5% 7/9/2025 66% – 81% 4
Loan 80 Hotel 1/9/2017 New York, NY 12,120 12,000 Floating 11.0% 11.5% 9/9/2022 63% – 76% 4
Loan 81(6)
Office 7/20/2018 Dublin, Ireland 4,715 4,582 Fixed n/a 12.5% 12/20/2021 45% – 68% 3
Loan 82 Multifamily 7/30/2014 Various - TX 4,497 4,497 Fixed 9.5% 9.5% 8/11/2024 71% – 83% 3
Loan 83(6)(7)
Other (Mixed-use) 6/29/2015 Rolling Hills Estates, CA 2,276 2,710
n/a (7)
n/a (7)
n/a (7)
6/29/2022 n/a 5
Loan 84(6)(7)
Other (Mixed-use) 3/19/2013 San Rafael, CA 173 311
n/a (7)
n/a (7)
n/a (7)
3/31/2022 32% – 86% 5
Loan 85(6)(7)
Other (Mixed-use) 9/1/2020 Los Angeles, CA — 162,243
n/a (7)
n/a (7)
n/a (7)
7/9/2023 n/a 5
Total/Weighted average mezzanine loans $ 185,631 $ 349,066 12.8% 9/16/2024 54% - 77% 3.4
Preferred equity & other loans
Loan 86 Office 8/22/2018 Las Vegas, NV $ 18,894 $ 18,953 Fixed 8.0% 15.3% 9/9/2023 n/a 3
Loan 87(8)
Industrial 9/1/2016 Various - U.S. 16,200 — n/a n/a n/a 9/2/2027 n/a 4
Loan 88(6)
Office 7/20/2018 Dublin, Ireland 373 — n/a n/a n/a 12/20/2021 n/a 3
Loan 89(8)
Hotel 10/24/2014 Austin, TX 314 — n/a n/a n/a n/a n/a n/a
Loan 90(6)(7)
Other (Mixed-use) 6/9/2015 Rolling Hills Estates, CA $ — $ —
n/a (7)
n/a (7)
n/a (7)
n/a n/a 5
Total/Weighted average preferred equity & other loans(9)
$ 35,781 $ 18,953 8.1% 8/2/2024 n/a 3.4


	Collateral type	Origination Date	City, State	Carrying value(1)	Principal balance	Coupon type	Cash Coupon(2)	Unlevered all-in yield(3)	Extended maturity date	Loan-to-value(4)	Q1 Risk ranking(5)

Loan 4	Hotel	6/28/2018	Berkeley, CA	119,671	120,000	Floating	3.2%	5.2%	7/9/2025	66%	4
Loan 5(6)	Multifamily	6/18/2019	Santa Clara, CA	107,424	107,429	Floating	4.4%	7.1%	6/18/2024	70%	4
Loan 6	Office	2/17/2022	Boston, MA	80,024	81,000	Floating	3.8%	4.6%	3/9/2027	54%	3
Loan 7	Other (Mixed-use)	10/24/2019	Brooklyn, NY	75,690	75,693	Floating	4.0%	4.8%	11/9/2024	70%	3
Loan 8	Office	8/28/2018	San Jose, CA	73,147	73,147	Floating	2.5%	4.3%	8/28/2025	75%	3
Loan 9	Hotel	6/25/2018	Englewood, CO	73,000	73,000	Floating	3.5%	4.8%	2/9/2025	69%	3
Loan 10	Office	1/19/2021	Phoenix, AZ	71,955	72,460	Floating	3.6%	4.4%	2/9/2026	70%	3
Loan 11	Office	5/29/2019	Long Island City, NY	66,712	66,740	Floating	3.5%	5.9%	6/9/2024	59%	4
Loan 12	Office	4/5/2019	Long Island City, NY	65,759	65,759	Floating	3.3%	5.7%	4/9/2024	58%	4
Loan 13	Office	7/12/2019	Washington, D.C.	56,685	56,690	Floating	2.8%	5.5%	8/9/2024	68%	4
Loan 14	Office	2/13/2019	Baltimore, MD	55,828	55,828	Floating	3.5%	6.2%	2/9/2024	74%	4
Loan 15	Multifamily	12/23/2020	Salt Lake City, UT	50,930	51,100	Floating	3.2%	4.0%	1/9/2026	68%	2
Loan 16	Multifamily	3/8/2022	Austin, TX	48,735	49,125	Floating	3.3%	4.2%	3/9/2027	75%	3
Loan 17	Multifamily	7/19/2021	Dallas, TX	48,024	48,244	Floating	3.3%	4.2%	8/9/2026	74%	3
Loan 18	Multifamily	5/26/2021	Las Vegas, NV	45,264	45,464	Floating	3.4%	4.2%	6/9/2026	70%	3
Loan 19	Other (Mixed-use)	1/13/2022	New York, NY	44,775	45,190	Floating	3.5%	4.3%	2/9/2027	67%	3
Loan 20	Multifamily	11/30/2021	Phoenix, AZ	43,100	43,457	Floating	3.4%	4.6%	12/9/2026	74%	3
Loan 21	Multifamily	3/1/2021	Richardson, TX	42,943	43,227	Floating	3.4%	4.1%	3/9/2026	75%	3
Loan 22	Multifamily	7/15/2021	Jersey City, NJ	42,789	43,000	Floating	3.0%	3.8%	8/9/2026	66%	2
Loan 23	Multifamily	12/21/2020	Austin, TX	42,606	42,850	Floating	3.7%	5.0%	1/9/2026	54%	2
Loan 24	Multifamily	2/3/2021	Arlington, TX	41,921	41,977	Floating	3.6%	4.9%	2/9/2026	81%	2
Loan 25	Multifamily	3/22/2021	Fort Worth, TX	39,275	39,454	Floating	3.5%	4.3%	4/9/2026	83%	3
Loan 26	Office	11/23/2021	Tualatin, OR	38,161	38,547	Floating	3.9%	4.8%	12/9/2026	66%	3
Loan 27	Multifamily	12/7/2021	Denver, CO	37,767	38,108	Floating	3.2%	4.2%	12/9/2026	74%	3
Loan 28	Multifamily	3/25/2021	Fort Worth, TX	37,633	37,807	Floating	3.3%	4.1%	4/9/2026	82%	3
Loan 29	Multifamily	7/15/2021	Dallas, TX	35,579	35,860	Floating	3.1%	4.1%	8/9/2026	77%	3
Loan 30	Office	9/28/2021	Reston, VA	35,560	35,887	Floating	4.0%	5.0%	10/9/2026	68%	3
Loan 31	Multifamily	3/31/2022	Long Beach, CA	35,198	35,636	Floating	3.4%	4.2%	4/9/2027	74%	3
Loan 32	Office	11/17/2021	Dallas, TX	34,902	35,250	Floating	3.9%	4.8%	12/9/2025	61%	3
Loan 33	Multifamily	12/29/2020	Fullerton, CA	34,664	34,860	Floating	3.8%	4.8%	1/9/2026	70%	3
Loan 34	Multifamily	1/18/2022	Dallas, TX	34,351	34,596	Floating	3.5%	4.4%	2/9/2027	75%	3
Loan 35	Office	6/16/2017	Miami, FL	34,036	33,696	Floating	4.9%	5.6%	7/9/2022	68%	3
Loan 36	Multifamily	1/12/2022	Los Angeles, CA	33,984	34,380	Floating	3.4%	4.0%	2/9/2027	65%	3
Loan 37	Multifamily	9/28/2021	Carrollton, TX	33,590	33,908	Floating	3.1%	3.9%	10/9/2025	73%	3
Loan 38	Multifamily	3/16/2021	Fremont, CA	33,158	33,380	Floating	3.5%	4.4%	4/9/2026	76%	3
Loan 39	Office	6/2/2021	South Pasadena, CA	32,319	32,435	Floating	4.9%	5.9%	6/9/2026	69%	3
Loan 40	Multifamily	3/31/2021	Mesa, AZ	30,961	31,107	Floating	3.7%	4.6%	4/9/2026	83%	3
Loan 41	Multifamily	7/29/2021	Phoenix, AZ	30,924	31,200	Floating	3.3%	4.0%	8/9/2026	75%	3
Loan 42	Office	3/28/2019	San Jose, CA	30,762	30,762	Floating	3.0%	5.7%	4/9/2024	64%	2
Loan 43	Office	4/30/2021	San Diego, CA	30,444	30,700	Floating	3.6%	4.3%	5/9/2026	55%	3
Loan 44	Multifamily	5/5/2021	Dallas. TX	29,584	29,749	Floating	3.4%	4.3%	5/9/2026	68%	3
Loan 45	Multifamily	4/29/2021	Las Vegas, NV	29,094	29,241	Floating	3.1%	3.9%	5/9/2026	76%	2
Loan 46	Office	11/19/2021	Gardena, CA	28,136	28,505	Floating	3.5%	4.3%	12/9/2026	69%	3
Loan 47	Multifamily	7/13/2021	Plano, TX	27,927	28,090	Floating	3.1%	3.9%	2/9/2025	82%	3
Loan 48	Multifamily	5/27/2021	Houston, TX	27,836	28,000	Floating	3.0%	4.0%	6/9/2026	67%	3
Loan 49	Office	10/21/2021	Blue Bell, PA	27,797	27,930	Floating	3.7%	4.9%	11/9/2023	67%	3
Loan 50	Office	3/31/2022	Blue Bell, PA	27,130	27,447	Floating	4.2%	5.5%	4/9/2025	59%	3
Loan 51	Multifamily	12/16/2021	Fort Mill, SC	25,852	26,100	Floating	3.2%	3.9%	1/9/2027	71%	3
Loan 52	Multifamily	8/31/2021	Glendale, AZ	25,829	26,076	Floating	3.2%	3.9%	9/9/2026	75%	3
Loan 53	Office	2/26/2019	Charlotte, NC	25,814	26,052	Floating	3.3%	3.9%	7/9/2025	56%	2
Loan 54	Multifamily	2/17/2022	Long Beach, CA	25,122	25,415	Floating	3.4%	4.2%	3/9/2027	67%	3
Loan 55	Office	11/23/2021	Oakland, CA	24,762	25,000	Floating	4.2%	5.1%	12/9/2026	57%	3
Loan 56	Office	9/26/2019	Salt Lake City, UT	24,688	24,765	Floating	2.7%	5.0%	10/9/2024	72%	4

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Collateral type Origination Date City, State
Carrying value(1)
Principal balance Coupon type
Cash Coupon(2)
Unlevered all-in yield(3)
Extended maturity date
Loan-to-value(4)
Q3 Risk ranking(5)
Total/Weighted average senior and mezzanine loans and preferred equity - Our Portfolio $ 3,197,530 $ 3,364,771 5.4% 3/11/2025 n/a 3.2


	Collateral type	Origination Date	City, State	Carrying value(1)		Principal balance		Coupon type	Cash Coupon(2)	Unlevered all-in yield(3)	Extended maturity date	Loan-to-value(4)	Q1 Risk ranking(5)

Loan 57	Multifamily	5/13/2021	Phoenix, AZ	24,604		24,792		Floating	3.1%	3.8%	6/9/2026	76%	2
Loan 58	Office	12/7/2021	Hillsboro, OR	24,271		24,511		Floating	3.9%	4.8%	12/9/2024	68%	3
Loan 59	Multifamily	12/21/2021	Phoenix, AZ	24,072		24,325		Floating	3.5%	4.3%	1/9/2027	75%	3
Loan 60	Multifamily	1/29/2021	Charlotte, NC	23,354		23,500		Floating	3.5%	4.3%	2/9/2026	76%	3
Loan 61	Multifamily	3/31/2022	Louisville, KY	23,220		23,600		Floating	3.7%	4.6%	4/9/2027	72%	3
Loan 62	Multifamily	3/31/2022	Phoenix, AZ	23,005		23,265		Floating	3.7%	4.3%	4/9/2027	75%	3
Loan 63	Multifamily	3/8/2022	Glendale, AZ	22,990		23,260		Floating	3.5%	4.1%	3/9/2027	73%	3
Loan 64	Office	9/16/2019	San Francisco, CA	22,948		22,951		Floating	3.2%	5.7%	10/9/2024	72%	3
Loan 65	Multifamily	7/1/2021	Aurora, CO	22,932		23,124		Floating	3.1%	3.9%	7/9/2026	73%	3
Loan 66	Multifamily	3/25/2021	San Jose, CA	22,499		22,650		Floating	3.7%	4.4%	4/9/2026	70%	2
Loan 67	Multifamily	10/7/2021	Irving, TX	22,344		22,400		Floating	3.4%	4.3%	9/1/2024	70%	3
Loan 68	Multifamily	11/4/2021	Austin, TX	22,134		22,353		Floating	3.3%	4.0%	11/9/2026	71%	3
Loan 69	Office	8/27/2019	San Francisco, CA	21,508		21,509		Floating	2.8%	5.4%	9/9/2024	73%	4
Loan 70	Office	7/30/2021	Denver, CO	21,474		21,705		Floating	4.3%	5.1%	8/9/2026	66%	3
Loan 71	Multifamily	7/13/2021	Oregon City, OR	21,227		21,353		Floating	3.3%	4.0%	8/9/2026	73%	3
Loan 72	Multifamily	6/22/2021	Phoenix, AZ	21,081		21,262		Floating	3.2%	3.9%	7/9/2026	75%	2
Loan 73	Multifamily	2/25/2021	Raleigh, NC	20,916		21,072		Floating	3.3%	4.1%	3/9/2026	76%	2
Loan 74	Multifamily	3/31/2021	San Antonio, TX	20,007		20,148		Floating	3.1%	3.9%	4/9/2026	77%	3
Loan 75	Multifamily	9/22/2021	Denton, TX	19,226		19,351		Floating	3.2%	4.0%	10/9/2025	70%	3
Loan 76	Multifamily	12/21/2021	Gresham, OR	19,020		19,199		Floating	3.5%	4.5%	1/9/2027	74%	3
Loan 77	Hotel	7/30/2020	Bloomington, MN	18,843		18,843		Floating	5.0%	6.0%	5/9/2022	64%	3
Loan 78	Multifamily	8/6/2021	La Mesa, CA	18,830		18,957		Floating	2.9%	3.8%	8/9/2025	70%	3
Loan 79	Multifamily	1/12/2022	Austin, TX	18,787		18,977		Floating	3.4%	4.2%	2/9/2027	75%	3
Loan 80	Office	10/29/2020	Denver, CO	18,573		18,708		Floating	3.6%	4.7%	11/9/2025	64%	3
Loan 81	Multifamily	6/24/2021	Phoenix, AZ	18,388		18,548		Floating	3.4%	4.3%	7/9/2026	63%	3
Loan 82	Multifamily	9/1/2021	Bellevue, WA	18,110		18,250		Floating	2.9%	3.9%	9/9/2025	64%	3
Loan 83	Multifamily	7/14/2021	Salt Lake City, UT	17,774		17,874		Floating	3.3%	4.0%	8/9/2026	73%	3
Loan 84	Multifamily	6/25/2021	Phoenix, AZ	16,740		16,878		Floating	3.2%	3.9%	7/9/2026	75%	3
Loan 85	Industrial	3/25/2022	City of Industry, CA	15,924		16,129		Floating	3.3%	4.1%	4/9/2027	67%	3
Loan 86	Multifamily	11/24/2020	Tucson, AZ	15,863		15,873		Floating	3.6%	4.7%	12/9/2025	75%	2
Loan 87	Multifamily	3/28/2022	Los Angeles, CA	15,751		15,949		Floating	3.6%	4.4%	4/9/2027	70%	3
Loan 88	Multifamily	3/5/2021	Tucson, AZ	15,694		15,737		Floating	3.7%	4.6%	3/9/2026	72%	2
Loan 89	Office	10/13/2021	Burbank, CA	15,362		15,538		Floating	3.9%	4.7%	11/9/2026	57%	3
Loan 90	Multifamily	6/15/2021	Phoenix, AZ	15,312		15,392		Floating	3.3%	4.0%	7/9/2026	74%	3
Loan 91	Multifamily	3/31/2021	Albuquerque, NM	15,138		15,246		Floating	3.4%	4.1%	4/9/2026	76%	2
Loan 92	Office	11/16/2021	Charlotte, NC	14,503		14,687		Floating	4.4%	5.2%	12/9/2026	67%	3
Loan 93	Office	8/31/2021	Los Angeles, CA	14,388		14,570		Floating	5.0%	6.0%	9/9/2026	66%	3
Loan 94	Multifamily	2/8/2019	Las Vegas, NV	14,323		14,323		Floating	3.2%	5.7%	2/9/2024	71%	2
Loan 95	Multifamily	7/21/2021	Durham, NC	14,062		14,183		Floating	3.3%	4.0%	8/9/2026	58%	3
Loan 96	Multifamily	5/27/2021	Phoenix, AZ	13,977		14,086		Floating	3.1%	3.8%	6/9/2026	72%	3
Loan 97	Multifamily	2/11/2021	Provo, UT	13,352		13,442		Floating	3.8%	4.6%	3/9/2026	71%	3
Loan 98	Office	11/10/2021	Richardson, TX	13,298		13,400		Floating	4.0%	5.0%	12/9/2026	71%	3
Loan 99	Multifamily	7/28/2021	San Antonio, TX	13,269		13,369		Floating	3.3%	4.3%	8/9/2024	76%	3
Loan 100	Multifamily	4/9/2021	Phoenix, AZ	11,176		11,258		Floating	3.6%	4.3%	4/9/2026	75%	3
Loan 101	Multifamily	3/8/2022	Glendale, AZ	10,697		10,825		Floating	3.5%	4.1%	3/9/2027	73%	3
Loan 102	Industrial	3/21/2022	Commerce, CA	9,104		9,224		Floating	3.3%	4.1%	4/9/2027	71%	3
Total/Weighted average senior loans				$	3,629,415	$	3,647,112		3.5%	4.8%	11/11/2025	69%	3.1

Mezzanine loans
Loan 103(6)	Multifamily	12/3/2019	Milpitas, CA	$	40,098	$	40,164	Fixed	8.0%	13.3%	12/3/2024	49% – 71%	3
Loan 104(6)	Multifamily	7/11/2019	Placentia, CA	34,292		34,314		Fixed	8.0%	13.3%	7/11/2024	51% – 84%	3
Loan 105	Hotel	9/23/2019	Berkeley, CA	28,915		28,915		Fixed	11.5%	11.5%	7/9/2025	66% – 81%	4
Loan 106	Hotel	1/9/2017	New York, NY	12,120		12,000		Floating	11.0%	11.5%	9/9/2022	63% – 76%	5
Loan 107(6)	Multifamily	2/8/2022	Las Vegas, NV	9,660		10,120		Fixed	7.0%	12.3%	2/8/2027	56% – 79%	3
Loan 108	Multifamily	7/30/2014	Various - TX	4,480		4,480		Fixed	9.5%	9.5%	8/11/2024	71% – 83%	3

Table of Contents


	Collateral type	Origination Date	City, State	Carrying value(1)		Principal balance		Coupon type	Cash Coupon(2)	Unlevered all-in yield(3)	Extended maturity date	Loan-to-value(4)	Q1 Risk ranking(5)

Loan 109(6)(7)	Other (Mixed-use)	9/1/2020	Los Angeles, CA	—		162,243		n/a (7)	n/a (7)	n/a (7)	7/9/2023	n/a	5
Total/Weighted average mezzanine loans				$	129,565	$	292,236		9.0%	12.5%	11/22/2024	58% – 78%	3.4

Preferred equity
Loan 110(8)	Industrial	9/1/2016	Various - U.S.	$	16,200	$	—	n/a	n/a	n/a	9/2/2027	n/a	4
Total/Weighted average preferred equity (9)				$	16,200	$	—			n/a	9/2/2027	n/a	4.0

Total/Weighted average senior and mezzanine loans and preferred equity - Our Portfolio				$	3,775,180	$	3,939,348		3.7%	5.0%	11/2/2025	n/a	3.1

(1)Represents carrying values at our share as of ~~September 30, 2021.~~March 31, 2022.

(2)Represents the stated coupon rate for loans; for floating rate loans, does not include USD 1-month London Interbank Offered Rate (“LIBOR”) or Secured Overnight Financing Rate (“SOFR”), which ~~was 0.08%~~were 0.45% and 0.30%, respectively, as of ~~September 30, 2021.~~March 31, 2022.

(3)In addition to the stated cash coupon rate, unlevered all-in yield includes non-cash payment in-kind interest income and the accrual of origination, extension and exit fees. Unlevered all-in yield for the loan portfolio assumes the applicable floating benchmark rate as of ~~September 30, 2021~~March 31, 2022, for weighted average calculations.

(4)Except for construction loans, senior loans reflect the initial loan amount divided by the as-is value as of the date the loan was originated, or the principal amount divided by the appraised value as of the date of the most recent as-is appraisal. Mezzanine loans include attachment loan-to-value and detachment loan-to-value, respectively. Attachment loan-to-value reflects initial funding of loans senior to our position divided by the as-is value as of the date the loan was originated, or the principal amount divided by the appraised value as of the date of the most recent appraisal. Detachment loan-to-value reflects the cumulative initial funding of our loan and the loans senior to our position divided by the as-is value as of the date the loan was originated, or the cumulative principal amount divided by the appraised value as of the date of the most recent appraisal.

(5)On a quarterly basis, the Company’s senior and mezzanine loans and preferred equity are rated “1” through “5,” from less risk to greater risk. Represents risk ranking as of ~~September 30, 2021.~~March 31, 2022.

(6)Construction senior loans’ loan-to-value reflect the total commitment amount of the loan divided by ~~the as completed~~as-completed appraised value, or the total commitment amount of the loan divided by the projected total cost basis. Construction mezzanine loans include attachment loan-to-value and detachment loan-to-value, respectively. Attachment loan-to-value reflects the total commitment amount of loans senior to our position divided by as-completed appraised value, or the total commitment amount of loans senior to our position divided by projected total cost basis. Detachment loan-to-value reflect the cumulative commitment amount of our loan and the loans senior to our position divided by as-completed appraised value, or the cumulative commitment amount of our loan and loans senior to our position divided by projected total cost basis.

(7)~~Loans 75, 83, 84, 85, and 90 are~~Loan 109 is on nonaccrual status as of ~~September 30, 2021;~~March 31, 2022; as such, no income is being recognized.

(8)Represents equity participation ~~interests~~interest related to ~~senior loans, mezzanine loans and/or~~a preferred equity ~~investments.~~investment.

(9)Weighted average calculation for preferred equity excludes equity participation interests.

The following table details the types of properties securing our senior and mezzanine loans and preferred equity and geographic distribution as of ~~September 30, 2021~~March 31, 2022 (dollars in thousands):


		Book value (at BRSP share)										Book value (at BRSP share)
Collateral property type	Collateral property type	Count	Senior mortgage loans		Mezzanine loans and preferred equity		Total		% of Total		Collateral property type	Count	Senior mortgage loans		Mezzanine loans and preferred equity		Total		% of Total
Multifamily	Multifamily	53	$	1,567,622	$	137,182	$	1,704,804	53.3	%	Multifamily	68	$	1,936,506	$	88,531	$	2,025,037	53.6	%
Office	Office	23	928,490		24,041		952,531		29.8	%	Office	30	1,150,948		—		1,150,948		30.5	%
Hotel	Hotel	7	396,748		41,599		438,347		13.7	%	Hotel	6	396,467		41,034		437,501		11.6	%
Other(1)		6	83,258		2,390		85,648		2.7	%
Industrial / Self Storage		1	—		16,200		16,200		0.5	%
Other (Mixed-use)(1)											Other (Mixed-use)(1)	3	120,465		—		120,465		3.2	%
Industrial											Industrial	3	25,029		16,200		41,229		1.1	%
Total	Total	90	$	2,976,118	$	221,412	$	3,197,530	100.0	%	Total	110	$	3,629,415	$	145,765	$	3,775,180	100.0	%

		Book value (at BRSP share)										Book value (at BRSP share)
Region	Region	Count	Senior mortgage loans		Mezzanine loans and preferred equity		Total		% of Total		Region	Count	Senior mortgage loans		Mezzanine loans and preferred equity		Total		% of Total
US West	US West	35	$	1,340,916	$	183,193	$	1,524,109	47.8	%	US West	43	$	1,637,843	$	112,965	$	1,750,808	46.4	%
US Southwest	US Southwest	35	967,860		4,811		972,671		30.4	%	US Southwest	45	1,212,223		4,480		1,216,703		32.2	%
US Northeast	US Northeast	8	475,739		12,120		487,859		15.2	%	US Northeast	11	543,189		12,120		555,309		14.7	%
US Southeast	US Southeast	7	164,197		—		164,197		5.1	%	US Southeast	9	217,317		—		217,317		5.8	%
US Midwest	US Midwest	2	19,253		16,200		35,453		1.1	%	US Midwest	2	18,843		16,200		35,043		0.9	%
Europe		3	8,153		5,088		13,241		0.4	%
Total	Total	90	$	2,976,118	$	221,412	$	3,197,530	100.0	%	Total	110	$	3,629,415	$	145,765	$	3,775,180	100.0	%

_________________________________________

(1)Other includes commercial and residential development and predevelopment assets.

Due to the continued impact of COVID-19, we expect some borrowers may continue to experience difficulties making their loan payments over the next several quarters. We are particularly concerned with and focused on loans collateralized by hotels as well as mezzanine loans and preferred equity investments that are subordinate to senior loans provided by other lenders such as our Los Angeles, California Mixed-use Development mezzanine B-participation investment discussed below. Failure of our borrowers to meet their loan obligations will not only impact our financial results but may also trigger repayments under our master repurchase facilities. Our asset management team speaks with borrowers on a reasonably current basis, and seeks to identify issues and address potential value preserving solutions, which may include a loan modification.

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We have five loans on nonaccrual status as of September 30, 2021, of which we received cash interest payments from these loans of $4.0 million and applied the cash interest collected as a reduction to the loan’s carrying value. Refer to loan 75, loan 83, loan 84, loan 85 and loan 90 in the asset level detail table above for further details. Loan 75, which is a euro-denominated senior mortgage loan for a fully entitled land acquisition for a mixed-use development project in Dublin, Ireland (“Project Dockland”) went into maturity default on September 15, 2021. Project Dockland’s investment interests are held through a joint venture that includes private investment vehicles managed by Digital Bridge (the “Co-Lenders”). The Co-Lenders have reserved all rights and are evaluating remedies, which may include the appointment of a receiver at the investment. Four of the five non-accrual loans are in the process of being sold as part of the Co-Invest Portfolio Sale, as discussed below. The remaining nonaccrual loan is associated with our Los Angeles, California Mixed-use Project which is discussed in further detail below.

At ~~September 30, 2021~~March 31, 2022, our current expected credit loss reserve (“CECL”) calculated by our probability of default (“PD”)/loss given default (“LGD”) model for our outstanding loans and future loan funding commitments is ~~$43.7~~$34.9 million, which is ~~1.3%~~0.85% of the aggregate commitment amount of our loan portfolio. This represents ~~an increase~~a decrease of ~~$0.8~~$0.9 million from ~~$42.9~~$35.8 million at ~~June 30, 2021, which is~~December 31, 2021. The decrease was primarily driven by ~~new~~ loan ~~originations~~repayments and improved operating performance of the underlying collateral on certain loans, partially offset by day one reserves on newly originated loans during the ~~third quarter of 2021.~~first quarter.

Asset Specific ~~Summaries: Senior and Mezzanine Loans and Preferred Equity~~

~~The Co-Invest Portfolio Sale~~

Loan Type Collateral type Origination Date Carrying value Principal balance Coupon type Cash Coupon Unlevered all-in yield Extended maturity date Loan-to-value Q3 Risk ranking
Loan 75 Senior Other (Mixed-use) 10/17/2018 $ 8,153 $ 16,013 n/a n/a n/a 12/31/2023 n/a 5
Loan 81/ 88 Mezzanine/Pref. Equity Office 7/20/2018 5,088 4,582 Fixed
n/a n/a 12.5% / n/a 12/20/2021 45% – 68% 3
Loan 83/90 Mezzanine/Pref. Equity Other (Mixed-use) 6/29/2015 2,276 2,710 n/a n/a n/a 6/29/2022 n/a 5
Loan 84 Mezzanine Other (Mixed-use) 3/19/2013 173 311 n/a n/a n/a 3/31/2022 32% – 86% 5
Loan 89 Preferred Equity Hotel 10/24/2014 314 — n/a n/a n/a n/a n/a n/a

On July 19, 2021, we reached an agreement to sell the five co-investment assets in the table above to managed by vehicles of Fortress Investment Group LLC (“Fortress”), for gross proceeds of $223 million (the “Co-Invest Portfolio Sale”). Upon closing of the transaction, which is subject to customary closing conditions, third-party consents and purchase price adjustments, we anticipate recognizing a total net realized loss of approximately $4.6 million, net of selling costs.

The Co-Invest Portfolio Sale will resolve five of six legacy co-investment assets owned alongside investment vehicles managed by DigitalBridge. The last remaining co-investment asset (which is not part of this sale) is our Los Angeles, California Mixed-Use Project (see narrative below). On June 7, 2021, DigitalBridge also announced a portfolio sale with Fortress that included its joint venture interests in the same five investments. The Co-Invest Portfolio Sale is conditioned on, and will close concurrent with, the transaction between DigitalBridge and Fortress. We anticipate closing of the Co-Invest Portfolio Sale prior to the outside closing date of March 31, 2022, subject to customary closing conditions and third party consents, however we can offer no assurances that the transaction will close as expected or at all. In October 2021, a joint venture partner applied in Ireland for an injunction to delay the DigitalBridge and Fortress transaction and a temporary injunction was granted pending a hearing on November 23, 2021. The outcome of this hearing may delay the closing of such transaction and Co-Invest Portfolio Sale and/or impact the ability to close both transactions.

Per generally accepted accounting principles, we are required to value these assets at the lower of cost or fair market value. As of June 30, 2021, to reflect the cash we expect to receive from the sale, we recorded other-than-temporary impairment loss adjustments on Loan 75: $32.8 million, Loans 83 & 90: $1.4 million and Loan 84: $1.3 million, totaling a loss of $35.5 million, of which $32.0 million was allocated to our Company and $3.5 million was allocated to our partner in the “5-Investment Preferred Financing.” Refer to “Liquidity and Capital Resources” section for further discussion. Additionally, we expect to record an offsetting gain on Loans 81, 88 and 89 totaling approximately $27.4 million upon the closing of the transaction, resulting in a total net realized loss of approximately $4.6 million, net of selling costs. However, we can offer no assurances regarding the amount of any loss or gain the Company will actually realize in connection with the sale.

The Co-Invest Portfolio Sale includes four of the investments included in our “5-Investment Preferred Financing,” a COVID-19 related financing secured in June 2020 for balance sheet protective purposes. We anticipate using the proceeds from the Co-Invest Portfolio Sale to pay-off the “5-Investment Preferred Financing.”

~~Table of Contents~~

~~Los Angeles, California Mixed-Use Project—Third Party $275 Million Construction Mezzanine Loan Upsize and Retained B-Participation Investment~~

~~Risk of Foreclosure and Maturity Default (see Historical Details below)~~

On July 9, 2021, the borrower failed to pay the principal balance of the Upsized Mezzanine Loan (as defined below) and senior mortgage loan or meet other tests for extension of the maturity date. The Senior Mezzanine Lender (as defined below) and senior mortgage lender each delivered reservation of rights letters to the senior mezzanine borrower and borrower, respectively. The lender parties and borrower have engaged in discussions regarding the current status of the sale of the hotel and the completion of the tower condominiums and anticipated tower condominium sales projections. Since the new capital investment of $275 million was made on September 1, 2020, there have been additional hard and soft costs overruns which are not supported by current commitments or reserves at the Mixed-use Project; provided, however, since the borrower maturity default, the Senior Mezzanine Lender has funded an additional approximately $47 million in protective advances ahead of our junior B-participation position. The hotel is currently open for business and the condominium towers are nearing completion. However, there continue to be delays experienced at the project, which include delays of the sale of the hotel property. In October 2021, in addition to the recent protective advances, the entire senior mortgage loan (with a total funding commitment of approximately $1.0 billion) was acquired at par by an affiliate of the Senior Mezzanine Lender (collectively, the “Senior Lender Group”). Since this acquisition, the senior mortgage commenced bearing interest at the default rate of approximately 11%. Given the Senior Lender Group’s consolidation of indebtedness, needed additional fundings and their preparedness to exercise any and all remedies, the CLNY Mezzanine Lender’s (as defined below) inability to reach a feasible restructuring agreement could result in the Senior Lender Group foreclosing out our mezzanine B-participation investment.

The borrower maturity default on July 9, 2021, further delays at the project and in sales activities, additional capital requirements, potential restructuring of indebtedness and actions that may be taken by the Senior Lender Group, notwithstanding continuing negotiations with the Senior Lender Group, have negatively impacted our investment interest. Importantly, the acquisition of the senior mortgage by the Senior Mezzanine Lender increases the likelihood of a mortgage foreclosure of our interests. As such, during the three months ended September 30, 2021, we recorded a fair value loss adjustment of $97.9 million, which represents our remaining proportionate share in the investment.

~~Historical Details~~

In July 2017, we originated a $189.0 million commitment to an approximately $574 million mezzanine loan and preferred equity investment in a development project in Los Angeles County, which includes a hospitality and retail renovation and a new condominium tower construction (the “Mixed-use Project”). Our investment interests are held through a joint venture (the “CLNY Mezzanine Lender”) with affiliates of DigitalBridge.

In April 2020, the senior mortgage lender notified the borrower developer that the Mixed-use Project loan funding was out of balance, due to cost overruns from certain hard and soft costs and senior loan interest reserve shortfalls projected through completion. To address the out of balance circumstance during the second quarter of 2020, the CLNY Mezzanine Lender made two protective advances to the senior mortgage lender totaling $69.1 million, of which our share was $28.5 million. The CLNY Mezzanine Lender placed this investment on nonaccrual status.

In June 2020, the senior mortgage lender funded a third protective advance of $15.5 million. Additionally, the loans held by the senior mortgage lender and CLNY Mezzanine Lender, respectively, matured on July 9, 2020.

On September 1, 2020, in cooperation with the borrower and the EB-5 lender, the CLNY Mezzanine Lender and senior mortgage lender secured $275 million of additional mezzanine financing from a third-party mezzanine lender (the “Senior Mezzanine Lender”). To consummate the new mezzanine financing, the CLNY Mezzanine Lender simplified its investment interest by converting its existing preferred equity principal and accrued interest into the existing mezzanine loan, transferred the mezzanine loan to the Senior Mezzanine Lender, who subsequently increased the mezzanine loan amount by $275 million to an approximately $821 million total mezzanine loan (the “Upsized Mezzanine Loan”). The Senior Mezzanine Lender holds a $275 million A-participation and the CLNY Mezzanine Lender (including our interest) continues to hold an approximately $546 million noncontrolling B-participation interest in the Upsized Mezzanine Loan at the Mixed-use Project. The Senior Mezzanine Lender is the sole administrative agent and Upsized Mezzanine Loan owner. The Upsized Mezzanine Loan closing and revised budget addressed certain amendments to maturity dates to complete and sell the hotel by July 2021 and modifications to certain borrower extension tests to facilitate completion of the Mixed-use Project. The CLNY Mezzanine

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Lender’s B-participation investment continues to carry an interest rate of 12.90% per annum, consistent with our interest rate prior to this mezzanine refinancing event. The B-participation investment is a subordinate interest to the A-participation interest in respect to payments of principal and interest. The new $275 million financing commitment covered current capital requirements at the Mixed-use Project and included both $65 million of interest reserves to cover A-participation interest payments and $100 million reserved for future funding obligations, in furtherance of a revised construction budget at such time. The CLNY Mezzanine Lender is no longer subject to future funding commitments in accordance with the revised budget. As previously reported, the CLNY Mezzanine Lender had a remaining unfunded commitment of $39.3 million, of which our share was $14.5 million.

During the three months ended June 30, 2020, we placed the mezzanine loans and preferred equity investment on nonaccrual status and recorded our proportionate share of a fair value loss adjustment totaling $89.3 million, and continued to maintain the nonaccrual status of the CLNY Mezzanine Lender’s B-participation investment.

The hotel portion of the development has been completed and the temporary certificate of occupancy was granted in October 2020. The borrower initiated a sales process for the hotel component of the mixed-use project, targeting a closing in the second half of 2021 (the proceeds of which would be used to pay down the senior mortgage loan). In addition, certain hotel and tower condominium sales have closed since December 2020, with $24 million in aggregate proceeds used to pay down the senior mortgage construction loan.

~~San Jose, California Hotel Senior Loan~~

We originated a $173.5 million senior loan for the sponsor’s purchase of the San Jose Hotel in 2018. The loan included an initial funding of $166.6 million with an additional $6.9 million of future advances. At closing, the borrower contributed approximately $90.0 million of equity toward the acquisition.

The onset of the COVID-19 pandemic in the spring of 2020 created challenges, which included lower occupancy rates, weaker financial performance and borrower funding of approximately $18.6 million of shortfalls to maintain operations, which ultimately led the borrower to close the San Jose, California hotel and file for Chapter 11 bankruptcy in March 2021. We entered into a restructuring support agreement with the borrower with respect to the bankruptcy process, in our capacity as the sole secured creditor. The bankruptcy court authorized the rejection of the existing hotel management agreement and approved a restructuring plan for the borrower to exit bankruptcy with Signia by Hilton as the new brand and hotel manager, and a $25 million mezzanine loan to support the re-opening, property improvement plans, certain operating expenses and all expenses associated with the bankruptcy process.

On May 18, 2021, the bankruptcy court issued a confirmation order approving the amended and restated senior mortgage loan terms and our right to rely on such order to finalize documents with our borrower as it emerges from bankruptcy in accordance with the third amended joint Chapter 11 plan of reorganization. In the fourth quarter of 2021, we expect to amend and restate the senior mortgage loan, subject to customary closing conditions, in the amount of $184.9 million, an upsize which reflects accrued interest and fees during the non-accrual period, collapsing the prior preferred equity investment into the restated senior mortgage loan and certain other costs and expenses associated with bankruptcy. The San Jose Hotel is scheduled to reopen in the first quarter of 2022. As the bankruptcy plan and loan terms were approved in the second quarter of 2021 and our senior loan documents were substantively finalized during the third quarter of 2021, for the three months ended September 30, 2021 we reinstated the loan investment and recognized interest income of $6.8 million, of which $4.4 million relates to past due interest and fees during the non-accrual period of February 2021 through June 2021 and $2.4 million relates to interest income during the third quarter of 2021. We currently hold the senior loan as an unencumbered asset and expect to finance the loan utilizing one of our warehouse facilities.Summaries

Berkeley, California Hotel Senior Loan and Mezzanine Loan

Loan Type Collateral type Origination Date Carrying value Principal balance Coupon type Cash Coupon Unlevered all-in yield Extended maturity date Loan-to-value Q3 Risk ranking
Loan 3 Senior Hotel 6/28/2018 $ 119,543 $ 120,000 Floating 3.2% 5.2% 7/9/2025 66% 4
Loan 79 Mezzanine Hotel 9/23/2019 29,165 29,165 Fixed 11.5% 11.5% 7/9/2025 66% -81% 4

Loan Type

Collateral type

Origination Date

Carrying value

Principal balance

Coupon type

Cash Coupon

Unlevered all-in yield

Extended maturity date

Loan-to-value(1)

Q1 Risk ranking

Loan 4

Senior

Hotel

6/28/2018

119,671

120,000

Floating

3.2%

5.2%

7/9/2025

66%

Loan 105

Mezzanine

Hotel

9/23/2019

28,915

Fixed

11.5%

7/9/2025

66% -81%

(1)Loan-to-value is calculated using the as-is value on the date of loan origination.

We originated a $109.8 million senior loan in 2018 to replace the sponsor’s existing financing on a hotel located in Berkeley, California (the “Berkeley Hotel”). The hotel includes meeting space, full-service restaurants and tennis club facilities. The loan

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included an initial funding of $98.8 million with an additional $11.0 million of future advances. The sponsor purchased the Berkeley Hotel in 2014 for a purchase price of $89.5 million and has spent a significant amount on capital improvements. In September 2019, we upsized the senior loan to $120.0 million and provided a ~~$29.3~~$28.3 million mezzanine loan to facilitate the sponsor’s acquisition of a third party’s equity interest in the property. Due to the COVID-19 pandemic the Berkeley Hotel was closed from April through July of 2020, during which time the loan stayed current through the combination of federal loans (Paycheck Protection Program), borrower reserves, and lender advances from the mezzanine loan.

The hotel partially re-opened in August 2020 and shortly thereafter began generating cash flow. Operating performance ~~has~~ steadily improved in 2021 at the ~~Berkley~~Berkeley Hotel. ~~During~~Due to seasonality, cash flows during certain months have been insufficient to service the ~~third~~debt. The borrower has supported debt service out-of-pocket, as they have previously during the pandemic, and the borrower anticipates cash flow exceeding debt service during the second quarter of ~~2021 cash flows were sufficient~~2022. Given mutual cooperation and commitment by the borrower, we entered into an amendment to ~~fully cover~~delay the debt service ~~payment. The~~hurdle test until the loan maturity in July 2023 upon the borrower ~~has previously supported debt service shortfalls out-of-pocket.~~funding two additional months of interest to the interest reserve, bringing the total interest reserve balance to three months of interest on both the senior and mezzanine loans. COVID-19 cases and regulations in California continue to impact ~~occupancy,~~the local economy, which may influence future borrower actions and support at the Berkeley Hotel and have a negative impact on performance of the asset and the value of our investment interest.

Long Island City, New York Office Senior Loans

Loan Type

Collateral type

Origination Date

Carrying value

Principal balance

Coupon type

Cash Coupon

Unlevered all-in yield

Extended maturity date

Loan-to-value

Q3 Risk ranking

Loan Type

Collateral type

Origination Date

Carrying value

Principal balance

Coupon type

Cash Coupon

Unlevered all-in yield

Extended maturity date

Loan-to-value(1)

Q1 Risk ranking

Loan 11

Senior

Office

5/29/2019

66,712

66,740

Floating

3.5%

5.9%

6/9/2024

59%

Loan 12

Senior

Office

5/29/2019

66,059

66,086

Floating

3.5%

5.9%

6/9/2024

59%

Loan 12

Senior

Office

4/5/2019

65,759

Floating

3.3%

5.7%

4/9/2024

58%

Loan 13

Senior

Office

4/5/2019

64,746

Floating

3.3%

5.7%

4/9/2024

58%

______________________________________

(1)Loan-to-value is calculated using the as-is value on the date of loan origination.

We originated two senior mortgage loans on two transitional office properties to the same sponsorship group. However, the borrowing entities are unrelated and the loans are neither cross-collateralized nor cross defaulted.

The New York City metro office markets have experienced substantial increases in vacancy rates due to the COVID-19 pandemic. The Long Island City market has experienced further increases in vacancy as newly developed or renovated properties have become available for leasing. Additionally, the availability of significant sub-lease space in Long Island City has created additional supply at below market rents. ~~There~~Currently there is increasing confidence among market participants that office demand will increase in the near future, ~~as many~~once tenants solidify their return-to-work plans. However, the timeline may not be rapid enough to remedy the negative impact on sponsor’s business plans and leasing activity for these two properties. As such, the underlying individual property cash flows are insufficient to cover their respective debt service payments. InSince March 2021 and as recently as January 2022, we ~~agreed~~have worked with the borrower on Loan 11 and Loan 12, as applicable, to ~~shift~~use certain future funding advances from the tenant improvements and leasing costs account to be used for interest carry and operations shortfalls, ~~for a period of~~provided that the borrower would deposit an incremental six months ~~on Loan 12 and twelve months on Loan 13. The six-month shortfall future funding advance period expired in August 2021~~of deposits for ~~Loan 12 and the borrower deposited six months~~ interest and carry ~~in exchange for certain waivers and extensions that extend through September 2022.~~ reserves on such loans as additional protection.

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In ~~regards~~regard to leasing, ~~activity at these properties,~~as of March 31, 2022, Loan 1311 has ~~in place~~in-place leases ~~accounting~~ for ~~21%~~10% of the property ~~along with two license agreements that generate revenue from rooftop signage~~ and ~~antenna space and there is a pending lease expected to be executed representing an additional 10%~~Loan 12 has in-place leases for 30% of the property. Additionally, both loans generate incremental revenue from license agreements for rooftop signage. Loan 12 ~~has in place leases accounting for 7% of the property with one~~also generates incremental revenue from a license agreement for ~~rooftop signage and a pending lease expected to be executed which represents an additional 3% of the property.~~antenna space. It is possible that uncertain market conditions and borrower actions may result in a future valuation impairment or investment loss.

~~Student Housing~~New York, New York Hotel Mezzanine Loan ~~Various - US~~

Loan Type

Collateral type

Origination Date

Carrying value

Principal balance

Coupon type

Cash Coupon

Unlevered all-in yield

Extended maturity date

Loan-to-value(1)

Q1 Risk ranking

Loan 106

Mezzanine

Hotel

1/9/2017

12,120

12,000

Floating

11.0%

11.5%

9/9/2022

63% - 76%

(1)Loan-to-value is calculated using the as-is value on the date of loan origination.

We originated a ~~$92.0~~$12.0 million ~~senior~~mezzanine loan in 2017 in conjunction with a third party first mortgage loan of $60.0 million to ~~refinance~~finance the acquisition and capital improvements of a ~~portfolio~~289 key hotel located in New York City (the “New York Hotel”). The hotel features a full-service restaurant, meeting rooms, fitness center and business center. The sponsor acquired the hotel in 2017 for a purchase price of ~~three cross-collateralized student~~$95.0 million. In 2019, the hotel underwent a brand conversion.

As a result of COVID-19, hotel occupancy declined significantly starting in March 2020. However, in May 2020 the hotel obtained a contract with a government housing ~~properties.~~authority to lease rooms. The ~~prolonged effect~~contract is on a month-to-month basis and currently remains active. It has been reported that the government authority would vacate certain hotels and return the residents to shelters, but in several instances the moves have been postponed and the length of stay at the New York Hotel remains uncertain. While the government authority contract provided rental revenue and stability during the pandemic, the receipt of payment from the government authority has often times been delayed, creating financial strain on the sponsor to support operating expenses and debt service out-of-pocket. The sponsor is currently unable to meet the reserve funding required for the extension of the ~~COVID-19 pandemic has put stress~~March 2022 maturity date on both the ~~student housing market~~senior and ~~forced one~~mezzanine loans. Default and reservation of rights letters have been issued by both lenders as a prudent measure. If the ~~three schools serviced by~~past due payments are received, it is anticipated that there will be sufficient funds to bring the ~~portfolio to hold classes 100% remotely during~~New York Hotel loan current and satisfy the ~~2020-2021 academic year, drastically decreasing revenue.~~

We have agreed to forbear the tax and replacement reserve requirements while the borrower pursues a sale of all three properties. The borrower has agreed to accelerated remedies in the event of default after the forbearance period. There are executed purchase and sales agreements for each of the three assets with three separate parties expected to close, subject to customary closing conditions. These sales are expected to generate total combined proceeds sufficient to payoff the debt amount. However, itextension requirements. It is possible that ~~a disruption of the sale process could~~uncertain market conditions and borrower actions may result in a future valuation impairment or investment loss.

Net Leased and Other Real Estate

Our net leased real estate investment strategy focuses on direct ownership in commercial real estate with an emphasis on properties with stable cash flow, which may be structurally senior to a third-party partner’s equity. In addition, we may own net leased real estate investments through joint ventures with one or more partners. As part of our net leased real estate strategy, we explore a variety of real estate investments including multi-tenant office, multifamily, student housing and industrial. These properties are typically well-located with strong operating partners and we believe offer both attractive cash flow and returns. Additionally, we have three investments in direct ownership of commercial real estate with an emphasis on properties with stable cash flow, which may be structurally senior to a third-party partner’s equity. We own these operating real estate investments through joint ventures with one or more partners. These properties are typically well-located with strong operating partners.

As of March 31, 2022, $824.9 million or 17.8% of our assets were invested in net leased and other real estate properties and these properties were 97.0% occupied. The following table presents our net leased and other real estate investments as of March 31, 2022 (dollars in thousands):


	Count(1)	Carrying Value(2)		NOI for the year ended March 31, 2022(3)
Net leased real estate	8	$	660,561	$	12,934
Other real estate	2	164,380		4,159
Total/Weighted average net leased and other real estate	10	$	824,941	$	17,093

(1)Count represents the number of investments.

(2)Represents carrying values at our share as of March 31, 2022; includes real estate tangible assets, deferred leasing costs and other intangible assets less intangible liabilities.

(3)Refer to “Non-GAAP Supplemental Financial Measures” for further information on NOI. Includes $0.2 million that relates to properties that were sold during 2022.

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~~Payment-In-Kind (“PIK”~~The following table provides asset-level detail of our net leased and other real estate as of March 31, 2022:


	Collateral type	City, State	Number of Properties	Rentable square feet (“RSF”) / units/keys(1)	Weighted average % leased(2)	Weighted average lease term (yrs)(3)
Net leased real estate
Net lease 1	Office	Stavenger, Norway	1	1,290,926 RSF	100%	8.4
Net lease 2	Industrial	Various - U.S.	2	2,787,343 RSF	100%	16.4
Net lease 3	Office	Aurora, CO	1	183,529 RSF	100%	0.6
Net lease 4	Office	Indianapolis, IN	1	338,000 RSF	100%	8.9
Net lease 5	Retail	Various - U.S.	7	319,600 RSF	100%	4.7
Net lease 6	Retail	Keene, NH	1	45,471 RSF	100%	6.8
Net lease 7	Retail	Fort Wayne, IN	1	50,000 RSF	100%	2.4
Net lease 8	Retail	South Portland, ME	1	52,900 RSF	100%	9.1
Total/Weighted average net leased real estate			15	5,067,769 RSF	100%	10.9

Other real estate
Other real estate 1	Office	Creve Coeur, MO	7	847,604 RSF	87%	3.2
Other real estate 2	Office	Warrendale, PA	5	496,414 RSF	82%	3.8
Total/Weighted average other real estate			12	1,344,018 RSF	85%	3.4

Total/Weighted average net leased and other real estate			27

(1)Rentable square feet based on carry value at our share as of March 31, 2022.

(2)Represents the percent leased as of March 31, 2022. Weighted average calculation based on carrying value at our share as of March 31, 2022.

(3)Based on in-place leases (defined as occupied and paying leases) as of March 31, 2022 and assumes that no renewal options are exercised. Weighted average calculation based on carrying value at our share as of March 31, 2022.

Asset Specific Net Leased Summaries

Stavenger, Norway Office Net Lease

Collateral type

City, State

Number of Properties

Rentable square feet (“RSF”) / units/keys

Weighted average % leased

Weighted average lease term (yrs)

Net lease 1

Office

Stavenger, Norway

1,290,926 RSF

100%

8.4

In July 2018, we acquired a class A office campus in Stavenger, Norway (the “Norway Net Lease”) ~~Interest Income~~

~~We have debt investments in our portfolio that contain~~for $320 million. This property is 100% occupied by a ~~PIK provision. Contractual PIK interest, which represents contractually deferred interest added to the loan balance~~single tenant that is ~~due~~rated investment grade AA-/Aa2 from S&P and Moody’s, respectively. The property serves as their global headquarters. The Norway Net Lease requires the tenant to pay for all real estate related expenses, including operational expenditures, capital expenditures and municipality taxes. The Norway Net Lease has a weighted average remaining lease term of nine years and the tenant has the option to extend for two 5-year periods at the ~~end~~same terms with rent adjusted to market rent. The Norway Net Lease also has annual rent increases based on the Norwegian CPI Index. Our tenant has injected a significant amount of capital into improvements of the property over the past 10 years. Financing on the Norway Net Lease consists of a mortgage payable of $183.7 million with a fixed rate of 3.9%, which matures in June 2025. The tenant has made all rent payments and is current on all its financial obligations under the lease. Both the lease payments and mortgage debt service are NOK denominated currency. We maintain a series of USD-NOK forward swaps for a total notional amount of 274 million NOK in order to minimize our foreign currency cash flow risk. These forward swaps occur quarterly through May 2024, where we have agreed to sell NOK and buy USD at a locked in forward curve rate.

Warehouse Distribution Portfolio Net Lease

Collateral type

City, State

Number of Properties

Rentable square feet (“RSF”) / units/keys

Weighted average % leased

Weighted average lease term (yrs)

Net lease 2

Industrial

Various - U.S.

2,787,343 RSF

100%

16.4

In August 2018 we acquired two warehouse distribution facilities located in Tracy, California and Tolleson, Arizona (the “Warehouse Distribution Portfolio”) for $292 million. These two properties are 100% occupied by a single tenant that is rated

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investment grade Ba1 from Moody’s. The tenant is a national grocer and these properties form a part of its national distribution network. The Warehouse Distribution Portfolio lease (the “Warehouse Distribution Portfolio Lease”) requires the tenant to pay for all real estate related expenses, including operational expenditures, capital expenditures and taxes. The tenant has invested a significant amount of capital expenditures into each property over the past few years and has plans for additional capital expenditures in 2022. The Warehouse Distribution Portfolio Lease has a remaining lease term of 16.4 years ending in 2038. The tenant has the option to extend the lease for nine 5-year periods at the same terms with rent adjusted to market rent. The Warehouse Distribution Portfolio Lease also has annual rent increases of 1.5%. Financing on the Warehouse Distribution Portfolio consists of mortgage and mezzanine debt for a total combined amount payable of $200 million. The debt is interest only at a blended fixed rate of 4.8% and matures in September 2028. The debt has a defeasance provision for any early loan ~~term,~~prepayment. The tenant has made all rent payments and is ~~generally recorded~~current on ~~an accrual basis to~~all its financial obligations under the ~~extent such amounts are expected to be collected. During~~Warehouse Distribution Portfolio Lease.

The Warehouse Distribution Portfolio has generated net operating income for the three ~~and nine~~ months ended ~~September 30, 2021, we recorded total PIK interest~~March 31, 2022 of ~~$11.1~~$5.1 million; and the asset value on our consolidated balance sheet is $260.4 million and $18.3 million, respectively. We will generally cease accruing PIK interest if there is insufficient value to support the accrual or management does not expect the borrower to be able to pay all principal and interest due.as of March 31, 2022.

~~CRE Debt Securities~~Warehouse Distribution Portfolio Net Lease

~~The following table presents an overview of our CRE debt securities as of September 30, 2021 (dollars~~

Collateral type

City, State

Number of Properties

Rentable square feet (“RSF”) / units/keys

Weighted average % leased

Weighted average lease term (yrs)

Net lease 2

Industrial

Various - U.S.

2,787,343 RSF

100%

16.4

In August 2018 we acquired two warehouse distribution facilities located in ~~thousands):~~

Weighted Average(1)
CRE Debt Securities by ratings category(2)
Number of Securities Book value Cash coupon Unlevered all-in yield Remaining term Ratings
Non-investment grade rated (BB) 1 $ 3,945 — % — % 4.5 BB | B
“B-pieces” of CMBS securitization pools 4 39,124 2.8 % 11.9 % 5.7 —
Total/Weighted Average 5 $ 43,069 2.5 % 10.8 % 5.6 —

~~(1)Weighted average metrics weighted by book value, except~~Tracy, California and Tolleson, Arizona (the “Warehouse Distribution Portfolio”) for ~~cash coupon which is weighted by principal balance.~~

~~(2)As of September 30, 2021, all CRE debt securities consisted of CMBS.~~

During the third quarter of 2021, we recorded a realized loss of $3.9 million related to the sale of an underlying loan held within one of our retained investments in the subordinate tranches of another securitization trust.

~~Subsequent to September 30, 2021, we sold one CRE security for $5.1 million in gross proceeds and will recognize a gain of approximately $1.2~~$292 million. ~~Following the sale, we only hold four B-piece securities.~~

~~Net Leased and Other Real Estate~~

Our net leased real estate investment strategy focuses on direct ownership in commercial real estate with an emphasis on properties with stable cash flow, which may be structurally senior to a third-party partner’s equity. In addition, we may own net leased real estate investments through joint ventures with one or more partners. As part of our net leased real estate strategy, we explore a variety of real estate investments including multi-tenant office, multifamily, student housing and industrial. These two properties are typically well-located with strong operating partners and we believe offer both attractive cash flow and returns. Additionally, we have three investments in direct ownership of commercial real estate with an emphasis on properties with stable cash flow, which may be structurally senior to100% occupied by a third-party partner’s equity. We own these operating real estate investments through joint ventures with one or more partners. These properties are typically well-located with strong operating partners.

As of September 30, 2021, $695.6 million or 17.6% of our assets were invested in net leased and other real estate properties and these properties were 96.8% occupied. The following table presents our net leased and other real estate investments as of September 30, 2021 (dollars in thousands):

Count
Carrying Value(1)
NOI for the three months ended September 30, 2021(2)
Net leased real estate 9 $ 495,790 $ 9,405
Other real estate 3 199,784 5,715
Total/Weighted average net leased and other real estate 12 $ 695,574 $ 15,120

~~(1)Represents carrying values at our share as of September 30, 2021; includes real estate tangible assets, deferred leasing costs and other intangible assets less intangible liabilities.~~

~~(2)Please refer to “Non-GAAP Supplemental Financial Measures” for further information on NOI.~~single tenant that is rated

8267

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~~The following table provides asset-level detail of our net leased and other real estate as of September 30, 2021:~~

Collateral type City, State Number of Properties Number of Buildings
Rentable square feet (“RSF”) / units/keys(1)
Weighted average % leased(2)
Weighted average lease term (yrs)(3)
Net leased real estate
Net lease 1 Office Stavenger, Norway 1 26 1,290,926 RSF 100% 9.3
Net lease 2 Industrial Various - U.S. 2 2 811,850 RSF 100% 16.8
Net lease 3 Office Aurora, CO 1 1 183,529 RSF 100% 1.2
Net lease 4 Office Indianapolis, IN 1 1 338,000 RSF 100% 9.3
Net lease 5 Retail Various - U.S. 7 7 319,600 RSF 100% 2.6
Net lease 6 Office Rockaway, NJ 1 1 121,038 RSF 100% 1.4
Net lease 7 Retail Keene, NH 1 1 45,471 RSF 100% 7.3
Net lease 8 Retail Fort Wayne, IN 1 1 50,000 RSF 100% 2.9
Net lease 9 Retail South Portland, ME 1 1 52,900 RSF 100% 10.3
Total/Weighted average net leased real estate 16 41 3,213,314 RSF 100% 9.2
Other real estate
Other real estate 1 Office Creve Coeur, MO 7 7 847,604 RSF 91% 3.8
Other real estate 2 Office Warrendale, PA 5 5 496,414 RSF 82% 4.1
Other real estate 3 Hotel Coraopolis, PA 1 1 318 Keys n/a —
Total/Weighted average other real estate 13 13 n/a 87% 3.9
Total/Weighted average net leased and other real estate 29 54
`

~~(1)Rentable square feet based on carry value at our share as of September 30, 2021.~~

~~(2)Represents the percent leased as of September 30, 2021. Weighted average calculation based on carrying value at our share as of September 30, 2021.~~

~~(3)~~Based on in-place leases (defined as occupied and paying leases) as of September 30, 2021 and assumes that no renewal options are exercised. Weighted average calculation based on carrying value at our share as of September 30, 2021.

~~Stavenger, Norway Office Net Lease~~

Collateral type City, State Number of Properties Number of Buildings Rentable square feet (“RSF”) / units/keys Weighted average % leased Weighted average lease term (yrs)
Net lease 1 Office Stavenger, Norway 1 26 1,290,926 RSF 100% 9.3

~~In July 2018, we acquired a class A office campus in Stavenger, Norway (the “Norway Net Lease”) for $320 million. This property is 100% occupied by a single tenant that is rated~~ investment grade ~~AA-/Aa2~~Ba1 from ~~S&P~~Moody’s. The tenant is a national grocer and ~~Moody’s, respectively.~~these properties form a part of its national distribution network. The ~~property serves as their global headquarters. The Norway Net Lease~~Warehouse Distribution Portfolio lease (the “Warehouse Distribution Portfolio Lease”) requires the tenant to pay for all real estate related expenses, including operational expenditures, capital expenditures and ~~municipality~~ taxes. The ~~Net~~tenant has invested a significant amount of capital expenditures into each property over the past few years and has plans for additional capital expenditures in 2022. The Warehouse Distribution Portfolio Lease has a ~~weighted average~~ remaining lease term of ~~9.3~~16.4 years ~~and the~~ending in 2038. The tenant has the option to extend the lease for ~~two~~nine 5-year periods at the same terms with rent adjusted to market rent. The ~~Net~~Warehouse Distribution Portfolio Lease also has annual rent increases ~~based on the Norwegian CPI Index. Our tenant has injected a significant amount~~ of ~~capital into improvements of the property over the past 10 years.~~1.5%. Financing on the ~~Norway Net Lease~~Warehouse Distribution Portfolio consists of mortgage and mezzanine debt for a ~~mortgage~~total combined amount payable of ~~$186.2 million with~~$200 million. The debt is interest only at a blended fixed rate of ~~3.9%, which~~4.8% and matures in ~~June 2025.~~September 2028. The debt has a defeasance provision for any early loan prepayment. The tenant has made all rent payments and is current on all its financial obligations under the ~~lease. Both the lease payments and mortgage debt service are NOK denominated currency. During the second quarter of 2021, we entered into a series of USD-NOK forward swaps~~Warehouse Distribution Portfolio Lease.

The Warehouse Distribution Portfolio has generated net operating income for the ~~total notional amount~~three months ended March 31, 2022 of ~~274~~$5.1 million; and the asset value on our consolidated balance sheet is $260.4 million NOK in order to minimize our foreign currency cash flow risk. These quarterly forward swaps are over the next three years through May 2024, where we have agreed to sell NOK and buy USD at a locked in forward curve rate.as of March 31, 2022.

Warehouse Distribution Portfolio Net Lease

Collateral type City, State Number of Properties Number of Buildings Rentable square feet (“RSF”) / units/keys Weighted average % leased Weighted average lease term (yrs)
Net lease 2 Industrial Various - U.S. 2 2 811,850 RSF 100% 16.8

~~Table of Contents~~

Collateral type

City, State

Number of Properties

Rentable square feet (“RSF”) / units/keys

Weighted average % leased

Weighted average lease term (yrs)

Net lease 2

Industrial

Various - U.S.

2,787,343 RSF

100%

16.4

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investment grade Ba1 from Moody’s. The tenant is a national grocer and these properties form a part of its national distribution network. The Warehouse Distribution Portfolio lease (the “Warehouse Distribution Portfolio Lease”) requires the tenant to pay for all real estate related expenses, including operational expenditures, capital expenditures and taxes. The tenant has invested a significant amount of capital expenditures into each property over the past few years and has plans for additional capital expenditures in 2022. The Warehouse Distribution Portfolio Lease has a remaining lease term of 1716.4 years ending in 2038. The tenant has the option to extend the lease for nine 5-year periods at the same terms with rent adjusted to market rent. The Warehouse Distribution Portfolio Lease also has annual rent increases of 1.5%. Financing on the Warehouse Distribution Portfolio consists of mortgage and mezzanine debt for a total combined amount payable of $200 million. The debt is interest only at a blended fixed rate of 4.8% and matures in September 2028. The debt has a defeasance provision for any early loan prepayment. The tenant has made all rent payments and is current on all its financial obligations under the Warehouse Distribution Portfolio Lease.

The Warehouse Distribution Portfolio has generated a net operating income for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 of $5.1 ~~million and $15.2 million, respectively;~~million; and the asset value on our consolidated balance sheet is ~~$264.8~~$260.4 million as of September 30, 2021. During the second quarter of 2020, we completed an asset level preferred financing on five assets which included the Warehouse Distribution Portfolio resulting in a reduction of our at-share ownership in the Warehouse Distribution Portfolio, which is approximately 29% at September 30, 2021. Upon resolution of the 5-Investment Preferred Financing we anticipate repurchasing the remaining interest in the investment. Refer to “Liquidity and Capital Resources” section for further discussion regarding the “~~5-Investment Preferred Financing.~~”March 31, 2022.

~~Results of Operations~~CRE Debt Securities

The following table ~~summarizes~~presents an overview of our ~~results~~CRE debt securities as of ~~operations for the three months ended September 30, 2021 and June 30, 2021~~March 31, 2022 (dollars in thousands):


				Weighted Average(1)
CRE Debt Securities by ratings category	Number of Securities	Book value		Cash coupon		Unlevered all-in yield		Remaining term	Ratings

“B-pieces” of CMBS securitization pools	4	$	36,154	2.8	%	12.9	%	5.2	—
Total/Weighted Average	4	$	36,154	2.8	%	12.9	%	5.2	—

(1)Weighted average metrics weighted by book value, except for cash coupon which is weighted by principal balance.

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Three Months Ended September 30, Three Months Ended June 30, Increase (Decrease)
2021 2021 Amount %
Net interest income
Interest income $ 47,082 $ 37,921 $ 9,161 24.2 %
Interest expense (14,962) (12,993) (1,969) 15.2 %
Interest income on mortgage loans held in securitization trusts 10,806 11,390 (584) (5.1) %
Interest expense on mortgage obligations issued by securitization trusts (9,508) (10,111) 603 (6.0) %
Net interest income 33,418 26,207 7,211 27.5 %
Property and other income
Property operating income 26,376 24,799 1,577 6.4 %
Other income 946 1,110 (164) (14.8) %
Total property and other income 27,322 25,909 1,413 5.5 %
Expenses
Management fee expense — 2,338 (2,338) n.m.
Property operating expense 7,266 6,758 508 7.5 %
Transaction, investment and servicing expense 1,086 644 442 68.6 %
Interest expense on real estate 7,968 7,777 191 2.5 %
Depreciation and amortization 8,850 9,994 (1,144) (11.4) %
Provision for loan losses 769 1,200 (431) (35.9) %
Administrative expense 11,812 14,053 (2,241) (15.9) %
Restructuring charges — 150 (150) n.m.
Total expenses 37,751 42,914 (5,013) (12.0) %
Other income (loss)
Unrealized gain on mortgage loans and obligations held in securitization trusts, net 3,867 19,516 (15,649) (80.2) %
Realized loss on mortgage loans and obligations held in securitization trusts, net (3,867) (19,516) 15,649 (80.2) %
Other gain, net 3,309 836 2,473 n.m.
Income before equity in earnings of unconsolidated ventures and income taxes 26,298 10,038 16,110 n.m.
Equity in earnings (loss) of unconsolidated ventures (95,977) (33,788) (62,189) n.m.
Income tax benefit (expense) (2,065) 134 (2,199) n.m.
Net loss $ (71,744) $ (23,616) $ (48,128) n.m.

~~Comparison for Three Months Ended September 30, 2021 and Three Months Ended June 30, 2021~~

~~Net Interest Income~~

~~Interest income~~

~~Interest income increased by $9.2 million to $47.1 million for the three months ended September 30, 2021, as compared to the three months ended June 30, 2021. The increase was primarily due to~~ ~~$6.1 million related to Signa by Hilton San Jose emerging from bankruptcy (see “Our Portfolio” section for further details on the “San Jose, California Hotel Loan”),~~ ~~of which $3.7 million relates to past due interest during the non-accrual period of February 2021 through June 2021 and $2.4 million relates to interest income during the third quarter of 2021,~~ ~~as well as~~ ~~approximately $2.6 million related to net new loan originations.~~

~~Interest expense~~

Interest expense increased by $2.0 million to $15.0 million for the three months ended September 30, 2021, as compared to the three months ended June 30, 2021. The increase is primarily due to $2.6 million related to financing on newly originated loans, partially offset by payoffs of financing.

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~~Net interest income on mortgage loans and obligations held in securitization trusts, net~~

Net interest income on mortgage loans and obligations held in securitization trusts, net increased by $0.6 million for the three months ended September 30, 2021, as compared to the three months ended June 30, 2021. ~~The increase was primarily due to receiving more interest income from an underlying tranche.~~

~~Property and other income~~

~~Property operating income~~

~~Property operating income increased by $1.6 million to $26.4 million for~~ the three months ended September 30, 2021, as compared to the three months ended June 30, 2021. The increase was primarily due to improved performance of our one hotel property during the third quarter of 2021.

~~Other income~~

Other income decreased by $0.2 million for the three months ended September 30, 2021, as compared to the three months ended June 30, 2021. The decrease was primarily due to a one-time reimbursement received in the second quarter on a previously resolved transaction. Other income includes $0.7 million in late fees related to the San Jose Hotel Loan during the three months ended September 30, 2021. S~~ee “Our Portfolio” section for further details on the “San Jose, California Hotel Loan.”~~

~~Expenses~~

~~Management fee expense~~

Management fee expense decreased by $2.3 million for the three months ended September 30, 2021 as compared to the three months ended June 30, 2021. The decrease was due to the termination of our Management Agreement with our previous Manager in April 2021.

~~Property operating expense~~

Property operating expense increased by $0.5 million to $7.3 million for the three months ended September 30, 2021, as compared to the three months ended June 30, 2021. The increase was primarily due to increased operating costs of our one hotel property during the third quarter of 2021.

~~Transaction, investment and servicing expense~~

Transaction, investment and servicing expense increased by $0.4 million to $1.1 million for the three months ended September 30, 2021 as compared to the three months ended June 30, 2021. The increase was primarily due to advisory fees.

~~Interest expense on real estate~~

Interest expense on real estate increased by $0.2 million to $8.0 million for the three months ended September 30, 2021, as compared to the three months ended June 30, 2021. The increase was primarily due to draws on the mortgage loan associated with one hotel property.

~~Depreciation and amortization~~

Depreciation and amortization expense decreased by $1.1 million to $8.9 million for the three months ended September 30, 2021, as compared to the three months ended June 30, 2021. The decrease was primarily due to a hotel property being classified as held for sale during the end of the second quarter of 2021. The hotel remains held for sale as of September 30, 2021.

~~Provision for loan losses~~

Provision for loan losses was $0.8 million and $1.2 million for the three months ended September 30, 2021 and June 30, 2021, respectively. The increase in reserves over both periods was primarily due to new loan originations.

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~~Administrative expense~~

Administrative expense decreased by $2.2 million to $11.8 million for the three months ended September 30, 2021, as compared to the three months ended June 30, 2021. The decrease was due to higher stock compensation expense of $2.8 million recorded during the three months ended June 30, 2021, which was partially offset by one additional month of compensation and benefits related payments during the three months ended September 30, 2021 following the internalization of management operations as of April 30, 2021.

~~Restructuring charges~~

~~During the three months ended June 30, 2021, we recorded $0.2 million in additional professional fees related to the Internalization.~~

~~Other income (loss)~~

~~Unrealized gain loss on mortgage loans and obligations held in securitization trusts, net~~

During the three months ended September 30, 2021, we recorded a $3.9 million unrealized gain on mortgage loans and obligations held in securitization trusts, net related to the sale of an underlying loan held within one of its retained investments in the subordinate tranches of a securitization trust. During the three months ended June 30, 2021, we record a $19.5 million unrealized gain on mortgage loans and obligations held in securitization trusts, net related to the sale of the retained investments in the subordinate tranches of another securitization trust. Upon both sales, the accumulated unrealized losses relating to the retained investments were reversed and subsequently recorded to realized loss on mortgage loans and obligations held in securitization trusts, net.

~~Realized loss on mortgage loans and obligations held in securitization trusts, net~~

~~During the three months ended September 30, 2021, we recorded a $3.9 million realized loss on~~mortgage loans and obligations held in securitization trusts, net. This was due to the realized loss on a sale of an underlying loan held within one of its retained investments in the subordinate tranches of a securitization trust. During the three months ended June 30, 2021, we recorded a $19.5 million realized loss on mortgage loans and obligations held in securitization trusts, net. This was due to the realized loss upon sale of the retained investments in the subordinate tranches of another securitization trust.

~~Other gain, net~~

Other gain, net increased by $2.5 million for the three months ended September 30, 2021, as compared to the three months ended June 30, 2021. The increase was primarily due to an increase in unrealized gains of $3.7 million on undesignated hedges partially offset by net realized losses of $1.6 million on maturing undesignated hedges.

~~Equity in earnings (loss) of unconsolidated ventures~~

Equity in earnings (loss) of unconsolidated ventures increased by $62.2 million to a loss of $96.0 million for the three months ended September 30, 2021 as compared to the three months ended June 30, 2021. The increase was primarily due to recording our proportionate share of a $97.9 million fair value loss adjustment on our Los Angeles, California Mixed-Use Project. See “Our Portfolio” section for further details.

~~Income tax expense~~

Income tax expense increased by $2.2 million to an expense of $2.1 million for the three months ended September 30, 2021, as compared to the three months ended June 30, 2021. The increase was due to return to provision adjustment related to private equity investments.

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Results of Operations

The following table summarizes our portfolio results of operations for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and December 31, 2021 ~~and 2020~~ (dollars in thousands):


		Nine Months Ended September 30,				Increase (Decrease)					Three Months Ended March 31,		Three Months Ended December 31,				Increase (Decrease)
		2021		2020		Amount		%			2022		2021		Amount		%
Net interest income	Net interest income									Net interest income
Interest income	Interest income	$	119,377	$	122,003	$	(2,626)	(2.2)	%	Interest income	$	44,570	$	49,469	$	(4,899)	(9.9)	%
Interest expense	Interest expense	(40,450)		(50,915)		10,465		(20.6)	%	Interest expense	(16,072)		(15,035)		(1,037)		6.9	%
Interest income on mortgage loans held in securitization trusts	Interest income on mortgage loans held in securitization trusts	41,885		61,556		(19,671)		(32.0)	%	Interest income on mortgage loans held in securitization trusts	9,375		9,724		(349)		(3.6)	%
Interest expense on mortgage obligations issued by securitization trusts	Interest expense on mortgage obligations issued by securitization trusts	(36,955)		(54,627)		17,672		(32.4)	%	Interest expense on mortgage obligations issued by securitization trusts	(8,488)		(8,504)		16		(0.2)	%
Net interest income	Net interest income	83,857		78,017		5,840		7.5	%	Net interest income	29,385		35,654		(6,269)		(17.6)	%

Property and other income	Property and other income									Property and other income
Property operating income	Property operating income	76,897		137,913		(61,016)		(44.2)	%	Property operating income	24,168		25,737		(1,569)		(6.1)	%
Other income	Other income	2,101		1,079		1,022		94.7	%	Other income	276		232		44		19.0	%
Total property and other income	Total property and other income	78,998		138,992		(59,994)		(43.2)	%	Total property and other income	24,444		25,969		(1,525)		(5.9)	%

Expenses	Expenses									Expenses
Management fee expense		9,596		22,235		(12,639)		(56.8)	%

Property operating expense	Property operating expense	22,135		54,119		(31,984)		(59.1)	%	Property operating expense	6,724		8,151		(1,427)		(17.5)	%
Transaction, investment and servicing expense	Transaction, investment and servicing expense	4,018		7,668		(3,650)		(47.6)	%	Transaction, investment and servicing expense	1,124		537		587		n.m.
Interest expense on real estate	Interest expense on real estate	24,378		37,101		(12,723)		(34.3)	%	Interest expense on real estate	7,556		7,900		(344)		(4.4)	%
Depreciation and amortization	Depreciation and amortization	28,383		46,766		(18,383)		(39.3)	%	Depreciation and amortization	8,594		8,015		579		7.2	%
Provision for loan losses		5,194		80,285		(75,091)		(93.5)	%
Impairment of operating real estate		—		33,512		(33,512)		n.m.
Administrative expense		38,460		19,569		18,891		96.5	%
Restructuring charges		109,321		—		109,321		n.m.
Decrease of CECL reserve										Decrease of CECL reserve	(866)		(6,626)		5,760		(86.9)	%

Compensation and benefits										Compensation and benefits	8,225		7,406		819		11.1	%
Operating expense										Operating expense	4,349		4,144		205		4.9	%
Total expenses	Total expenses	241,485		301,255		(59,770)		(19.8)	%	Total expenses	35,706		29,527		6,179		20.9	%

Other income (loss)	Other income (loss)									Other income (loss)
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net		32,021		(41,589)		73,610		n.m.
Unrealized gain on mortgage loans and obligations held in securitization trusts, net										Unrealized gain on mortgage loans and obligations held in securitization trusts, net	—		9,883		(9,883)		(100.0)	%
Realized loss on mortgage loans and obligations held in securitization trusts, net	Realized loss on mortgage loans and obligations held in securitization trusts, net	(23,383)		—		(23,383)		n.m.		Realized loss on mortgage loans and obligations held in securitization trusts, net	—		(13,240)		13,240		(100.0)	%
Other gain (loss), net		12,512		(130,115)		142,627		n.m.
Loss before equity in earnings of unconsolidated ventures and income taxes		(57,480)		(255,950)		198,470		(77.5)	%
Equity in earnings (loss) of unconsolidated ventures		(132,243)		(69,889)		(62,354)		89.2	%
Income tax benefit (expense)		(130)		11,544		(11,674)		n.m.
Net loss		$	(189,853)	$	(314,295)	$	124,442	(39.6)	%
Other gain, net										Other gain, net	10,288		61,555		(51,267)		(83.3)	%
Income before equity in earnings of unconsolidated ventures and income taxes										Income before equity in earnings of unconsolidated ventures and income taxes	28,411		90,294		(61,883)		(68.5)	%
Equity in earnings of unconsolidated ventures										Equity in earnings of unconsolidated ventures	25		1,128		(1,103)		(97.8)	%
Income tax expense										Income tax expense	(36)		(6,146)		6,110		(99.4)	%
Net income										Net income	$	28,400	$	85,276	$	(56,876)	(66.7)	%

Comparison of ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2022 and December 31, 2021 ~~and Nine Months EndedSeptember 30, 2020~~

Net Interest Income

Interest income

Interest income decreased by ~~$2.6~~$4.9 million to ~~$119.4~~$44.6 million for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 as compared to the ~~nine~~three months ended ~~September 30, 2020.~~December 31, 2021. The decrease was primarily related to $4.1 million received in non-recurring profit participation income received in the three months ended December 31, 2021 and $4.3 million due to ~~$27.4 million related to~~ loan ~~payoffs,~~repayments which was partially offset by ~~$25.0~~$4.6 million ~~related to~~in interest from new loan ~~originations.~~originations during the three months ended March 31, 2022.

Interest expense

Interest expense ~~decreased~~increased by ~~$10.5~~$1.0 million to ~~$40.5~~$16.1 million for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 as compared to the ~~nine~~three months ended ~~September 30, 2020.~~December 31, 2021. The ~~decrease~~increase was primarily due to ~~$14.7~~$1.6 million related to ~~paydowns~~financing for loan originations partially offset by $0.3 million related to payoffs of financing on our Bank Credit Facility and Master Repurchase Facilities and $3.1 million due to fully paying down our CMBS Credit Facilities. This was offset by $5.6 million relating to financings on new loans and $2.6 million relating to the BRSP 2021-FL1 securitization.in connection with loan repayments.

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Net interest income on mortgage loans and obligations held in securitization trusts, net

Net interest income on mortgage loans and obligations held in securitization trusts, net decreased by ~~$19.7~~$0.3 million to $0.9 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the ~~nine~~three months ended ~~September 30, 2020.~~December 31, 2021. The decrease was primarily due to ~~the sale of~~decreased interest income on the retained ~~interest~~investments in the subordinate tranches of a securitization ~~trust during the second quarter of 2021.~~trusts.

Property and other income

Property operating income

Property operating income decreased by ~~$61.0~~$1.6 million to ~~$76.9~~$24.2 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the ~~nine~~three months ended ~~September 30, 2020.~~December 31, 2021. The decrease was primarily due to ~~real estate properties sold throughout 2020 and 2021.~~two property sales during the first quarter of 2022, partially offset by increased tenant reimbursement income.

Other income

Other income of $0.3 million and $0.2 million~~$2.1 million~~ was recorded for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022 and the three months ended December 31, 2021, respectively. This ~~was~~ primarily ~~due~~relates to special servicing income associated with a ~~one-time reimbursement received on a previously resolved transaction.~~securitization trust.

Expenses

~~Management fee expense~~

~~Management fee expense decreased by~~ ~~$12.6 million~~ ~~for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020 due to the termination of the Management Agreement in April 2021.~~

Property operating expense

Property operating expense decreased by ~~$32.0~~$1.4 million to ~~$22.1~~$6.7 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the ~~nine~~three months ended ~~September 30, 2020.~~December 31, 2021. The decrease was primarily due to ~~real estate properties sold throughout 2020 and 2021.~~two property sales in the first quarter of 2022.

Transaction, investment and servicing expense

Transaction, investment and servicing expense ~~decreased~~increased by ~~$3.7~~$0.6 million to ~~$4.0~~$1.1 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the ~~nine~~three months ended ~~September 30, 2020,~~December 31, 2021, primarily due to ~~higher legal costs of $2.4~~$0.5 million a~~ssociated with exploring strategic options of the Company~~ in ~~the first quarter of 2020.~~expenses relating to a joint venture investment.

Interest expense on real estate

Interest expense on real estate decreased by ~~$12.7~~$0.3 million to ~~$24.4~~$7.6 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the ~~nine~~three months ended ~~September 30, 2020.~~December 31, 2021. The decrease was primarily due to ~~real estate~~repayments of mortgage loans secured by two properties ~~sold throughout 2020 and the sale of an industrial portfolio during the first quarter of 2021.~~sold.

Depreciation and amortization

Depreciation and amortization expense ~~decreased~~increased by ~~$18.4~~$0.6 million to ~~$28.4~~$8.6 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the ~~nine~~three months ended ~~September 30, 2020.~~December 31, 2021. This was the result of a decrease in depreciation recorded in the fourth quarter of 2021 on one property.

CECL Reserve

We recorded a reversal of our CECL reserve of $0.9 million and $6.6 million for the three months ended March 31, 2022 and the three months ended December 31, 2021, respectively. The ~~decrease~~reversal of CECL for the three months ended March 31, 2022 was driven by improved operating performance of the underlying collateral of certain loans and repayments, partially offset by reserves on newly originated loans.

Compensation and benefits

Compensation and benefits increased by $0.8 million to $8.2 million for the three months ended March 31, 2022, as compared to the three months ended December 31, 2021. The increase is primarily due to annual salary increases and severance costs incurred during the first quarter of 2022.

Operating expense

Operating expense increased by $0.2 million to $4.3 million for the three months ended March 31, 2022, as compared to the three months ended December 31, 2021. The increase was primarily due to ~~real estate properties sold throughout 2020 and 2021.~~

~~Provision for loan losses~~

Provision for loan losses decreased by $75.1 million for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020. During the nine months ended September 30, 2020, we recorded $68.3 million of specific reserves on three loans, which have since been resolved.

~~Impairment of operating real estate~~

~~Impairment of operating real estate was $33.5 million for the nine months ended September 30, 2020. The impairment resulted from a reduction in the estimated holding period of certain properties sold~~higher non-recurring costs incurred during the ~~period.~~first quarter of 2022.

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~~Administrative expense~~

Administrative expense increased by $18.9 million to $38.5 million for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020. This increase was primarily due to $9.8 million of compensation and benefits following the internalization of management operations on April 30, 2021 and higher stock compensation expense of $9.1 million during the nine months ended September 30, 2021.

~~Restructuring charges~~

During the nine months ended September 30, 2021, we recorded $109.3 million in restructuring costs related to the termination of our Management Agreement with our previous Manager. This consisted of a one-time cash payment of $102.3 million to our previous Manager paid on April 30, 2021 and $7.0 million in additional restructuring costs consisting primarily of fees paid for legal and investment banking advisory services.

Other income (loss)

Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we recorded ~~a $32.0 million~~no unrealized gain on mortgage loans and obligations held in securitization trusts, net, primarily due to the sale of the retained investments in the subordinate tranches of one securitization trust. Upon the sale in the second quarter of 2021, the accumulated unrealized losses relating to the retained investments were reversed and subsequently recorded to realizedor loss on mortgage loans and obligations held in securitization trusts, net. During the ~~nine~~three months ended ~~September 30, 2020,~~December 31, 2021, we recorded an unrealized ~~loss~~gain of ~~$41.6~~$9.9 million on mortgage loans and obligations held in securitization trusts, net which represents the reversal of unrealized losses upon the sale of an underlying loan in the securitization trust and the change in fair value of the assets and liabilities of the securitization trusts consolidation as a result of our investment in the subordinate tranches of the securitization trusts.

Realized loss on mortgage loans and obligations held in securitization trusts, net

During the ~~nine~~three months ended ~~September 30,~~March 31, 2022, we recorded no realized gain or loss onmortgage loans and obligations held in securitization trusts, net. During the three months ended December 31, 2021, we ~~recorded~~experienced a ~~$23.4~~$13.2 million realized loss on mortgage loans and obligations held in securitization trusts, net primarily due to the realized loss upon sale of ~~the retained investments~~an underlying loan in the ~~subordinate tranches of one~~ securitization ~~trust in the second quarter of 2021.~~trust.

Other gain, ~~(loss),~~ net

During the ~~nine~~three months ended ~~September 30,~~March 31, 2022, we recorded other gain, net of $10.3 million primarily due to two property sales in the first quarter of 2022. During the three months ended December 31, 2021, we recorded other gain, net of ~~$12.5~~$61.6 million primarily relating to the realized gain on the sale of five co-investment assets to managed vehicles of Fortress Investment Group LLC.

Equity in earnings (loss) of unconsolidated ventures

Equity in earnings of unconsolidated ventures decreased by $1.1 million for the three months ended March 31, 2022 due to the sale of an equity method investment in the fourth quarter of 2021.

Income tax expense

Income tax expense decreased by $6.1 million for the three months ended March 31, 2022, as compared to the three months ended December 31, 2021. This was due to a $6.1 million income tax expense recorded in the fourth quarter of 2021 relating to the sale of a hotel investment in Austin, Texas.

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	Three Months Ended March 31,						Increase (Decrease)
	2022		2021		Amount		%
Net interest income
Interest income	$	44,570	$	34,374	$	10,196	29.7	%
Interest expense	(16,072)		(12,495)		(3,577)		28.6	%
Interest income on mortgage loans held in securitization trusts	9,375		19,689		(10,314)		(52.4)	%
Interest expense on mortgage obligations issued by securitization trusts	(8,488)		(17,336)		8,848		(51.0)	%
Net interest income	29,385		24,232		5,153		21.3	%

Property and other income
Property operating income	24,168		25,722		(1,554)		(6.0)	%
Other income	276		45		231		n.m.
Total property and other income	24,444		25,767		(1,323)		(5.1)	%

Expenses
Management fee expense	—		7,258		(7,258)		(100.0)	%
Property operating expense	6,724		8,111		(1,387)		(17.1)	%
Transaction, investment and servicing expense	1,124		2,288		(1,164)		(50.9)	%
Interest expense on real estate	7,556		8,633		(1,077)		(12.5)	%
Depreciation and amortization	8,594		9,539		(945)		(9.9)	%
Increase (decrease) of CECL reserve	(866)		3,225		(4,091)		n.m.

Compensation and benefits	8,225		6,786		1,439		21.2	%
Operating expense	4,349		5,809		(1,460)		(25.1)	%
Restructuring charges	—		109,171		(109,171)		(100.0)	%
Total expenses	35,706		160,820		(125,114)		(77.8)	%

Other income (loss)
Unrealized gain on mortgage loans and obligations held in securitization trusts, net	—		8,638		(8,638)		(100.0)	%

Other gain, net	10,288		8,367		1,921		23.0	%
Income (loss) before equity in earnings of unconsolidated ventures and income taxes	28,411		(93,816)		122,227		n.m.
Equity in earnings (loss) of unconsolidated ventures	25		(2,478)		2,503		n.m.
Income tax benefit (expense)	(36)		1,801		(1,837)		n.m.
Net income (loss)	$	28,400	$	(94,493)	$	122,893	n.m.

Comparison of Three Months EndedMarch 31, 2022 and March 31, 2021

Net Interest Income

Interest income

Interest income increased by $10.2 million to $44.6 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. The increase was primarily due to $17.6 million in interest from new loan originations, partially offset by $8.0 million related to loan repayments.

Interest expense

Interest expense increased by $3.6 million to $16.1 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. The increase was driven by $6.8 million related to financing for loan originations and was partially offset by $3.2 million related to payoffs of financings in connection with loan repayments, lower deferred financings costs, and unused fees on our Bank Credit Facility.

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Net interest income on mortgage loans and obligations held in securitization trusts, net

Net interest income on mortgage loans and obligations held in securitization trusts, net decreased by $1.5 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, primarily due to the sale of the retained interest of a securitization trust during 2021.

Property and other income

Property operating income

Property operating income decreased by $1.6 million to $24.2 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. The decrease was primarily due to the sale of an industrial portfolio in the first quarter of 2021 and two property sales in the first quarter of 2022.

Other income

Other income of $0.3 million was recorded during the three months ended March 31, 2022, which primarily relates to special servicing income associated with a securitization trust. During the three months ended March 31, 2021, we recorded de minimis other income.

Expenses

Management fee expense

Management fee expense decreased by $7.3 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. The decrease is due to the termination of the management agreement (the “Management Agreement”) with our former manager (the “Manager”), a subsidiary of DigitalBridge Group, Inc. that occurred in April 2021.

Property operating expense

Property operating expense decreased by $1.4 million to $6.7 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. The decrease was primarily due to the sale of an industrial portfolio in the first quarter of 2021 and two property sales in the first quarter of 2022.

Transaction, investment and servicing expense

Transaction, investment and servicing expense decreased by $1.2 million to $1.1 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, primarily due to higher franchise tax refunds received in the first quarter of 2021.

Interest expense on real estate

Interest expense on real estate decreased by $1.1 million to $7.6 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. The decrease was primarily due to repayments of mortgage loans secured by an industrial portfolio that was sold in the first quarter of 2021.

Depreciation and amortization

Depreciation and amortization expense decreased by $0.9 million to $8.6 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. The decrease was primarily due to a hotel property classified as held for sale in the second quarter 2021.

Increase (decrease) of CECL reserve

We recorded a reversal of our CECL reserve of $0.9 million and recorded a CECL reserve of $3.2 million for the three months ended March 31, 2022 and the three months ended March 31, 2021, respectively. The reversal of CECL reserve for the three months ended March 31, 2022 was driven by improved operating performance of the underlying collateral of certain loans and repayments, partially offset by reserves on newly originated loans.

Compensation and benefits

Compensation and benefits increased by $1.4 million to $8.2 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. The change is due to our hiring of employees following the termination of the Management Agreement in April 2021.

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Operating expense

Operating expense decreased by $1.5 million to $4.3 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. This decrease was due to lower operating expenses following the internalization of our management and operating functions (the “Internalization”) on April 30, 2021.

Restructuring Charges

During the three months ended March 31, 2021, we recorded $109.2 million in restructuring costs related to the termination of our Management Agreement with our previous Manager. This consisted of a one-time cash payment of $102.3 million to our previous Manager paid on April 30, 2021 and $6.9 million in additional restructuring costs consisting primarily of fees paid for legal and investment banking advisory services.

Other income (loss)

Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net

During the three months ended March 31, 2022, we recorded no unrealized gain or loss on mortgage loans and obligations held in securitization trusts, net. During the three months ended March 31, 2021, we recorded an unrealized gain of $8.6 million on mortgage loans and obligations held in securitization trusts, net which represents the change in fair value of the assets and liabilities of the securitization trusts consolidated as a result of our investment in the subordinate tranches of these securitization trusts.

Other gain, net

During the three months ended March 31, 2022, we recorded other gain, net of $10.3 million, primarily due to realized gains on two property sales in the first quarter of 2022. During the three months ended March 31, 2021, we recorded other gain, net of $8.4 million, primarily due to a realized gain ~~of $11.8 million~~ on the sale of an industrial portfolio in the first quarter of 2021. During the nine months ended September 30, 2020, we recorded other loss, net of $130.1 million primarily due to a $93.0 million realized net loss on the sale of 32 CRE securities and the realization of the fair value marks on our remaining CRE securities portfolio in addition to a $38.0 million provision for loan loss recorded on one hospitality loan.

Equity in earnings (loss) of unconsolidated ventures

Equity in earnings (loss) of unconsolidated ventures ~~was $132.2 million and $69.9~~increased by $2.5 million for the ~~nine~~three months ended ~~September 30, 2021 and~~March 31, 2022, as compared to the ~~nine~~three months ended ~~September 30, 2020, respectively. During the nine months ended September 30, 2021 the $132.2 million loss~~March 31, 2021. This was ~~comprised of~~primarily due to recording our proportionate share of a $97.9 million fair value loss adjustment on our Los Angeles, California Mixed-Use Project and our proportionate share of a $35.5 million fair value loss adjustment to reflect the expected proceeds from the Co-Investment portfolio sale. See "Our Portfolio" section for further details. During the nine months ended September 30, 2020 the $69.9 million loss was primarily comprised of fair value losses ~~relating to two equity method investments~~ on ~~nonaccrual status.~~one unconsolidated venture in the first quarter of 2021, partially offset by the sale of one unconsolidated venture in the fourth quarter of 2021.

Income tax benefit (expense)

Income tax benefit ~~(expense)~~ decreased by ~~$11.7~~$1.8 million to an expense ~~of $0.1 million~~ for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the ~~nine~~three months ended ~~September 30, 2020. The decrease in income tax benefit was~~March 31, 2021, primarily due to ~~an $11.8 million one-time prior year benefit from~~ a tax capital loss carryback onrelating to private equity ~~investments.~~

investments recorded in the first quarter of 2021.

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Book Value Per Share

The following table calculates our GAAP book value per share and undepreciated book value per share ($ in thousands, except per share data):


		September 30, 2021		June 30, 2021			March 31, 2022		December 31, 2021
Stockholders’ Equity excluding noncontrolling interests in investment entities	Stockholders’ Equity excluding noncontrolling interests in investment entities	$	1,466,050	$	1,560,311	Stockholders’ Equity excluding noncontrolling interests in investment entities	$	1,494,536	$	1,489,843
Shares	Shares					Shares
Class A common stock	Class A common stock	129,759		129,759		Class A common stock	129,633		129,769
OP units	OP units	3,076		3,076		OP units	3,076		3,076
Total outstanding	Total outstanding	132,835		132,835		Total outstanding	132,709		132,845
GAAP book value per share	GAAP book value per share	$	11.04	$	11.75	GAAP book value per share	$	11.26	$	11.22
Accumulated depreciation and amortization per share	Accumulated depreciation and amortization per share	$	0.96	$	0.91	Accumulated depreciation and amortization per share	$	1.10	$	1.15
Undepreciated book value per share	Undepreciated book value per share	$	12.00	$	12.66	Undepreciated book value per share	$	12.36	$	12.37

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Non-GAAP Supplemental Financial Measures

Distributable Earnings

We present Distributable Earnings, which is a non-GAAP supplemental financial measure of our performance. We believe that Distributable Earnings provides meaningful information to consider in addition to our net income and cash flow from operating activities determined in accordance with U.S. GAAP, and this metric is a useful indicator for investors in evaluating and comparing our operating performance to our peers and our ability to pay dividends. We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, beginning with our taxable year ended December 31, 2018. As a REIT, we are required to distribute substantially all of our taxable income and we believe that dividends are one of the principal reasons investors invest in credit or commercial mortgage REITs such as our company. Over time, Distributable Earnings has been a useful indicator of our dividends per share and we consider that measure in determining the dividend, if any, to be paid. This supplemental financial measure also helps us to evaluate our performance excluding the effects of certain transactions and U.S. GAAP adjustments that we believe are not necessarily indicative of our current portfolio and operations. ~~For information on the fees we paid the Manager, see Note 10, “Related Party Arrangements” to our consolidated financial statements included in this Form 10-Q.~~

We define Distributable Earnings as U.S. GAAP net income (loss) attributable to our common stockholders (or, without duplication, the owners of the common equity of our direct subsidiaries, such as our OP) and excluding (i) non-cash equity compensation expense, (ii) the expenses incurred in connection with our formation or other strategic transactions, (iii) the incentive fee, (iv) acquisition costs from successful acquisitions, (v) gains or losses from sales of real estate property and impairment write-downs of depreciable real estate, including unconsolidated joint ventures and preferred equity investments, (vi) CECL reserves determined by probability of default/loss given default (“PD/LGD”) model, (vii) depreciation and amortization, (viii) any unrealized gains or losses or other similar non-cash items that are included in net income for the current quarter, regardless of whether such items are included in other comprehensive income or loss, or in net income, (ix) one-time events pursuant to changes in U.S. GAAP and (x) certain material non-cash income or expense items that in the judgment of management should not be included in Distributable Earnings. For clauses (ix) and (x), such exclusions shall only be applied after approval by a majority of our independent directors. Distributable Earnings include ~~provision for loan losses~~CECL reserves when realized. Loan losses are realized when such amounts are deemed nonrecoverable at the time the loan is repaid, or if the underlying asset is sold following foreclosure, or if we determine that it is probable that all amounts due will not be collected; realized loan losses to be included in Distributable Earnings is the difference between the cash received, or expected to be received, and the book value of the asset.

Additionally, we define Adjusted Distributable Earnings as Distributable Earnings excluding (i) realized gains and losses on asset sales, (ii) fair value adjustments, which represent mark-to-market adjustments to investments in unconsolidated ventures based on an exit price, defined as the estimated price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants, (iii) unrealized gains or losses, ~~(iii)~~(iv) realized ~~provision for loan losses~~CECL reserves and ~~(iv)~~(v) one-time gains or losses that in the judgement of management should not be included in Adjusted Distributable Earnings. We believe Adjusted Distributable Earnings is a useful indicator for investors to further evaluate and compare our operating performance to our peers and our ability to pay dividends, net of the impact of any gains or losses on assets sales or fair value adjustments, as described above.

Distributable Earnings and Adjusted Distributable Earnings do not represent net income or cash generated from operating activities and should not be considered as an alternative to U.S. GAAP net income or an indication of our cash flows from operating activities determined in accordance with U.S. GAAP, a measure of our liquidity, or an indication of funds available to fund our cash needs. In addition, our methodology for calculating Distributable Earnings and Adjusted Distributable Earnings may differ from methodologies employed by other companies to calculate the same or similar non-GAAP supplemental

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financial measures, and accordingly, our reported Distributable Earnings and Adjusted Distributable Earnings may not be comparable to the Distributable Earnings and Adjusted Distributable Earnings reported by other companies.

The following table presents a reconciliation of net income (loss) attributable to our common stockholders to Distributable Earnings and Adjusted Distributable Earnings attributable to our common stockholders and noncontrolling interest of the Operating Partnership (dollars and share amounts in thousands, except per share data) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021:

Three Months Ended
September 30, 2021 Nine Months Ended
September 30, 2021
Net loss attributable to BrightSpire Capital, Inc. common stockholders $ (70,057) $ (182,091)
Adjustments:
Net loss attributable to noncontrolling interest of the Operating Partnership (1,626) (4,016)
Non-cash equity compensation expense 2,673 12,378
Transaction costs — 109,321
Depreciation and amortization 8,859 28,418
Net unrealized loss (gain):
Other unrealized gain on investments (8,797) (40,479)
CECL reserves 768 5,194
Gains on sales of real estate and preferred equity — (9,782)
Adjustments related to noncontrolling interests (190) (557)
Distributable Earnings (Loss) attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership $ (68,370) $ (81,614)
Adjustments:
     Fair value adjustments $ 97,856 133,200
     Realized loss on hedges 1,621 1,621
     Realized loss on CRE debt securities and B-pieces 3,868 26,801
Adjusted Distributable Earnings attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership $ 34,975 $ 80,008
Distributable Earnings (Loss) per share(1)
$ (0.51) $ (0.61)
Adjusted Distributable Earnings per share(1)
$ 0.26 $ 0.60
Weighted average number of common shares and OP units(1)
132,835 132,795

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	Three Months Ended March 31, 2022		Three Months Ended March 31, 2021

Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	$	27,724	$	(92,314)
Adjustments:
Net income (loss) attributable to noncontrolling interest of the Operating Partnership	654		(1,953)
Non-cash equity compensation expense	1,880		4,262
Transaction costs	—		109,171
Depreciation and amortization	8,603		9,758
Net unrealized loss (gain):

Other unrealized loss (gain) on investments	1,448		(8,372)
CECL reserves	(866)		3,225
Gain on sales of real estate, preferred equity and investments in unconsolidated joint ventures	(10,503)		(9,782)
Adjustments related to noncontrolling interests	(165)		(175)
Distributable Earnings attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership	$	28,775	$	13,820
Adjustments:
Fair value adjustments	$	—	$	3,305
Realization of CRE debt securities mark-to-market loss	—		990
Realized gain on CRE debt securities sales	—		(131)
Adjusted Distributable Earnings attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership	$	28,775	$	17,984
Distributable Earnings (Loss) per share(1)	$	0.22	$	0.10
Adjusted Distributable Earnings per share(1)	$	0.22	$	0.14
Weighted average number of common shares and OP units(1)	132,821		132,857

________________________________________

(1)We calculate Distributable Earnings (Loss) per share, and Adjusted Distributable Earnings per share, non-GAAP financial measures, based on a weighted-average number of common shares and OP units (held by members other than us or our subsidiaries). For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, weighted average number of common shares includes 3.1 million OP units.

NOI

We believe NOI to be a useful measure of operating performance of our net leased and other real estate portfolios as they are more closely linked to the direct results of operations at the property level. NOI excludes historical cost depreciation and amortization, which are based on different useful life estimates depending on the age of the properties, as well as adjustments for the effects of real estate impairment and gains or losses on sales of depreciated properties, which eliminate differences arising from investment and disposition decisions. Additionally, by excluding corporate level expenses or benefits such as interest expense, any gain or loss on early extinguishment of debt and income taxes, which are incurred by the parent entity and are not directly linked to the operating performance of the Company’s properties, NOI provides a measure of operating performance independent of the Company’s capital structure and indebtedness. However, the exclusion of these items as well as others, such as capital expenditures and leasing costs, which are necessary to maintain the operating performance of the Company’s properties, and transaction costs and administrative costs, may limit the usefulness of NOI. NOI may fail to capture significant trends in these components of U.S. GAAP net income (loss) which further limits its usefulness.

NOI should not be considered as an alternative to net income (loss), determined in accordance with U.S. GAAP, as an indicator of operating performance. In addition, our methodology for calculating NOI involves subjective judgment and discretion and may differ from the methodologies used by other companies, when calculating the same or similar supplemental financial measures and may not be comparable with other companies.

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The following tables present a reconciliation of net income (loss) on our net leased and other real estate portfolios attributable to our common stockholders to NOI attributable to our common stockholders (dollars in thousands) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021:


		Three Months Ended September 30, 2021				Nine Months Ended September 30, 2021					Three Months Ended March 31, 2022				Three Months Ended March 31, 2021

Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders~~(1)~~	Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders~~(1)~~			$	2,613			$	13,157	Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders~~(1)~~			$	27,724			$	(92,314)
Adjustments:	Adjustments:							Adjustments:

Net (income) loss attributable to non-net leased and other real estate portfolios(1)								Net (income) loss attributable to non-net leased and other real estate portfolios(1)			(16,242)				101,412
Net income (loss) attributable to noncontrolling interests in investment entities	Net income (loss) attributable to noncontrolling interests in investment entities	55				(54)		Net income (loss) attributable to noncontrolling interests in investment entities			22				(132)
Amortization of above- and below-market lease intangibles	Amortization of above- and below-market lease intangibles	(34)				(59)		Amortization of above- and below-market lease intangibles			(41)				183
Interest income	Interest income	—				18		Interest income			—				9
Interest expense on real estate	Interest expense on real estate	7,968				24,378		Interest expense on real estate			7,556				8,632
Other income	Other income	1				3		Other income			—				(34)
Transaction, investment and servicing expense	Transaction, investment and servicing expense	(87)				(36)		Transaction, investment and servicing expense			100				(12)
Depreciation and amortization	Depreciation and amortization	8,697				28,185		Depreciation and amortization			8,551				9,539

Administrative expense		121				213
Operating expense								Operating expense			32				31
Other gain on investments, net	Other gain on investments, net	(275)				(11,008)		Other gain on investments, net			(10,369)				(9,496)
Income tax benefit / expense		7				(104)
Income tax expense (benefit)								Income tax expense (benefit)			69				(25)
NOI attributable to noncontrolling interest in investment entities	NOI attributable to noncontrolling interest in investment entities	(3,946)				(11,862)		NOI attributable to noncontrolling interest in investment entities			(309)				(3,998)
Total NOI, at share	Total NOI, at share	$	15,120			$	42,831	Total NOI, at share			$	17,093			$	13,795

(1)Net ~~income (loss) attributable to BrightSpire Capital, Inc. common stockholders excludes $72.7 million and $195.2 million of net~~ loss attributable to non-net leased and other real estate ~~investments for the three~~portfolio includes net (income) loss on our senior and ~~nine months ended September 30, 2021, respectively. The total net loss attributable to BrightSpire Capital, Inc.’s common stockholders was $70.1 million~~mezzanine loans and ~~$182.1 million for the three~~preferred equity, CRE debt securities and ~~nine months ended September 30, 2021.~~corporate business segments.

Liquidity and Capital Resources

Overview

Our ~~primary liquidity needs~~material cash commitments include commitments to repay borrowings, finance our assets and operations, meet future funding obligations, make distributions to our stockholders and fund other general business needs. We use significant cash to make ~~additional~~ investments, meet commitments to existing investments, repay the principal of and interest on our borrowings and pay other financing costs, make distributions to our stockholders and fund our operations.

Our primary sources of liquidity include cash on hand, cash generated from our operating activities and cash generated from asset sales and investment maturities. However, subject to maintaining our qualification as a REIT and our Investment Company Act exclusion, we may use several sources to finance our business, including bank credit facilities (including term loans and revolving facilities), master repurchase facilities and securitizations, as described below. In addition to our current sources of liquidity, there may be opportunities from time to time to access liquidity through public offerings of debt and equity securities. We ~~also invested in a number~~have sufficient sources of liquidity to meet our ~~assets through co-investments with other investment vehicles managed by third parties, which has~~material cash commitments for the next 12 months and ~~may allow us to pool capital to access larger transactions and diversify investment exposure.~~beyond.

Financing Strategy

We have a multi-pronged financing strategy that ~~includes~~included an up to ~~$300~~$165 million ~~as of September 30, 2021,~~ secured revolving credit facility as of March 31, 2022, up to approximately $2.1 billion in secured revolving repurchase facilities, ~~$1,510 million~~$1.5 billion in non-recourse securitization financing, ~~$700~~$654 million in commercial mortgages and $65 million in other asset-level financing ~~structures.~~structures (refer to “Bank Credit Facility” section below for further discussion). In addition, we may use other forms of financing, including additional warehouse facilities, public and private secured and unsecured debt issuances and equity or equity-related securities issuances by us or our subsidiaries. We may also finance a portion of our investments through the syndication of one or more interests in a whole loan. We will seek to match the nature and duration of the financing with the underlying asset’s cash flow, including using hedges, as appropriate.

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Debt-to-Equity Ratio

The following table presents our debt-to-equity ratio:

~~September 30, 2021~~March 31, 2022

December 31, ~~2020~~2021

Debt-to-equity ratio(1)

~~1.8x~~2.1x

~~1.0x~~2.0x

(1)Represents (i) total outstanding secured debt less cash and cash equivalents of ~~$208.7~~$246.1 million and ~~$474.8~~$259.7 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively to (ii) total equity, in each case, at period end.

Potential Sources of Liquidity

The COVID-19 pandemic has had a significant impact on our business, and we have taken actions since its onset to protect our liquidity. However, there is still uncertainty regarding the pandemic’s impact on the financial condition of our borrowers and their ability to make their monthly mortgage payments and remain in compliance with loan covenants and ~~terms is uncertain, and the~~terms. The failure of our borrowers to meet their loan obligations may trigger repayments under our Bank Credit Facility and Master Repurchase Facilities.

Additionally, if our operating real estate lessees are unable to make monthly rent payments, we would be unable to make our monthly mortgage payments which could result in defaults under these obligations or trigger repayments under our Bank Credit Facility. If these events were to occur, we may not have sufficient available cash to repay amounts due.

Furthermore, as discussed in greater detail above under “Factors Impacting Our Operating Results—Impact of the Russia-Ukraine conflict and increases in market interest rates,” a rising interest rate environment will result in increased interest expense on our variable rate debt that is not hedged and may result in disruptions to our borrowers’ and tenants’ ability to finance their activities, which could similarly adversely impact their ability to make their monthly mortgage payments and meet their loan obligations.

Our primary sources of liquidity include borrowings available under our credit facilities, master repurchase facilities and CMBS facilities and monthly mortgage payments.

Bank Credit Facilities

We use bank credit facilities (including term loans and revolving facilities) to finance our business. These financings may be collateralized or non-collateralized and may involve one or more lenders. Credit facilities typically have maturities ranging from two to five years and may accrue interest at either fixed or floating rates.

On ~~February 1, 2018, the OP~~January 28, 2022, BrightSpire Capital Operating Company, LLC (“BrightSpire OP”) (together with certain subsidiaries of ~~the~~BrightSpire OP from time to time party thereto as borrowers, collectively, the “Borrowers”) entered into ~~a credit agreement~~an Amended and Restated Credit Agreement (the ~~“Bank Credit Facility”~~“Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), and the several lenders from time to time party thereto (the “Lenders”), pursuant to which the Lenders agreed to provide a revolving credit ~~facility.~~facility in the aggregate principal amount of up to $165.0 million, of which up to $25.0 million is available as letters of credit. Loans under the Credit Agreement may be advanced in U.S. dollars and certain foreign currencies, including euros, pounds sterling and swiss francs. The Credit Agreement amended and restated BrightSpire OP’s prior $300.0 million revolving credit facility that would have matured on February 1, 2022.

~~On April 5, 2021, we entered into a fourth amendment~~The Credit Agreement also includes an option for the Borrowers to the Bank Credit Facility to: (i) permit the OP to consummate the Internalization; (ii) reduce the minimum tangible net worth covenant requirement from $1.5 billion to $1.35 billion upon consummation of the Internalization; (iii) increase our ability to make restricted payments including additional dividends and stock buybacks and the removal all material restrictions on new investments, in each case, so long as no default exists and the OP is in compliance with the financial covenants; (iv) increase the maximum available principal amount ~~available for borrowing from 90%~~ to ~~100%~~up to $300.0 million, subject to one or more new or existing Lenders agreeing to provide such additional loan commitments and satisfaction of ~~borrowing base value; and (v) reduce the aggregate amount of lender commitments from $450 million to $300 million.~~other customary conditions.

Advances under the ~~Bank~~ Credit ~~Facility~~Agreement accrue interest at a per annum rate equal to, at the applicable Borrower’s election, either ~~a LIBOR~~(x) an adjusted SOFR rate plus a margin of 2.25%, or (y) a base rate ~~determined according~~equal to athe highest of (i) the Wall Street Journal’s prime rate, or(ii) the federal funds rate plus 0.50% and (iii) the adjusted SOFR rate plus 1.00%, plus a margin of 1.25%. An unused commitment fee at a rate of 0.25% or 0.35%, per annum, depending on the amount of facility utilization, applies to un-utilized borrowing capacity under the ~~Bank~~ Credit ~~Facility.~~Agreement. Amounts ~~owing~~owed under the ~~Bank~~ Credit ~~Facility~~Agreement may be prepaid at any time without premium or penalty, subject to customary breakage costs in the case of borrowings with respect to which a ~~LIBOR~~SOFR rate election is in effect.

The maximum amount available for borrowing at any time under the ~~Bank~~ Credit ~~Facility~~Agreement is limited to a borrowing base valuation of certain investment assets, with the valuation of such investment assets generally determined according to a percentage of adjusted net book value. As of ~~the date hereof,~~March 31, 2022, the borrowing base valuation is sufficient to ~~support the outstanding borrowings. The Bank Credit Facility will mature on February 1, 2022, unless the OP elects to exercise the extension options for~~permit borrowings of up to the entire $165.0 million commitment. If any borrowing is outstanding for more than 180 days after its initial draw, the borrowing base valuation will be reduced by 50% until all outstanding borrowings are repaid in full. The ability to borrow new amounts

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under the Credit Agreement terminates on January 31, 2026, at which time BrightSpire OP may, at its election and by written notice to the Administrative Agent, extend the termination date for two (2) additional terms of six (6) months each, subject to the terms and conditions in the ~~Bank~~ Credit ~~Facility,~~Agreement, resulting in a latest ~~maturity~~termination date of ~~February 1, 2023.~~January 31, 2027.

The obligations of the Borrowers under the ~~Bank~~ Credit ~~Facility~~Agreement are guaranteed pursuant to a Guarantee and Collateral Agreement by substantially all material wholly owned subsidiaries of ~~the~~BrightSpire OP ~~pursuant to a Guarantee and Collateral Agreement with the OP and certain subsidiaries of the OP~~(the “Guarantors”) in favor of ~~JPMorgan Chase Bank, N.A., as administrative agent~~the Administrative Agent (the “Guarantee and Collateral Agreement”) and, subject to certain exceptions, secured by a pledge of substantially all equity interests owned by the Borrowers and the ~~guarantors,~~Guarantors, as well as by a security interest in deposit accounts of the Borrowers and the Guarantors ~~(as such terms are defined in the Guarantee and Collateral Agreement)~~ in which the proceeds of investment asset distributions are maintained.

The ~~Bank~~ Credit ~~Facility~~Agreement contains various affirmative and negative covenants, including, among other things, the obligation of the Company to maintain REIT status and be listed on the ~~NYSE,~~New York Stock Exchange, and limitations on debt, liens and restricted payments. In

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addition, the ~~Bank~~ Credit ~~Facility~~Agreement includes the following financial covenants applicable to ~~the~~BrightSpire OP and its consolidated subsidiaries: (a) minimum consolidated tangible net worth of ~~the~~BrightSpire OP ~~must~~to be greater than or equal to the sum of (i) ~~$1.35 billion~~$1,112,000,000 and (ii) ~~75%~~70% of the net cash proceeds received by ~~the~~BrightSpire OP from any offering of its common equity after September 30, 2021 and of the net cash proceeds from any offering by the Company of its common equity to the extent such proceeds are contributed to ~~the~~BrightSpire OP, excluding any such proceeds that are contributed to ~~the~~BrightSpire OP within ninety (90) days of receipt and applied to acquire capital stock of ~~the~~BrightSpire OP; (b) ~~the~~BrightSpire OP’s ~~earnings before interest, income tax, depreciation, and amortization~~ratio of EBITDA plus lease expenses to fixed charges for any period of four (4) consecutive fiscal quarters ~~must~~to be not less than 1.50 to 1.00; (c) ~~the~~BrightSpire OP’s minimum interest coverage ratio ~~must~~to be not less than 3.00 to 1.00; and (d) ~~the~~BrightSpire OP’s ratio of consolidated total debt to consolidated total assets ~~must~~to be not more than ~~0.70~~0.80 to 1.00. The ~~Bank~~ Credit ~~Facility~~Agreement also includes customary events of default, including, among other things, failure to make payments when due, breach of covenants or representations, cross default to material indebtedness, or material judgment defaults, bankruptcy matters involving any Borrower or any Guarantor and certain change of control events. The occurrence of an event of default will limit the ability of ~~the~~BrightSpire OP and its subsidiaries to make distributions and may result in the termination of the credit facility, acceleration of repayment obligations and the exercise of remedies by the Lenders with respect to the collateral.

Master Repurchase Facilities and CMBS Credit Facilities

Currently, our primary source of financing is our Master Repurchase Facilities, which we use to finance the origination of senior loans, and CMBS Credit Facilities, which we use to finance the purchase of securities. Repurchase agreements effectively allow us to borrow against loans, participations and securities that we own in an amount generally equal to (i) the market value of such loans, participations and/or securities multiplied by (ii) the applicable advance rate. Under these agreements, we sell our loans, participations and securities to a counterparty and agree to repurchase the same loans and securities from the counterparty at a price equal to the original sales price plus an interest factor. During the term of a repurchase agreement, we receive the principal and interest on the related loans, participations and securities and pay interest to the lender under the master repurchase agreement. We intend to maintain formal relationships with multiple counterparties to obtain master repurchase financing onof favorable terms.

During the first quarter of ~~2021, we entered into an amendment under our Master Repurchase Facility with Bank 3 and Bank 7 to extend the maturity date by two years and three years, respectively.~~

During the second quarter of 2021, we entered into an amendment under our Master Repurchase Facility with Bank 1, Bank 8 and Bank 9 to extend the maturity date by three years, two years and two and a half years, respectively.

~~Additionally, during the second quarter of 2021,~~2022, we entered into amendments under our ~~six~~five Master Repurchase Facilities ~~to: (i) permit the guarantor~~and/or associated guarantees to ~~consummate the Internalization; and (ii)~~ reduce the minimum tangible net worth covenant requirement from ~~$1.5~~$1.35 billion to ~~$1.35 billion upon consummation~~$1.11 billion.

Additionally, during the first quarter of 2022, we entered into amendments under four of our Master Repurchase Facilities to expand the ~~Internalization.~~eligibility criteria to allow for loans indexed to SOFR, and to allow for borrowings under those facilities to also be indexed to SOFR.

As of ~~September 30, 2021~~March 31, 2022, we had entered into eight master repurchase agreements (collectively the “CMBS Credit Facilities”) to finance CMBS investments. The CMBS Credit Facilities are on a recourse basis and contain representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of this type. The CMBS Credit Facilities were undrawn as of ~~September 30, 2021.~~March 31, 2022.

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The following table presents a summary of our Master Repurchase and Bank Credit Facilities as of ~~September 30, 2021~~March 31, 2022 (dollars in thousands):


		Maximum Facility Size		Current Borrowings		Weighted Average Final Maturity (Years)	Weighted Average Interest Rate		Maximum Facility Size		Current Borrowings		Weighted Average Final Maturity (Years)	Weighted Average Interest Rate(1)
Master Repurchase Facilities	Master Repurchase Facilities							Master Repurchase Facilities
Bank 1	Bank 1	$	400,000	$	94,350	4.5	LIBOR + 1.94%	Bank 1	$	400,000	$	126,015	4.0	LIBOR/SOFR + 1.89%
Bank 2		21,353		—		1.0
Bank 3	Bank 3	600,000		97,312		1.5	LIBOR + 1.97%	Bank 3	600,000		371,044		1.0	LIBOR/SOFR + 1.94%
Bank 7	Bank 7	500,000		163,991		3.5	LIBOR + 1.86%	Bank 7	500,000		382,497		3.0	LIBOR/SOFR + 1.76%
Bank 8	Bank 8	250,000		148,464		1.7	LIBOR + 1.95%	Bank 8	250,000		158,503		1.2	LIBOR/SOFR + 2.18%
Bank 9	Bank 9	300,000		54,345		4.6	LIBOR + 2.00%	Bank 9	300,000		161,730		4.1	LIBOR/SOFR + 1.73%
Total Master Repurchase Facilities	Total Master Repurchase Facilities	2,071,353		558,462				Total Master Repurchase Facilities	2,050,000		1,199,789

Bank Credit Facility	Bank Credit Facility	300,000		—		1.3	LIBOR + 2.25%	Bank Credit Facility	165,000		—		4.8	SOFR + 2.25%

Total Facilities	Total Facilities	$	2,371,353	$	558,462			Total Facilities	$	2,215,000	$	1,199,789

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~~Subsequent~~(1)The Company utilized the Secured Overnight Financing Rate (“SOFR”) for all deals beginning January 1, 2022.

The following table presents the quarterly average unpaid principal balance (“UPB”), end of period UPB and the maximum UPB at any month-end related to ~~September 30,~~our Master Repurchase and Bank Credit Facilities (dollars in thousands):


Quarter Ended	Quarterly Average UPB		End of Period UPB		Maximum UPB at Any Month-End
March 31, 2022	$	1,052,455	$	1,199,789	$	1,199,789
December 31, 2021	731,792		905,122		905,122
September 30, 2021	780,625		558,461		622,961
June 30, 2021	895,356		1,002,789		1,002,789
March 31, 2021	661,573		787,923		787,923

The increase in our end of period UPB from December 31, 2021 ~~we repaid approximately $23.3 million under~~to March 31, 2022 was driven by our ~~master repurchase facilities.~~16 senior loan originations and financing obtained on a hotel loan partially offset by loan repayments during the first quarter of 2022.

Securitizations

We may seek to utilize non-recourse long-term securitizations of our investments in mortgage loans, especially loan originations, to the extent consistent with the maintenance of our REIT qualification and exclusion from the Investment Company Act in order to generate cash for funding new investments. This would involve conveying a pool of assets to a special purpose vehicle (or the issuing entity), which would issue one or more classes of non-recourse notes pursuant to the terms of an indenture. The notes would be secured by the pool of assets. In exchange for the transfer of assets to the issuing entity, we would receive the cash proceeds on the sale of non-recourse notes and a 100% interest in the equity of the issuing entity. The securitization of our portfolio investments might magnify our exposure to losses on those portfolio investments because any equity interest we retain in the issuing entity would be subordinate to the notes issued to investors and we would, therefore, absorb all of the losses sustained with respect to a securitized pool of assets before the owners of the notes experience any losses.

In October 2019, we executed a securitization transaction through our wholly-owned subsidiaries, CLNC 2019-FL1, Ltd. and CLNC 2019-FL1, LLC (collectively, “CLNC 2019-FL1”), which resulted in the sale of $840.4 million of investment grade notes. ~~The~~As of March 31, 2022, the securitization reflects an advance rate of ~~83.5%~~82.8% at a weighted average cost of funds of adjusted term SOFR plus ~~1.59%~~1.61% (before transaction expenses) and is collateralized by a pool of 24 senior loan investments.

On March 5, 2021, the Financial Conduct Authority of the U.K. (the “FCA”) announced that LIBOR tenors relevant to CLNC 2019-FL1 would cease to be published or no longer be representative after June 30, 2023. The Alternative Reference Rates Committee (the “ARRC”) interpreted this announcement to constitute a benchmark transition event. As of June 17, 2021, the benchmark index interest rate was converted from LIBOR to SOFR, plus a benchmark adjustment of 11.448 basis points with a lookback period equal to the number of calendar days in the applicable Interest Accrual Period plus two SOFR business days, conforming with the indenture agreement and recommendations from the ARRC. Compounded SOFR for any interest accrual

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period shall be the “30-Day Average SOFR” as published by the Federal Reserve Bank of New York on each benchmark determination date.

As of ~~September 30, 2021,~~February 19, 2022, the benchmark index interest rate was converted from Compounded SOFR to Term SOFR, plus a benchmark adjustment of 11.448 basis points, conforming with the indenture agreement. Term SOFR for any interest accrual period shall be the one month CME Term SOFR reference rate as published by the CME Group benchmark administration on each benchmark determination date.

As of March 31, 2022, the CLNC 2019-FL1 mortgage assets are indexed to LIBOR and the borrowings under CLNC 2019-FL are indexed to Term SOFR, creating an underlying benchmark index rate basis difference between CLNC 2019-FL1 assets and liabilities, which is meant to be mitigated by the benchmark replacement adjustment described above. We have the right to transition the CLNC 2019-FL1 mortgage assets to SOFR, eliminating the basis difference between CLNC 2019-FL1 assets and liabilities, and will make ~~its~~the determination taking into account the loan portfolio as a whole. The transition to SOFR is not expected to have a material impact to CLNC 2019-FL1’s assets and liabilities and related interest expense.

CLNC 2019-FL1 ~~includes~~included a two-year reinvestment feature that ~~allows~~allowed us to contribute existing or newly originated loan investments in exchange for proceeds from repayments or repurchases of loans held in CLNC 2019-FL1, subject to the satisfaction of certain conditions set forth in the indenture. In addition to existing eligible loans available for reinvestment, the continued origination of securitization eligible loans is required to ensure that we reinvest the available proceeds within CLNC 2019-FL1. During the three months ended September 30, 2021 and through November 2, 2021, two loans held in CLNC 2019-FL1 were fully repaid, totaling $121.7 million. Additionally, during the three months ended September 30, 2021 a loan

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investment held in CLNC 2019-FL1 was removed as a result of the loan becoming a credit risk collateral interest, totaling 25.0 million. We replaced the repaid and credit risk assets by contributing existing loan investments of equal value. The reinvestment period for CLNC 2019-FL1 expired on October 19, 2021. ~~Going forward, principal~~During the first quarter of 2022, two loans held in CLNC 2019-FL1 was repaid, totaling $54.4 million. Additionally, subsequent to March 31, 2022, two loans held in CLNC 2019-FL1 were repaid, totaling $44.9 million. The proceeds from ~~underlying loans will be~~the four loan payoffs were used to amortize the securitization bonds ~~payable going forward.~~in accordance with the securitization priority of payments. As of May 4, 2022, the securitization advance rate was 81.7% at a weighted average cost of funds of Adjusted Term SOFR plus 1.64% (before transaction costs).

Additionally, CLNC 2019-FL1 contains note protection tests that can be triggered as a result of contributed loan defaults, losses, and certain other events outlined in the indenture, beyond established thresholds. A note protection test failure that is not remedied can result in the redirection of interest proceeds from the below investment grade tranches to amortize the most senior outstanding tranche. While we continue to closely monitor all loan investments contributed to CLNC 2019-FL1, a deterioration in the performance of an underlying loan could negatively impact our liquidity position.

In July 2021, we executed a securitization transaction through our subsidiaries BRSP 2021-FL1 Ltd. and BRSP 2021-FL1, LLC, which resulted in the sale of $670 million of investment grade notes. The securitization reflects an advance rate of 83.75% at a weighted costs of funds of LIBOR plus 1.49% (before transaction expenses) and is collateralized by a pool of 33 senior loan investments.

BRSP 2021-FL1 includes a two-year reinvestment feature that allows us to contribute existing or newly originated loan investments in exchange for proceeds from repayments or repurchases of loans held in BRSP 2021-FL1, subject to the satisfaction of certain conditions set forth in the indenture. In addition to existing eligible loans available for reinvestment, the continued origination of securitization eligible loans is required to ensure that we reinvest the available proceeds within BRSP 2021-FL1. During the ~~three months ended September 30, 2021~~first quarter of 2022 and through ~~November 2, 2021, two loans~~May 4, 2022, one loan held in BRSP 2021-FL1 ~~were~~was fully repaid, totaling ~~$126.2~~$11.7 million. We replaced the repaid ~~loans~~loan by contributing existing loan investments of equal value.

~~5-Investment Preferred Financing~~

On June 5, 2020, we entered into a preferred financing arrangement (on a portfolio of five of our underlying investment interests) (the “5-Investment Preferred Financing”) from investment vehicles managed by Goldman Sachs (“GS”). The preferred financing provided $200 million of proceeds at closing.

The preferred financing is limited to (i) our interests in four co-investments alongside investment funds managed by affiliates of the Manager, each of which are financings on underlying development projects (including residential, office and/or mixed-use components), and (ii) a wholly-owned triple-net industrial distribution center investment leased to a national grocery chain. The preferred financing provides GS a 10% preferred return and certain other minimum returns, as well as a minority interest in future cash flows.

The transaction resulted in net liquidity to us of approximately $170 million, net of approximately $30 million in paydowns under the Company’s Bank Credit Facility. The preferred financing provides the ability to draw down up to an additional $29 million of commitments from GS for future advances to the portfolio, if any, at our same advance rate.

~~The following table presents a summary of the five assets included in the portfolio financing as of September 30, 2021 (dollars in thousands):~~

City, State Collateral
Asset Type / #(1)
GS BRSP Total
Dublin, Ireland Mixed Use Loan 75 $ 87,485 $ 8,153 $ 95,638
Various, US Industrial Net Leased 2 51,872 21,317 73,189
Rolling Hills, CA Single Family Development Loan 83 and 89 23,797 2,218 26,015
Dublin, Ireland Office Loans 81 and 87 54,601 5,088 59,689
San Rafael, CA Mixed Use Loan 84 1,855 173 2,028
Total Net Assets $ 219,610 $ 36,949 $ 256,559

~~(1)~~For further details on each asset included in the portfolio financing please refer to “Our Portfolio” in the section titled “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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We and our affiliates control the continuing investment and portfolio management of such investments and such investments are consolidated on our consolidated balance sheet at September 30, 2021. The preferred financing provides for a disproportionate allocation of profits and losses and the share of income or loss is determined using a balance sheet approach known as the hypothetical liquidation at book value (“HLBV”) method. Under the HLBV method, earnings and losses are recognized based on how an entity would allocate and distribute its cash if it were to sell all of its assets and settle its liabilities for their carrying amounts and liquidate at the reporting date. Under the HLBV method, we could record, in any period, more or less income than may be generated in the case of an actual liquidation. The preferred financing resulted in a reallocation of a portion of stockholders equity to noncontrolling interest, resulting in a $69 million day one reduction in stockholders equity. The noncontrolling interest in investment entities on our consolidated balance sheet includes $219.6 million representing GS’s investment at September 30, 2021 under the HLBV method.

~~The following table presents a summary of the members’ capital for the period ended September 30, 2021 (dollars in thousands):~~

GS BRSP Total
Beginning Balance - January 1, 2021 $ 259,524 $ 71,085 $ 330,609
Contributions(1)
3,888 3,518 7,406
Distributions(2)
(39,940) — (39,940)
Profit / (Loss) allocation(3)
(3,862) (37,654) (41,516)
Ending Balance - September 30, 2021 $ 219,610 $ 36,949 $ 256,559

~~(1)Future advances on Loan 81 and Loan 87.~~

~~(2)Distributions from Net Lease 2 totaled $6.1 million, Loan 83 and Loan 89 totaled $30.3 million and Loan 84 totaled $3.5 million.~~

~~(3)~~Losses during the period were driven by the $35.5 million fair value adjustment, of which $32.0 million was allocated to BRSP and $3.5 million was allocated to GS, substantially all related to our Dublin, Ireland mixed use loan 75.

We anticipate using the proceeds from the Co-Invest Portfolio Sale to pay-off the 5-Investment Preferred Financing. See “Our Portfolio” above for further information on the Co-Invest Portfolio Sale.

Other potential sources of financing

In the future, we may also use other sources of financing to fund the acquisition of our target assets, including secured and unsecured forms of borrowing and selective wind-down and dispositions of assets. We may also seek to raise equity capital or issue debt securities in order to fund our future investments.

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Liquidity Needs

In addition to our loan origination activity and general operating expenses, our primary liquidity needs include interest and principal payments under our Bank Credit Facility, securitization bonds, and secured debt. Information concerning our contractual obligations and commitments to make future payments, including our commitments to repay borrowings, is included in the following table as of March 31, 2022. This table excludes our obligations that are not fixed and determinable (dollars in thousands):


	Payments Due by Period
	Total		Less than a Year		1-3 Years		3-5 Years		More than 5 Years
Bank credit facility(1)	$	1,972	$	413	$	825	$	734	$	—
Secured debt(2)	2,190,154		245,501		699,059		951,881		293,713
Securitization bonds payable(3)	1,537,378		296,826		1,161,735		78,817		—
Ground lease obligations(4)	29,125		3,105		5,083		4,144		16,793
Office leases	8,829		877		2,578		2,638		2,736
	$	3,767,458	$	546,722	$	1,869,280	$	1,038,214	$	313,242
Lending commitments(5)	333,459
Total	$	4,100,917

(1)Future interest payments were estimated based on the applicable index at March 31, 2022 and unused commitment fee of 0.25% per annum, assuming principal is repaid on the current maturity date of January 2027.

(2)Amounts include minimum principal and interest obligations through the initial maturity date of the collateral assets. Interest on floating rate debt was determined based on the applicable index at March 31, 2022.

(3)The timing of future principal payments was estimated based on expected future cash flows of underlying collateral loans. Repayments are estimated to be earlier than contractual maturity only if proceeds from underlying loans are repaid by the borrowers.

(4)The amounts represent minimum future base rent commitments through initial expiration dates of the respective noncancellable operating ground leases, excluding any contingent rent payments. Rents paid under ground leases are recoverable from tenants.

(5)Future lending commitments may be subject to certain conditions that borrowers must meet to qualify for such fundings. Commitment amount assumes future fundings meet the terms to qualify for such fundings.

Cash Flows

The following presents a summary of our consolidated statements of cash flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (dollars in thousands):


		Nine Months Ended September 30,							Three Months Ended March 31,
Cash flow provided by (used in):	Cash flow provided by (used in):	2021		2020		Change		Cash flow provided by (used in):		2022		2021		Change
Operating activities	Operating activities	$	(70,985)	$	44,862	$	(115,847)	Operating activities		$	32,357	$	1,660	$	30,697
Investing activities	Investing activities	(474,690)		831,295		(1,305,985)		Investing activities		(218,802)		(38,334)		(180,468)
Financing activities	Financing activities	283,535		(535,660)		819,195		Financing activities		169,948		(18,533)		188,481

Operating Activities

Cash inflows from operating activities are generated primarily through interest received from loans receivable and securities, and property operating income from our real estate ~~portfolio, and distributions of earnings received from unconsolidated ventures.~~portfolio. This is partially offset by payment of interest expenses for credit facilities and mortgages payable, and operating expenses supporting our various lines of business, including property management and operations, loan servicing and workout of loans in default, investment transaction costs, as well as general administrative costs.

Our operating activities ~~used net cash outflows of $71.0 million and~~ provided net cash inflows of ~~$44.9~~$32.4 million and $1.7 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Net cash provided by operating activities ~~decreased $115.8~~increased $30.7 million for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 compared to the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, primarily due to ~~lower net property operating income and~~higher net interest income earned resulting from ~~sales of real estate properties~~loan originations throughout 2021 and ~~loans throughout~~2022 and lower operating expenses following the Internalization on April 30, 2021.

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We believe cash flows from operations, available cash balances and our ability to generate cash through ~~short-~~short and long-term borrowings are sufficient to fund our operating liquidity needs.

Investing Activities

Investing activities include cash outlays for acquisition of real estate, disbursements on new and/or existing loans, and contributions to unconsolidated ventures, which are partially offset by repayments and sales of loan receivables, distributions of

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capital received from unconsolidated ventures, proceeds from sale of real estate, as well as proceeds from maturity or sale of securities.

Investing activities used net cash outflows of ~~$474.7~~$218.8 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022. Net cash used in investing activities in 2022 resulted primarily from originations and future advances on our loans held for investment, net of $498.2 million partially offset by repayments on loans held for investment of $215.3 million, proceeds from sales of real estate of $55.6 million, and repayments of principal in mortgage loans held in securitization trusts of $13.3 million.

Investing activities used net cash outflows of $38.3 million for the three months ended March 31, 2021. Net cash used in investing activities in 2021 resulted primarily from originations and future advances on our loans ~~and preferred equity~~ held for investment, net of ~~$1.3 billion~~$432.9 million and contributions to investments in unconsolidated ventures of $1.8 million partially offset by proceeds from sales of real estate of $332.0 million, repayments on ~~loan~~loans and preferred equity held for investment of ~~$357.2~~$41.3 million, ~~and repayments~~repayment of principal in mortgage loans held in ~~securitization~~securitizations trusts ~~of $70.8 million.~~

Investing activities generated net cash inflows of $831.3 million for the nine months ended September 30, 2020, respectively. Net cash provided by investing activities in 2020 resulted primarily from repayment on loan and preferred equity held for investment of $334.2 million, proceeds from sale of real estate of $300.5 million, proceeds from sale of loans held for sale of $137.1 million and proceeds from sale ofas well as real estate securities, available for sale of ~~$118.6 million partially offset by originations and future advances on our loans and preferred equity held for investment, net of $122.4~~$12.2 million, and ~~contributions to investments~~distributions in excess of cumulative earnings from unconsolidated ventures of ~~$47.5~~$8.8 million.

Financing Activities

We finance our investing activities largely through borrowings secured by our investments along with capital from third party or affiliated co-investors. We also have the ability to raise capital in the public markets through issuances of common stock, as well as draw upon our corporate credit facility, to finance our investing and operating activities. Accordingly, we incur cash outlays for payments on third party debt, dividends to our common stockholders as well as distributions to our noncontrolling interests.

Financing activities provided net cash of ~~$283.5~~$169.9 million for the ~~nine~~three months ended ~~September 30, 2021. Net cash provided by financing activities in 2021~~March 31, 2022, which resulted primarily from borrowings from credit facilities ~~and securitization bonds in the amounts~~ of ~~$943.7~~$383.3 million ~~and of $670.0 million, respectively,~~ partially offset by repayment of credit facilities of ~~$920.6~~$88.7 million, repayment of mortgage notes of ~~$264.8~~$43.3 million, repayment of securitization bonds of $40.7 million, distributions paid on common stock of $23.9 million and repayment of mortgage obligations issued by securitization trusts of ~~$70.8~~$13.3 million.

Financing activities used net cash of $18.5 million for the three months ended March 31, 2021. Net cash used in financing activities in 2021 resulted primarily from repayment of mortgage notes of $251.8 million, repayment of credit facilities of $76.8 million, and distributions to noncontrolling interests in the amount of ~~$40.2 million.~~

Financing activities used net cash of $535.7 million for the nine months ended September 30, 2020. Net cash used in financing activities in 2020 resulted primarily from repayment of credit facilities of $745.7 million, repayment of mortgage notes of $156.1 million, distributions paid on common stock and noncontrolling interests of $52.6 million and distributions to noncontrolling interests in the amount of $22.9$10.8 million. This was partially offset by of borrowings from credit facilities in the amount of ~~$255.1 million, contributions to the 5-Investment Preferred Financing of $200.0 million, and borrowings from mortgage notes in the amount of $15.0~~$329.3 million.

~~Contractual Obligations, Commitments and Contingencies of the Company~~

The following table sets forth the known contractual obligations of the Company on an undiscounted basis. This table excludes obligations of the Company that are not fixed and determinable, including the Management Agreement (dollars in thousands):

Payments Due by Period
Total Less than a Year 1-3 Years 3-5 Years More than 5 Years
Bank credit facility(1)
$ 1,412 $ 1,050 $ 362 $ — $ —
Secured debt(2)
1,517,302 35,115 405,098 697,899 379,190
Securitization bonds payable(3)
1,598,756 169,244 1,326,501 103,011 —
Ground lease obligations(4)
30,665 3,089 5,568 4,236 17,772
Office lease 5,586 798 1,596 1,596 1,596
$ 3,153,721 $ 209,296 $ 1,739,125 $ 806,742 $ 398,558
Lending commitments(5)
238,137
Total $ 3,391,858

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~~(1)~~Future interest payments were estimated based on the applicable index at September 30, 2021 and unused commitment fee of 0.35% per annum, assuming principal is repaid on the current maturity date of February 2022.

~~(2)~~Amounts include minimum principal and interest obligations through the initial maturity date of the collateral assets. Interest on floating rate debt was determined based on the applicable index at September 30, 2021.

~~(3)~~The timing of future principal payments was estimated based on expected future cash flows of underlying collateral loans. Repayments are estimated to be earlier than contractual maturity only if proceeds from underlying loans are repaid by the borrowers.

~~(4)~~The amounts represent minimum future base rent commitments through initial expiration dates of the respective noncancellable operating ground leases, excluding any contingent rent payments. Rents paid under ground leases are recoverable from tenants.

~~(5)~~Future lending commitments may be subject to certain conditions that borrowers must meet to qualify for such fundings. Commitment amount assumes future fundings meet the terms to qualify for such fundings.

Our Investment Strategy

Our objective is to generate consistent and attractive risk-adjusted returns to our stockholders. We seek to achieve this objective primarily through cash distributions and the preservation of invested capital. We believe our ~~diversified~~ investment strategy ~~across the CRE capital stack~~ provides flexibility through economic cycles to achieve attractive risk-adjusted returns. This approach is driven by a disciplined investment strategy, focused on:

•~~capitalizing on asset level underwriting~~leveraging long standing relationships, our organization structure and the experience of the team;

•the underlying real estate and market ~~analytics~~dynamics to identify investments with attractive risk-return profiles;

•primarily originating and structuring CRE senior mortgage loans and selective investments in mezzanine loans and preferred equity with attractive return profiles relative to the underlying value and financial operating performance of the real estate collateral, given the strength and quality of the sponsorship;

•structuring transactions with a prudent amount of leverage, if any, given the risk of the underlying asset’s cash flows, attempting to match the structure and duration of the financing with the underlying asset’s cash flows, including through the use of hedges, as ~~appropriate.~~appropriate; and

•~~identifying~~operating our net leased real estate investments and selectively pursuing new investments based on property location and purpose, tenant credit quality, market lease rates and potential appreciation of, and alternative uses for, the real ~~estate; and~~

•selectively identifying appropriate CRE debt securities investments based on the performance of the underlying real estate assets, the impact of such performance on the credit return profile of the investments and our expected return on the investments;estate.

The period for which we intend to hold our investments will vary depending on the type of asset, interest rates, investment performance, micro and macro real estate environment, capital markets and credit availability, among other factors. We generally expect to hold debt investments until the stated maturity and equity investments in accordance with each investment’s proposed business plan. We may sell all or a partial ownership interest in an investment before the end of the expected holding period if we believe that market conditions have maximized its value to us, or the sale of the asset would otherwise be in the best interests of our stockholders.

Our investment strategy is ~~dynamic and~~ flexible, enabling us to adapt to shifts in economic, real estate and capital market conditions and to exploit market inefficiencies. We may expand or change our investment strategy or target assets over time in response to opportunities available in different economic and capital market conditions. This flexibility in our investment strategy allows us

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to employ a customized, solutions-oriented approach, which we believe is attractive to borrowers and tenants. We believe that our diverse portfolio, our ability to originate, acquire and manage our target assets and the flexibility of our investment strategy positions us to capitalize on market inefficiencies and generate attractive long-term risk-adjusted returns for our stockholders through a variety of market conditions and economic cycles.

Underwriting, Asset and Risk Management

We closely monitor our portfolio and actively ~~manages~~manage risks associated with, among other things, our assets and interest rates. Prior to investing in any particular asset, the underwriting team, in conjunction with third party providers, undertakes a rigorous asset-level due diligence process, involving intensive data collection and analysis, to ensure that we understand fully the state of the market and the risk-reward profile of the asset. Beginning in 2021, our investment and portfolio management and risk assessment practices diligence the environmental, social and governance (“ESG”) standards of our business counterparties, including borrowers, sponsors, partners and service providers, and that of our investment assets and underlying collateral, which may include sustainability initiatives, recycling, energy efficiency and water management, volunteer and charitable efforts, anti-money laundering and know-your-client policies, and diversity, equity and inclusion practices in workforce leadership, composition and hiring practices. Prior to making a final investment decision, we focus on portfolio diversification to determine whether a target asset will cause our portfolio to be too heavily concentrated with, or cause too much risk exposure to, any one borrower, real estate sector, geographic region, source of cash flow for payment or other geopolitical issues. If we determine that a proposed acquisition presents excessive concentration risk, it may determine not to acquire an otherwise attractive asset.

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For each asset that we acquire, our asset management team engages in active management of the asset, the intensity of which depends on the attendant risks. The asset manager works collaboratively with the underwriting team to formulate a strategic plan for the particular asset, which includes evaluating the underlying collateral and updating valuation assumptions to reflect changes in the real estate market and the general economy. This plan also generally outlines several strategies for the asset to extract the maximum amount of value from each asset under a variety of market conditions. Such strategies may vary depending on the type of asset, the availability of refinancing options, recourse and maturity, but may include, among others, the restructuring of non-performing or sub-performing loans, the negotiation of discounted pay-offs or other modification of the terms governing a loan, and the foreclosure and management of assets underlying non-performing loans in order to reposition them for profitable disposition. We continuously track the progress of an asset against the original business plan to ensure that the attendant risks of continuing to own the asset do not outweigh the associated rewards. Under these circumstances, certain assets will require intensified asset management in order to achieve optimal value realization.

Our asset management team engages in a proactive and comprehensive on-going review of the credit quality of each asset it manages. In particular, for debt investments on at least an annual basis, the asset management team will evaluate the financial wherewithal of individual borrowers to meet contractual obligations as well as review the financial stability of the assets securing such debt investments. Further, there is ongoing review of borrower covenant compliance including the ability of borrowers to meet certain negotiated debt service coverage ratios and debt yield tests. For equity investments, the asset management team, with the assistance of third-party property managers, monitors and reviews key metrics such as occupancy, same store sales, tenant payment rates, property budgets and capital expenditures. If through this analysis of credit quality, the asset management team encounters declines in credit not in accord with the original business plan, the team evaluates the risks and determine what changes, if any, are required to the business plan to ensure that the attendant risks of continuing to hold the investment do not outweigh the associated rewards.

In addition, the audit committee of our Board of Directors, in consultation with management, periodically reviews our policies with respect to risk assessment and risk management, including key risks to which we are subject, including credit risk, liquidity risk and market risk, and the steps that management has taken to monitor and control such risks.

Inflation

Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors influence our performance significantly more than inflation does. A change in interest rates may correlate with the inflation rate. Substantially all of the leases at our multifamily properties allow for monthly or annual rent increases which provide us with the opportunity to achieve increases, where justified by the market, as each lease matures. Such types of leases generally minimize the risks of inflation on our multifamily properties.

Refer to Item 3, “Quantitative and Qualitative Disclosures About Market Risk” for additional details.

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Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. There have been no material changes to our critical accounting policies ~~since the filing of~~and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

Recent Accounting Updates

For recent accounting updates, refer to Note 2, “Summary of Significant Accounting Policies” in our accompanying consolidated financial statements included in Part I, Item 1, “Financial Statements.”

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our primary market risks are interest rate risk, prepayment risk, extension risk, credit risk, real estate market risk, capital market risk and foreign currency risk, either directly through the assets held or indirectly through investments in unconsolidated ventures, with each risk heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic. As stated in the “Impact of COVID-19” section in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we are taking steps to mitigate certain risks associated with COVID-19, however the extent to which the COVID-19 pandemic impacts us, our business, our borrowers and our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic ~~efforts~~effects of the pandemic and containment measures, among others.

Interest Rate Risk

Interest rate risk relates to the risk that the future cash flow of a financial instrument will fluctuate because of changes in market interest rates. Interest rate risk is highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations, international conflicts, inflation and other factors beyond our control. Credit curve spread risk is highly sensitive to the dynamics of the markets for loans and securities we hold. Excessive supply of these assets combined with reduced demand will cause the market to require a higher yield. This demand for higher yield will cause the market to use a higher spread over the U.S. Treasury securities yield curve, or other benchmark interest rates, to value these assets.

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As U.S. Treasury securities are priced to a higher yield and/or the spread to U.S. Treasuries used to price the assets increases, the price at which we could sell some of our fixed rate financial assets may decline. Conversely, as U.S. Treasury securities are priced to a lower yield and/or the spread to U.S. Treasuries used to price the assets decreases, the value of our fixed rate financial assets may increase. Fluctuations in LIBOR and SOFR may affect the amount of interest income we earn on our floating rate borrowings and interest expense we incur on borrowings indexed to LIBOR and SOFR, including under credit facilities and investment-level financing.

We utilize a variety of financial instruments on some of our investments, including interest rate swaps, caps, floors and other interest rate exchange contracts, in order to limit the effects of fluctuations in interest rates on their operations. The use of these types of derivatives to hedge interest-earning assets and/or interest-bearing liabilities carries certain risks, including the risk that losses on a hedge position will reduce the funds available for distribution and that such losses may exceed the amount invested in such instruments. A hedge may not perform its intended purpose of offsetting losses of rising interest rates. Moreover, with respect to certain of the instruments used as hedges, there is exposure to the risk that the counterparties may cease making markets and quoting prices in such instruments, which may inhibit the ability to enter into an offsetting transaction with respect to an open position. Our profitability may be adversely affected during any period as a result of changing interest rates.

As of ~~September 30, 2021,~~March 31, 2022, a hypothetical 100 basis point increase in the applicable interest rate benchmark on our loan portfolio would ~~decrease~~increase interest income by ~~$7.2~~$0.5 million annually, net of interest expense.

See the “Impact of the Russia-Ukraine conflict and increases in market interest rates” section in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Impacting Our Operating Results” for further discussion on interest rates.

Prepayment risk

Prepayment risk is the risk that principal will be repaid at a different rate than anticipated, resulting in a less than expected return on an investment. As prepayments of principal are received, any premiums paid on such assets are amortized against interest income, while any discounts on such assets are accreted into interest income. Therefore, an increase in prepayment rates

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has the following impact: (i) accelerates amortization of purchase premiums, which reduces interest income earned on the assets; and conversely, (ii) accelerates accretion of purchase discounts, which increases interest income earned on the assets.

Extension risk

The weighted average life of assets is projected based on assumptions regarding the rate at which borrowers will prepay or extend their mortgages. If prepayment rates decrease or extension options are exercised by borrowers at a rate that deviates significantly from projections, the life of fixed rate assets could extend beyond the term of the secured debt agreements. This in turn could negatively impact liquidity to the extent that assets may have to be sold and losses may be incurred as a result.

Credit risk

Investment in loans held for investment is subject to a high degree of credit risk through exposure to loss from loan defaults. Default rates are subject to a wide variety of factors, including, but not limited to, borrower financial condition, property performance, property management, supply/demand factors, construction trends, consumer behavior, regional economics, interest rates, the strength of the U.S. economy and other factors beyond our control, all of which have and may continue to be detrimentally impacted by the COVID-19 pandemic. All loans are subject to a certain probability of default. We manage credit risk through the underwriting process, acquiring investments at the appropriate discount to face value, if any, and establishing loss assumptions. Performance of the loans is carefully monitored, including those held through joint venture investments, as well as external factors that may affect their value.

We are also subject to the credit risk of the tenants in our properties, including business closures, occupancy levels, meeting rent or other expense obligations, lease concessions, and ESG standards and practices among other factors, all of which have and may continue to be detrimentally impacted by the COVID-19 pandemic. We seek to undertake a rigorous credit evaluation of the tenants prior to acquiring properties. This analysis includes an extensive due diligence investigation of the tenants’ businesses, as well as an assessment of the strategic importance of the underlying real estate to the respective tenants’ core business operations. Where appropriate, we may seek to augment the tenants’ commitment to the properties by structuring various credit enhancement mechanisms into the underlying leases. These mechanisms could include security deposit requirements or guarantees from entities that are deemed credit worthy.

We are working closely with our borrowers and tenants to address the impact of COVID-19 on their ~~business.~~businesses. Our in-depth understanding of CRE and real estate-related investments, and in-house underwriting, asset management and resolution capabilities, provides us and management with a sophisticated full-service platform to regularly evaluate our investments and determine primary, secondary or alternative strategies to manage the credit risks described above. This includes intermediate servicing and complex and creative negotiating, restructuring of non-performing investments, foreclosure considerations, intense management or development of owned real estate, in each case to manage the risks faced to achieve value realization events in our interests and our stockholders. Solutions considered due to the impact of the COVID-19 pandemic may include defensive loan or lease modifications, temporary interest or rent deferrals or forbearances, converting current interest payment

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obligations to payment-in-kind, repurposing reserves and/or covenant waivers. Depending on the nature of the underlying investment and credit risk, we may pursue repositioning strategies through judicious capital investment in order to extract value from the investment or limit losses.

There can be no assurance that the measures taken will be sufficient to address the negative impact the COVID-19 pandemic may have on our future operating results, liquidity and financial condition.

Real estate market risk

We are exposed to the risks generally associated with the commercial real estate market. The market values of commercial real estate are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions, as well as changes or weakness in specific industry segments, and other macroeconomic factors beyond our control, including the COVID-19 pandemic, which have and may continue to affect occupancy rates, capitalization rates and absorption rates. This in turn could impact the performance of tenants and borrowers. We seek to manage these risks through ~~their~~our underwriting due diligence and asset management processes and the solutions oriented process described above.

Capital markets risk

We are exposed to risks related to the debt capital markets, specifically the ability to finance our business through borrowings under secured revolving repurchase facilities, secured and unsecured warehouse facilities or other debt instruments. We seek to mitigate these risks by monitoring the debt capital markets to inform their decisions on the amount, timing and terms of ~~their~~our borrowings.

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The COVID-19 pandemic has had a direct and volatile impact on the global markets, including the commercial real estate equity and debt capital markets. The disruption caused by the COVID-19 pandemic has led to a negative impact on asset valuations and significant constraints on liquidity in the capital markets, which have led to restrictions on lending activity, downward pressure on covenant compliance and requirements to post margin or repayments under master repurchase financing arrangements. Our Master Repurchase Facilities are partial recourse, and margin call provisions do not permit valuation adjustments based on capital markets events; rather they are limited to collateral-specific credit marks generally determined on a commercially reasonable basis. We have timely met margin calls, primarily under our CMBS Credit Facilities.

We have amended our Bank Credit Facility and Master Repurchase Facilities to adjust certain covenants (such as the tangible net worth covenant), reduce advance rates on certain financed assets, obtain margin call holidays and permitted modification flexibilities, in an effort to mitigate the risk of future compliance issues, including margin calls, under our financing arrangements.

Foreign Currency Risk

We have foreign currency rate exposures related to our foreign currency-denominated investments held by our foreign subsidiaries. Changes in foreign currency rates can adversely affect the fair values and earning of our non-U.S. holdings. We generally mitigate this foreign currency risk by utilizing currency instruments to hedge our net investments in our foreign subsidiaries. The type of hedging instruments that we employ on our foreign subsidiary investments are put options.

At ~~September 30, 2021,~~March 31, 2022, we had approximately NOK ~~723.9 million and €157.0~~685.3 million or a total of ~~$265.8~~$78.7 million, in net investments in our European subsidiaries. A 1.0% change in ~~these~~the foreign currency ~~rates~~rate would result in a ~~$2.7~~$0.8 million increase or decrease in translation gain or loss included in other comprehensive income in connection with our European ~~subsidiaries.~~subsidiary.

A summary of the foreign exchange contracts in place at ~~September 30, 2021,~~March 31, 2022, including notional amount and key terms, is included in Note 15, “Derivatives,” to Part I, Item 1, “Financial Statements.” The maturity dates of these instruments approximate the projected dates of related cash flows for specific investments. Termination or maturity of currency hedging instruments may result in an obligation for payment to or from the counterparty to the hedging agreement. We are exposed to credit loss in the event of non-performance by counterparties for these contracts. To manage this risk, we select major international banks and financial institutions as counterparties and perform a quarterly review of the financial health and stability of our trading counterparties. Based on our review at ~~September 30, 2021,~~March 31, 2022, we do not expect any counterparty to default on its obligations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized

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and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(b) under the Exchange Act, our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of ~~September 30, 2021,~~March 31, 2022, our disclosure controls and procedures were effective at providing reasonable assurance regarding the reliability of the information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—Other Information

Item 1. Legal Proceedings

~~Neither the~~The Company ~~nor the Manager~~ is not currently subject to any material legal proceedings. We anticipate that we may from time to time be involved in legal actions arising in the ordinary course of business, the outcome of which we would not expect to have a material adverse effect on our financial position, results of operations or cash flow.

Item 1A. Risk Factors

In addition to the other information in this Quarterly Report on Form 10-Q, you should carefully consider the risks described in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, in Part I, Item 1A, Risk Factors, and in our other filings with the SEC. These factors may materially affect our business, financial condition and operating results. ~~Except as described below, there~~There have been no material changes to the risk factors relating to the Company disclosed in our Form 10-K for the year ended December 31, ~~2020.~~

In addition, in considering the forward-looking statements contained in this Form 10-Q and elsewhere, you should refer to the qualifications and limitations on our forward-looking statements that are described in Forward Looking Statements at the beginning of Part I, Item 2 of this Form 10-Q.

We terminated our relationship with our manager, which could delay or hinder implementation of our investment strategy, adversely affect our results of operations and financial condition and/or limit our ability to realize some or all of the targeted benefits of the Internalization.

On April 30, 2021, we completed the Internalization of our management and operating functions and terminated the management agreement with our external manager. Pursuant to the Internalization, we extended offers of employment to certain employees of our external manager who, prior to the Internalization, had contributed substantially to our investment, underwriting, portfolio and asset management, loan servicing, financial reporting, treasury, legal, tax, credit, risk and compliance responsibilities employment, which offers were accepted, and entered into an employment agreement with Mr. Michael J. Mazzei, our Chief Executive Officer and President. Our executive team consists of individuals who were previously employed by, but are no longer affiliated with, the manager, specifically: Michael J. Mazzei, Chief Executive Officer and President; Andrew E. Witt, Chief Operating Officer and Executive Vice President; Frank V. Saracino, Chief Financial Officer and Executive Vice President; and David A. Palamé, General Counsel, Secretary and Executive Vice President. Accordingly, we believe that our success depends significantly upon the experience, skill, resources, relationships and contacts of the executive officers and key personnel. The departure of any of these persons from our management team could have a material adverse effect on our performance. Taken together, our ability to achieve our stated objectives and to realize the expected cost savings through the Internalization may be impacted by increased overhead costs and/or management’s ability to focus on operating our business.2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no sales of unregistered securities of our Company during the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, other than those previously disclosed in filings with the SEC.

Purchases of Equity Securities by Issuer

The Company did not purchase any of its Class A common stock during the three months ended ~~September 30, 2021.~~March 31, 2022.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~Not applicable.~~None.

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Item 6. Exhibits

EXHIBIT INDEX


Exhibit Number						Description of Exhibit
2.1						Amended and Restated Master Combination Agreement, dated as of November 20, 2017, among Colony Capital Operating Company, LLC, NRF RED REIT Corp., NorthStar Real Estate Income Trust, Inc., NorthStar Real Estate Income Trust Operating Partnership, LP, NorthStar Real Estate Income II, Inc., NorthStar Real Estate Income Operating Partnership II, LP, Colony NorthStar Credit Real Estate, Inc. and Credit RE Operating Company, LLC (incorporated by reference to Exhibit 2.1 to the Company’s Registration Statement on Form S-4 (No. 333-221685) effective December 6, 2017)
3.1						Articles of Amendment and Restatement of BrightSpire Capital, Inc., ~~date~~d dated as of June 23, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q (No. 001-38377) for the quarter ended June 30, 2021 filed on August 5, 2021)
3.2						Fourth Amended and Restated Bylaws of BrightSpire Capital, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (No. 001-38377) filed on June 24, 2021)
10.1						~~Indenture,~~Amended and Restated Credit Agreement, dated as of ~~July 20, 2021,~~January 28, 2022, by and among ~~BRSP 2021-FL1, Ltd.~~BrightSpire Capital Operating Company, LLC, as a borrower, the several lenders from time to time parties thereto and JPMorgan Chase Bank, N.A., as Issuer, BRSP 2021-FL1, LLC, as Co-Issuer, BrightSpire Capital Advancing Agent, LLC (f/k/a CLNC Advancing Agent, LLC), as Advancing Agent, Wilmington Trust, National Association, as Trustee, and Wells Fargo Bank, National Association, as Note Administrator and as Custodianadministrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K ~~(No. 001-38377)~~(No.001-38377) filed on ~~July 26, 2021)~~January 31, 2022)
10.2*10.2						Second Amendment to ~~Amended and Restated~~ Master Repurchase Agreement, dated as of ~~August 24, 2021,~~February 8, 2022, by and ~~among NSREIT CB Loan, LLC, CB Loan NT-II, LLC, BrightSpire Credit 3, LLC, BrightSpire Credit 4, LLC, BrightSpire Credit 3EU, LLC~~between Barclays Bank PLC and BrightSpire Credit ~~3UK,~~7, LLC (incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K (No. 001-38377) for the year ended December 31, 2021)
10.3						Third Amendment to Guaranty, dated as of January 28, 2022, by and between BrightSpire Capital Operating Company, LLC and Barclays Bank PLC (incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K (No. 001-38377) for the year ended December 31, 2021)
10.4						Third Amendment to Guaranty, dated as of January 28, 2022, by and between BrightSpire Capital Operating Company, LLC and Goldman Sachs Bank USA (incorporated by reference to Exhibit 10.26 to the Company’s Annual Report on Form 10-K (No. 001-38377) for the year ended December 31, 2021)
10.5						Amendment No. 3 to Master Repurchase and Securities Contract, dated as of February 17, 2022, by and between BrightSpire Credit 8, LLC (f/k/a CLNC Credit 8, LLC) and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.32 to the Company’s Annual Report on Form 10-K (No. 001-38377) for the year ended December 31, 2021)
10.6						Third Amendment to Guarantee, dated as of January 28, 2022, by and between BrightSpire Capital Operating Company, LLC and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.36 to the Company’s Annual Report on Form 10-K (No. 001-38377) for the year ended December 31, 2021)
10.7						Sixth Omnibus Amendment to Transaction Documents, dated as of January 24, 2022, by and between BrightSpire Capital Operating Company, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.45 to the Company’s Annual Report on Form 10-K (No. 001-38377) for the year ended December 31, 2021)
10.8						Seventh Omnibus Amendment to Transaction Documents, dated as of January 28, 2022, by and between BrightSpire Capital Operating Company, LLC and Morgan Stanley Bank, N.A. (incorporated by reference to Exhibit 10.46 to the Company’s Annual Report on Form 10-K (No. 001-38377) for the year ended December 31, 2021)
10.9						Third Amendment to Guaranty, dated as of January 28, 2022, by and between BrightSpire Capital Operating Company, LLC and Citibank, N.A. (incorporated by reference to Exhibit 10.54 to the Company’s Annual Report on Form 10-K (No. 001-38377) for the year ended December 31, 2021)
10.10*						Supplemental Indenture No. 1, dated as of July 20, 2021, by and among CLNC 2019-FL 1, Ltd., as issuer, CLNC 2019-FL 1, LLC, as co-issuer, BrightSpire Capital Advancing Agent, LLC (f/k/a CLNC Advancing Agent, LLC), as advancing agent and U.S. Bank National Association, as trustee
10.11*						Supplemental Indenture No. 2, dated as of March 15, 2022, by and among CLNC 2019-FL 1, Ltd., as issuer, CLNC 2019-FL 1, LLC, as co-issuer, BrightSpire Capital Advancing Agent, LLC (f/k/a CLNC Advancing Agent, LLC), as advancing agent and U.S. Bank Trust Company, National Association, as trustee
31.1*						Certification by the Chief Executive Officer pursuant to 17 CFR 240.13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification by the Chief Financial Officer pursuant to 17 CFR 240.13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*						Certification by the Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*						Certification by the Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

Table of Contents


Exhibit Number						Description of Exhibit
101.SCH*						Inline XBRL Taxonomy Extension Schema Document
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

______________________________________

* Filed herewith

~~106~~90

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: ~~November 3, 2021~~May 5, 2022


BRIGHTSPIRE CAPITAL, INC.

By:						/s/ Michael J. Mazzei
						Michael J. Mazzei
						Chief Executive Officer ~~and President~~
						(Principal Executive Officer)

By:						/s/ Frank V. Saracino
						Frank V. Saracino
						Chief Financial Officer
						(Principal Accounting Officer)


	Common Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income		Total Stockholders’ Equity		Noncontrolling Interests in Investment Entities		Noncontrolling Interests in the Operating Partnership		Total Equity
	Class A
	Shares	Amount






























Balance as of December 31, 2019	128,539	$	1,285	$	2,909,181	$	(819,738)	$	28,294	$	2,119,022	$	31,631	$	50,697	$	2,201,350

Distributions	—	—		—		—		—		—		(11,013)		—		(11,013)
Issuance and amortization of equity-based compensation	—	—		342		—		—		342		—		—		342
Other comprehensive income	—	—		—		—		(70,999)		(70,999)		—		(1,702)		(72,701)
Dividends and distributions declared ($0.30 per share)	—	—		—		(38,541)		—		(38,541)		—		(922)		(39,463)
Shares canceled for tax withholding on vested stock awards	(173)	(1)		(1,686)		—		—		(1,687)		—		—		(1,687)
Reallocation of equity	—	—		(41)		—		—		(41)		—		41		—
Costs of noncontrolling equity	—	—		—		—		—		—		—		—		—
Investment by JV partner in consolidated JV and equity reallocation related to that partner's return (see Note 2)	—	—		—		—		—		—		—		—		—
Effect of CECL Adoption (see Note 2)	—	—		—		(22,644)		—		(22,644)		—		(542)		(23,186)
Net income (loss)	—	—		—		(78,772)		—		(78,772)		523		(1,892)		(80,141)
Balance as of March 31, 2020	128,366	$	1,284	$	2,907,796	$	(959,695)	$	(42,705)	$	1,906,680	$	21,141	$	45,680	$	1,973,501

Contributions	—	—		—		—		—		—		200,467		—		200,467
Distributions	—	—		—		—		—		—		(3,156)		—		(3,156)
Issuance and amortization of equity-based compensation	237	2		1,547		—		—		1,549		—		—		1,549
Other comprehensive income	—	—		—		—		67,946		67,946		257		1,404		69,607
Dividends and distributions declared ($0.10 per share)	—	—		—		—		—		—		—		—		—
Shares canceled for tax withholding on vested stock awards	(20)	—		(81)		—		—		(81)		—		—		(81)
Reallocation of equity	—	—		1,777		—		—		1,777		—		(1,777)		—
Costs of noncontrolling equity	—	—		(466)		—		—		(466)		—		—		(466)
Investments by JV partner in consolidated JV and equity reallocation to that partner's return (see Note 2)	—	—		(70,439)		—		—		(70,439)		70,439		—		—
Net income (loss)	—	—		—		(227,059)		—		(227,059)		(8,107)		(5,418)		(240,584)
Balance as of June 30, 2020	128,583	$	1,286	$	2,840,134	$	(1,186,754)	$	25,241	$	1,679,907	$	281,041	$	39,889	$	2,000,837
Contributions	—	—		—		—		—		—		27		—		27
Distributions	—	—		—		—		—		—		(8,724)		—		(8,724)
Issuance and amortization of equity-based compensation	—	—		1,376		—		—		1,376		—		—		1,376
Other comprehensive income	—	—		—		—		15,713		15,713		916		318		16,947
Shares canceled for tax withholding on vested stock awards	—	—		(1)		—		—		(1)		—		—		(1)
Reallocation of equity	—	—		(296)		—		—		(296)		—		296		—

Investment by JV partner in consolidated JV and equity reallocation related to that partner's return (see Note 2)	—	—		1,679		—		—		1,679		(1,679)		—		—
Net income	—	—		—		5,007		—		5,007		1,222		201		6,430
Balance as of September 30, 2020	128,583	$	1,286	$	2,842,892	$	(1,181,747)	$	40,954	$	1,703,385	$	272,803	$	40,704	$	2,016,892


		Carrying Value
Investments	Description	September 30, 2021		December 31, 2020
ADC investments(1)(2)(3)	Interests in three acquisition, development and construction loans in which the Company participates in residual profits from the projects, and the risk and rewards of the arrangements are more similar to those associated with investments in joint ventures	$	26,032	$	57,481
Other investment ventures(1)(4)	Interests in 6 investments, each with less than $95.4 million carrying value at September 30, 2021	173,548		309,000


														Weighted Average
		Principal Amount		Total Discount		Amortized Cost		Cumulative Unrealized on Investments				Fair Value		Coupon(1)		Unleveraged Current Yield(2)
As of Date:	Count							Gain		(Loss)
September 30, 2021	1	$	11,820	$	(7,875)	$	3,945	$	—	$	—	$	3,945	3.25	%	—	%
December 31, 2020	2	19,560		(9,371)		10,189		200		—		10,389		3.35	%	—	%


Remainder of 2021	$	21,993
2022	74,780
2023	68,336
2024	63,627
2025	57,474
2026 and thereafter	417,321
Total(1)	$	703,531


2021	$	77,716
2022	73,760
2023	66,137
2024	60,657
2025	55,152
2026 and thereafter	393,964
Total(1)	$	727,386


				Weighted Average(1)
CRE Debt Securities by ratings category(2)	Number of Securities	Book value		Cash coupon		Unlevered all-in yield		Remaining term	Ratings

Non-investment grade rated (BB)	1	$	3,945	—	%	—	%	4.5	BB \| B
“B-pieces” of CMBS securitization pools	4	39,124		2.8	%	11.9	%	5.7	—
Total/Weighted Average	5	$	43,069	2.5	%	10.8	%	5.6	—


	Count	Carrying Value(1)		NOI for the three months ended September 30, 2021(2)
Net leased real estate	9	$	495,790	$	9,405
Other real estate	3	199,784		5,715
Total/Weighted average net leased and other real estate	12	$	695,574	$	15,120


	Three Months Ended September 30,		Three Months Ended June 30,		Increase (Decrease)
	2021		2021		Amount		%
Net interest income
Interest income	$	47,082	$	37,921	$	9,161	24.2	%
Interest expense	(14,962)		(12,993)		(1,969)		15.2	%
Interest income on mortgage loans held in securitization trusts	10,806		11,390		(584)		(5.1)	%
Interest expense on mortgage obligations issued by securitization trusts	(9,508)		(10,111)		603		(6.0)	%
Net interest income	33,418		26,207		7,211		27.5	%

Property and other income
Property operating income	26,376		24,799		1,577		6.4	%
Other income	946		1,110		(164)		(14.8)	%
Total property and other income	27,322		25,909		1,413		5.5	%

Expenses
Management fee expense	—		2,338		(2,338)		n.m.
Property operating expense	7,266		6,758		508		7.5	%
Transaction, investment and servicing expense	1,086		644		442		68.6	%
Interest expense on real estate	7,968		7,777		191		2.5	%
Depreciation and amortization	8,850		9,994		(1,144)		(11.4)	%
Provision for loan losses	769		1,200		(431)		(35.9)	%

Administrative expense	11,812		14,053		(2,241)		(15.9)	%
Restructuring charges	—		150		(150)		n.m.
Total expenses	37,751		42,914		(5,013)		(12.0)	%

Other income (loss)
Unrealized gain on mortgage loans and obligations held in securitization trusts, net	3,867		19,516		(15,649)		(80.2)	%
Realized loss on mortgage loans and obligations held in securitization trusts, net	(3,867)		(19,516)		15,649		(80.2)	%
Other gain, net	3,309		836		2,473		n.m.
Income before equity in earnings of unconsolidated ventures and income taxes	26,298		10,038		16,110		n.m.
Equity in earnings (loss) of unconsolidated ventures	(95,977)		(33,788)		(62,189)		n.m.
Income tax benefit (expense)	(2,065)		134		(2,199)		n.m.
Net loss	$	(71,744)	$	(23,616)	$	(48,128)	n.m.


	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021

Net loss attributable to BrightSpire Capital, Inc. common stockholders	$	(70,057)	$	(182,091)
Adjustments:
Net loss attributable to noncontrolling interest of the Operating Partnership	(1,626)		(4,016)
Non-cash equity compensation expense	2,673		12,378
Transaction costs	—		109,321
Depreciation and amortization	8,859		28,418
Net unrealized loss (gain):

Other unrealized gain on investments	(8,797)		(40,479)
CECL reserves	768		5,194
Gains on sales of real estate and preferred equity	—		(9,782)
Adjustments related to noncontrolling interests	(190)		(557)
Distributable Earnings (Loss) attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership	$	(68,370)	$	(81,614)
Adjustments:
Fair value adjustments	$	97,856	133,200
Realized loss on hedges	1,621		1,621
Realized loss on CRE debt securities and B-pieces	3,868		26,801
Adjusted Distributable Earnings attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership	$	34,975	$	80,008
Distributable Earnings (Loss) per share(1)	$	(0.51)	$	(0.61)
Adjusted Distributable Earnings per share(1)	$	0.26	$	0.60
Weighted average number of common shares and OP units(1)	132,835		132,795


City, State	Collateral	Asset Type / #(1)	GS		BRSP		Total
Dublin, Ireland	Mixed Use	Loan 75	$	87,485	$	8,153	$	95,638
Various, US	Industrial	Net Leased 2	51,872		21,317		73,189
Rolling Hills, CA	Single Family Development	Loan 83 and 89	23,797		2,218		26,015
Dublin, Ireland	Office	Loans 81 and 87	54,601		5,088		59,689
San Rafael, CA	Mixed Use	Loan 84	1,855		173		2,028
Total Net Assets			$	219,610	$	36,949	$	256,559


	GS		BRSP		Total
Beginning Balance - January 1, 2021	$	259,524	$	71,085	$	330,609
Contributions(1)	3,888		3,518		7,406
Distributions(2)	(39,940)		—		(39,940)
Profit / (Loss) allocation(3)	(3,862)		(37,654)		(41,516)
Ending Balance - September 30, 2021	$	219,610	$	36,949	$	256,559