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 March 31, ~~2022~~2023


☐			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 May ~~5, 2022,~~2, 2023, BrightSpire Capital, Inc. had ~~131,083,848~~129,946,184 shares of Class A common stock, par value $0.01 per share, ~~outstanding~~outstanding.

Table of Contents

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 March 31, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022	4
	Consolidated Statements of Operations (unaudited) for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022	6
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022	7
	Consolidated Statements of Equity (unaudited) for the three ~~months~~month s ended March 31, ~~2022~~2023 and ~~2021~~202 2	8
	Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022	9
	Notes to Consolidated Financial Statements (unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5752
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8582
Item 4.	Controls and Procedures	8785
Part ~~II.~~II.	Other Information	8886
Item 1.	Legal Proceedings	8886
Item 1A.	Risk Factors	8886
Item 2.	Unregistered Sales of Equity and Use of Proceeds	8886
Item 3.	Defaults Upon Senior Securities	8886
Item 4.	Mine Safety Disclosures	8886
Item 5.	Other Information	8886
Item 6.	Exhibits	8987
Signatures

Table of Contents

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond our control, and may cause actual results to differ significantly from those expressed in any forward-looking statement.

Currently, one of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the adverse effect of the ~~current pandemic of the~~ ongoing coronavirus, or COVID-19, pandemic on the financial condition, results of operations, cash flows and performance of the Company, its borrowers and tenants, the real estate market and the global economy and financial markets. 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, among others, the scope ~~severity~~ and ~~duration~~severity 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.~~measures.

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 impact of the ongoing ~~coronavirus~~COVID-19 pandemic, ~~measures intended to prevent its spread~~such as changes in consumer behavior and ~~government actions to mitigate its economic impact~~corporate policies that have affected the use of and demand for traditional retail, hotel and office space, has had and may 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~~variable-rate investments, result in higher interest expense and in disruptions to our borrowers’ and tenants’ ability to finance their activities, on whom we depend for a substantial portion of our revenue;

•deterioration in the performance of the properties securing our investments (including depletion of interest and other reserves or payment-in-kind concessions in lieu of current interest payment ~~obligations) that~~obligations, population shifts and migration, or reduced demand for office, multifamily, hospitality or retail space) may cause deterioration in the performance of our investments and, potentially, principal losses to us;

•the fair value of our investments may be subject to uncertainties ~~or decrease;~~including impacts associated with accelerating inflationary trends, recent and potential further interest rate increases, the volatility of interest rates, credit spreads and the transition from LIBOR to SOFR, and increased market volatility affecting commercial real estate businesses and public securities;

•our use of leverage and interest rate mismatches between our assets and borrowings could hinder our ability to make distributions and may significantly impact our liquidity position;

•the ability to realize ~~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 available capacity under and margin calls on master repurchase facilities, debt service or lease payment defaults or deferrals, demands for protective advances and capital expenditures;

•our real estate investments are relatively illiquid and we may not be able to vary our portfolio in response to changes in economic and other conditions, which may result in losses to us;

•the timing of and ability to deploy available capital;

•~~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; and

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

•the impact of increasing geopolitical uncertainty and unforeseen public health crises such as the COVID-19 pandemic on the real estate market.

Table of Contents

The foregoing list of factors is not ~~exhaustive.~~exhaustive, and many of these risks are heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic. We urge you to carefully review the disclosures we make concerning risks in the sections entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021, the section entitled~~2022, “Risk Factors” in this Form 10-Q for the quarter ended March 31, ~~2022~~2023 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein.

~~Table of Contents~~

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.

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

BRIGHTSPIRE CAPITAL, INC.

CONSOLIDATED BALANCE SHEETS

(in Thousands, Except Share and Per Share Data)


		March 31, 2022 (Unaudited)		December 31, 2021			March 31, 2023 (Unaudited)		December 31, 2022
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	246,070	$	259,722	Cash and cash equivalents	$	313,520	$	306,320
Restricted cash	Restricted cash	84,492		86,841		Restricted cash	80,023		92,508
Loans held for investment		3,759,873		3,485,607
Loans and preferred equity held for investment						Loans and preferred equity held for investment	3,494,895		3,574,989
Current expected credit loss reserve	Current expected credit loss reserve	(34,004)		(36,598)		Current expected credit loss reserve	(145,836)		(106,247)
Loans held for investment, net		3,725,869		3,449,009
Loans and preferred equity held for investment, net						Loans and preferred equity held for investment, net	3,349,059		3,468,742

Real estate, net	Real estate, net	781,629		783,211		Real estate, net	714,725		732,468
Investments in unconsolidated ventures ($4,406 and $4,406 at fair value, respectively)		20,615		20,591
Receivables, net	Receivables, net	60,131		54,499		Receivables, net	42,980		40,698
Deferred leasing costs and intangible assets, net	Deferred leasing costs and intangible assets, net	62,697		64,981		Deferred leasing costs and intangible assets, net	51,130		53,980
Assets held for sale		—		44,345
Other assets		64,531		61,860
Mortgage loans held in securitization trusts, at fair value		754,579		813,310

Other assets ($2,790 and $3,035 at fair value, respectively)						Other assets ($2,790 and $3,035 at fair value, respectively)	52,576		55,673

Total assets	Total assets	$	5,800,613	$	5,638,369	Total assets	$	4,604,013	$	4,750,389
Liabilities	Liabilities					Liabilities
Securitization bonds payable, net	Securitization bonds payable, net	$	1,461,340	$	1,500,899	Securitization bonds payable, net	$	1,132,692	$	1,167,600
Mortgage and other notes payable, net	Mortgage and other notes payable, net	719,801		760,583		Mortgage and other notes payable, net	644,512		656,468
Credit facilities	Credit facilities	1,199,789		905,122		Credit facilities	1,292,176		1,339,993

Accrued and other liabilities	Accrued and other liabilities	103,931		99,814		Accrued and other liabilities	84,256		87,633
Intangible liabilities, net	Intangible liabilities, net	5,878		6,224		Intangible liabilities, net	4,494		4,839

Escrow deposits payable	Escrow deposits payable	70,004		73,344		Escrow deposits payable	65,323		79,055
Dividends payable	Dividends payable	25,525		23,912		Dividends payable	25,989		25,777
Mortgage obligations issued by securitization trusts, at fair value		718,425		777,156

Total liabilities	Total liabilities	4,304,693		4,147,054		Total liabilities	3,249,442		3,361,365
Commitments and contingencies (Note 16)		0		0
Commitments and contingencies (Note 15)						Commitments and contingencies (Note 15)
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 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, 2023 and December 31, 2022, respectively						Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of March 31, 2023 and December 31, 2022, 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, 129,633,136 and 129,769,365 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		1,296		1,298
Class A, 950,000,000 shares authorized, 129,946,184 and 128,872,471 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively						Class A, 950,000,000 shares authorized, 129,946,184 and 128,872,471 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	1,299		1,289
Additional paid-in capital	Additional paid-in capital	2,856,635		2,855,766		Additional paid-in capital	2,853,123		2,853,723
Accumulated deficit	Accumulated deficit	(1,407,495)		(1,410,562)		Accumulated deficit	(1,496,865)		(1,466,568)
Accumulated other comprehensive income		9,446		8,786
Accumulated other comprehensive income (loss)						Accumulated other comprehensive income (loss)	(4,139)		(676)
Total stockholders’ equity	Total stockholders’ equity	1,459,882		1,455,288		Total stockholders’ equity	1,353,418		1,387,768
Noncontrolling interests in investment entities	Noncontrolling interests in investment entities	1,384		1,472		Noncontrolling interests in investment entities	1,153		1,256
Noncontrolling interests in the Operating Partnership		34,654		34,555
Total equity	Total equity	1,495,920		1,491,315		Total equity	1,354,571		1,389,024
Total liabilities and equity	Total liabilities and equity	$	5,800,613	$	5,638,369	Total liabilities and equity	$	4,604,013	$	4,750,389

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

Table of Contents

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.


		March 31, 2022 (Unaudited)		December 31, 2021			March 31, 2023 (Unaudited)		December 31, 2022
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	5,527	$	6,720	Cash and cash equivalents	$	5,199	$	5,163
Restricted cash	Restricted cash	10,193		9,658		Restricted cash	6,759		7,831
Loans held for investment, net		1,716,090		1,781,522
Loans and preferred equity held for investment, net						Loans and preferred equity held for investment, net	1,372,099		1,444,398
Real estate, net	Real estate, net	169,728		170,201		Real estate, net	166,179		167,821
Investments in unconsolidated ventures		16,200		16,200
Receivables, net	Receivables, net	37,922		12,808		Receivables, net	12,716		11,869
Deferred leasing costs and intangible assets, net	Deferred leasing costs and intangible assets, net	14,036		15,105		Deferred leasing costs and intangible assets, net	9,921		10,956

Other assets	Other assets	21,808		21,901		Other assets	21,697		21,977
Mortgage loans held in securitization trusts, at fair value		754,579		813,310

Total assets	Total assets	$	2,746,083	$	2,847,425	Total assets	$	1,594,570	$	1,670,015
Liabilities	Liabilities					Liabilities
Securitization bonds payable, net	Securitization bonds payable, net	$	1,461,340	$	1,500,899	Securitization bonds payable, net	$	1,132,692	$	1,167,600
Mortgage and other notes payable, net	Mortgage and other notes payable, net	176,506		177,373		Mortgage and other notes payable, net	173,265		173,960

Accrued and other liabilities	Accrued and other liabilities	7,624		6,768		Accrued and other liabilities	5,946		5,026
Intangible liabilities, net	Intangible liabilities, net	5,878		6,224		Intangible liabilities, net	4,494		4,839

Escrow deposits payable	Escrow deposits payable	2,476		3,484		Escrow deposits payable	220		2,366
Mortgage obligations issued by securitization trusts, at fair value		718,425		777,156

Total liabilities	Total liabilities	$	2,372,249	$	2,471,904	Total liabilities	$	1,316,617	$	1,353,791

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

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in Thousands, Except Per Share Data)

(Unaudited)

Three Months Ended March 31,
2022 2021
Net interest income
Interest income $ 44,570 $ 34,374
Interest expense (16,072) (12,495)
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 29,385 24,232
Property and other income
Property operating income 24,168 25,722
Other income 276 45
Total property and other income 24,444 25,767
Expenses
Management fee expense — 7,258
Property operating expense 6,724 8,111
Transaction, investment and servicing expense 1,124 2,288
Interest expense on real estate 7,556 8,633
Depreciation and amortization 8,594 9,539
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) 8,225 6,786
Operating expense 4,349 5,809
Restructuring charges — 109,171
Total expenses 35,706 160,820
Other income
Unrealized gain on mortgage loans and obligations held in securitization trusts, net — 8,638
Other gain, net 10,288 8,367
Income (loss) before equity in earnings of unconsolidated ventures and income taxes 28,411 (93,816)
Equity in earnings (loss) of unconsolidated ventures 25 (2,478)
Income tax benefit (expense) (36) 1,801
Net income (loss) 28,400 (94,493)
Net (income) loss attributable to noncontrolling interests:
Investment entities (22) 226
Operating Partnership (654) 1,953
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)
$ 0.21 $ (0.71)
Weighted average shares of common stock outstanding - basic (Note 18)
128,758 129,781
Weighted average shares of common stock outstanding - diluted (Note 18)
129,745 129,781


	Three Months Ended March 31,
	2023		2022
Net interest income
Interest income	$	75,616	$	44,570
Interest expense	(42,662)		(16,072)
Interest income on mortgage loans held in securitization trusts	—		9,375
Interest expense on mortgage obligations issued by securitization trusts	—		(8,488)
Net interest income	32,954		29,385

Property and other income
Property operating income	22,551		24,168
Other income	3,056		276
Total property and other income	25,607		24,444

Expenses

Property operating expense	5,852		6,724
Transaction, investment and servicing expense	835		1,124
Interest expense on real estate	5,509		7,556
Depreciation and amortization	7,996		8,594
Increase (decrease) of current expected credit loss reserve	39,613		(866)

Compensation and benefits (including $2,295 and $1,880 of equity-based compensation expense, respectively)	8,805		8,225
Operating expense	3,473		4,349

Total expenses	72,083		35,706

Other income


Other gain, net	655		10,288
Income (loss) before equity in earnings of unconsolidated ventures and income taxes	(12,867)		28,411
Equity in earnings of unconsolidated ventures	9,055		25
Income tax expense	(390)		(36)
Net income (loss)	(4,202)		28,400
Net (income) loss attributable to noncontrolling interests:
Investment entities	75		(22)
Operating Partnership	—		(654)
Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	$	(4,127)	$	27,724

Net income (loss) per common share - basic (Note 17)	$	(0.03)	$	0.21
Net income (loss) per common share - diluted (Note 17)	$	(0.03)	$	0.21

Weighted average shares of common stock outstanding - basic (Note 17)	126,665		128,758
Weighted average shares of common stock outstanding - diluted (Note 17)	126,665		129,745

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

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in Thousands)

(Unaudited)


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Net income (loss)	Net income (loss)	$	28,400	$	(94,493)		Net income (loss)	$	(4,202)	$	28,400
Other comprehensive income (loss)	Other comprehensive income (loss)						Other comprehensive income (loss)
Unrealized loss on real estate securities, available for sale		—		(200)

Foreign currency translation gain (loss)	Foreign currency translation gain (loss)	676		(8,533)			Foreign currency translation gain (loss)	(3,463)		676
Total other comprehensive income (loss)	Total other comprehensive income (loss)	676		(8,733)			Total other comprehensive income (loss)	(3,463)		676
Comprehensive income (loss)	Comprehensive income (loss)	29,076		(103,226)			Comprehensive income (loss)	(7,665)		29,076
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	(22)		1,002			Investment entities	75		(22)
Operating Partnership	Operating Partnership	(670)		2,168			Operating Partnership	—		(670)
Comprehensive income (loss) attributable to common stockholders	Comprehensive income (loss) attributable to common stockholders	$	28,384	$	(100,056)		Comprehensive income (loss) attributable to common stockholders	$	(7,590)	$	28,384

The accompanying notes are an integral part of these consolidated financial 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 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																										Total Equity
		Shares	Amount																						Shares							Total Equity
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		—	—				—			—			—			—			1,384			—				1,384
Distributions		—	—				—			—			—			—			(10,794)			—				(10,794)
Issuance and amortization of equity-based compensation		1,420	14				4,248			—			—			4,262			—			—				4,262
Other comprehensive income		—	—				—			—			(7,742)			(7,742)			(776)			(215)				(8,733)
Dividends and distributions declared ($0.10 per share)		—	—				—			(12,988)			—			(12,988)			—			(308)				(13,296)
Shares canceled for tax withholding on vested stock awards		(136)	(2)				(1,307)			—			—			(1,309)			—			—				(1,309)
Reallocation of equity		—	—				521			—			—			521			—			(521)				—

Net loss		—	—				—			(92,314)			—			(92,314)			(226)			(1,953)				(94,493)
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 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		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	—	—				—			—			—			—			(110)			—				(110)			Distributions		—			—						—			—			—			—				(110)			—			(110)
Issuance and amortization of equity-based compensation	Issuance and amortization of equity-based compensation	—	—				1,880			—			—			1,880			—			—				1,880			Issuance and amortization of equity-based compensation		—			—						1,880			—			—			1,880				—			—			1,880
Other comprehensive income	Other comprehensive income	—	—				—			—			660			660			—			16				676			Other comprehensive income		—			—						—			—			660			660				—			16			676
Dividends and distributions declared ($0.19 per share)	Dividends and distributions declared ($0.19 per share)	—	—				—			(24,657)			—			(24,657)			—			(584)				(25,241)			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	(136)	(2)				(998)			—			—			(1,000)			—			—				(1,000)			Shares canceled for tax withholding on vested stock awards		(136)			(2)						(998)			—			—			(1,000)				—			—			(1,000)
Reallocation of equity	Reallocation of equity	—	—				(13)			—			—			(13)			—			13				—			Reallocation of equity		—			—						(13)			—			—			(13)				—			13			—
Net income	Net income	—	—				—			27,724			—			27,724			22			654				28,400			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		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

Balance as of December 31, 2022																												Balance as of December 31, 2022		128,872			$	1,289					$	2,853,723		$	(1,466,568)		$	(676)		$	1,387,768			$	1,256		$	—		$	1,389,024
Distributions																												Distributions		—			—						—			—			—			—				(28)			—			(28)
Issuance and amortization of equity-based compensation																												Issuance and amortization of equity-based compensation		1,527			15						2,280			—			—			2,295				—			—			2,295
Other comprehensive loss																												Other comprehensive loss		—			—						—			—			(3,463)			(3,463)				—			—			(3,463)
Dividends and distributions declared ($0.20 per share)																												Dividends and distributions declared ($0.20 per share)		—			—						—			(26,170)			—			(26,170)				—			—			(26,170)
Shares canceled for tax withholding on vested stock awards																												Shares canceled for tax withholding on vested stock awards		(453)			(5)						(2,880)			—			—			(2,885)				—			—			(2,885)
Net loss																												Net loss		—			—						—			(4,127)			—			(4,127)				(75)			—			(4,202)
Balance as of March 31, 2023																												Balance as of March 31, 2023		129,946			$	1,299					$	2,853,123		$	(1,496,865)		$	(4,139)		$	1,353,418			$	1,153		$	—		$	1,354,571

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

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in Thousands)

(Unaudited)


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Cash flows from operating activities:	Cash flows from operating activities:						Cash flows from operating activities:
Net income (loss)	Net income (loss)	$	28,400	$	(94,493)		Net income (loss)	$	(4,202)	$	28,400
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:						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	(25)		2,478			Equity in (earnings) losses of unconsolidated ventures	—		(25)
Depreciation and amortization	Depreciation and amortization	8,594		9,539			Depreciation and amortization	7,996		8,594
Straight-line rental income	Straight-line rental income	(391)		(1,082)			Straight-line rental income	(467)		(391)
Amortization of above/below market lease values, net	Amortization of above/below market lease values, net	(42)		182			Amortization of above/below market lease values, net	(140)		(42)
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	(2,999)		(1,490)			Amortization of premium/accretion of discount and fees on investments and borrowings, net	(3,038)		(2,999)
Amortization of deferred financing costs	Amortization of deferred financing costs	2,327		3,016			Amortization of deferred financing costs	2,957		2,327
Amortization of right-of-use lease assets and operating lease liabilities	Amortization of right-of-use lease assets and operating lease liabilities	99		26			Amortization of right-of-use lease assets and operating lease liabilities	53		99
Paid-in-kind interest added to loan principal, net of interest received	Paid-in-kind interest added to loan principal, net of interest received	2,719		(2,547)			Paid-in-kind interest added to loan principal, net of interest received	(1,848)		2,719

Unrealized (gain) loss on mortgage loans and obligations held in securitization trusts, net		—		(8,638)

Realized loss on securities from write-down to fair value		—		990
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	(10,632)		(11,911)			Realized gain on sale of real estate	—		(10,632)

Increase (decrease) of current expected credit loss reserve	Increase (decrease) of current expected credit loss reserve	(866)		3,225			Increase (decrease) of current expected credit loss reserve	39,613		(866)

Amortization of equity-based compensation	Amortization of equity-based compensation	1,880		4,262			Amortization of equity-based compensation	2,295		1,880
Mortgage notes above/below market value amortization	Mortgage notes above/below market value amortization	53		27			Mortgage notes above/below market value amortization	(1,324)		53

Deferred income tax (benefit) expense	Deferred income tax (benefit) expense	(500)		(768)			Deferred income tax (benefit) expense	159		(500)
Other (gain) loss, net	Other (gain) loss, net	269		1,369			Other (gain) loss, net	(547)		269
Changes in assets and liabilities:	Changes in assets and liabilities:						Changes in assets and liabilities:
Receivables, net	Receivables, net	2,010		(3,992)			Receivables, net	(1,835)		2,010
Deferred costs and other assets	Deferred costs and other assets	472		1,439			Deferred costs and other assets	770		472
Due to related party		—		101,956

Other liabilities	Other liabilities	989		(1,797)			Other liabilities	(769)		989
Net cash provided by operating activities	Net cash provided by operating activities	32,357		1,660			Net cash provided by operating activities	39,673		32,357
Cash flows from investing activities:	Cash flows from investing activities:						Cash flows from investing activities:
Acquisition, origination and funding of loans held for investment, net	Acquisition, origination and funding of loans held for investment, net	(498,195)		(432,918)			Acquisition, origination and funding of loans held for investment, net	(16,388)		(498,195)
Repayment on loans held for investment	Repayment on loans held for investment	215,305		41,337			Repayment on loans held for investment	101,368		215,305

Proceeds from sale of real estate	Proceeds from sale of real estate	55,600		332,003			Proceeds from sale of real estate	—		55,600

Acquisition of and additions to real estate, related intangibles and leasing commissions	Acquisition of and additions to real estate, related intangibles and leasing commissions	(1,468)		(1,760)			Acquisition of and additions to real estate, related intangibles and leasing commissions	(1,870)		(1,468)
Investments in unconsolidated ventures		—		(1,795)

Distributions in excess of cumulative earnings from unconsolidated ventures	Distributions in excess of cumulative earnings from unconsolidated ventures	(4)		8,784			Distributions in excess of cumulative earnings from unconsolidated ventures	245		(4)

Repayment of real estate securities, available for sale, from sales		—		5,079
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	13,300		7,128			Repayment of principal in mortgage loans held in securitization trusts	—		13,300

Change in escrow deposits		(3,340)		3,690
Net cash used in investing activities		(218,802)		(38,334)
Change in escrow deposits payable							Change in escrow deposits payable	(13,733)		(3,340)
Net cash provided by (used in) investing activities							Net cash provided by (used in) investing activities	69,622		(218,802)
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	(23,934)		—			Distributions paid on common stock	(25,963)		(23,934)

Shares canceled for tax withholding on vested stock awards	Shares canceled for tax withholding on vested stock awards	(998)		(1,309)			Shares canceled for tax withholding on vested stock awards	(2,885)		(998)
Borrowings from mortgage notes		—		37

Repayment of mortgage notes	Repayment of mortgage notes	(43,303)		(251,804)			Repayment of mortgage notes	(1,358)		(43,303)
Borrowings from credit facilities	Borrowings from credit facilities	383,334		329,336			Borrowings from credit facilities	110,324		383,334
Repayment of credit facilities	Repayment of credit facilities	(88,667)		(76,765)			Repayment of credit facilities	(158,216)		(88,667)

Repayment of securitization bonds	Repayment of securitization bonds	(40,736)		—			Repayment of securitization bonds	(36,171)		(40,736)
Repayment of mortgage obligations issued by securitization trusts	Repayment of mortgage obligations issued by securitization trusts	(13,300)		(7,128)			Repayment of mortgage obligations issued by securitization trusts	—		(13,300)
Payment of deferred financing costs	Payment of deferred financing costs	(2,338)		(1,490)			Payment of deferred financing costs	(126)		(2,338)
Contributions from noncontrolling interests		—		1,384

Distributions to noncontrolling interests	Distributions to noncontrolling interests	(110)		(10,794)			Distributions to noncontrolling interests	(28)		(110)

Issuance of common stock							Issuance of common stock	15		—
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	169,948		(18,533)			Net cash provided by (used in) financing activities	(114,408)		169,948
Effect of exchange rates on cash, cash equivalents and restricted cash	Effect of exchange rates on cash, cash equivalents and restricted cash	496		3,520			Effect of exchange rates on cash, cash equivalents and restricted cash	(172)		496
Net increase (decrease) in cash, cash equivalents and restricted cash		(16,001)		(51,687)
Net decrease in cash, cash equivalents and restricted cash							Net decrease in cash, cash equivalents and restricted cash	(5,285)		(16,001)
Cash, cash equivalents and restricted cash - beginning of period	Cash, cash equivalents and restricted cash - beginning of period	346,563		540,030			Cash, cash equivalents and restricted cash - beginning of period	398,828		346,563
Cash, cash equivalents and restricted cash - end of period	Cash, cash equivalents and restricted cash - end of period	$	330,562	$	488,343		Cash, cash equivalents and restricted cash - end of period	$	393,543	$	330,562

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

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(in Thousands)

(Unaudited)

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 —


	Three Months Ended March 31,
	2023		2022
Reconciliation of cash, cash equivalents, and restricted cash to consolidated balance sheets
Beginning of the period
Cash and cash equivalents	$	306,320	$	259,722
Restricted cash	92,508		86,841
Total cash, cash equivalents and restricted cash, beginning of period	$	398,828	$	346,563

End of the period
Cash and cash equivalents	$	313,520	$	246,070
Restricted cash	80,023		84,492
Total cash, cash equivalents and restricted cash, end of period	$	393,543	$	330,562


	Three Months Ended March 31,
	2023		2022



Supplemental disclosure of non-cash investing and financing activities:





Accrual of distribution payable	$	25,989	$	25,525

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

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

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Business and Organization

BrightSpire Capital, Inc. (the “Company”) is a commercial real estate (“CRE”) credit real estate investment trust (“REIT”) focused on originating, acquiring, financing and managing a diversified portfolio consisting primarily of CRE debt investments and net leased properties predominantly in the United States. CRE debt investments primarily consist of first mortgage loans, which the Company expects to be its primary investment strategy. Additionally, the Company may selectively originate mezzanine loans and make preferred equity investments, which may include profit participations. The mezzanine loans and preferred equity investments may be in conjunction with the Company’s origination of corresponding first mortgages on the same properties. Net leased properties consist of CRE properties with long-term leases to tenants on a net-lease basis, where such tenants generally will be responsible for property operating expenses such as insurance, utilities, maintenance capital expenditures and real estate taxes. The Company will continue to target net leased equity investments on a selective basis. ~~The Company also currently has investments in CRE debt securities consisting of commercial mortgage-backed securities (“CMBS”) that are “B-pieces” of a CMBS securitization 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 (the “OP”). ~~At March 31, 2022,~~

Trends Affecting the ~~Company owned 97.7% of the OP, as its sole managing member. The remaining 2.3% is owned as noncontrolling interests.~~

~~Impact of COVID-19~~Business

The ~~COVID-19 pandemic~~global markets are currently characterized by volatility, driven by a tightening of monetary policy and geopolitical uncertainty, coupled with the ongoing impacts of COVID-19. In response to heightened inflation, the Federal Reserve continues to raise interest rates, which has ~~negatively impacted CRE credit REITs across~~tempered the ~~industry, as well as other companies that own~~loan financing market and ~~operate commercial real estate investments. Throughout 2020, continuing into~~created further uncertainty for the first quarter of 2022, countries around the world continued to face healthcare and economic challenges arising from the 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,~~for the Company’s ~~loans for investment~~borrowers and ~~real estate investments in~~tenants. To the ~~hospitality and retail sectors have experienced or anticipate a myriad of challenges, including, but not limited to:~~extent certain borrowers are experiencing 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 suppliesfinancial dislocation as a result of ~~COVID-19; potential~~economic conditions or the ongoing effects of COVID-19, the Company 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 ~~defaults on~~obligations for a limited period. Additionally, the ~~Company's loans held~~market for ~~investment;~~office properties was particularly negatively impacted by the COVID-19 pandemic and aremains distressed, ~~market affecting real estate values in general. The COVID-19 crisis may also lead~~with high overall vacancy rates due to ~~heightened risk~~the normalization of ~~litigation at the investment and corporate level, with an ensuing increase in litigation and related costs.~~

~~The volatility in equity and debt markets,~~work from home and the economic fallout from COVID-19 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 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.”hybrid attendance models.

~~A prolonged economic downturn as~~As a result of ~~efforts~~fewer employees commuting to ~~contain COVID-19~~their offices, businesses are re-evaluating their need for physical office space. These current macroeconomic conditions may continue or intensify and could cause the United States economy or other global economies to ~~negatively affect the Company’s financial condition and results of operations.~~experience an economic slowdown or recession. While the ~~extent~~Company monitors macroeconomic conditions closely, there are too many uncertainties to predict and ~~duration of~~quantify the ~~broad effects of COVID-19~~full impact that these factors may have 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.business.

2. Summary of Significant Accounting Policies

The significant accounting policies of the Company are described below. The accounting policies of the Company’s unconsolidated ventures are substantially similar to those of the Company.

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by generally

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

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, ~~2022,~~2023, or any other future period. These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in, or presented as exhibits to, the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

The accompanying consolidated financial statements include the accounts of the Company and its controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated. The portions of equity, net income and other comprehensive income of consolidated subsidiaries that are not attributable to the parent are presented separately as amounts attributable to noncontrolling interests in the consolidated financial statements.

~~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

Table of ~~operations or cash flows.~~Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Use of Estimates

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

~~Restructuring Charges~~

On April 4, 2021, the Company entered into the termination agreement (the “Termination Agreement”) with 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 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.

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

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

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 March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company ~~has~~had identified certain consolidated ~~and~~VIEs. As of December 31, 2022, the Company had identified certain unconsolidated VIEs. Assets of each of the VIEs, other than the OP, may only be used to settle obligations of the respective VIE. Creditors of each of the VIEs have no recourse to the general credit of the Company.

Consolidated VIEs

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~~Consolidated VIEs include the Investing VIEs (as defined and discussed below) and certain operating real estate properties that have noncontrolling interests. At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the noncontrolling interests in the operating real

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

estate properties represent third party joint venture partners with ownership ranging from 5.0% to 11.0%. These noncontrolling interests do not have substantive kick-out nor participating rights.

Investing VIEs

The Company’s previous investments in securitization financing entities (“Investing VIEs”) ~~include~~included subordinate first-loss tranches of securitization trusts, which ~~represent~~represented 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.

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

As of March 31, 2023, the Company did not hold any tranches of any securitization trusts. During the three months ended December 31, 2022, the Company ~~held~~sold its remaining subordinate tranches of a securitization trust in 1one Investing VIE for which ~~the Company has~~it had determined it iswas the primary beneficiary because it ~~has~~had the power to direct the activities that most significantly ~~impact~~impacted the economic performance of the securitization trust. The Company’s subordinate tranches of the securitization trust, which ~~represents~~represented the retained interest and related interest income, ~~are~~were eliminated in consolidation. As a result, all of the assets, liabilities (obligations to the certificate holders of the securitization trust, less the Company’s retained interest from the subordinate tranches of the securitization trust), income and expenses of the Investing VIE ~~are~~were presented in the consolidated financial statements of the Company although the Company legally ~~owns~~owned the subordinate tranches of the securitization trust only. Regardless of the presentation, the Company’s consolidated financial statements of operations ultimately reflect the net income attributable to its retained interest in the subordinate tranches of the securitization trust.

The Company elected the fair value option for the initial recognition of the assets and liabilities of its consolidated Investing VIE. Interest income and interest expense associated with the Investing VIE are presented separately on the consolidated statements of operations, and the assets and liabilities of the Investing VIE are separately presented as “Mortgage loans held in securitization trusts, at fair value” and “Mortgage obligations issued by securitization trusts, at fair value,” respectively, on the consolidated balance sheets. Refer to Note ~~14,~~13, “Fair Value” for further discussion.

The Company has adopted guidance issued by the Financial Accounting Standards Board (“FASB”), allowing the Company to measure both the financial assets and liabilities of a qualifying collateralized financing entity (“CFE”), such as its Investing VIE, using the fair value of either the CFE’s financial assets or financial liabilities, whichever is more observable. A CFE is a VIE that holds financial assets, issues beneficial interests in those assets and has no more than nominal equity, and the beneficial interests have contractual recourse only to the related assets of the CFE. As the liabilities of the Company’s Investing VIE are marketable securities with observable trade data, their fair value is more observable and is referenced to determine fair value of the assets of its Investing VIE. Refer to Note ~~14,~~13, “Fair Value” for further discussion.

Unconsolidated VIEs

As of March 31, ~~2022~~2023, the Company did not hold, and had no remaining obligations to, any unconsolidated VIEs. As of December 31, ~~2021,~~2022, the Company identified unconsolidated VIEs related to its 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 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~~held one investment which had no ~~recourse to the general credit of the Company.~~

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

March 31, 2022 December 31, 2021
Carrying Value Maximum Exposure to Loss Carrying Value Maximum Exposure to Loss
Investments in unconsolidated ventures $ 16,200 $ 16,200 $ 16,200 $ 16,200
Total assets $ 16,200 $ 16,200 $ 16,200 $ 16,200

~~The~~VIE to which the Company did not provide financial support ~~to the unconsolidated VIEs~~ during the ~~three months ended March 31, 2022 and the fiscal~~ year ended December 31, 2021. As of 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. 2022.

The maximum exposure to loss of investments in unconsolidated ventures was determined as the carrying value plus any future funding commitments. ~~Refer to 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.

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

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

measuring the change in the party’s capital account from the beginning of the period in question to the end of period, adjusting for effects of distributions and new investments.

Noncontrolling Interests in the Operating Partnership—~~This represents membership~~Prior to the May 2022 redemption of the noncontrolling interests in the OP ~~which were~~ held by ~~an affiliate of DigitalBridge through February 2022, after which such entity was sold to an unaffiliated~~ third ~~party. Noncontrolling~~parties, noncontrolling interests in the OP ~~are~~were allocated a share of net income or loss in the OP based on their weighted average ownership interest in the OP during the period. Noncontrolling interests in the OP ~~have~~had the right to require the OP to redeem part or all of the membership units in the OP for cash based on the market value of an equivalent number of shares of Class A common stock at the time of redemption, or at the Company’s election as managing member of the OP, through the issuance of shares of Class A common stock on a ~~1-for-one~~one-for-one basis. At the end of each reporting period,

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

noncontrolling interests in the OP iswere adjusted to reflect their ownership percentage in the OP at the end of the period, through a reallocation between controlling and noncontrolling interests in the OP, as applicable.

There are no noncontrolling interests in the OP and the OP is owned by the Company directly, and indirectly through the Company’s subsidiary, BRSP-T Partner, LLC.

Comprehensive Income (Loss)

The Company reports consolidated comprehensive income (loss) in separate statements following the consolidated statements of operations. Comprehensive income (loss) is defined as the change in equity resulting from net income (loss) and other comprehensive income (“OCI”). The components of OCI include unrealized gain (loss) on CRE debt securities available for sale for which the fair value option was not elected, gain (loss) on derivative instruments used in the Company’s risk management activities used for economic hedging purposes (“designated hedges”), and gain (loss) on foreign currency translation.

Fair Value Measurement

Fair value is based on an exit price, defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Where appropriate, the Company makes adjustments to estimated fair values to appropriately reflect counterparty credit risk as well as the Company’s own 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”). The Company has ~~also~~previously 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.

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

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 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

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 March 31, ~~2022~~2023 or December 31, ~~2021.~~2022. 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

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

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.

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

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 ~~CECL~~Current Expected Credit 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 March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, 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.

At March 31, 2023 and December 31, 2022, the Company had no ADC arrangements.

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.~~values and assumed debt, if any. 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.

1716

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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)						2833 to 4047 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 6,5, “Real Estate, net and Real Estate Held for Sale” and Note ~~14,~~13, “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 March 31, 2023 and December 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 current expected credit loss reserves and the cumulative 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.

1817

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 March~~During the year ended December 31, 2022, the Company ~~held~~sold its retained investments in the subordinate tranches of 1a securitization trust. In connection with the sale, the Company deconsolidated the securitization trust ~~which represent the Company’s retained interest in~~and recognized a ~~securitization trust that the Company consolidates under U.S. GAAP.~~realized gain. Refer to Note 5,4, “Real Estate ~~Securities, Available for Sale”~~Securities” 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 three months ended March 31, 2022 and March 31, 2021, the Company recorded no impairment and~~ ~~$1.0 million of impairment~~ related to its CRE 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 ~~net.~~(loss), net on the Company’s consolidated statements of operations.

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.

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

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

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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~~Other Than Temporary Impairment (“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.

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(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

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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.~~borrowing, including the Company’s master repurchase facilities.

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 accrued and other liabilities on a gross basis on the Company’s consolidated 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~~consolidated statements 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~~designates the portion of the derivative notional amount that is in excess of the beginning balance of its net investments as undesignated hedges.

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,~~14, “Derivatives” for further discussion on the Company’s derivative and hedging activity.

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

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~~other gain (loss), net 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.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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.

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 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

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(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.

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

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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,~~10, “Equity-Based Compensation” for further discussion.

The compensation expense is adjusted for actual forfeitures upon occurrence. Equity-based compensation is classified within 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 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.

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(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 an investment in Europe which is subject to tax in ~~each~~its 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

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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)~~expense in the consolidated statements of operations.

For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, the Company recorded income tax expense of $0.4 million and a de minimis income expense, ~~and income tax benefit of $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 general 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 specific 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 general 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~~mortgage-backed securities database with historical losses from 1998 through March ~~2022~~2023 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 determining a specific CECL reserve, financial instruments are assessed outside of the PD/LGD model on an individual ~~basis, including~~basis. This occurs when it is probable that the Company will be unable to collect the full payment of principal and interest on the ~~instrument,~~instrument. 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 specific CECL reserve. The Company applies a discounted cash flow (“DCF”) ~~methodology. For~~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 CECL reserve.~~

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

collateral.

In developing the CECL reserve for its loans 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

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 an 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 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 increase/decrease in current expected credit loss reserve on the consolidated statement of 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.

~~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 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

~~Table of Contents~~

~~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.

~~Accounting Standards to be adopted~~2022

Credit ~~Losses~~—Losses—In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the Troubled Debt Restructuring (“TDR”) model for creditors that have adopted Topic 326, CECL. The general loan modification guidance in Subtopic 310-20 will apply to all loan modifications, including modifications for borrowers experiencing financial difficulty. ASU 2022-02 also requires entities within the scope of ASC 326 to provide vintage disclosures which show the gross writeoffs recorded in the current period by origination year. ASU No. 2022-02 is effective in reporting periods beginning after December 15, 2022. ~~The~~During the fourth quarter of 2022, the Company ~~is currently evaluating~~adopted the TDR enhancements and new vintage disclosures under ASU 2022-02, and the impact ~~ASU 2022-02 will have on the consolidated financial statements.~~was not material. Refer to Note 3, “Loans and Preferred Equity Held for Investment, net.”

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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):


		March 31, 2022							December 31, 2021								March 31, 2023							December 31, 2022
		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

Variable rate	Variable rate															Variable rate
Senior loans	Senior loans	$	1,906,808	$	1,893,583	4.5	%	3.9	$	1,576,439	$	1,564,940	4.6	%	3.7	Senior loans	$	1,932,096	$	1,925,969	8.3	%	3.3	$	1,981,973	$	1,972,952	7.9	%	3.5
Securitized loans(2)	Securitized loans(2)	1,740,299		1,736,398		4.3	%	3.4	1,806,583		1,803,042		4.2	%	3.5	Securitized loans(2)	1,432,619		1,430,720		8.0	%	2.5	1,468,790		1,466,754		7.8	%	2.7
Mezzanine loans	Mezzanine loans	12,000		12,120		11.5	%	0.4	12,000		12,120		11.5	%	0.7	Mezzanine loans	12,330		12,450		15.8	%	0.7	12,000		12,120		15.4	%	0.0

		3,659,107		3,642,101					3,395,022		3,380,102						3,377,045		3,369,139					3,462,763		3,451,826
Fixed rate	Fixed rate															Fixed rate
Mezzanine loans	Mezzanine loans	117,994		117,772		12.4	%	2.9	105,636		105,505		12.4	%	3.0	Mezzanine loans	103,121		103,033		12.2	%	2.4	100,765		100,666		12.2	%	2.6
Preferred equity interests																Preferred equity interests	22,941		22,723		12.0	%	9.7	22,720		22,497		12.0	%	9.9
		117,994		117,772					105,636		105,505						126,062		125,756					123,485		123,163
Loans held for investment	Loans held for investment	3,777,101		3,759,873					3,500,658		3,485,607					Loans held for investment	3,503,107		3,494,895					3,586,248		3,574,989

CECL reserve	CECL reserve	NA		(34,004)					NA		(36,598)					CECL reserve	—		(145,836)					—		(106,247)
Loans held for investment, net		$	3,777,101	$	3,725,869				$	3,500,658	$	3,449,009
Loans and preferred equity held for investment, net																Loans and preferred equity held for investment, net	$	3,503,107	$	3,349,059				$	3,586,248	$	3,468,742

(1)Calculated based on contractual interest rate.

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

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

The weighted average maturity, including extensions, of loans and preferred equity was ~~3.6~~3.0 years at March 31, ~~2022.~~2023. At December 31, ~~2021,~~2022, the weighted average maturity, including extensions, of loans was ~~3.6~~3.2 years.

The Company had ~~$9.8~~$17.1 million and ~~$9.5~~$16.4 million of interest receivable related to its loans and preferred equity held for investment, net as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, 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, 2022~~

~~3,449,009~~

~~Acquisitions/originations/additional funding~~

~~498,195~~

~~Loan maturities/principal repayments~~

~~(227,897)~~

~~Discount accretion/premium amortization~~

~~2,999~~

~~Capitalized interest~~

~~969~~

~~(Increase) decrease of CECL reserve(1)~~

~~1,343~~

~~Charge-off~~

~~1,251~~

~~Balance at March 31, 2022~~

~~3,725,869~~


	Carrying Value
	Three Months Ended March 31,
	2023		2022
Balance at January 1	$	3,468,742	$	3,449,009
Acquisitions/originations/additional funding	16,388		498,195
Loan maturities/principal repayments	(101,368)		(227,897)

Discount accretion/premium amortization	3,038		2,999
Capitalized interest	1,848		969
(Increase) decrease of CECL reserve(1)	(39,589)		1,343
Charge-off	—		1,251


Balance at March 31	$	3,349,059	$	3,725,869

(1)~~Excludes~~Provision for loan losses excludes a de minimis amount for the three months ended March 31, 2023 and $0.5 million ~~as of~~for the three months ended March 31, 2022 as determined by the Company’s PD/LGD model for unfunded commitments reported on the consolidated statement of operations, with a corresponding offset to accrued and other liabilities recorded on the Company’s consolidated balance sheets.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 March 31, 2022 and December 31, 2021, the Company did not have any loans on nonaccrual status.~~

The following table provides an aging summary of loans and preferred equity held for investment at carrying values before 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
March 31, 2022 $ 3,759,873 $ — $ — $ — $ 3,759,873
December 31, 2021 3,485,607 — — — 3,485,607


	Current or Less Than 30 Days Past Due		30-59 Days Past Due		60-89 Days Past Due(1)		90 Days or More Past Due(2)(3)		Total Loans and Preferred Equity
March 31, 2023	$	3,369,528	$	—	$	56,935	$	68,432	$	3,494,895
December 31, 2022	3,494,437		68,432		—		12,120		3,574,989

(1)Represents the Washington, D.C. office senior loan which is in maturity default and was placed on nonaccrual status on February 9, 2023.

(2)At March 31, 2023 represents the Long Island City, New York office senior loan which is in interest payment default and was placed on a nonaccrual status on September 9, 2022. Included in 30-59 Days Past Due at December 31, 2022.

(3)At December 31, 2022 represents the New York, New York Hotel mezzanine loan which was in maturity default as of March 2022. In January 2023, the New York, New York Hotel mezzanine loan was extended to December 2023.

Current Expected Credit Loss Reserve

The following table provides details on the changes in 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


CECL reserve at December 31, 2022	$	106,247
Increase (decrease) in general CECL reserve(1)	(15,418)
Increase in specific CECL reserve(2)	55,007

CECL reserve at March 31, 2023	$	145,836

CECL reserve at December 31, 2021	$	36,598
Increase (decrease) in general CECL reserve(1)	(1,343)

Charge-offs of CECL reserve(3)	(1,251)
CECL reserve at March 31, 2022	$	34,004

(1)Excludes ~~$0.5 million~~the increase (decrease) in CECL reserves related to unfunded commitments reported on the consolidated statement of operations: a de minimis amount for the three months ended March 31, 2023 and ~~$0.4~~$0.5 million for the three months ended March 31, ~~2022~~2022.

(2)During the first quarter of 2023, the Company recorded specific CECL reserves of $29.9 million related to one Washington, D.C. office senior loan, $14.5 million related to one development mezzanine loan located in Milpitas, California (the “Development Mezzanine Loan”) and ~~year ended December 31, 2021, respectively. These amounts~~$10.6 million related to one Long Island City, New York office senior loan. The specific CECL reserves for the two office senior loans were ~~determined for unfunded commitments reported~~based on the ~~consolidated statement~~estimated fair value of ~~operations,~~the collateral using a discounted cash flow model, which included inputs based on the location, type and nature of the property, current and prospective leasing data and anticipated market conditions. The specific CECL reserve for the Development Mezzanine Loan was recorded in connection with the restructuring and modification of the loan in April 2023, which is collateralized by multifamily with a ~~corresponding offset to other liabilities recorded~~retail component. The specific CECL reserve was based on the ~~Company’s consolidated balance sheets.~~estimated proceeds the Company expects to receive upon the resolution of the asset. Refer to Note 13, “Fair Value” for information on valuation inputs.

~~(2)~~(3)During the first quarter of 2022, the Company received a $36.5 million repayment on 1one senior loan collateralized by a student housing property, which was $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 specific CECL reserve on the loan, as the loss was probable at that point in time ~~which~~and was subsequently charged off in the first quarter of 2022.

Credit Quality Monitoring

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

evaluates its 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 March 31, ~~2022,~~2023, all loans and preferred equity were performing in accordance with the contractual terms of their governing documents and were categorized as performing ~~loans. There were no~~ loans, ~~held~~except for ~~investment with contractual payments past due~~the Long Island City, New York Office senior loan and the Washington D.C. office senior loan, as noted in “Nonaccrual and Past Due Loans and Preferred Equity” above. As of December 31, ~~2021.~~2022, all loans and preferred equity were performing in accordance with the contractual terms of their governing documents and were categorized as performing loans, except for the New York, New York Hotel mezzanine loan and the Long

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Island City, New York Office senior loan, as noted in “Nonaccrual and Past Due Loans and Preferred Equity” above. For the three months ended March 31, ~~2022~~2023 and March 31, ~~2021,~~2022, no debt investment contributed more than 10.0% of interest income.

The following tables provide a summary by carrying values before any 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~~2023 and December 31, ~~2021,~~2022, respectively. Refer to Note 2, “Summary of Significant Accounting Policies” for ~~loans~~loan risk ~~rating~~ranking 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												March 31, 2023
		2021		2020		2019		2018		2017		Total				Year of Origination
Risk Rankings															Risk Rankings	2023		2022		2021		2020		2019 and earlier		Total
Senior loans	Senior loans														Senior loans
Risk Rankings:

2	2	$	242,850	$	109,103	$	70,811	$	—	$	—	$	422,764		2	$	—	$	—	$	93,778	$	—	$	25,929	$	119,707
3	3	1,393,307		72,359		443,162		262,147		34,036		2,205,011			3	—		852,187		1,174,409		96,178		486,498		2,609,272
4	4	—		—		396,395		304,477		—		700,872			4	—		—		108,422		—		325,591		434,013
5	5	—		—		39,335		—		—		39,335			5	—		—		—		—		193,697		193,697
Total Senior loans	Total Senior loans	1,636,157		181,462		949,703		566,624		34,036		3,367,982			Total Senior loans	—		852,187		1,376,609		96,178		1,031,715		3,356,689

Mezzanine loans	Mezzanine loans														Mezzanine loans
Risk Rankings:

3	3	—		—		38,796		4,489		—		43,285			3	—		24,799		—		—		32,489		57,288
4	4	—		—		62,220		—		12,120		74,340			4	1,028		—		—		—		12,450		13,478
5															5	—		—		—		—		44,717		44,717
Total Mezzanine loans															Total Mezzanine loans	1,028		24,799		—		—		89,656		115,483

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

3															3	—		22,723		—		—		—		22,723

Total Preferred equity interests															Total Preferred equity interests	—		22,723		—		—		—		22,723

Total Loans held for investment		$	1,636,157	$	181,462	$	1,050,719	$	571,113	$	46,156	$	3,485,607
Total Loans and preferred equity held for investment															Total Loans and preferred equity held for investment	$	1,028	$	899,709	$	1,376,609	$	96,178	$	1,121,371	$	3,494,895

2827

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As of March 31, 2023, the weighted average risk ranking for loans and preferred equity held for investment was 3.2.


	December 31, 2022
	Year of Origination
Risk Rankings	2022		2021		2020		2019		2018 and Earlier		Total
Senior loans

2	$	—	$	141,457	$	42,710	$	25,904	$	—	$	210,071
3	845,097		1,267,092		53,386		112,689		291,996		2,570,260
4	—		24,871		—		192,920		304,822		522,613
5	—		—		—		68,330		68,432		136,762
Total Senior loans	845,097		1,433,420		96,096		399,843		665,250		3,439,706

Mezzanine loans



3	24,056		—		—		—		4,459		28,515
4	—		—		—		72,151		—		72,151
5	—		—		—		—		12,120		12,120
Total Mezzanine loans	24,056		—		—		72,151		16,579		112,786

Preferred equity interests



3	22,497		—		—		—		—		22,497


Total Preferred equity interests	22,497		—		—		—		—		22,497

Total Loans and Preferred Equity held for investment	$	891,650	$	1,433,420	$	96,096	$	471,994	$	681,829	$	3,574,989

As of December 31, ~~2021,~~2022, the weighted average risk ~~rating~~ranking for loans and preferred equity held for investment was ~~3.1.~~3.2.

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 March 31, 2022, assuming~~Assuming the terms to qualify for future advances, if any, had been met, total gross unfunded lending commitments were ~~$333.5 million.~~$256.3 million and $263.4 million at March 31, 2023 and December 31, 2022, respectively. Refer to Note ~~16,~~15, “Commitments and Contingencies” for further details. ~~At March 31, 2022, the~~The Company recorded ~~a $0.9~~$0.4 million and $0.4 million for 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~~CECL at March 31, 2023 and December 31, 2021, assuming the terms to qualify for future advances, if any, had been met, total gross unfunded lending commitments were $264.9 million. At December 31, 2021, the Company recorded a $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. 2016-13.2022, respectively. See Note 2, “Summary of Significant Accounting Policies” for further details.

4. Real Estate Securities

Investments in ~~Unconsolidated Ventures~~Investing VIEs

~~Summary~~As of March 31, 2023 and December 31, 2022, the Company did not hold any assets or liabilities attributable to securitization trusts.

The Company did not generate net income attributable to investments in the subordinate tranches of securitization trusts for the three months ended March 31, 2023.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The below table presents net income attributable to the Company’s common stockholders for the three months ended March 31, 2022 generated from the Company’s investments in ~~unconsolidated ventures represent noncontrolling equity interests in various entities, as follows~~the subordinate tranches of securitization trusts (dollars in thousands):

March 31, 2022 December 31, 2021
Equity method investments $ 16,209 $ 16,185
Investments under fair value option 4,406 4,406
Investments in Unconsolidated Ventures $ 20,615 $ 20,591


	Three Months Ended March 31,
	2022
Statement of Operations

Interest income on mortgage loans held in securitization trusts	$	9,375
Interest expense on mortgage obligations issued by securitization trusts	(8,488)
Net interest income	887
Operating expense	(97)


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

~~Equity Method Investments~~

~~Investment Ventures~~5. Real Estate, net and Real Estate Held for Sale

~~Certain of~~The following table presents the Company’s equity method investments are structured as joint ventures with one or more private funds or other investment vehicles. These investment entities are generally capitalized through equity contributions from the members, although certain investments are leveraged through various financing arrangements.

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 balancenet lease portfolio, net, as of March 31, ~~2022~~2023 and December 31, ~~2021, respectively.~~

~~The Company’s investments accounted for under the equity method are summarized below~~2022 (dollars in thousands):

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


	March 31, 2023		December 31, 2022
Land and improvements	$	125,797	$	128,608
Buildings, building leaseholds, and improvements	493,020		505,297
Tenant improvements	18,989		17,851

Subtotal	$	637,806	$	651,756
Less: Accumulated depreciation	(89,604)		(87,109)

Net lease portfolio, net	$	548,202	$	564,647

~~(1)~~The ~~Company’s ownership interest in investment ventures varies and represents capital contributed to date and may not be reflective of~~following table presents the Company’s ~~economic interest~~portfolio of other real estate as of March 31, 2023 and December 31, 2022 (dollars in thousands):


	March 31, 2023		December 31, 2022
Land and improvements	$	29,790	$	29,582
Buildings, building leaseholds, and improvements	152,748		152,186
Tenant improvements	20,370		18,757
Furniture, fixtures and equipment	269		135
Construction-in-progress	864		3,011
Subtotal	$	204,041	$	203,671
Less: Accumulated depreciation	(37,518)		(35,850)

Other portfolio, net	$	166,523	$	167,821

Depreciation Expense

Depreciation expense on real estate was $6.0 million and $6.1 million for the ~~entity because of provisions in operating agreements governing various matters, such as classes of partner or member interests, allocations of profits~~three months ended March 31, 2023 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.2022, respectively.

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.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Property Operating Income

For the three months ended March 31, 2023 and 2022 the components of property operating income were as follows (dollars in thousands):


	Three Months Ended March 31,
	2023		2022
Lease revenues(1)
Minimum lease revenue	$	19,388	$	19,734
Variable lease revenue	3,023		2,826
	$	22,411	$	22,560
Hotel operating income	—		1,566
	$	22,411	$	24,126

(1)Excludes amortization expense related to above and below-market leases of $0.2 million and income of $0.3 million for the three months ended March 31, 2023, respectively. Excludes amortization expense related to above and below-market leases of $0.3 million and income of $0.3 million for the three months ended March 31, 2022, respectively.

For the three months ended March 31, 2023 and 2022, the Company had no single property with property operating income equal to or greater than 10.0% of total revenue of the Company.

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 lease revenue of tenant reimbursements, to be received over the next five years and thereafter as of March 31, 2023 (dollars in thousands):


Remainder of 2023	$	57,208
2024	73,627
2025	67,305
2026	60,327
2027	57,209
2028 and thereafter	317,423
Total	$	633,099

The rental properties owned at March 31, 2023 are leased under noncancellable operating leases with current expirations ranging from 2023 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.

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 2050. Rents on certain ground leases are paid directly by the tenants. Ground rent expense for the three months ended March 31, 2023 and 2022 was $0.8 million and $0.8 million, respectively.

Refer to Note 15, “Commitments and Contingencies” for the details of future minimum rental payments on noncancellable ground lease on real estate as of March 31, 2023.

Real Estate Sales

There were no sales during the three months ended March 31, 2023. During the three months ended March 31, 2022, the Company completed the sale of one net lease property for a gross sales price of $19.6 million which resulted in a $7.6 million gain on sale and one hotel property for a gross sales price of $36.0 million which resulted in a $2.4 million gain on sale. The gains on sale are included in other gain (loss), net on the consolidated statement of operations.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

6. 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 March 31, 2023 and December 31, 2022 are as follows (dollars in thousands):


	March 31, 2023
	Carrying Amount		Accumulated Amortization		Net Carrying Amount
Deferred Leasing Costs and Intangible Assets
In-place lease values	$	74,468	$	(36,692)	$	37,776
Deferred leasing costs	28,533		(16,457)		12,076
Above-market lease values	8,359		(7,081)		1,278
	$	111,360	$	(60,230)	$	51,130
Intangible Liabilities
Below-market lease values	$	16,075	$	(11,581)	$	4,494


	December 31, 2022
	Carrying Amount		Accumulated Amortization		Net Carrying Amount
Deferred Leasing Costs and Intangible Assets
In-place lease values	$	75,503	$	(35,805)	$	39,698
Deferred leasing costs	28,641		(15,843)		12,798
Above-market lease values	8,359		(6,875)		1,484
	$	112,503	$	(58,523)	$	53,980
Intangible Liabilities
Below-market lease values	$	16,074	$	(11,235)	$	4,839

The following table summarizes the amortization of deferred leasing costs, intangible assets and intangible liabilities for the three months ended March 31, 2023 and 2022 (dollars in thousands):


	Three Months Ended March 31,
	2023		2022
Above-market lease values	$	(199)	$	(288)
Below-market lease values	339		330
Net increase to property operating income	$	140	$	42

In-place lease values	$	1,283	$	1,602
Deferred leasing costs	664		806

Amortization expense	$	1,947	$	2,408

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 March 31, 2023 (dollars in thousands):



	2023		2024		2025		2026		2027		2028 and thereafter		Total
Above-market lease values	$	(431)	$	(448)	$	(270)	$	(91)	$	(38)	$	—	$	(1,278)
Below-market lease values	1,034		1,379		1,378		703		—		—		4,494
Net increase (decrease) to property operating income	$	603	$	931	$	1,108	$	612	$	(38)	$	—	$	3,216

In-place lease values	$	3,721	$	4,684	$	3,999	$	3,165	$	3,062	$	19,145	$	37,776
Deferred leasing costs	1,924		2,290		1,873		967		849		4,173		12,076
Amortization expense	$	5,645	$	6,974	$	5,872	$	4,132	$	3,911	$	23,318	$	49,852

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

The following table presents a summary of restricted cash as of March 31, 2023 and December 31, 2022 (dollars in thousands):


	March 31, 2023		December 31, 2022
Restricted cash:
Borrower escrow deposits	$	65,323	$	79,055
Capital expenditure reserves	9,030		8,623
Real estate escrow reserves	2,623		1,583
Working capital and other reserves	2,186		2,145
Tenant lockboxes	861		1,102

Total	$	80,023	$	92,508

The following table presents a summary of other assets as of March 31, 2023 and December 31, 2022 (dollars in thousands):


	March 31, 2023		December 31, 2022
Other assets:
Right-of-use lease asset	$	24,219	$	25,237
Tax receivable and deferred tax assets	19,080		19,117
Deferred financing costs, net - credit facilities	3,086		4,630
Investments in unconsolidated ventures ($2,790 and $3,035 at fair value, respectively)	2,790		3,035

Derivative assets	2,149		1,601
Prepaid expenses and other	1,252		2,053
Total	$	52,576	$	55,673

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 March 31, 2023 and December 31, 2022 (dollars in thousands):


	March 31, 2023		December 31, 2022
Accrued and other liabilities:
Operating lease liability	$	24,997	$	25,961
Current and deferred tax liability	24,637		26,198
Interest payable	12,719		11,680
Prepaid rent and unearned revenue	12,251		7,688
Accounts payable, accrued expenses and other liabilities	8,358		15,087
Tenant security deposits	661		411
Unfunded CECL loan allowance	414		389
Other	219		219
Total	$	84,256	$	87,633

~~Investments~~Property Operating Income

Property operating income includes the following:

~~Private Funds~~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.

Real Estate Securities

Foreign Currency

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 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 10, “Equity-Based Compensation” for further discussion.

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

Earnings Per Share

Income Taxes

For U.S. federal income tax purposes, the Company elected to ~~account~~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 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 ~~limited partnership interests~~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.

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 an investment in ~~PE Investments under~~Europe which is subject to tax in its local jurisdiction.

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 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

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 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 expense in the consolidated statements of operations.

For the three months ended March 31, 2023 and 2022, the Company recorded income tax expense of $0.4 million and a de minimis income expense, respectively.

Current Expected Credit Losses (“CECL”) reserve

In measuring the general 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 through March 2023 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 determining a specific CECL reserve, financial instruments are assessed outside of the PD/LGD model on an individual basis. This occurs when it is probable that the Company will be unable to collect the full payment of principal and interest on the instrument. The Company may elect to use as a practical expedient to determine the fair value ~~option,~~of the collateral at the reporting date when determining the specific CECL reserve. 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.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

occupancy metrics. Sponsor is investment grade, very well capitalized, and employs a very experienced management team.

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 ~~15.6% respectively,~~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.

Accounting Standards Adopted in 2022

Credit Losses—In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the Troubled Debt Restructuring (“TDR”) model for creditors that have adopted Topic 326, CECL. The general loan modification guidance in Subtopic 310-20 will apply to all loan modifications, including modifications for borrowers experiencing financial difficulty. ASU 2022-02 also requires entities within the scope of ASC 326 to provide vintage disclosures which show the gross writeoffs recorded in the current period by origination year. ASU No. 2022-02 is effective in reporting periods beginning after December 15, 2022. During the fourth quarter of 2022, the Company adopted the TDR enhancements and new vintage disclosures under ASU 2022-02, and the impact was not material. Refer to Note 3, “Loans and Preferred Equity Held for Investment, net.”

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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):


	March 31, 2023							December 31, 2022
	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





Variable rate
Senior loans	$	1,932,096	$	1,925,969	8.3	%	3.3	$	1,981,973	$	1,972,952	7.9	%	3.5
Securitized loans(2)	1,432,619		1,430,720		8.0	%	2.5	1,468,790		1,466,754		7.8	%	2.7
Mezzanine loans	12,330		12,450		15.8	%	0.7	12,000		12,120		15.4	%	0.0

	3,377,045		3,369,139					3,462,763		3,451,826
Fixed rate
Mezzanine loans	103,121		103,033		12.2	%	2.4	100,765		100,666		12.2	%	2.6
Preferred equity interests	22,941		22,723		12.0	%	9.7	22,720		22,497		12.0	%	9.9
	126,062		125,756					123,485		123,163
Loans held for investment	3,503,107		3,494,895					3,586,248		3,574,989

CECL reserve	—		(145,836)					—		(106,247)
Loans and preferred equity held for investment, net	$	3,503,107	$	3,349,059				$	3,586,248	$	3,468,742

(1)Calculated based on contractual interest rate.

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

The weighted average maturity, including extensions, of loans and preferred equity was 3.0 years at March 31, 2023. At December 31, 2022, the weighted average maturity, including extensions, of loans was 3.2 years.

The Company had $17.1 million and $16.4 million of interest receivable related to its loans and preferred equity held for investment, net as of March 31, 2023 and December 31, 2022, 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
	Three Months Ended March 31,
	2023		2022
Balance at January 1	$	3,468,742	$	3,449,009
Acquisitions/originations/additional funding	16,388		498,195
Loan maturities/principal repayments	(101,368)		(227,897)

Discount accretion/premium amortization	3,038		2,999
Capitalized interest	1,848		969
(Increase) decrease of CECL reserve(1)	(39,589)		1,343
Charge-off	—		1,251


Balance at March 31	$	3,349,059	$	3,725,869

(1)Provision for loan losses excludes a de minimis amount for the three months ended March 31, ~~2022. The Company records equity in earnings~~2023 and $0.5 million 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 Company did not hold any CRE securities at March 31, 2022 and December 31, 2021.

~~During~~ the three months ended March 31, ~~2021,~~2022 as determined by the ~~Company wrote down through earnings~~Company’s PD/LGD model for unfunded commitments reported on the ~~amortized cost basis for securities in which the fair value dropped below the amortized cost basis, realizing~~consolidated statement of operations, with a ~~loss of $1.0 million. The loss was~~corresponding offset to accrued and other liabilities recorded ~~in other gain, net~~ on the Company’s consolidated ~~statements~~balance sheets.

Table of ~~operations.~~Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Nonaccrual and Past Due Loans and Preferred Equity

The following table provides an aging summary of loans and preferred equity held for investment at carrying values before CECL reserve (dollars in thousands):


	Current or Less Than 30 Days Past Due		30-59 Days Past Due		60-89 Days Past Due(1)		90 Days or More Past Due(2)(3)		Total Loans and Preferred Equity
March 31, 2023	$	3,369,528	$	—	$	56,935	$	68,432	$	3,494,895
December 31, 2022	3,494,437		68,432		—		12,120		3,574,989

(1)Represents the Washington, D.C. office senior loan which is in maturity default and was placed on nonaccrual status on February 9, 2023.

~~During~~(2)At March 31, 2023 represents the Long Island City, New York office senior loan which is in interest payment default and was placed on a nonaccrual status on September 9, 2022. Included in 30-59 Days Past Due at December 31, 2022.

Current Expected Credit Loss Reserve

The following table provides details on the changes in CECL reserves (dollars in thousands):


CECL reserve at December 31, 2022	$	106,247
Increase (decrease) in general CECL reserve(1)	(15,418)
Increase in specific CECL reserve(2)	55,007

CECL reserve at March 31, 2023	$	145,836

CECL reserve at December 31, 2021	$	36,598
Increase (decrease) in general CECL reserve(1)	(1,343)

Charge-offs of CECL reserve(3)	(1,251)
CECL reserve at March 31, 2022	$	34,004

(1)Excludes the increase (decrease) in CECL reserves related to unfunded commitments reported on the consolidated statement of operations: a de minimis amount for the three months ended March 31, ~~2021, the Company sold 1 CRE security~~2023 and $0.5 million 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, net on the Company’s consolidated statements of operations. At~~ March 31, 2021, the Company had one remaining CRE security, which was on cost recovery, and as a result 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.~~

~~During~~ the three months ended March 31, 2022.

(2)During the first quarter of 2023, the Company recorded specific CECL reserves of $29.9 million related to one Washington, D.C. office senior loan, $14.5 million related to one development mezzanine loan located in Milpitas, California (the “Development Mezzanine Loan”) and $10.6 million related to one Long Island City, New York office senior loan. The specific CECL reserves for the two office senior loans were based on the estimated fair value of the collateral using a discounted cash flow model, which included inputs based on the location, type and nature of the property, current and prospective leasing data and anticipated market conditions. The specific CECL reserve for the Development Mezzanine Loan was recorded in connection with the restructuring and modification of the loan in April 2023, which is collateralized by multifamily with a retail component. The specific CECL reserve was based on the estimated proceeds the Company expects to receive upon the resolution of the asset. Refer to Note 13, “Fair Value” for information on valuation inputs.

(3)During the first quarter of 2022, the Company received a $36.5 million repayment on one senior loan collateralized by a student housing property, which was $1.3 million less than the unpaid principal balance. As such, during the fourth quarter of 2021, the Company had recorded ~~an unrealized~~a $1.3 million specific CECL reserve on the loan, as the loss was probable at that point in ~~OCI~~time and was subsequently charged off in the first quarter of ~~$0.2 million.~~2022.

~~Investments~~Credit Quality Monitoring

Loans are typically secured by direct senior priority liens on real estate properties or by interests in ~~Investing VIEs~~entities that directly own real estate properties, which serve as the primary source of cash for the payment of principal and interest. The Company evaluates its 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 March 31, 2023, all loans and preferred equity were performing in accordance with the contractual terms of their governing documents and were categorized as performing loans, except for the Long Island City, New York Office senior loan and the Washington D.C. office senior loan, as noted in “Nonaccrual and Past Due Loans and Preferred Equity” above. As of December 31, 2022, all loans and preferred equity were performing in accordance with the contractual terms of their governing documents and were categorized as performing loans, except for the New York, New York Hotel mezzanine loan and the Long

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Island City, New York Office senior loan, as noted in “Nonaccrual and Past Due Loans and Preferred Equity” above. For the three months ended March 31, 2023 and March 31, 2022, no debt investment contributed more than 10.0% of interest income.

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 expensesfollowing tables provide a summary by carrying values before any CECL reserves of the ~~securitization trusts~~Company’s loans and preferred equity held for investment by year of origination and credit quality risk ranking (dollars in thousands) as ~~Investing VIEs.~~of March 31, 2023 and December 31, 2022, respectively. Refer to Note 2, “Summary of Significant Accounting Policies” for ~~further discussion~~loan risk ranking definitions.


	March 31, 2023
	Year of Origination
Risk Rankings	2023		2022		2021		2020		2019 and earlier		Total
Senior loans

2	$	—	$	—	$	93,778	$	—	$	25,929	$	119,707
3	—		852,187		1,174,409		96,178		486,498		2,609,272
4	—		—		108,422		—		325,591		434,013
5	—		—		—		—		193,697		193,697
Total Senior loans	—		852,187		1,376,609		96,178		1,031,715		3,356,689

Mezzanine loans



3	—		24,799		—		—		32,489		57,288
4	1,028		—		—		—		12,450		13,478
5	—		—		—		—		44,717		44,717
Total Mezzanine loans	1,028		24,799		—		—		89,656		115,483

Preferred equity interests



3	—		22,723		—		—		—		22,723


Total Preferred equity interests	—		22,723		—		—		—		22,723

Total Loans and preferred equity held for investment	$	1,028	$	899,709	$	1,376,609	$	96,178	$	1,121,371	$	3,494,895

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As of March 31, 2023, the weighted average risk ranking for loans and preferred equity held for investment was 3.2.


	December 31, 2022
	Year of Origination
Risk Rankings	2022		2021		2020		2019		2018 and Earlier		Total
Senior loans

2	$	—	$	141,457	$	42,710	$	25,904	$	—	$	210,071
3	845,097		1,267,092		53,386		112,689		291,996		2,570,260
4	—		24,871		—		192,920		304,822		522,613
5	—		—		—		68,330		68,432		136,762
Total Senior loans	845,097		1,433,420		96,096		399,843		665,250		3,439,706

Mezzanine loans



3	24,056		—		—		—		4,459		28,515
4	—		—		—		72,151		—		72,151
5	—		—		—		—		12,120		12,120
Total Mezzanine loans	24,056		—		—		72,151		16,579		112,786

Preferred equity interests



3	22,497		—		—		—		—		22,497


Total Preferred equity interests	22,497		—		—		—		—		22,497

Total Loans and Preferred Equity held for investment	$	891,650	$	1,433,420	$	96,096	$	471,994	$	681,829	$	3,574,989

As of December 31, 2022, the weighted average risk ranking for loans and preferred equity held for investment was 3.2.

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 ~~Investing VIEs.~~

~~Other than the securities represented~~achieving certain criteria, which must be approved 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 lender, such as leasing, performance of capital expenditures and construction in progress with an approved budget. Assuming the ~~consolidator~~terms to qualify for future advances, if any, had been met, total gross unfunded lending commitments were $256.3 million and $263.4 million at March 31, 2023 and December 31, 2022, respectively. Refer to Note 15, “Commitments and Contingencies” for further details. The Company recorded $0.4 million and $0.4 million for allowance for lending commitments in accrued and other liabilities on its consolidated balance sheets in accordance with CECL at March 31, 2023 and December 31, 2022, respectively. See Note 2, “Summary of ~~the securitization trust. The Company’s maximum exposure to loss would not exceed the carrying value of its retained investments~~Significant Accounting Policies” for further details.

4. Real Estate Securities

Investments in ~~the securitization trusts, or the subordinate tranches of the securitization trust.~~Investing VIEs

As of March 31, 2023 and December 31, 2022, the ~~mortgage loans and the related mortgage obligations held~~Company did not hold any assets or liabilities attributable to securitization trusts.

The Company did not generate net income attributable to investments in the subordinate tranches of securitization ~~trust had an unpaid principal balance~~trusts for the three months ended March 31, 2023.

Table of ~~$770.5~~Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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


	Three Months Ended March 31,
	2022
Statement of Operations

Interest income on mortgage loans held in securitization trusts	$	9,375
Interest expense on mortgage obligations issued by securitization trusts	(8,488)
Net interest income	887
Operating expense	(97)


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

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

The following table presents the Company’s net lease portfolio, net, as of March 31, 2023 and December 31, 2022 (dollars in thousands):


	March 31, 2023		December 31, 2022
Land and improvements	$	125,797	$	128,608
Buildings, building leaseholds, and improvements	493,020		505,297
Tenant improvements	18,989		17,851

Subtotal	$	637,806	$	651,756
Less: Accumulated depreciation	(89,604)		(87,109)

Net lease portfolio, net	$	548,202	$	564,647

The following table presents the Company’s portfolio of other real estate as of March 31, 2023 and December 31, 2022 (dollars in thousands):


	March 31, 2023		December 31, 2022
Land and improvements	$	29,790	$	29,582
Buildings, building leaseholds, and improvements	152,748		152,186
Tenant improvements	20,370		18,757
Furniture, fixtures and equipment	269		135
Construction-in-progress	864		3,011
Subtotal	$	204,041	$	203,671
Less: Accumulated depreciation	(37,518)		(35,850)

Other portfolio, net	$	166,523	$	167,821

Depreciation Expense

Depreciation expense on real estate was $6.0 million and ~~$667.9~~$6.1 million for the three months ended March 31, 2023 and 2022, respectively. As

Table of ~~December~~Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Property Operating Income

For the three months ended March 31, ~~2021,~~2023 and 2022 the ~~mortgage loans~~components of property operating income were as follows (dollars in thousands):


	Three Months Ended March 31,
	2023		2022
Lease revenues(1)
Minimum lease revenue	$	19,388	$	19,734
Variable lease revenue	3,023		2,826
	$	22,411	$	22,560
Hotel operating income	—		1,566
	$	22,411	$	24,126

(1)Excludes amortization expense related to above and ~~the related mortgage obligations held in the securitization trusts had an unpaid principal balance~~below-market leases of ~~$783.8~~$0.2 million and ~~$681.2~~income of $0.3 million for the three months ended March 31, 2023, respectively. AsExcludes amortization expense related to above and below-market leases of $0.3 million and income of $0.3 million for the three months ended March 31, 2022, respectively.

For the three months ended March 31, 2023 and 2022, the Company had no single property with property operating income equal to or greater than 10.0% of total revenue of the Company.

Minimum Future Rents


Remainder of 2023	$	57,208
2024	73,627
2025	67,305
2026	60,327
2027	57,209
2028 and thereafter	317,423
Total	$	633,099

Commitments and Contractual Obligations

Ground Lease Obligation

Refer to Note 15, “Commitments and Contingencies” for the details of future minimum rental payments on noncancellable ground lease on real estate as of March 31, 2023.

Real Estate Sales

There were no sales during the three months ended March 31, 2023. During the three months ended March 31, 2022, the ~~underlying collateral~~Company completed the sale of one net lease property for a gross sales price of $19.6 million which resulted in a $7.6 million gain on sale and one hotel property for a gross sales price of $36.0 million which resulted in a $2.4 million gain on sale. The gains on sale are included in other gain (loss), net on the ~~securitization trust consisted~~consolidated statement of ~~61 underlying commercial mortgage loans, with a weighted average coupon of 4.9% and a weighted average loan to value ratio of 60.5%.~~operations.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

6. Deferred Leasing Costs and Other Intangibles


	March 31, 2023
	Carrying Amount		Accumulated Amortization		Net Carrying Amount
Deferred Leasing Costs and Intangible Assets
In-place lease values	$	74,468	$	(36,692)	$	37,776
Deferred leasing costs	28,533		(16,457)		12,076
Above-market lease values	8,359		(7,081)		1,278
	$	111,360	$	(60,230)	$	51,130
Intangible Liabilities
Below-market lease values	$	16,075	$	(11,581)	$	4,494


	December 31, 2022
	Carrying Amount		Accumulated Amortization		Net Carrying Amount
Deferred Leasing Costs and Intangible Assets
In-place lease values	$	75,503	$	(35,805)	$	39,698
Deferred leasing costs	28,641		(15,843)		12,798
Above-market lease values	8,359		(6,875)		1,484
	$	112,503	$	(58,523)	$	53,980
Intangible Liabilities
Below-market lease values	$	16,074	$	(11,235)	$	4,839

The following table summarizes the amortization of deferred leasing costs, intangible assets and intangible liabilities for the three months ended March 31, 2023 and 2022 (dollars in thousands):


	Three Months Ended March 31,
	2023		2022
Above-market lease values	$	(199)	$	(288)
Below-market lease values	339		330
Net increase to property operating income	$	140	$	42

In-place lease values	$	1,283	$	1,602
Deferred leasing costs	664		806

Amortization expense	$	1,947	$	2,408

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, ~~recorded on~~for each of the ~~consolidated balance sheets attributable to the securitization trust~~next five years and thereafter as of March 31, ~~2022 and December 31, 2021~~2023 (dollars in thousands):

March 31, 2022 December 31, 2021
Assets
Mortgage loans held in a securitization trust, at fair value $ 754,579 $ 813,310
Receivables, net 3,171 3,325
Total assets $ 757,750 $ 816,635
Liabilities
Mortgage obligations issued by a securitization trust, at fair value $ 718,425 $ 777,156
Accrued and other liabilities 2,933 3,032
Total liabilities $ 721,358 $ 780,188



	2023		2024		2025		2026		2027		2028 and thereafter		Total
Above-market lease values	$	(431)	$	(448)	$	(270)	$	(91)	$	(38)	$	—	$	(1,278)
Below-market lease values	1,034		1,379		1,378		703		—		—		4,494
Net increase (decrease) to property operating income	$	603	$	931	$	1,108	$	612	$	(38)	$	—	$	3,216

In-place lease values	$	3,721	$	4,684	$	3,999	$	3,165	$	3,062	$	19,145	$	37,776
Deferred leasing costs	1,924		2,290		1,873		967		849		4,173		12,076
Amortization expense	$	5,645	$	6,974	$	5,872	$	4,132	$	3,911	$	23,318	$	49,852

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

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

~~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 $36.2 million~~restricted cash as of March 31, ~~2022~~2023 and December 31, 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 months ended March 31,~~ 2022 ~~and 2021 generated from the Company’s investments in the subordinate tranches of the securitization trusts~~ (dollars in thousands):

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


	March 31, 2023		December 31, 2022
Restricted cash:
Borrower escrow deposits	$	65,323	$	79,055
Capital expenditure reserves	9,030		8,623
Real estate escrow reserves	2,623		1,583
Working capital and other reserves	2,186		2,145
Tenant lockboxes	861		1,102

Total	$	80,023	$	92,508

The following table presents a summary of other assets as of March 31, 2023 and December 31, 2022 (dollars in thousands):


	March 31, 2023		December 31, 2022
Other assets:
Right-of-use lease asset	$	24,219	$	25,237
Tax receivable and deferred tax assets	19,080		19,117
Deferred financing costs, net - credit facilities	3,086		4,630
Investments in unconsolidated ventures ($2,790 and $3,035 at fair value, respectively)	2,790		3,035

Derivative assets	2,149		1,601
Prepaid expenses and other	1,252		2,053
Total	$	52,576	$	55,673

3132

Table of Contents

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,~~a summary of accrued and other liabilities as of March 31, ~~2022,~~2023 and December 31, ~~2021~~2022 (dollars in thousands):

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


	March 31, 2023		December 31, 2022
Accrued and other liabilities:
Operating lease liability	$	24,997	$	25,961
Current and deferred tax liability	24,637		26,198
Interest payable	12,719		11,680
Prepaid rent and unearned revenue	12,251		7,688
Accounts payable, accrued expenses and other liabilities	8,358		15,087
Tenant security deposits	661		411
Unfunded CECL loan allowance	414		389
Other	219		219
Total	$	84,256	$	87,633

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

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

~~At 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 $33.5 million.~~

~~Depreciation Expense~~

~~Depreciation expense on real estate was $6.1 million and $6.9 million for the three months ended March 31, 2022, and 2021, respectively.~~

Property Operating Income

Property operating income includes the following:

Real Estate Securities

Foreign Currency

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

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

Earnings Per Share

Income Taxes

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 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

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 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 expense in the consolidated statements of operations.

For the three months ended March 31, 2023 and 2022, the Company recorded income tax expense of $0.4 million and a de minimis income expense, respectively.

Current Expected Credit Losses (“CECL”) reserve

In measuring the general 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 through March 2023 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 determining a specific CECL reserve, financial instruments are assessed outside of the PD/LGD model on an individual basis. This occurs when it is probable that the Company will be unable to collect the full payment of principal and interest on the instrument. 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 specific CECL reserve. 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.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

occupancy metrics. Sponsor is investment grade, very well capitalized, and employs a very experienced management team.

Accounting Standards Adopted in 2022

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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):


	March 31, 2023							December 31, 2022
	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





Variable rate
Senior loans	$	1,932,096	$	1,925,969	8.3	%	3.3	$	1,981,973	$	1,972,952	7.9	%	3.5
Securitized loans(2)	1,432,619		1,430,720		8.0	%	2.5	1,468,790		1,466,754		7.8	%	2.7
Mezzanine loans	12,330		12,450		15.8	%	0.7	12,000		12,120		15.4	%	0.0

	3,377,045		3,369,139					3,462,763		3,451,826
Fixed rate
Mezzanine loans	103,121		103,033		12.2	%	2.4	100,765		100,666		12.2	%	2.6
Preferred equity interests	22,941		22,723		12.0	%	9.7	22,720		22,497		12.0	%	9.9
	126,062		125,756					123,485		123,163
Loans held for investment	3,503,107		3,494,895					3,586,248		3,574,989

CECL reserve	—		(145,836)					—		(106,247)
Loans and preferred equity held for investment, net	$	3,503,107	$	3,349,059				$	3,586,248	$	3,468,742

(1)Calculated based on contractual interest rate.

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

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


	Carrying Value
	Three Months Ended March 31,
	2023		2022
Balance at January 1	$	3,468,742	$	3,449,009
Acquisitions/originations/additional funding	16,388		498,195
Loan maturities/principal repayments	(101,368)		(227,897)

Discount accretion/premium amortization	3,038		2,999
Capitalized interest	1,848		969
(Increase) decrease of CECL reserve(1)	(39,589)		1,343
Charge-off	—		1,251


Balance at March 31	$	3,349,059	$	3,725,869

(1)Provision for loan losses excludes a de minimis amount for the three months ended March 31, 2023 and $0.5 million for the three months ended March 31, 2022 as determined by the Company’s PD/LGD model for unfunded commitments reported on the consolidated statement of operations, with a corresponding offset to accrued and other liabilities recorded on the Company’s consolidated balance sheets.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Nonaccrual and Past Due Loans and Preferred Equity

The following table provides an aging summary of loans and preferred equity held for investment at carrying values before CECL reserve (dollars in thousands):


	Current or Less Than 30 Days Past Due		30-59 Days Past Due		60-89 Days Past Due(1)		90 Days or More Past Due(2)(3)		Total Loans and Preferred Equity
March 31, 2023	$	3,369,528	$	—	$	56,935	$	68,432	$	3,494,895
December 31, 2022	3,494,437		68,432		—		12,120		3,574,989

(1)Represents the Washington, D.C. office senior loan which is in maturity default and was placed on nonaccrual status on February 9, 2023.

Current Expected Credit Loss Reserve

The following table provides details on the changes in CECL reserves (dollars in thousands):


CECL reserve at December 31, 2022	$	106,247
Increase (decrease) in general CECL reserve(1)	(15,418)
Increase in specific CECL reserve(2)	55,007

CECL reserve at March 31, 2023	$	145,836

CECL reserve at December 31, 2021	$	36,598
Increase (decrease) in general CECL reserve(1)	(1,343)

Charge-offs of CECL reserve(3)	(1,251)
CECL reserve at March 31, 2022	$	34,004

(2)During the first quarter of 2023, the Company recorded specific CECL reserves of $29.9 million related to one Washington, D.C. office senior loan, $14.5 million related to one development mezzanine loan located in Milpitas, California (the “Development Mezzanine Loan”) and $10.6 million related to one Long Island City, New York office senior loan. The specific CECL reserves for the two office senior loans were based on the estimated fair value of the collateral using a discounted cash flow model, which included inputs based on the location, type and nature of the property, current and prospective leasing data and anticipated market conditions. The specific CECL reserve for the Development Mezzanine Loan was recorded in connection with the restructuring and modification of the loan in April 2023, which is collateralized by multifamily with a retail component. The specific CECL reserve was based on the estimated proceeds the Company expects to receive upon the resolution of the asset. Refer to Note 13, “Fair Value” for information on valuation inputs.

(3)During the first quarter of 2022, the Company received a $36.5 million repayment on one senior loan collateralized by a student housing property, which was $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 specific CECL reserve on the loan, as the loss was probable at that point in time and was subsequently charged off in the first quarter of 2022.

Credit Quality Monitoring

Loans are typically 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 evaluates its 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.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following tables provide a summary by carrying values before any 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, 2023 and December 31, 2022, respectively. Refer to Note 2, “Summary of Significant Accounting Policies” for loan risk ranking definitions.


	March 31, 2023
	Year of Origination
Risk Rankings	2023		2022		2021		2020		2019 and earlier		Total
Senior loans

2	$	—	$	—	$	93,778	$	—	$	25,929	$	119,707
3	—		852,187		1,174,409		96,178		486,498		2,609,272
4	—		—		108,422		—		325,591		434,013
5	—		—		—		—		193,697		193,697
Total Senior loans	—		852,187		1,376,609		96,178		1,031,715		3,356,689

Mezzanine loans



3	—		24,799		—		—		32,489		57,288
4	1,028		—		—		—		12,450		13,478
5	—		—		—		—		44,717		44,717
Total Mezzanine loans	1,028		24,799		—		—		89,656		115,483

Preferred equity interests



3	—		22,723		—		—		—		22,723


Total Preferred equity interests	—		22,723		—		—		—		22,723

Total Loans and preferred equity held for investment	$	1,028	$	899,709	$	1,376,609	$	96,178	$	1,121,371	$	3,494,895

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As of March 31, 2023, the weighted average risk ranking for loans and preferred equity held for investment was 3.2.


	December 31, 2022
	Year of Origination
Risk Rankings	2022		2021		2020		2019		2018 and Earlier		Total
Senior loans

2	$	—	$	141,457	$	42,710	$	25,904	$	—	$	210,071
3	845,097		1,267,092		53,386		112,689		291,996		2,570,260
4	—		24,871		—		192,920		304,822		522,613
5	—		—		—		68,330		68,432		136,762
Total Senior loans	845,097		1,433,420		96,096		399,843		665,250		3,439,706

Mezzanine loans



3	24,056		—		—		—		4,459		28,515
4	—		—		—		72,151		—		72,151
5	—		—		—		—		12,120		12,120
Total Mezzanine loans	24,056		—		—		72,151		16,579		112,786

Preferred equity interests



3	22,497		—		—		—		—		22,497


Total Preferred equity interests	22,497		—		—		—		—		22,497

Total Loans and Preferred Equity held for investment	$	891,650	$	1,433,420	$	96,096	$	471,994	$	681,829	$	3,574,989

As of December 31, 2022, the weighted average risk ranking for loans and preferred equity held for investment was 3.2.

Lending Commitments

4. Real Estate Securities

Investments in Investing VIEs

As of March 31, 2023 and December 31, 2022, the Company did not hold any assets or liabilities attributable to securitization trusts.

The Company did not generate net income attributable to investments in the subordinate tranches of securitization trusts for the three months ended March 31, 2023.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


	Three Months Ended March 31,
	2022
Statement of Operations

Interest income on mortgage loans held in securitization trusts	$	9,375
Interest expense on mortgage obligations issued by securitization trusts	(8,488)
Net interest income	887
Operating expense	(97)


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

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

The following table presents the Company’s net lease portfolio, net, as of March 31, 2023 and December 31, 2022 (dollars in thousands):


	March 31, 2023		December 31, 2022
Land and improvements	$	125,797	$	128,608
Buildings, building leaseholds, and improvements	493,020		505,297
Tenant improvements	18,989		17,851

Subtotal	$	637,806	$	651,756
Less: Accumulated depreciation	(89,604)		(87,109)

Net lease portfolio, net	$	548,202	$	564,647

The following table presents the Company’s portfolio of other real estate as of March 31, 2023 and December 31, 2022 (dollars in thousands):


	March 31, 2023		December 31, 2022
Land and improvements	$	29,790	$	29,582
Buildings, building leaseholds, and improvements	152,748		152,186
Tenant improvements	20,370		18,757
Furniture, fixtures and equipment	269		135
Construction-in-progress	864		3,011
Subtotal	$	204,041	$	203,671
Less: Accumulated depreciation	(37,518)		(35,850)

Other portfolio, net	$	166,523	$	167,821

Depreciation Expense

Depreciation expense on real estate was $6.0 million and $6.1 million for the three months ended March 31, 2023 and 2022, respectively.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Property Operating Income

For the three months ended March 31, 2023 and 2022 the components of property operating income were as follows (dollars in thousands):


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023			2022
Lease revenues(1)	Lease revenues(1)
Minimum lease revenue	Minimum lease revenue	$	19,734	$	22,409		Minimum lease revenue		$	19,388		$	19,734
Variable lease revenue	Variable lease revenue	2,826		2,780			Variable lease revenue		3,023			2,826
		$	22,560	$	25,189				$	22,411		$	22,560
Hotel operating income	Hotel operating income	1,566		701			Hotel operating income		—			1,566
		$	24,126	$	25,890				$	22,411		$	24,126

(1)Excludes ~~net~~amortization expense related to above and below-market leases of $0.2 million and income of $0.3 million for the three months ended March 31, 2023, respectively. Excludes amortization expense related to above and below-market leases of $0.3 million and income of $0.3 million for the three months ended March 31, 2022, respectively. ~~Excludes net amortization expense related to above market leases of $0.4 million and below-market leases of $0.2 million for~~

For the three months ended March 31, ~~2021, respectively.~~2023 and 2022, the Company had no single property with property operating income equal to or greater than 10.0% of total revenue of the Company.

Minimum Future Rents

~~Table of Contents~~

~~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 March 31, ~~2022~~2023 (dollars in thousands):


Remainder of 2022		$	57,019
2023		71,616
Remainder of 2023				Remainder of 2023	$	57,208
2024	2024	66,926		2024	73,627
2025	2025	60,569		2025	67,305
2026	2026	54,092		2026	60,327
2027 and thereafter		371,190
2027				2027	57,209
2028 and thereafter				2028 and thereafter	317,423
Total	Total	$	681,412	Total	$	633,099

The rental properties owned at March 31, ~~2022~~2023 are leased under noncancellable operating leases with current expirations ranging from ~~2022~~2023 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.

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 2050. Rents on certain ground leases are paid directly by the tenants. Ground rent expense for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 was $0.8 million and $0.8 million, respectively.

Refer to Note ~~16,~~15, “Commitments and Contingencies” for the details of future minimum rental payments on noncancellable ground lease on real estate as of March 31, ~~2022.~~

~~Real Estate Held for Sale~~

~~The following table summarizes the Company’s assets held for sale at December 31, 2021 (dollars in thousands):~~


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

~~As of March 31, 2022, the Company held no properties as held for sale. As of December 31, 2021, the Company held 1 net lease property and 1 hotel as held for sale.~~

~~There were no assets held for sale that constituted discontinued operations as of December 31, 2021.~~2023.

Real Estate Sales

There were no sales during the three months ended March 31, 2023. During the three months ended March 31, 2022, the Company completed the sale of 1one 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~~and one hotel property for a gross sales price of $36.0 million which resulted in a ~~$2.9~~$2.4 million gain on sale. The gains on sale ~~which is~~are included in other gain (loss), 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 of $11.8 million.~~

3330

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

7.6. 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 March 31, ~~2022~~2023 and December 31, ~~2021~~2022 are as follows (dollars in thousands):


		March 31, 2022							March 31, 2023
		Carrying Amount		Accumulated Amortization		Net Carrying Amount			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	$	77,911	$	(32,081)	$	45,830	In-place lease values	$	74,468	$	(36,692)	$	37,776
Deferred leasing costs	Deferred leasing costs	28,395		(13,728)		14,667		Deferred leasing costs	28,533		(16,457)		12,076
Above-market lease values	Above-market lease values	8,359		(6,159)		2,200		Above-market lease values	8,359		(7,081)		1,278
		$	114,665	$	(51,968)	$	62,697		$	111,360	$	(60,230)	$	51,130
Intangible Liabilities	Intangible Liabilities							Intangible Liabilities
Below-market lease values	Below-market lease values	$	16,075	$	(10,197)	$	5,878	Below-market lease values	$	16,075	$	(11,581)	$	4,494

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 December 31, 2021.~~


	December 31, 2022
	Carrying Amount		Accumulated Amortization		Net Carrying Amount
Deferred Leasing Costs and Intangible Assets
In-place lease values	$	75,503	$	(35,805)	$	39,698
Deferred leasing costs	28,641		(15,843)		12,798
Above-market lease values	8,359		(6,875)		1,484
	$	112,503	$	(58,523)	$	53,980
Intangible Liabilities
Below-market lease values	$	16,074	$	(11,235)	$	4,839

The following table summarizes the amortization of deferred leasing costs, intangible assets and intangible liabilities for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (dollars in thousands):

Three Months Ended March 31,
2022 2021
Above-market lease values $ (288) $ (404)
Below-market lease values 330 222
Net increase (decrease) to property operating income $ 42 $ (182)
In-place lease values $ 1,602 $ 1,765
Deferred leasing costs 806 620
Other intangibles — 43
Amortization expense $ 2,408 $ 2,428


	Three Months Ended March 31,
	2023		2022
Above-market lease values	$	(199)	$	(288)
Below-market lease values	339		330
Net increase to property operating income	$	140	$	42

In-place lease values	$	1,283	$	1,602
Deferred leasing costs	664		806

Amortization expense	$	1,947	$	2,408

3431

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


		2022		2023		2024		2025		2026		2027 and thereafter		Total			2023		2024		2025		2026		2027		2028 and thereafter		Total
Above-market lease values	Above-market lease values	$	763	$	578	$	451	$	272	$	93	$	43	$	2,200	Above-market lease values	$	(431)	$	(448)	$	(270)	$	(91)	$	(38)	$	—	$	(1,278)
Below-market lease values	Below-market lease values	(1,039)		(1,379)		(1,379)		(1,377)		(704)		—		(5,878)		Below-market lease values	1,034		1,379		1,378		703		—		—		4,494
Net increase (decrease) to property operating income	Net increase (decrease) to property operating income	$	(276)	$	(801)	$	(928)	$	(1,105)	$	(611)	$	43	$	(3,678)	Net increase (decrease) to property operating income	$	603	$	931	$	1,108	$	612	$	(38)	$	—	$	3,216

In-place lease values	In-place lease values	$	4,526	$	5,275	$	4,975	$	4,290	$	3,456	$	23,308	$	45,830	In-place lease values	$	3,721	$	4,684	$	3,999	$	3,165	$	3,062	$	19,145	$	37,776
Deferred leasing costs	Deferred leasing costs	2,225		2,536		2,229		1,823		943		4,911		14,667		Deferred leasing costs	1,924		2,290		1,873		967		849		4,173		12,076
Amortization expense	Amortization expense	$	6,751	$	7,811	$	7,204	$	6,113	$	4,399	$	28,219	$	60,497	Amortization expense	$	5,645	$	6,974	$	5,872	$	4,132	$	3,911	$	23,318	$	49,852

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

The following table presents a summary of restricted cash as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (dollars in thousands):


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Restricted cash:	Restricted cash:					Restricted cash:
Borrower escrow deposits	Borrower escrow deposits	$	70,004	$	73,344	Borrower escrow deposits	$	65,323	$	79,055
Capital expenditure reserves	Capital expenditure reserves	9,426		8,921		Capital expenditure reserves	9,030		8,623
Real estate escrow reserves	Real estate escrow reserves	2,541		2,025		Real estate escrow reserves	2,623		1,583
Working capital and other reserves	Working capital and other reserves	2,271		2,310		Working capital and other reserves	2,186		2,145
Tenant lockboxes	Tenant lockboxes	250		241		Tenant lockboxes	861		1,102

Total	Total	$	84,492	$	86,841	Total	$	80,023	$	92,508

The following table presents a summary of other assets as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (dollars in thousands):


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Other assets:	Other assets:					Other assets:
Right-of-use lease asset	Right-of-use lease asset	$	27,475	$	24,970	Right-of-use lease asset	$	24,219	$	25,237
Tax receivable and deferred tax assets	Tax receivable and deferred tax assets	26,194		26,194		Tax receivable and deferred tax assets	19,080		19,117
Prepaid expenses		4,375		5,069
Deferred financing costs, net - credit facilities	Deferred financing costs, net - credit facilities	3,136		2,113		Deferred financing costs, net - credit facilities	3,086		4,630
Other		2,246		2,141
Derivative asset		1,105		1,373
Investments in unconsolidated ventures ($2,790 and $3,035 at fair value, respectively)						Investments in unconsolidated ventures ($2,790 and $3,035 at fair value, respectively)	2,790		3,035

Derivative assets						Derivative assets	2,149		1,601
Prepaid expenses and other						Prepaid expenses and other	1,252		2,053
Total	Total	$	64,531	$	61,860	Total	$	52,576	$	55,673

3532

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 March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (dollars in thousands):


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Accrued and other liabilities:	Accrued and other liabilities:					Accrued and other liabilities:
Operating lease liability						Operating lease liability	$	24,997	$	25,961
Current and deferred tax liability	Current and deferred tax liability	$	35,335	$	34,612	Current and deferred tax liability	24,637		26,198
Operating lease liability		27,822		25,205
Accounts payable, accrued expenses and other liabilities		14,530		20,168
Interest payable	Interest payable	13,214		11,076		Interest payable	12,719		11,680
Prepaid rent and unearned revenue	Prepaid rent and unearned revenue	11,504		7,669		Prepaid rent and unearned revenue	12,251		7,688
Unfunded CECL Loan Allowance		909		432
Accounts payable, accrued expenses and other liabilities						Accounts payable, accrued expenses and other liabilities	8,358		15,087
Tenant security deposits	Tenant security deposits	409		424		Tenant security deposits	661		411
Unfunded CECL loan allowance						Unfunded CECL loan allowance	414		389
Other	Other	208		228		Other	219		219
Total	Total	$	103,931	$	99,814	Total	$	84,256	$	87,633

Investments under Fair Value Option

Private Funds

The Company elected to account for its limited partnership interests in PE Investments under the fair value option, which interests ranged from 1.0% to 15.6% as of March 31, 2023 and December 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.

Investments in Unconsolidated Ventures

The Company realized a one-time gain from its ratable share of dispute resolution proceeds of approximately $9.0 million from the senior mezzanine lender at the Company’s prior Los Angeles, California mixed-use project construction mezzanine loan and retained B-participation investment, which is recorded in equity in earnings of unconsolidated ventures on the Company’s consolidated statements of operations. In connection with the settlement, effective January 26, 2023, the Company has no further interest in the loan or investment.

3633

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

9.8. Debt

The following table presents debt as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (dollars in thousands):


								March 31, 2022				December 31, 2021											March 31, 2023				December 31, 2022
		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) + 1.61%		$	799,687	$	796,669	$	840,423	$	836,812	CLNC 2019-FL1(3)			Non-recourse	Aug-35	SOFR(4) + 1.87%		$	466,546	$	465,867	$	502,717	$	501,406
BRSP 2021-FL1(3)	BRSP 2021-FL1(3)			Non-recourse	Aug-38	LIBOR + 1.49%		670,000		664,671		670,000		664,087		BRSP 2021-FL1(3)			Non-recourse	Aug-38	LIBOR + 1.49%		670,000		666,825		670,000		666,194
Subtotal securitization bonds payable, net	Subtotal securitization bonds payable, net							1,469,687		1,461,340		1,510,423		1,500,899		Subtotal securitization bonds payable, net							1,136,546		1,132,692		1,172,717		1,167,600

Mortgage and other notes payable, net	Mortgage and other notes payable, net															Mortgage and other notes payable, net
Net lease 1																Net lease 1			Non-recourse	Sep-33	4.77%		200,000		198,801		200,000		198,778
Net lease 2(5)																Net lease 2(5)			Non-recourse	Jun-25	3.91%		153,280		154,085		162,449		164,752
Net lease 3																Net lease 3			Non-recourse	Aug-26	4.08%		29,843		29,698		30,009		29,853
Net lease 4																Net lease 4			Non-recourse	Oct-27	4.45%		22,412		22,412		22,559		22,559
Net lease 5(6)																Net lease 5(6)			Non-recourse	Nov-26	4.45%		17,385		17,117		17,486		17,200
Net lease 5(7)																Net lease 5(7)			Non-recourse	Mar-28	4.38%		11,462		11,025		11,526		11,089
Net lease 6	Net lease 6			Non-recourse	Oct-27	4.45%		22,976		22,976		23,117		23,117		Net lease 6			Non-recourse	Nov-26	4.45%		6,907		6,801		6,948		6,834
Net lease 5				Non-recourse	Nov-26	4.45%		3,264		3,202		3,282		3,216
Net lease 4				Non-recourse	Nov-26	4.45%		7,043		6,907		7,081		6,939
Net lease 3(5)				Non-recourse	Jan-22	6.00%		—		—		11,867		11,807
Net lease 6				Non-recourse	Jul-23	LIBOR + 2.15%		791		775		908		889
Net lease 5				Non-recourse	Aug-26	4.08%		30,530		30,342		30,639		30,442
Net lease 1(6)				Non-recourse	Nov-26	4.45%		17,725		17,385		17,823		17,465
Net lease 1(7)				Non-recourse	Mar-28	4.38%		11,707		11,270		11,769		11,332
Net lease 7																Net lease 7			Non-recourse	Jul-23	LIBOR + 2.15%		310		305		432		424
Net lease 8																Net lease 8			Non-recourse	Nov-26	4.45%		3,202		3,152		3,220		3,168

Net lease 2(8)				Non-recourse	Jun-25	3.91%		183,744		186,350		181,504		184,078
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%		104,614		104,928		105,090		105,452		Other real estate 1			Non-recourse	Oct-24	4.47%		102,912		103,054		103,218		103,391
Other real estate 3				Non-recourse	Jan-25	4.30%		71,982		71,577		72,359		71,922
Other real estate 2																Other real estate 2			Non-recourse	Jan-25	4.30%		70,477		70,211		70,870		70,569

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		65,377		65,376
Loan 1(8)																Loan 1(8)			Non-recourse	Jun-24	LIBOR + 3.00%		27,851		27,851		27,851		27,851
Subtotal mortgage and other notes payable, net	Subtotal mortgage and other notes payable, net							719,753		719,801		760,816		760,583		Subtotal mortgage and other notes payable, net							646,041		644,512		656,568		656,468

Bank credit facility	Bank credit facility															Bank credit facility
Bank credit facility	Bank credit facility	$	165,000	Recourse	Jan-27 (11)	SOFR + 2.25%		—		—		—		—		Bank credit facility	$	165,000	Recourse	Jan-27 (9)	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		$	400,000	Limited Recourse(12)	Apr-26(13)	LIBOR/SOFR + 1.89%	(14)	126,015		126,015		109,915		109,915

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		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		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		300,000		(18)	May-26(19)	LIBOR/SOFR + 1.73%	(14)	161,730		161,730		102,098		102,098

Bank 1																Bank 1	600,000		Limited Recourse(10)	April-27(11)	SOFR + 2.17%	(12)	522,677		522,677		415,892		415,892
Bank 2																Bank 2	600,000		Limited Recourse(10)	Apr-26(13)	LIBOR/SOFR + 1.88%	(12)	309,113		309,113		351,539		351,539
Bank 3																Bank 3	400,000		(14)	June-27(15)	SOFR + 1.74%	(12)	236,718		236,718		247,404		247,404
Bank 4																Bank 4	400,000		Limited Recourse(10)	July-27(16)	SOFR + 1.86%	(12)	223,668		223,668		220,054		220,054
Bank 5																Bank 5	250,000		Limited Recourse(10)	Jun-25(17)	LIBOR/SOFR + 1.86%	(12)	—		—		105,104		105,104

Subtotal master repurchase facilities	Subtotal master repurchase facilities	$	2,050,000					1,199,789		1,199,789		905,122		905,122		Subtotal master repurchase facilities	$	2,250,000					1,292,176		1,292,176		1,339,993		1,339,993

Subtotal credit facilities	Subtotal credit facilities							1,199,789		1,199,789		905,122		905,122		Subtotal credit facilities							1,292,176		1,292,176		1,339,993		1,339,993

Total	Total							$	3,389,229	$	3,380,930	$	3,176,361	$	3,166,604	Total							$	3,074,763	$	3,069,380	$	3,169,278	$	3,164,061

(1)Subject to customary non-recourse carveouts.

~~Table of Contents~~

~~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

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 the one-month London Interbank Offered Rates (“LIBOR”) to 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, conforming with the indenture agreement.

(5)~~During the three months ended~~ As of March 31, ~~2022~~,2023, the ~~property was sold and~~outstanding principal of the mortgage payable was ~~repaid in full.~~NOK 1.6 billion, which translated to $153.3 million.

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

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

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

~~(9)During the three months ended~~ ~~March 31, 2022, the property was sold and the mortgage payable was repaid in full.~~

~~(10)~~The current maturity of the note payable is June ~~2022,~~2023, with 2one one-year ~~extensions~~extension available at the Company’s option, which may be subject to the satisfaction of certain customary conditions set forth in the governing documents.

~~(11)~~(9)On January 28, 2022, the Company, through its subsidiaries, including the OP, entered into an Amended and Restated Credit Agreement. Refer to “Bank Credit Facility”~~Bank Credit Facility~~ within this note for more details.

~~(12)~~(10)Recourse solely with respect to 25.0% of the financed amount.

(11)The current maturity date is April 2025, with two one-year extension options, which may be exercised upon the satisfaction of certain customary conditions set forth in the governing documents.

(12)Represents the weighted average spread as of March 31, 2023. The contractual interest rate depends upon asset type and characteristics and ranges from one-month LIBOR or SOFR plus 1.50% to 3.00%.

(13)The current maturity date is April ~~2023,~~2025, with 3a 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.

(14)Recourse is either 25.0% or 50.0% depending on loan metrics.

(15)The current maturity date is June 2025, with two 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 March 31, 2022. The contractual interest rate depends upon asset type and characteristics and ranges from one-month LIBOR or SOFR plus~~ ~~1.50% to 2.70%.~~

~~(15)The current maturity date is April 2023, with no extension currently available at the option of the Company.~~

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

(17)The current maturity date is June ~~2022,~~2023, with a ~~one-year~~two-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.~~agreements.

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

~~(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 March 31, ~~2022~~2023 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
Remaining 2022		$	1,886	$	—	$	1,886	$	—
2023		532,114		—		2,566		529,548
Remaining 2023										Remaining 2023	$	1,906	$	—	$	1,906	$	—
2024	2024	172,210		—		172,210		—		2024	132,982		—		132,982		—
2025	2025	640,498		—		258,002		382,496		2025	226,086		—		226,086		—
2026	2026	342,341		—		54,596		287,745		2026	363,684		—		54,571		309,113
2027 and thereafter		1,700,180		1,469,687		230,493		—
2027										2027	1,003,419		—		20,356		983,063
2028 and thereafter										2028 and thereafter	1,346,686		1,136,546		210,140		—
Total	Total	$	3,389,229	$	1,469,687	$	719,753	$	1,199,789	Total	$	3,074,763	$	1,136,546	$	646,041	$	1,292,176

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 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 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 $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 the OP’s prior $300.0 million revolving credit facility that would have matured on February 1, 2022.

3835

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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.

The maximum amount available for borrowing at any time under the Credit 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 March 31, ~~2022,~~2023, the borrowing base valuation is sufficient to permit borrowings of up to the entire $165.0 ~~million commitment.~~million. 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 Credit 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 2two additional terms of six months each, subject to the terms and conditions in the Credit Agreement, resulting in a latest termination date of January 31, 2027.

The obligations of the Borrowers under the Credit Agreement are guaranteed pursuant to a Guarantee and Collateral Agreement by substantially all material wholly owned subsidiaries of the OP (the “Guarantors”) in favor of 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, 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 Credit 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 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 of the OP to be greater than or equal to the sum of (i) $1,112,000,000 and (ii) 70% of the net cash proceeds received by the 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 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 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.

As of March 31, 2023, the Company was in compliance with all of its financial covenants under the Credit Agreement.

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 ~~$840.0~~$840.4 million of investment grade notes. As of March 31, ~~2022,~~2023, the securitization reflects an advance rate of ~~82.8%~~73.75% at a weighted average cost of funds of Adjusted Term SOFR plus ~~1.61%~~1.87% (before transaction expenses) and is collateralized by a pool of 2417 senior loan investments.

3936

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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~~one-month CME Term SOFR Reference Rate as published by the CME Group Benchmark Administration on each benchmark determination date.

As of March 31, 2023, less than half of the CLNC 2019-FL1 mortgage assets are indexed to LIBOR and the borrowings under CLNC 2019-FL1 are indexed to Term SOFR, creating an underlying benchmark index rate basis difference between a portion of the CLNC 2019-FL1 assets and liabilities, which is meant to be mitigated by the benchmark replacement adjustment described above. The Company has 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 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 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. The reinvestment period for CLNC 2019-FL1 expired on October 19, 2021. During the ~~three months ended March 31, 2022, 2 loans~~first quarter of 2023, one loan held in CLNC 2019-FL1 ~~were~~was fully repaid and one loan was partially repaid totaling ~~$54.4~~$36.2 million. ~~Additionally, subsequent to~~At March 31, ~~2022, 2 loans held in~~2023, the Company had $632.6 million of unpaid principal balance of CRE debt investments financed with CLNC ~~2019-FL1 were repaid, totaling $44.9 million. The proceeds from the four loan payoffs were used to amortize the securitization bonds in accordance with the securitization priority of payments.~~2019-FL1.

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 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~~$670.0 million of investment grade notes. The securitization reflects an advance rate of 83.75% at a weighted ~~costs~~average cost of funds of LIBOR plus 1.49% (before transaction costs), and is collateralized by a pool of 3328 senior loan investments.

BRSP 2021-FL1 includes a two-year reinvestment feature that allows the 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 wethe Company reinvest the available proceeds within BRSP 2021-FL1. For the quarter ended March 31, 2023, two loans held in BRSP 2021-FL1 were fully repaid, totaling $48.0 million. The Company replaced the repaid loans by contributing existing loan investments of equal value. At March 31, 2023, the Company had $800.0 million of unpaid principal balance of CRE debt investments financed with 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. WeThe Company 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~~its liquidity position.

As of March 31, ~~2022,~~2023, the Company had ~~$1.7~~$1.4 billion carrying value of CRE debt investments and other assets financed with ~~$1.5~~$1.1 billion of securitization bonds payable, net. As of December 31, ~~2021,~~2022, the Company had ~~$1.8~~$1.5 billion carrying value of CRE debt investments financed with ~~$1.5~~$1.2 billion of securitization bonds payable, net.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Master Repurchase Facilities

As of March 31, ~~2022,~~2023, 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~~$2.3 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

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

new investments. As of March 31, ~~2022,~~2023, the Company was in compliance with all of its financial covenants under the Master Repurchase Facilities.

As of March 31, ~~2022,~~2023, the Company had ~~$1.6~~$1.8 billion carrying value of CRE debt investments financed with ~~$1.2~~$1.3 billion under the ~~master repurchase facilities.~~Master Repurchase Facilities. As of December 31, ~~2021,~~2022, the Company had ~~$1.2~~$1.8 billion carrying value of CRE debt investments financed with ~~$905.1 million~~$1.3 billion 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~~Facilities.

As of March 31, 2023, the Company had one counterparty which held collateral that exceeded amounts borrowed by more than 10% of its total equity. The Company’s net exposure to Bank 1 was $211.8 million. As of December 31, 2022, the Company ~~had entered into 8 master repurchase agreements (collectively~~did not hold any Master Repurchase Facilities where 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, eventscollateral exceeded the amounts borrowed by more than 10% 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.~~its total equity.

~~10.~~9. 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~~had no related party transactions 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~~2023 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~~

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.

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

~~Table of Contents~~

~~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%.2022.

~~11.~~10. Equity-Based Compensation

On ~~January 29, 2018,~~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 Company’s 2018 Equity Incentive Plan (the “2018 Plan”)~~. The 2018 Plan permits~~ to increase the ~~grant~~total number of ~~awards with respect to 4.0 million~~ shares of the Class A common stock ~~subject~~issuable by 10.0 million shares (subject to adjustment pursuant to the terms of the ~~2018 Plan.~~2022 Plan) and extending the termination date to May 4, 2032. Awards may be granted under the ~~2018~~2022 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~~its affiliates and (y) any other individual whose participation in the ~~2018~~2022 Plan is determined to be in the best interests of the Company. The following types of awards may be made under the ~~2018~~2022 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~~2022 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~~2022 Plan will again become available for issuance under the ~~2018~~2022 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~~2022 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. Shares granted to non-independent directors, officers and employees, if applicable, generally vest ratably in three annual installments following the grant date.

On May 5, 2022, the Company granted 1,456,366 shares of Class A common stock to certain of its employees, including executive officers. Remaining one-third increments of such share grant will vest on March 15, 2024 and March 15, 2025. On March 6, 2023, the Company granted 1,391,217 shares of Class A common stock to certain of its employees, including executive officers. The shares vest in one-third increments on March 15, 2024, March 15, 2025 and March 15, 2026.

On May 6, 2022, the Company granted ~~in May 2020~~62,190 shares of Class A common stock 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 Planwhich 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~~6, 2023.

Table 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.Contents

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.BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Equity-Based Compensation Expense

In connection with the share grants, the Company recognized share-based compensation expense of $2.3 million and $1.9 million within compensation and benefits in the consolidated statement of operations for the three months ended March 31, ~~2022. The Company recognized~~

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

~~share-based compensation expense of $4.3 million to its Manager within compensation~~2023 and ~~benefits in the consolidated statement of operations for the three months ended~~ March 31, ~~2021.~~2022, respectively.

Restricted Stock—Restricted stock awards relating to the Company’s ~~class~~Class A common stock are granted to independent directors of the Company and generally vest within one ~~year and restricted~~year. Restricted stock awards ~~were~~are granted to certain employees of the ~~Manager,~~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~~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~~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~~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~~Class A common stock relative to the Company’s GAAP book value at the end of a two-year measurement ~~period.~~period for the 2021 PSU grant (the “2021 Grant”) or the Company’s total shareholder return relative to certain peer group companies at the end of a three-year measurement period for the 2023 PSU grant (the “2023 Grant”). 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~~2023 Grant
Expected volatility(1)	~~86.6~~74.4	%
Risk free rate(2)	~~0.1~~4.6	%
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 award holders being entitled to dividends paid during the ~~dividend yield in place as of the grant date.~~measurement period on any shares earned.

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~~expense. Following the completion of the measurement period for the 2021 Grant, the Company issued 136,000 shares of Class A common stock to ~~reversal if the performance condition is not achieved.~~certain of its employees in March 2023.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The table below summarizes the Company’s awards granted, forfeited or vested under the ~~2018~~2022 Plan during the three months ended March 31, 2023 and 2022:


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

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

Unvested shares at December 31, 2021	Unvested shares at December 31, 2021	1,482,094	272,000	1,754,094	$	12.35	$	11.96	Unvested shares at December 31, 2021	1,482,094	272,000	1,754,094	$	12.35	$	11.96
Vested									Vested	(500,462)	—	(500,462)	9.14		—
Unvested shares at March 31, 2022									Unvested shares at March 31, 2022	981,632	272,000	1,253,632	11.54		11.96

Unvested shares at December 31, 2022									Unvested shares at December 31, 2022	2,308,691	272,000	2,580,691	$	8.47	$	11.96
Granted									Granted	1,391,217	384,378	1,775,595	6.90		9.69
Vested	Vested	(500,462)	—	(500,462)	9.14		—		Vested	(888,834)	(136,000)	(1,024,834)	8.46		11.96

Unvested shares at March 31, 2022		981,632	272,000	1,253,632	11.54		11.96
Forfeited									Forfeited	—	(136,000)	—	—		11.96
Unvested shares at March 31, 2023									Unvested shares at March 31, 2023	2,811,074	384,378	3,331,452	7.65		9.69

Fair value of equity awards that vested during the three months ended March 31, ~~2022~~2023 and March 31, ~~2021,~~2022, determined based on their respective fair values at vesting date, was ~~$3.2~~$5.4 million and ~~$2.3~~$3.2 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, 2023, aggregate unrecognized compensation cost for all unvested equity awards was $23.7 million, which is expected to be recognized over a weighted-average period of 2.4 years. 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~~1.8 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.

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

~~12.~~11. Stockholders’ Equity

Authorized Capital

As of March 31, ~~2022,~~2023, 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.~~2023.

Dividends

During the three months ended March 31, 2023 and 2022, the Company declared the following ~~dividend~~dividends on its common stock:

Declaration Date

Record Date

Payment Date

Per Share

March 16, 2023

March 31, 2023

April 17, 2023

$0.20

March 15, 2022

March 31, 2022

April 15, 2022

$0.19

Share Repurchases

In April 2023, the Company’s board of directors authorized a stock repurchase program (“Stock Repurchase Program”) under which the Company may repurchase up to $50.0 million of its outstanding Class A common stock until April 30, 2024. The Stock Repurchase Program replaces the prior repurchase program authorization which expired on April 30, 2023. Under the Stock Repurchase Program, the Company may repurchase shares in open market purchases, in privately negotiated transactions or otherwise. The Company has a written trading plan as part of the Share Repurchase Program that provides for share repurchases in open market transactions that is intended to comply with Rule 10b-18 under the Exchange Act. The Stock Repurchase Program will be utilized at management’s discretion and in accordance with the requirements of the SEC. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate requirements and other conditions.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The Company did not repurchase any shares of its Class A common stock during the three months ended March 31, 2023. As of March 31, 2023, there was $81.7 million remaining available to make repurchases under the prior stock repurchase plan.

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


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


















AOCI at December 31, 2022	$	18,603	$	(19,279)	$	(676)
Other comprehensive income (loss)	—		(3,463)		(3,463)
AOCI at March 31, 2023	$	18,603	$	(22,742)	$	(4,139)

(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


(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

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)

~~Table of Contents~~

~~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.~~12. 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 iswas based on such members ownership percentage of the OP. For the three months ended March 31, 2023, there were no noncontrolling interests in the OP and the OP is owned by the Company directly, and indirectly through the Company’s subsidiary, BRSP-T Partner, LLC. 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.~~2022.

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~~$0.1 million for ~~the three months ended March 31, 2021.~~

4541

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~14.~~the three months ended March 31, 2023 and net income attributable to noncontrolling interests was de minimis for the three months ended March 31, 2022.

13. 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

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.

Investing VIEs

~~As discussed in Note 5, “Real Estate Securities, Available for Sale,” the~~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.

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

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(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 March 31, ~~2022~~2023 and December 31, ~~2021~~2022 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


	March 31, 2023								December 31, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Other assets - PE Investments	$	—	$	—	$	2,790	$	2,790	$	—	$	—	$	3,035	$	3,035


Other assets - derivative assets	—		2,149		—		2,149		—		1,601		—		1,601

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~~2023 and ~~year ended December 31, 2021~~2022 (dollars in thousands):


											Three Months Ended March 31,
		Three Months Ended March 31, 2022				Year Ended December 31, 2021					2023		2022
		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			Other assets - PE Investments		Other assets - PE Investments		Mortgage loans held in securitization trusts(1)
Beginning balance	Beginning balance	$	4,406	$	813,310	$	6,878	$	1,768,069	Beginning balance	$	3,035	$	4,406	$	813,310

Distributions/paydowns	Distributions/paydowns	—		(13,300)		(2,380)		(78,903)		Distributions/paydowns	(245)		—		(13,300)
Sale of investments		—		—		—		(28,662)
Deconsolidation of securitization trust(2)		—		—		—		(802,196)
Equity in earnings		—		—		(92)		—

Unrealized loss in earnings	Unrealized loss in earnings	—		(45,431)		—		(8,375)		Unrealized loss in earnings	—		—		(45,431)
Realized loss in earnings		—		—		—		(36,623)

Ending balance	Ending balance	$	4,406	$	754,579	$	4,406	$	813,310	Ending balance	$	2,790	$	4,406	$	754,579

(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~~2023 and December 31, ~~2021,~~2022, 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~~2023 and December 31, ~~2021,~~2022, 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.

~~Table of Contents~~

~~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~~2023 and December 31, ~~2021,~~2022, the Company has elected not to apply the fair value option for any other eligible financial assets or liabilities.

Fair Value 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 by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair value.

The following table presents the principal amount, carrying value and fair value of certain financial assets and liabilities as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (dollars in thousands):


		March 31, 2022							December 31, 2021								March 31, 2023						December 31, 2022
		Principal Amount		Carrying Value			Fair Value		Principal Amount			Carrying Value		Fair Value			Principal Amount		Carrying Value		Fair Value		Principal Amount		Carrying Value		Fair Value
Financial assets:(1)	Financial assets:(1)															Financial assets:(1)
Loans held for investment, net(2)	Loans held for investment, net(2)	$	3,777,101	$	3,725,869	(2)	$	3,743,097	$	3,500,658	(2)	$	3,449,009	$	3,464,060	Loans held for investment, net(2)	$	3,503,107	$	3,349,059	$	3,357,271	$	3,586,248	$	3,468,472	$	3,480,001
Financial liabilities:(1)	Financial liabilities:(1)															Financial liabilities:(1)
Securitization bonds payable, net	Securitization bonds payable, net	$	1,469,687	$	1,461,340		$	1,469,687	$	1,510,423		$	1,500,899	$	1,510,423	Securitization bonds payable, net	$	1,136,546	$	1,132,692	$	1,136,546	$	1,172,717	$	1,167,600	$	1,172,717
Mortgage and other notes payable, net	Mortgage and other notes payable, net	719,753		719,801			719,753		760,816			760,583		760,816		Mortgage and other notes payable, net	646,041		644,512		624,574		656,568		656,468		656,568
Master repurchase facilities	Master repurchase facilities	1,199,789		1,199,789			1,199,789		905,122			905,122		905,122		Master repurchase facilities	1,292,176		1,292,176		1,292,176		1,339,993		1,339,993		1,339,993

(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~~$256.3 million and ~~$264.9~~$263.4 million as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Disclosure about fair value of financial instruments is based on pertinent information available to management as of March 31, ~~2022.~~2023. 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.

~~Table of Contents~~

~~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,~~2023, the Company believes the ~~carrying value~~unpaid principal balance 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 March 31, ~~2022,~~2023, 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, restricted cash, receivables, and accrued and other liabilities approximate fair value due to their short term nature and credit risk, if any, are negligible.

Table of Contents

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 ~~Company did not hold any~~following tables summarize 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~~2023 and December 31, ~~2021~~2022 (dollars in thousands):

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


	March 31, 2023
	Level 1		Level 2		Level 3		Total
Loans held for investment, net(1)	$	—	$	—	$	126,239	$	126,239


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Loans held for investment, net(2)	$	—	$	—	$	79,596	$	79,596

(1)~~See Note~~During the first quarter of 2023, the Company recorded $55.0 million of specific CECL reserves. The Company recorded specific CECL reserves of $29.9 million related to one Washington, D.C. office senior loan, $14.5 million related to the Development Mezzanine Loan and $10.6 million related to one Long Island City, New York office senior loan. The Company elected to use a practical expedient in accordance with the CECL standard to determine the estimated fair value of the collateral. The specific CECL reserves for the two office senior loans were based on the estimated fair value of the collateral using a discounted cash flow model and Level 3 ~~“Loans Held~~inputs which included assuming a rent per square foot ranging from $25 to $48, a capitalization rate ranging from 6.0% to 7.5% and a discount rate ranging from 9.0% to 12.0%. These inputs are based on the location, type and nature of the property, current and prospective leasing data and anticipated market conditions. The specific CECL reserve for ~~Investment, net”~~the Development Mezzanine Loan was recorded in connection with the amendment and restructuring of the loan in April 2023, which is collateralized by multifamily with a retail component. The specific CECL reserve for ~~further details.~~the Development Mezzanine Loan was based on the estimated proceeds the Company expects to receive upon the resolution of the asset in three years, using Level 3 inputs which included assuming a rent per square foot ranging from $42 to $60 and a capitalization rate ranging from 5.0% to 7.0%. These inputs are based on the location, type and nature of the property, current and prospective leasing data and anticipated market conditions.

(2)During the third quarter of 2022, the Company recorded $57.2 million of specific CECL reserves related to two Long Island City, New York office senior loans. The Company elected to use a practical expedient in accordance with the CECL standard to determine the estimated fair value of the collateral. The estimated fair value of the collateral was determined by using a discounted cash flow model and Level 3 inputs, which included assuming a rent per square foot ranging from $25 to $34, a capitalization rate ranging from 6.0% to 6.5% and a discount rate ranging from 9.5% to 12.2%. These inputs are based on the location, type and nature of the property, current and prospective leasing data and anticipated market conditions.

~~15.~~14. 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 March 31, 2023 and December 31, 2022, fair value of derivative assets and derivative liabilities were as follows (dollars in thousands):


	Non-Designated Hedges
	March 31, 2023		December 31, 2022
Derivative Assets
Foreign exchange contracts	$	2,148	$	1,599

Interest rate contracts	1		2
Included in other assets	$	2,149	$	1,601

As of March 31, 2023, the Company’s counterparties do not hold any cash collateral.

Table of Contents

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 FX forwards and interest rate contracts as of March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:

Type of Derivatives

Notional Currency

Notional Amount (in thousands)

Range of Maturity Dates

Non-Designated

March 31, 2023

FX Forward

NOK

94,467

May 2023 - May 2024

Interest Rate Swap

USD

163

July 2023

December 31, 2022

FX Forward

NOK

~~185,576~~99,733

~~May 2022~~February 2023 - May 2024

Interest Rate Swap

USD

~~30,644~~285

~~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 months ended March 31, ~~2022~~2023 and ~~2021~~2022 (dollars in thousands):


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Other gain, net
Other gain (loss), net							Other gain (loss), net
Non-designated foreign exchange contracts	Non-designated foreign exchange contracts	$	(221)	$	(279)		Non-designated foreign exchange contracts	$	651	$	(221)
Non-designated interest rate contracts	Non-designated interest rate contracts	8		13			Non-designated interest rate contracts	(1)		8
		$	(213)	$	(266)			$	650	$	(213)

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, net. During the three months ended March 31, 2022 and 2021, 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.

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

~~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 March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (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)
March 31, 2022
March 31, 2023								March 31, 2023
Derivative Assets	Derivative Assets							Derivative Assets
Foreign exchange contracts	Foreign exchange contracts	$	1,105		$	1,105		Foreign exchange contracts	$	2,148			$	2,148

		$	1,105		$	1,105
Derivative Liabilities

Interest rate contracts	Interest rate contracts	$	(2)		$	(2)		Interest rate contracts	1				1
		$	(2)		$	(2)			$	2,149			$	2,149

December 31, 2021

December 31, 2022								December 31, 2022
Derivative Assets	Derivative Assets							Derivative Assets
Foreign exchange contracts	Foreign exchange contracts	$	1,373		$	1,373		Foreign exchange contracts	$	1,599			$	1,599
Interest rate contracts								Interest rate contracts	2				2
									$	1,601			$	1,601
		$	1,373		$	1,373
Derivative Liabilities

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

The Company did not offset any of its derivatives positions as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

~~16.~~

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

15. Commitments and Contingencies

Lending Commitments

Ground Lease Obligation

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

At March 31, ~~2022~~2023 and December 31, ~~2021~~2022, the weighted average remaining lease term was ~~13.9~~13.7 years and 13.7 years for ground ~~leases.~~leases, respectively.

The following table presents ground lease expense, included in property operating expense, for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (dollars in thousands):

Three Months Ended March 31, 2022 Three Months Ended March 31, 2021
Operating lease expense:
Minimum lease expense $ 768 $ 768
Variable lease expense — —
$ 768 $ 768

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~


	Three Months Ended March 31,
	2023		2022
Operating lease expense:
Minimum lease expense	$	777	$	768
Variable lease expense	—		—
	$	777	$	768

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 March 31, ~~2022~~2023 (dollars in thousands):


Remainder of 2022		$	2,327
2023		3,110
Remainder of 2023				Remainder of 2023	$	2,332
2024	2024	2,213		2024	2,213
2025	2025	2,148		2025	2,148
2026	2026	2,073		2026	2,073
2027 and thereafter		17,254
2027				2027	1,755
2028 and thereafter				2028 and thereafter	15,499
Total lease payments	Total lease payments	29,125		Total lease payments	26,020
Less: Present value discount	Less: Present value discount	9,391		Less: Present value discount	8,419
Operating lease liability (Note 8)		$	19,734
Operating lease liability (Note 7)				Operating lease liability (Note 7)	$	17,601

For these ground leases, the Company has elected the practical expedient to combine lease and related nonlease components as a single lease component.

Office Lease

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

At March 31, ~~2022,~~2023, the weighted average remaining lease term ~~was 6.9~~was 5.6 years for ~~the~~the office ~~leases.~~leases, which are located in New York, New York and Los Angeles, California.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

For the three months ended March 31, 2023 and 2022, the following table summarizes lease expense, included in operating expense (dollars in thousands):


	~~Three Months Ended March 31, 2022~~
	~~Corporate Offices~~
~~Operating lease expense:~~
~~Fixed lease expense~~	$	~~200~~

	$	~~200~~


	Three Months Ended March 31,
	2023		2022
Corporate Offices
Operating lease expense:
Fixed lease expense	$	315	$	200

	$	315	$	200

The operating lease liability for the office leases were determined using a weighted average discount rate of 2.36%. As of March 31, ~~2022,~~2023, the Company’s future operating lease commitments for the corporate office leases were as follows (dollars in thousands):


		Corporate Offices			Corporate Offices(1)
Remainder of 2022(1)		$	598
2023		1,239
Remainder of 2023				Remainder of 2023	$	961
2024	2024	1,293		2024	1,293
2025	2025	1,308		2025	1,308
2026	2026	1,323		2026	1,323
2027 and thereafter		3,068
2027				2027	1,339
2028 and thereafter				2028 and thereafter	1,729
Total lease payments	Total lease payments	8,829		Total lease payments	7,953
Less: Present value discount	Less: Present value discount	741		Less: Present value discount	557
Operating lease liability (Note 8)		$	8,088
Operating lease liability (Note 7)				Operating lease liability (Note 7)	$	7,396

__________________________________________

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

For these office leases, the Company has elected the practical expedient to combine lease and related nonlease components as a single lease component.

Litigation and Claims

The Company may be involved in litigation and claims in the ordinary course of the business. As of March 31, ~~2022,~~2023, 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.

~~Table of Contents~~

~~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 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.~~16. Segment Reporting

The Company presents its business 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, 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~~two investments with direct ownership in commercial real estate with an emphasis on properties with stable cash flow.

•CRE Debt Securities—investments ~~currently consisting~~previously consisted 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~~currently includes a sub-portfolio of private equity funds.

•Corporate—includes corporate-level asset management and other fees including operating expenses, compensation and benefits and restructuring charges.

The Company primarily generates revenue from net interest income on the loan and preferred equity portfolio and ~~securities portfolios,~~ rental and other income from its net leased and multi-tenant office 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.assets. The Company’s income is primarily derived through the

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 months ended March 31, ~~2022~~2023 and ~~2021~~2022 (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		Total
Three Months Ended March 31, 2022
Three Months Ended March 31, 2023												Three Months Ended March 31, 2023
Net interest income (expense)	Net interest income (expense)	$	29,365	$	886	$	—	$	(866)	$	29,385	Net interest income (expense)	$	33,243	$	—	$	—	$	(289)	$	32,954
Property and other income	Property and other income	121		133		24,168		22		24,444		Property and other income	—		—		22,551		3,056		25,607
Property operating expense	Property operating expense	—		—		(6,724)		—		(6,724)		Property operating expense	—		—		(5,852)		—		(5,852)
Transaction, investment and servicing expense	Transaction, investment and servicing expense	(1,051)		—		(100)		27		(1,124)		Transaction, investment and servicing expense	(501)		—		(24)		(310)		(835)
Interest expense on real estate	Interest expense on real estate	—		—		(7,556)		—		(7,556)		Interest expense on real estate	—		—		(5,509)		—		(5,509)
Depreciation and amortization	Depreciation and amortization	—		—		(8,551)		(43)		(8,594)		Depreciation and amortization	—		—		(7,938)		(58)		(7,996)
Decrease of current expected credit loss reserve		866		—		—		—		866
Increase of current expected credit loss reserve												Increase of current expected credit loss reserve	(39,613)		—		—		—		(39,613)

Compensation and benefits	Compensation and benefits	—		—		—		(8,225)		(8,225)		Compensation and benefits	—		—		—		(8,805)		(8,805)
Operating expense	Operating expense	(152)		(40)		(32)		(4,125)		(4,349)		Operating expense	(4)		—		—		(3,469)		(3,473)

Other gain (loss), net		(129)		—		10,369		48		10,288

Other gain, net												Other gain, net	—		—		655		—		655
Income (loss) before equity in earnings of unconsolidated ventures and income taxes	Income (loss) before equity in earnings of unconsolidated ventures and income taxes	29,020		979		11,574		(13,162)		28,411		Income (loss) before equity in earnings of unconsolidated ventures and income taxes	(6,875)		—		3,883		(9,875)		(12,867)
Equity in earnings (loss) of unconsolidated ventures		25		—		—		—		25
Income tax benefit (expense)		63		—		(99)		—		(36)
Equity in earnings of unconsolidated ventures												Equity in earnings of unconsolidated ventures	9,055		—		—		—		9,055
Income tax expense												Income tax expense	(40)		(5)		(345)		—		(390)
Net income (loss)	Net income (loss)	$	29,108	$	979	$	11,475	$	(13,162)	$	28,400	Net income (loss)	$	2,140	$	(5)	$	3,538	$	(9,875)	$	(4,202)


	Senior and Mezzanine Loans and Preferred Equity		CRE Debt Securities		Net Leased and Other Real Estate		Corporate		Total
Three Months Ended March 31, 2022
Net interest income (expense)	$	29,365	$	886	$	—	$	(866)	$	29,385
Property and other income	121		133		24,168		22		24,444

Property operating expense	—		—		(6,724)		—		(6,724)
Transaction, investment and servicing expense	(1,051)		—		(100)		27		(1,124)
Interest expense on real estate	—		—		(7,556)		—		(7,556)
Depreciation and amortization	—		—		(8,551)		(43)		(8,594)
Decrease of current expected credit loss reserve	866		—		—		—		866

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



Other gain (loss), net	(129)		—		10,369		48		10,288
Income (loss) before equity in earnings of unconsolidated ventures and income taxes	29,020		979		11,574		(13,162)		28,411
Equity in earnings of unconsolidated ventures	25		—		—		—		25
Income tax benefit (expense)	63		—		(99)		—		(36)
Net income (loss)	$	29,108	$	979	$	11,475	$	(13,162)	$	28,400

The following table presents total assets by segment as of March 31, 2023 and December 31, 2022 (dollars in thousands):


Total Assets	Senior and Mezzanine Loans and Preferred Equity		CRE Debt Securities(1)		Net Leased and Other Real Estate		Corporate(2)		Total
March 31, 2023	$	3,445,340	$	15,415	$	842,203	$	301,055	$	4,604,013
December 31, 2022	3,580,912		15,459		864,856		289,162		4,750,389

5349

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
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 ~~income earned from 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.~~

~~The following table presents total assets by segment as of March 31, 2022~~PE Investments totaling $2.8 million and ~~December 31, 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
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 $16.2~~$3.0 million as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022, respectively.

(2)~~Includes PE Investments totaling $4.4 million as of March 31, 2022 and December 31, 2021.~~

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

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

~~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~~long-lived assets are presented as follows (dollars in thousands):


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Total income by geography:	Total income by geography:						Total income by geography:
United States	United States	$	73,445	$	70,951		United States	$	105,556	$	73,445
Europe	Europe	4,969		6,401			Europe	4,722		4,969

Total(1)	Total(1)	$	78,414	$	77,352		Total(1)	$	110,278	$	78,414


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Long-lived assets by geography:	Long-lived assets by geography:					Long-lived assets by geography:
United States	United States	$	548,749	$	553,368	United States	$	528,266	$	532,380
Europe	Europe	295,577		294,824		Europe	237,589		254,068
Total(2)	Total(2)	$	844,326	$	848,192	Total(2)	$	765,855	$	786,448

(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~~estate-related intangible assets, and excludes financial instruments and assets held for sale.

~~18.~~17. Earnings Per Share

The Company’s net income (loss) and weighted average shares outstanding for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 consist of the following (dollars in thousands, except per share data):


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Net income (loss)	Net income (loss)	$	28,400	$	(94,493)		Net income (loss)	$	(4,202)	$	28,400
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	(22)		226			Investment Entities	75		(22)
Operating Partnership	Operating Partnership	(654)		1,953			Operating Partnership	—		(654)
Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	$	27,724	$	(92,314)		Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	$	(4,127)	$	27,724

Numerator:	Numerator:						Numerator:
Net loss allocated to participating securities (non-vested shares)		$	(110)	$	(192)
Net (income) loss allocated to participating securities (non-vested shares)							Net (income) loss allocated to participating securities (non-vested shares)	$	—	$	(110)
Net income (loss) attributable to common stockholders	Net income (loss) attributable to common stockholders	$	27,614	$	(92,506)		Net income (loss) attributable to common stockholders	$	(4,127)	$	27,614

Denominator:	Denominator:						Denominator:
Weighted average shares outstanding - basic(1)	Weighted average shares outstanding - basic(1)	128,758		129,781			Weighted average shares outstanding - basic(1)	126,665		128,758
Weighted average shares outstanding - diluted(2)	Weighted average shares outstanding - diluted(2)	129,745		129,781			Weighted average shares outstanding - diluted(2)	126,665		129,745

Net income (loss) per common share - basic and diluted	Net income (loss) per common share - basic and diluted	$	0.21	$	(0.71)		Net income (loss) per common share - basic and diluted	$	(0.03)	$	0.21

(1)The outstanding shares used to calculate the weighted average basic shares outstanding exclude ~~981,632~~2,811,074 and ~~1,924,568~~981,632 of restricted stock awards as of March 31, ~~2022~~2023 and March 31, ~~2021,~~2022, 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.

(2)The calculation of diluted earnings per share for the three months ended March 31, 2023 excludes the effect of weighted average unvested non-participating restricted shares of 2,537,125 as the effect would be antidilutive.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~19.~~18. Subsequent Events

Dividends

In April ~~2022,~~2023, the Company paid a quarterly cash dividend of ~~$0.19~~$0.20 per share of its Class A common stock for the quarter ~~ending~~ended March 31, ~~2022,~~2023, to stockholders of record on March 31, ~~2022.~~2023.

Development Mezzanine Loan ~~Originations~~

~~Subsequent to~~ ~~March 31, 2022~~,In April 2023, the Company ~~funded~~ 6amended the Development Mezzanine Loan, bifurcating it into a $30.2 million Mezzanine A note (the “Mezzanine A Note”) and a $14.5 million Mezzanine B note (the “Mezzanine B Note”) to facilitate a new equity contribution from the borrower behind the Mezzanine A Note and ahead of the Mezzanine B Note. As part of the restructuring, the Company extended the terms of both the Mezzanine A Note and Mezzanine B Note to be conterminous with the senior ~~mortgage loans with a total commitment of~~ ~~$177.2 million. The average initial funded amount~~loan which was ~~$27.3 million and had a weighted average spread of 3.86% plus SOFR.~~

~~Stock Grant~~

~~Subsequent~~extended to March ~~31, 2022,~~2025, with an additional one-year extension option to March 2026. In connection with this amendment and restructuring of the loan in April 2023, during the first quarter of 2023, the Company ~~granted 1,456,366 shares~~recorded a specific CECL reserve of $14.5 million based on the estimated proceeds the Company expects to receive upon the resolution of the asset. Additionally, the Company placed the Mezzanine B Note on nonaccrual status in April 2023.

Share Repurchase Program

In April 2023, the Company’s board of directors authorized the Stock Repurchase Program under which the Company may repurchase up to $50.0 million of its outstanding Class A common stock ~~to certain employees of~~until April 30, 2024. The Stock Repurchase Program replaces the ~~Company.~~prior repurchase program authorization which expired on April 30, 2023.

5651

Table of Contents

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, ~~2021,~~2022, 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~~is 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 hold investments in CRE debt securities consisting of commercial mortgage-backed securities (“CMBS”) that are “B-pieces” of a CMBS securitization pool 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 (the “OP”). ~~At March 31, 2022, we owned 97.7% of the OP, as its sole managing member. The remaining 2.3% is owned as noncontrolling interests.~~

Our Target Assets

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

•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. 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 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.

~~Table of Contents~~

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

Table of Contents

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”).

We believe that events in the financial markets from time to time, including the ~~current and potential impacts~~ongoing impact of the COVID-19 pandemic, have created and will continue to create 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~~ us and 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

We present our business as one portfolio. We conduct our operations through 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 acquisition, development and construction (“ADC”) arrangements accounted for as equity method investments.~~

•Net Leased and Other Real 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~~two investments with direct ownership in commercial real estate, with an emphasis on properties with stable cash flow.

•CRE Debt Securities— securities investments ~~currently~~previously 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~~currently only includes ~~two sub-portfolios~~a sub-portfolio of private equity funds.

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

~~Our target assets are included in different business segments.~~

Significant Developments

During the three months ended March 31, ~~2022,~~2023, and through May ~~5, 2022,~~2, 2023, significant developments affecting our business and results of operations of our portfolio included the following:

Capital Resources

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

•Amended our Bank Credit Facility to reduce the aggregate amount of lender commitments from $300 million to $165 million. We also amended five of our Master Repurchase Facilities to 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 ~~$428~~$424.0 million of liquidity, consisting of ~~$263~~$259.0 million cash on hand and ~~$165~~$165.0 million available on our Bank Credit ~~Facility.~~Facility; and

•Declared and paid a first quarter $0.20 per share dividend on April 17, 2023.

Our Portfolio

•Generated ~~U.S.~~ GAAP net ~~income~~loss of ~~$27.7~~$4.1 million, or ~~$0.21~~$(0.03) per basic and diluted share, ~~and~~ Distributable Earnings (Loss) of $11.5 million, or $(0.09) per share and Adjusted Distributable Earnings of ~~$28.8~~$34.5 million or ~~$0.22~~$0.27 per share for the three months ended March 31, ~~2022;~~2023;

•~~Funded 16~~For the three months ended March 31, 2023, we:

◦Recorded specific current expected credit loss (“CECL”) reserves of $55.0 million related to two senior ~~mortgage~~ loans ~~with a total commitment of $560.7 million. The average initial funded amount was $29.6 million~~ and ~~had a weighted average spread of SOFR plus 3.54%. We also funded~~ one mezzanine ~~loan with~~loan; (refer to “Our Portfolio - Asset Specific Loan Summaries” section for further discussion);

◦We realized a ~~total commitment~~one-time gain from our ratable share of ~~$28.2~~dispute resolution proceeds of approximately $9.0 million ~~and an initial funded amount~~from the senior mezzanine lender of ~~$7.4 million. The~~our prior Los Angeles, California mixed-use project construction mezzanine loan ~~has a fixed~~and retained B-participation investment. In connection with the settlement, effective January 26, 2023, we have no further interest ~~rate of 12.00%;~~in the loan or investment;

•◦Received loan repayment proceeds of ~~$223.7~~$101.2 million from ~~five~~four loans;

•~~Sold~~In April 2023, we amended and restructured a ~~net lease property~~development mezzanine loan to bifurcate it into a $30.2 million mezzanine A note and ~~hotel property~~a $14.5 million mezzanine B note (the “Mezzanine B Note”). We subsequently placed the Mezzanine B Note on nonaccrual status (refer to “Our Portfolio - Asset Specific Loan Summaries” section for ~~a gross sales price of $19.6 million~~further discussion); and ~~$36.0 million, respectively, generating net proceeds of $10.7 million from the combined sales;~~

5853

Table of Contents

•Subsequent to March 31, ~~2022,~~2023, we ~~funded six senior mortgage~~placed the second of our two Long Island City, New York Office Senior Loans on nonaccrual status (refer to “Our Portfolio - Asset Specific Loan Summaries” section for further discussion).

Trends Affecting Our Business

Global Markets

The current global markets are characterized by volatility, driven by a tightening of monetary policy and geopolitical uncertainty, coupled with the ongoing impacts of COVID-19. In response to heightened inflation, the Federal Reserve continues to raise interest rates, which has tempered the loan financing market and created further uncertainty for the economy and for our borrowers and tenants. These current macroeconomic conditions may continue or intensify. This may cause the United States economy or other global economies to experience an economic slowdown or recession. While we monitor macroeconomic conditions closely, we believe there are too many uncertainties to predict and quantify the full impact that these factors may have on our business.

Office Property Market

The market for office properties was particularly negatively impacted by the COVID-19 pandemic and remains distressed, with increases in vacancy as newly developed or renovated properties become available for leasing and high overall vacancy rates due to the normalization of work from home and the hybrid attendance model. As a result of fewer employees commuting to their offices, businesses are re-evaluating their need for physical office space. To the extent certain borrowers are experiencing significant financial dislocation as a result of economic conditions, 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. Given the uncertainty in the office market, there is risk of future valuation impairment or investment loss on our loans ~~with a total commitment of $177.2 million. The average initial funded amount was $27.3 million and had a weighted average spread of SOFR plus 3.86%;~~secured by office properties.

•~~Subsequent to March 31, 2022, we received loan repayment proceeds of $98.2 million from four loans.~~

Factors Impacting Our Operating Results

~~Impact~~Our results of ~~COVID-19~~

~~The COVID-19 pandemic has negatively impacted~~operations are affected by a number of factors and depend primarily on, among other things, the ability of the borrowers of our assets to service our debt as it is due and payable, the ability of our tenants to pay rent and other amounts due under their leases, our ability to actively and effectively service any sub-performing and non-performing loans and other assets we may have from time to time in our portfolio, the market value of our assets and the supply of, and demand for, CRE ~~credit REITs across~~senior loans, mezzanine loans, preferred equity, debt securities, net leased properties and our other assets, and the ~~industry,~~level of our net operating income (“NOI”). Our net interest income, which includes the amortization of purchase premiums and the accretion of purchase discounts, varies primarily as ~~well as~~a result of changes in market interest rates, prepayment rates and frequency on our CRE loans and the ability of our borrowers to make scheduled interest payments. Interest rates and prepayment rates vary according to the type of investment, conditions in the financial markets, creditworthiness of our borrowers, competition and other ~~companies that own and operate commercial~~factors, none of which can be predicted with any certainty. Our net property operating income depends on our ability to maintain the historical occupancy rates of our real estate equity investments, ~~including~~lease currently available space and continue to attract new tenants.

Changes in fair value of our ~~company. As we manage the impact and uncertainties of the COVID-19 pandemic, cash preservation, liquidity and investment and portfolio management are our key priorities.~~assets

We consider and treat our assets as long-term investments. As a result, we do not expect that changes in market value will impact our operating results. However, at least on a quarterly basis, we assess both our ability and intent to hold such assets for the long-term. As part of this process, we monitor our assets for impairment. A change in our ability and/or intent to continue to ~~work closely with~~hold any of our ~~borrowers and tenants to address~~assets may result in our recognizing an impairment charge or realizing losses upon the ~~impact~~sale of COVID-19 on their 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.such investments.

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’ 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~~Changes 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 financingWith respect to ~~from, or in Russia and certain regions of Ukraine. Although we do not conduct any~~our proposed 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, in general, may ~~result in the following impacts to our business operations:~~over time cause:

–•the value of our fixed-rate investments ~~may~~to decrease;

–•prepayments on certain assets in our portfolio ~~may slow;~~to slow, thereby slowing the amortization of our purchase premiums and the accretion of our purchase discounts;

–•coupons on our floating and adjustable-rate mortgage loans ~~and CMBS may~~to reset, although on a delayed basis, to higher interest rates;

–•interest rate caps required by our borrowers to increase in cost;

•to the extent we use leverage to finance our assets, the interest expense associated with our borrowings to increase; and

Table of Contents

•to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to increase.

Conversely, decreases in interest rates, in general, may over time cause:

•the value of the fixed-rate assets in our portfolio to increase;

–•prepayments on certain assets in our portfolio to increase, thereby accelerating the amortization of our purchase premiums and the accretion of our purchase discounts;

•to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements ~~may increase;~~to decrease;

•coupons on our floating and adjustable-rate mortgage loans to reset, although on a delayed basis, to lower interest rates; and

–•~~disruptions~~ to ~~our borrowers’ and tenants’ ability~~the extent we use leverage to finance ~~their activities,~~our assets, the interest expense associated with our borrowings to decrease.

Credit risk

We are subject to varying degrees of credit risk in connection with our target assets. We seek to mitigate this risk by seeking to acquire high quality assets, at appropriate prices given anticipated and unanticipated losses and by employing a comprehensive review and asset selection process and by careful ongoing monitoring of acquired assets. Nevertheless, unanticipated credit losses could occur, which could adversely impact ~~their ability~~our operating results.

Size of investment portfolio

The size of our portfolio, as measured by the aggregate principal balance of our commercial mortgage loans, other commercial real estate-related debt investments and the other assets we own, is also a key revenue driver. Generally, as the size of our portfolio grows, the amount of interest income we earn increases. However, a larger portfolio may result in increased expenses to ~~make their monthly mortgage payments and meet their loan obligations.~~the extent that we incur additional interest expense to finance our assets.

~~Table of Contents~~

Our Portfolio

As of March 31, ~~2022,~~2023, our portfolio consisted of ~~125~~111 investments representing approximately ~~$4.6~~$4.1 billion in ~~book~~carrying 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 ~~110~~100 senior ~~mortgage~~ loans, mezzanine ~~loans~~ and preferred ~~equity investments~~loans and had a weighted average cash coupon of ~~3.7%~~3.8% and a weighted average all-in unlevered yield of ~~5.0%~~8.8%. Our net leased and other real estate consisted of approximately 6.4 million total square feet of space and total first quarter ~~2022 net operating income (“NOI”)~~2023 NOI of that portfolio was approximately ~~$17.1~~$16.3 million. Refer to “Non-GAAP Supplemental Financial Measures” below for further information on NOI.

As of March 31, ~~2022,~~2023, 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)	Carrying value (Consolidated)		Carrying value (at BRSP share)(2)		Net carrying value (Consolidated)(3)		Net carrying value (at BRSP share)(4)
Our Portfolio	Our Portfolio										Our Portfolio
Senior mortgage loans		102	$	3,629,415	$	3,629,415	$	894,559	$	894,559
Senior loans											Senior loans	93	$	3,258,992	$	3,258,992	$	802,416	$	802,416
Mezzanine loans~~(5)~~	Mezzanine loans~~(5)~~	7	129,565		129,565		129,565		129,565		Mezzanine loans~~(5)~~	6	101,006		101,006		101,006		101,006
Preferred equity~~(6)~~	Preferred equity~~(6)~~	1	16,200		16,200		16,200		16,200		Preferred equity~~(6)~~	1	22,723		22,723		22,723		22,723
Subtotal	Subtotal	110	3,775,180		3,775,180		1,040,324		1,040,324		Subtotal	100	3,382,721		3,382,721		926,145		926,145
Net leased real estate	Net leased real estate	8	660,561		660,561		182,781		182,781		Net leased real estate	8	589,411		589,411		144,611		144,611
Other real estate	Other real estate	2	177,886		164,380		1,290		933		Other real estate	2	171,951		158,876		(1,439)		(1,616)
CRE debt securities		4	36,154		36,154		36,154		36,154
Private equity interests	Private equity interests	1	4,406		4,406		4,406		4,406		Private equity interests	1	2,790		2,790		2,790		2,790
Total/Weighted average Our Portfolio	Total/Weighted average Our Portfolio	125	$	4,654,187	$	4,640,681	$	1,264,955	$	1,264,598	Total/Weighted average Our Portfolio	111	$	4,146,873	$	4,133,798	$	1,072,107	$	1,071,930

(1)Count for net leased real estate and other real estate represents number of investments.

(2)~~Book~~Carrying value at our share represents the proportionate ~~book~~carrying value based on ownership by asset as of March 31, ~~2022.~~2023.

(3)Net ~~book~~carrying value represents ~~book~~carrying value less any associated financing as of March 31, ~~2022.~~2023.

(4)Net ~~book~~carrying value at our share represents the proportionate ~~book~~carrying value based on asset ownership less any associated financing based on ownership as of March 31, ~~2022~~2023.

~~(5)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 $16.2 million~~Table of ~~book value at our share attributable to related equity participation interests.~~Contents

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 held for investment for impairment quarterly, we evaluate loans held for investment to determine if 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 held for investment are rated “1” through “5,” from less risk to greater risk. At the time of origination or purchase, loans held for investment are ranked as a “3” and will move accordingly going forward based on the ratings which are defined as follows:

~~Table of Contents~~

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 an 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 rankings each quarter. We believe the long-term impacts of the COVID-19 pandemic remain uncertain, and therefore continue to represent a risk to our portfolio. During the first quarter of ~~2022, we added 17 new~~2023, two loans changed to ~~our portfolio with~~ a risk ranking of ~~3. Additionally, one loan improved~~5 from a risk ranking of 4, two loans changed to a risk ranking of 4 from a risk ranking of 3, and one loan changed to a risk ranking of 3 ~~and separately another loan declined~~ from a 4 risk ranking of 2. Additionally, one loan changed to a risk ranking of 4 from a risk ranking of 5 and two loans changed to a risk ~~ranking. However,~~ranking of 3 from a risk ranking of 4. Two loans with a risk ranking of 2 and one loan with a risk ranking of 3 were repaid, and one mezzanine loan with a risk ranking of 5 was resolved. As a result, our weighted average risk ranking at March 31, ~~2022~~2023 is unchanged from December 31, ~~2021~~2022 at ~~3.1.~~3.2.

Table of Contents

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~~tables provides a summary of our senior ~~and~~loans, mezzanine loans and preferred equity based on our internal risk rankings, collateral property type and geographic distribution as of March 31, ~~2022~~2023 (dollars in thousands):


			Carrying Value (at BRSP share)(1)												Carrying Value (at BRSP share)(1)
Risk Ranking	Risk Ranking	Count	Senior mortgage loans(2)		Mezzanine loans		Preferred equity		Total		% of Our Portfolio		Risk Ranking	Count	Senior loans(2)		Mezzanine loans		Preferred Equity		Total		% of Total

2	2	15	$	414,035	$	—	$	—	$	414,035	11.0	%	2	4	$	119,708	$	—	$	—	$	119,708	3.5	%
3	3	80	2,489,198		48,432		—		2,537,630		67.2	%	3	83	2,637,311		29,249		22,723		2,689,283		79.5	%
4	4	13	755,097		40,098		16,200		811,395		21.5	%	4	9	434,013		13,478		—		447,491		13.2	%
5	5	2	—		12,120		—		12,120		0.3	%	5	4	96,000		30,239		—		126,239		3.7	%
		110	$	3,658,330	$	100,650	$	16,200	$	3,775,180	100.0	%		100	$	3,287,032	$	72,966	$	22,723	$	3,382,721	100.0	%

Weighted average risk ranking	Weighted average risk ranking										3.1		Weighted average risk ranking										3.2

(1)Carrying value at our share represents the proportionate ~~book~~carrying value based on ownership by asset as of March 31, ~~2022.~~2023.

(2)Includes one mezzanine loan totaling ~~$28.9~~$28.0 million where we are also the senior lender.


	Carrying value (at BRSP share)
Collateral property type	Count	Senior loans		Mezzanine loans		Preferred Equity		Total		% of Total
Multifamily	56	$	1,579,925	$	59,488	$	22,723	$	1,662,136	49.1	%
Office	33	1,093,804		1,028		—		1,094,832		32.4	%
Hotel	5	382,232		40,490		—		422,722		12.5	%
Other (Mixed-use)(1)	3	151,699		—		—		151,699		4.5	%
Industrial	3	51,332		—		—		51,332		1.5	%
Total	100	$	3,258,992	$	101,006	$	22,723	$	3,382,721	100.0	%

(1)Other includes commercial and residential development and predevelopment assets.


	Carrying value (at BRSP share)
Region	Count	Senior loans		Mezzanine loans		Preferred Equity		Total		% of Total
US West	42	$	1,455,803	$	83,079	$	22,723	$	1,561,605	46.2	%
US Southwest	37	1,113,392		4,449		—		1,117,841		33.0	%
US Northeast	13	484,221		13,478		—		497,699		14.7	%
US Southeast	8	205,576		—		—		205,576		6.1	%

Total	100	$	3,258,992	$	101,006	$	22,723	$	3,382,721	100.0	%

Table of Contents

The following table provides asset level detail for our senior ~~and~~loans, mezzanine loans and preferred equity as of March 31, ~~2022~~2023 (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)		Q1 Risk ranking(5)			Loan 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
Multifamily														Multifamily
Loan 1(6)	Loan 1(6)	Hotel	1/2/2018	San Jose, CA	$	184,959	$	184,959	Floating	4.8%	5.3%	11/9/2026	74%		4	Loan 1(6)		Senior		6/18/2019		Santa Clara, CA			$	57,442			$	57,442		Floating		4.4%		9.5%		6/18/2024		65%		4
Loan 2	Loan 2	Multifamily	6/21/2019	Milpitas, CA	184,565		184,234		Floating	3.1%	5.5%	7/9/2024	72%		3	Loan 2		Senior		7/19/2021		Dallas, TX			50,034				49,999			Floating		3.4%		8.7%		8/9/2026		74%		3
Loan 3	Loan 3	Office	12/7/2018	Carlsbad, CA	120,000		120,000		Floating	4.3%	4.9%	12/9/2023	73%		3	Loan 3		Senior		3/8/2022		Austin, TX			49,972				50,103			Floating		3.3%		8.7%		3/9/2027		75%		3
Loan 4														Loan 4			Senior		5/17/2022		Las Vegas, NV		49,448				49,758				Floating		3.6%		8.9%		6/9/2027		74%		3
Loan 5														Loan 5			Senior		5/26/2021		Las Vegas, NV		46,104				46,101				Floating		3.5%		8.7%		6/9/2026		70%		3
Loan 6														Loan 6			Senior		11/30/2021		Phoenix, AZ		44,571				44,572				Floating		3.5%		9.1%		12/9/2026		74%		4
Loan 7														Loan 7			Senior		2/3/2021		Arlington, TX		43,680				43,580				Floating		3.7%		9.0%		2/9/2026		81%		3
Loan 8														Loan 8			Senior		3/1/2021		Richardson, TX		43,276				43,411				Floating		3.4%		8.5%		3/9/2026		75%		3
Loan 9														Loan 9			Senior		7/15/2021		Jersey City, NJ		42,919				43,000				Floating		3.0%		8.2%		8/9/2026		66%		2
Loan 10														Loan 10			Senior		12/21/2020		Austin, TX		42,745				42,850				Floating		3.7%		8.8%		1/9/2026		54%		3
Subtotal top 10 multifamily														Subtotal top 10 multifamily									$	470,191			$	470,816			14% of total loans

Loan 11														Loan 11			Senior		3/22/2021		Fort Worth, TX		$	41,247			$	41,286			Floating		3.6%		8.8%		4/9/2026		83%		3
Loan 12														Loan 12			Senior		12/7/2021		Denver, CO		39,237				39,372				Floating		3.3%		8.6%		12/9/2026		74%		3
Loan 13														Loan 13			Senior		7/15/2021		Dallas, TX		39,136				39,206				Floating		3.1%		8.5%		8/9/2026		77%		3
Loan 14														Loan 14			Senior		3/31/2022		Long Beach, CA		37,223				37,429				Floating		3.4%		8.7%		4/9/2027		74%		3
Loan 15														Loan 15			Senior		3/31/2022		Louisville, KY		37,201				37,326				Floating		3.7%		9.1%		4/9/2027		72%		3
Loan 16														Loan 16			Senior		7/12/2022		Irving, TX		36,847				37,096				Floating		3.6%		8.9%		8/9/2027		73%		3
Loan 17														Loan 17			Senior		9/28/2021		Carrollton, TX		36,098				36,282				Floating		3.2%		8.4%		10/9/2025		73%		3
Loan 18														Loan 18			Senior		1/18/2022		Dallas, TX		35,542				35,575				Floating		3.5%		8.9%		2/9/2027		75%		3
Loan 19														Loan 19			Senior		1/12/2022		Los Angeles, CA		35,310				35,551				Floating		3.4%		8.5%		2/9/2027		65%		3
Loan 20														Loan 20			Senior		12/29/2020		Fullerton, CA		34,776				34,860				Floating		3.8%		8.9%		1/9/2026		70%		3
Subtotal top 20 multifamily														Subtotal top 20 multifamily									$	842,808			$	844,799			25% of total loans

Loan 21														Loan 21			Senior		3/16/2021		Fremont, CA		$	33,550			$	33,550			Floating		3.5%		8.8%		4/9/2026		76%		3
Loan 22														Loan 22			Senior		7/29/2021		Phoenix, AZ		32,408				32,562				Floating		3.4%		8.5%		8/9/2026		74%		3
Loan 23														Loan 23			Senior		3/31/2021		Mesa, AZ		31,403				31,434				Floating		3.8%		9.0%		4/9/2026		83%		3
Loan 24(7)														Loan 24(7)			Mezzanine		12/3/2019		Milpitas, CA		30,239				44,716				Fixed		8.0%		13.3%		12/3/2024		58% - 85%		5
Loan 25														Loan 25			Senior		4/29/2021		Las Vegas, NV		29,697				29,736				Floating		3.2%		8.3%		5/9/2026		76%		2
Loan 26														Loan 26			Senior		4/15/2022		Mesa, AZ		29,142				29,354				Floating		3.4%		8.5%		5/9/2027		75%		3
Loan 27														Loan 27			Senior		7/13/2021		Plano, TX		28,935				28,994				Floating		3.2%		8.3%		2/9/2025		82%		3

6158

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 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	Loan 28	Multifamily	3/25/2021	Fort Worth, TX	37,633	37,807	Floating	3.3%	4.1%	4/9/2026	82%		3	Loan 28		Senior		5/19/2022		Denver, CO			28,152			28,327		Floating		3.5%		8.8%		6/9/2027		73%		3
Loan 29	Loan 29	Multifamily	7/15/2021	Dallas, TX	35,579	35,860	Floating	3.1%	4.1%	8/9/2026	77%		3	Loan 29		Senior		5/27/2021		Houston, TX			27,977			28,000		Floating		3.0%		8.4%		6/9/2026		67%		3
Loan 30	Loan 30	Office	9/28/2021	Reston, VA	35,560	35,887	Floating	4.0%	5.0%	10/9/2026	68%		3	Loan 30		Senior		2/17/2022		Long Beach, CA			27,746			27,901		Floating		3.4%		8.7%		3/9/2027		67%		3
Loan 31	Loan 31	Multifamily	3/31/2022	Long Beach, CA	35,198	35,636	Floating	3.4%	4.2%	4/9/2027	74%		3	Loan 31		Senior		8/31/2021		Glendale, AZ			27,345			27,486		Floating		3.3%		8.4%		9/9/2026		75%		3
Loan 32	Loan 32	Office	11/17/2021	Dallas, TX	34,902	35,250	Floating	3.9%	4.8%	12/9/2025	61%		3	Loan 32		Senior		12/16/2021		Fort Mill, SC			26,822			26,976		Floating		3.3%		8.4%		1/9/2027		71%		3
Loan 33		Multifamily	12/29/2020	Fullerton, CA	34,664	34,860	Floating	3.8%	4.8%	1/9/2026	70%		3
Loan 33(6)												Loan 33(6)			Mezzanine		2/8/2022		Las Vegas, NV		24,799			24,887			Fixed		7.0%		12.3%		2/8/2027		56% - 79%		3
Loan 34	Loan 34	Multifamily	1/18/2022	Dallas, TX	34,351	34,596	Floating	3.5%	4.4%	2/9/2027	75%		3	Loan 34		Senior		12/21/2021		Phoenix, AZ			24,720			24,876		Floating		3.6%		8.7%		1/9/2027		75%		3
Loan 35	Loan 35	Office	6/16/2017	Miami, FL	34,036	33,696	Floating	4.9%	5.6%	7/9/2022	68%		3	Loan 35		Senior		7/12/2022		Irving, TX			24,505			24,674		Floating		3.6%		8.9%		8/9/2027		72%		3
Loan 36	Loan 36	Multifamily	1/12/2022	Los Angeles, CA	33,984	34,380	Floating	3.4%	4.0%	2/9/2027	65%		3	Loan 36		Senior		3/8/2022		Glendale, AZ			23,768			23,937		Floating		3.5%		8.6%		3/9/2027		73%		3
Loan 37	Loan 37	Multifamily	9/28/2021	Carrollton, TX	33,590	33,908	Floating	3.1%	3.9%	10/9/2025	73%		3	Loan 37		Senior		7/1/2021		Aurora, CO			23,647			23,753		Floating		3.2%		8.3%		7/9/2026		73%		3
Loan 38	Loan 38	Multifamily	3/16/2021	Fremont, CA	33,158	33,380	Floating	3.5%	4.4%	4/9/2026	76%		3	Loan 38		Senior		3/31/2022		Phoenix, AZ			23,098			23,265		Floating		3.7%		8.8%		4/9/2027		75%		3
Loan 39	Loan 39	Office	6/2/2021	South Pasadena, CA	32,319	32,435	Floating	4.9%	5.9%	6/9/2026	69%		3	Loan 39		Senior		11/4/2021		Austin, TX			22,900			23,031		Floating		3.4%		8.5%		11/9/2026		71%		3
Loan 40	Loan 40	Multifamily	3/31/2021	Mesa, AZ	30,961	31,107	Floating	3.7%	4.6%	4/9/2026	83%		3	Loan 40		Preferred		11/30/2022		Milpitas, CA			22,723			22,941		Fixed		6.0%		12.1%		12/1/2032		n/a		3
Loan 41	Loan 41	Multifamily	7/29/2021	Phoenix, AZ	30,924	31,200	Floating	3.3%	4.0%	8/9/2026	75%		3	Loan 41		Senior		7/13/2021		Oregon City, OR			21,720			21,764		Floating		3.4%		8.5%		8/9/2026		73%		3
Loan 42	Loan 42	Office	3/28/2019	San Jose, CA	30,762	30,762	Floating	3.0%	5.7%	4/9/2024	64%		2	Loan 42		Senior		6/22/2021		Phoenix, AZ			21,163			21,262		Floating		3.3%		8.4%		7/9/2026		75%		2
Loan 43	Loan 43	Office	4/30/2021	San Diego, CA	30,444	30,700	Floating	3.6%	4.3%	5/9/2026	55%		3	Loan 43		Senior		9/22/2021		Denton, TX			19,709			19,761		Floating		3.3%		8.4%		10/9/2025		70%		3
Loan 44	Loan 44	Multifamily	5/5/2021	Dallas. TX	29,584	29,749	Floating	3.4%	4.3%	5/9/2026	68%		3	Loan 44		Senior		1/12/2022		Austin, TX			19,684			19,769		Floating		3.4%		8.7%		2/9/2027		75%		3
Loan 45	Loan 45	Multifamily	4/29/2021	Las Vegas, NV	29,094	29,241	Floating	3.1%	3.9%	5/9/2026	76%		2	Loan 45		Senior		8/6/2021		La Mesa, CA			19,535			19,570		Floating		3.0%		8.3%		8/9/2025		70%		3
Loan 46	Loan 46	Office	11/19/2021	Gardena, CA	28,136	28,505	Floating	3.5%	4.3%	12/9/2026	69%		3	Loan 46		Senior		12/21/2021		Gresham, OR			19,378			19,455		Floating		3.6%		8.9%		1/9/2027		74%		3
Loan 47	Loan 47	Multifamily	7/13/2021	Plano, TX	27,927	28,090	Floating	3.1%	3.9%	2/9/2025	82%		3	Loan 47		Senior		9/1/2021		Bellevue, WA			19,267			19,308		Floating		3.0%		8.3%		9/9/2025		64%		3
Loan 48	Loan 48	Multifamily	5/27/2021	Houston, TX	27,836	28,000	Floating	3.0%	4.0%	6/9/2026	67%		3	Loan 48		Senior		6/24/2021		Phoenix, AZ			19,038			19,071		Floating		3.4%		8.7%		7/9/2026		63%		3
Loan 49	Loan 49	Office	10/21/2021	Blue Bell, PA	27,797	27,930	Floating	3.7%	4.9%	11/9/2023	67%		3	Loan 49		Senior		5/5/2022		Charlotte, NC			18,396			18,500		Floating		3.5%		8.8%		5/9/2027		61%		3
Loan 50	Loan 50	Office	3/31/2022	Blue Bell, PA	27,130	27,447	Floating	4.2%	5.5%	4/9/2025	59%		3	Loan 50		Senior		7/14/2021		Salt Lake City, UT			18,279			18,315		Floating		3.4%		8.5%		8/9/2026		73%		3
Loan 51	Loan 51	Multifamily	12/16/2021	Fort Mill, SC	25,852	26,100	Floating	3.2%	3.9%	1/9/2027	71%		3	Loan 51		Senior		4/29/2022		Tacoma, WA			17,744			17,852		Floating		3.3%		8.6%		5/9/2027		72%		3
Loan 52	Loan 52	Multifamily	8/31/2021	Glendale, AZ	25,829	26,076	Floating	3.2%	3.9%	9/9/2026	75%		3	Loan 52		Senior		6/25/2021		Phoenix, AZ			17,189			17,263		Floating		3.2%		8.3%		7/9/2026		75%		3
Loan 53	Loan 53	Office	2/26/2019	Charlotte, NC	25,814	26,052	Floating	3.3%	3.9%	7/9/2025	56%		2	Loan 53		Senior		7/21/2021		Durham, NC			15,083			15,150		Floating		3.3%		8.4%		8/9/2026		58%		3
Loan 54	Loan 54	Multifamily	2/17/2022	Long Beach, CA	25,122	25,415	Floating	3.4%	4.2%	3/9/2027	67%		3	Loan 54		Senior		2/11/2021		Provo, UT			14,039			14,082		Floating		3.9%		9.0%		3/9/2026		72%		3
Loan 55	Loan 55	Office	11/23/2021	Oakland, CA	24,762	25,000	Floating	4.2%	5.1%	12/9/2026	57%		3	Loan 55		Senior		3/8/2022		Glendale, AZ			11,079			11,158		Floating		3.5%		8.6%		3/9/2027		73%		3
Loan 56	Loan 56	Office	9/26/2019	Salt Lake City, UT	24,688	24,765	Floating	2.7%	5.0%	10/9/2024	72%		4	Loan 56		Mezzanine		7/30/2014		Various - TX			4,449			4,449		Fixed		9.5%		9.5%		8/11/2024		71% - 83%		3
Total/Weighted average multifamily loans												Total/Weighted average multifamily loans									$	1,662,136		$	1,681,928		49% of total loans		3.6%		8.9%		3.4 years				3.0

6259

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 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)

Office														Office
Loan 57	Loan 57	Multifamily	5/13/2021	Phoenix, AZ	24,604		24,792		Floating	3.1%	3.8%	6/9/2026	76%		2	Loan 57		Senior		2/17/2022		Boston, MA			$	80,969			$	81,420		Floating		3.8%		9.1%		3/9/2027		54%		3
Loan 58	Loan 58	Office	12/7/2021	Hillsboro, OR	24,271		24,511		Floating	3.9%	4.8%	12/9/2024	68%		3	Loan 58		Senior		12/7/2018		Carlsbad, CA			76,411				76,411			Floating		4.4%		9.3%		12/9/2023		73%		3
Loan 59	Loan 59	Multifamily	12/21/2021	Phoenix, AZ	24,072		24,325		Floating	3.5%	4.3%	1/9/2027	75%		3	Loan 59		Senior		8/28/2018		San Jose, CA			73,147				73,147			Floating		2.5%		7.6%		8/28/2025		75%		3
Loan 60	Loan 60	Multifamily	1/29/2021	Charlotte, NC	23,354		23,500		Floating	3.5%	4.3%	2/9/2026	76%		3	Loan 60		Senior		1/19/2021		Phoenix, AZ			72,229				72,460			Floating		3.7%		8.8%		2/9/2026		70%		3
Loan 61	Loan 61	Multifamily	3/31/2022	Louisville, KY	23,220		23,600		Floating	3.7%	4.6%	4/9/2027	72%		3	Loan 61		Senior		2/13/2019		Baltimore, MD			56,730				56,730			Floating		3.6%		8.6%		2/9/2025		74%		4
Loan 62	Loan 62	Multifamily	3/31/2022	Phoenix, AZ	23,005		23,265		Floating	3.7%	4.3%	4/9/2027	75%		3	Loan 62		Senior		5/23/2022		Plano, TX			40,143				40,300			Floating		4.3%		9.4%		6/9/2027		64%		3
Loan 63	Loan 63	Multifamily	3/8/2022	Glendale, AZ	22,990		23,260		Floating	3.5%	4.1%	3/9/2027	73%		3	Loan 63		Senior		4/27/2022		Plano, TX			39,310				39,434			Floating		4.1%		9.3%		5/9/2027		70%		3
Loan 64	Loan 64	Office	9/16/2019	San Francisco, CA	22,948		22,951		Floating	3.2%	5.7%	10/9/2024	72%		3	Loan 64		Senior		11/23/2021		Tualatin, OR			38,945				39,102			Floating		4.0%		9.3%		12/9/2026		66%		4
Loan 65	Loan 65	Multifamily	7/1/2021	Aurora, CO	22,932		23,124		Floating	3.1%	3.9%	7/9/2026	73%		3	Loan 65		Senior		9/28/2021		Reston, VA			36,677				36,784			Floating		4.1%		9.4%		10/9/2026		71%		3
Loan 66	Loan 66	Multifamily	3/25/2021	San Jose, CA	22,499		22,650		Floating	3.7%	4.4%	4/9/2026	70%		2	Loan 66		Senior		11/17/2021		Dallas, TX			36,172				36,309			Floating		4.0%		9.3%		12/9/2025		61%		3
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
Subtotal top 10 office loans														Subtotal top 10 office loans									$	550,733			$	552,097			16% of total loans

Loan 67(8)														Loan 67(8)			Senior		4/5/2019		L.I. City, NY		$	35,000			$	68,330			Floating		3.3%		8.3%		4/9/2024		58%		5
Loan 68(9)														Loan 68(9)			Senior		5/29/2019		L.I. City, NY		34,000				68,432				n/a/(9)		n/a/(9)		n/a/(9)		6/9/2024		59%		5
Loan 69	Loan 69	Office	8/27/2019	San Francisco, CA	21,508		21,509		Floating	2.8%	5.4%	9/9/2024	73%		4	Loan 69		Senior		4/7/2022		San Jose, CA			33,572				33,750			Floating		4.2%		9.5%		4/9/2027		70%		3
Loan 70	Loan 70	Office	7/30/2021	Denver, CO	21,474		21,705		Floating	4.3%	5.1%	8/9/2026	66%		3	Loan 70		Senior		6/2/2021		South Pasadena, CA			33,136				33,091			Floating		4.9%		10.3%		6/9/2026		69%		3
Loan 71	Loan 71	Multifamily	7/13/2021	Oregon City, OR	21,227		21,353		Floating	3.3%	4.0%	8/9/2026	73%		3	Loan 71		Senior		4/30/2021		San Diego, CA			31,237				31,365			Floating		3.6%		8.7%		5/9/2026		55%		3
Loan 72	Loan 72	Multifamily	6/22/2021	Phoenix, AZ	21,081		21,262		Floating	3.2%	3.9%	7/9/2026	75%		2	Loan 72		Senior		6/16/2017		Miami, FL			30,348				30,008			Floating		5.8%		10.6%		6/9/2023		73%		3
Loan 73	Loan 73	Multifamily	2/25/2021	Raleigh, NC	20,916		21,072		Floating	3.3%	4.1%	3/9/2026	76%		2	Loan 73		Senior		11/19/2021		Gardena, CA			28,296				28,505			Floating		3.5%		8.7%		12/9/2026		69%		3
Loan 74	Loan 74	Multifamily	3/31/2021	San Antonio, TX	20,007		20,148		Floating	3.1%	3.9%	4/9/2026	77%		3	Loan 74		Senior		3/31/2022		Blue Bell, PA			27,975				27,988			Floating		4.2%		10.0%		4/9/2025		59%		3
Loan 75	Loan 75	Multifamily	9/22/2021	Denton, TX	19,226		19,351		Floating	3.2%	4.0%	10/9/2025	70%		3	Loan 75		Senior		10/21/2021		Blue Bell, PA			27,930				27,930			Floating		3.8%		8.9%		11/9/2023		67%		3
Loan 76		Multifamily	12/21/2021	Gresham, OR	19,020		19,199		Floating	3.5%	4.5%	1/9/2027	74%		3
Loan 76(10)														Loan 76(10)			Senior		7/12/2019		Washington, D.C.		27,000				56,935				n/a/(10)		n/a/(10)		n/a/(10)		8/9/2024		68%		5
Subtotal top 20 office loans														Subtotal top 20 office loans									$	859,227			$	958,431			27% of total loans

Loan 77	Loan 77	Hotel	7/30/2020	Bloomington, MN	18,843		18,843		Floating	5.0%	6.0%	5/9/2022	64%		3	Loan 77		Senior		2/26/2019		Charlotte, NC			$	25,929			$	26,052		Floating		3.3%		8.3%		7/9/2025		51%		2
Loan 78	Loan 78	Multifamily	8/6/2021	La Mesa, CA	18,830		18,957		Floating	2.9%	3.8%	8/9/2025	70%		3	Loan 78		Senior		11/23/2021		Oakland, CA			24,906				25,000			Floating		4.3%		9.6%		12/9/2026		57%		4
Loan 79	Loan 79	Multifamily	1/12/2022	Austin, TX	18,787		18,977		Floating	3.4%	4.2%	2/9/2027	75%		3	Loan 79		Senior		12/7/2021		Hillsboro, OR			24,413				24,511			Floating		4.0%		9.3%		12/9/2024		71%		3
Loan 80	Loan 80	Office	10/29/2020	Denver, CO	18,573		18,708		Floating	3.6%	4.7%	11/9/2025	64%		3	Loan 80		Senior		9/16/2019		San Francisco, CA			23,465				23,465			Floating		3.3%		8.3%		10/9/2024		82%		3
Loan 81	Loan 81	Multifamily	6/24/2021	Phoenix, AZ	18,388		18,548		Floating	3.4%	4.3%	7/9/2026	63%		3	Loan 81		Senior		7/30/2021		Denver, CO			22,863				22,986			Floating		4.4%		9.5%		8/9/2026		66%		3
Loan 82	Loan 82	Multifamily	9/1/2021	Bellevue, WA	18,110		18,250		Floating	2.9%	3.9%	9/9/2025	64%		3	Loan 82		Senior		8/27/2019		San Francisco, CA			22,121				22,121			Floating		2.9%		8.0%		9/9/2024		79%		4
Loan 83	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 83		Senior		10/29/2020		Denver, CO			18,657				18,708			Floating		3.7%		8.8%		11/9/2025		64%		3
Loan 84	Loan 84	Multifamily	6/25/2021	Phoenix, AZ	16,740		16,878		Floating	3.2%	3.9%	7/9/2026	75%		3	Loan 84		Senior		10/13/2021		Burbank, CA			15,910				16,011			Floating		4.0%		9.1%		11/9/2026		57%		3
Loan 85	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 85		Senior		8/31/2021		Los Angeles, CA			15,183				15,229			Floating		4.6%		9.9%		9/9/2026		58%		3
Loan 86	Loan 86	Multifamily	11/24/2020	Tucson, AZ	15,863		15,873		Floating	3.6%	4.7%	12/9/2025	75%		2	Loan 86		Senior		11/16/2021		Charlotte, NC			15,120				15,223			Floating		4.5%		9.6%		12/9/2026		67%		3
Loan 87	Loan 87	Multifamily	3/28/2022	Los Angeles, CA	15,751		15,949		Floating	3.6%	4.4%	4/9/2027	70%		3	Loan 87		Senior		11/10/2021		Richardson, TX			13,486				13,507			Floating		4.1%		9.4%		12/9/2026		71%		3
Loan 88	Loan 88	Multifamily	3/5/2021	Tucson, AZ	15,694		15,737		Floating	3.7%	4.6%	3/9/2026	72%		2	Loan 88		Senior		9/26/2019		Salt Lake City, UT			12,524				12,524			Floating		2.7%		7.8%		10/9/2024		72%		3
Loan 89	Loan 89	Office	10/13/2021	Burbank, CA	15,362		15,538		Floating	3.9%	4.7%	11/9/2026	57%		3	Loan 89		Mezzanine		2/13/2023		Baltimore, MD			1,028				1,028			Fixed		n/a/(11)		13.0%		2/7/2025		74% - 75%		4
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
Total/Weighted average office loans														Total/Weighted average office loans									$	1,094,832			$	1,194,796			32 % of total loans		3.6%		8.5%		2.6 years				3.3

6360

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


	Loan 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)

Hotel
Loan 90	Senior	1/2/2018	San Jose, CA	$	189,298	$	189,298	Floating	4.8%	9.6%	11/9/2026	79%	4
Loan 91	Senior	6/28/2018	Berkeley, CA	119,934		120,000		Floating	3.2%	8.3%	7/9/2025	66%	3
Loan 92	Senior	6/25/2018	Englewood, CO	73,000		73,000		Floating	3.5%	8.3%	2/9/2025	62%	3
Loan 93	Mezzanine	9/23/2019	Berkeley, CA	28,040		28,040		Fixed	11.5%	11.5%	7/9/2025	66% - 81%	3
Loan 94	Mezzanine	1/9/2017	New York, NY	12,450		12,330		Floating	11.0%	16.8%	12/15/2023	67% - 80%	4
Total/Weighted average hotel loans				$	422,722	$	422,668		4.7%	9.3%	2.8 years		3.5

Other (Mixed-use)
Loan 95	Senior	10/24/2019	Brooklyn, NY	$	77,669	$	77,669	Floating	4.2%	9.2%	11/9/2024	70%	3
Loan 96	Senior	1/13/2022	New York, NY	45,516		45,705		Floating	3.5%	8.8%	2/9/2027	67%	3
Loan 97	Senior	5/3/2022	Brooklyn, NY	28,514		28,665		Floating	4.4%	9.7%	5/9/2027	68%	3
Total/Weighted average other (mixed-use) loans				$	151,699	$	152,039		4.0%	9.2%	2.8 years		3.0

Industrial
Loan 98	Senior	7/13/2022	Ontario, CA	$	23,353	$	23,539	Floating	3.3%	8.4%	8/9/2027	66%	3
Loan 99	Senior	3/25/2022	City of Industry, CA	16,996		17,096		Floating	3.4%	8.7%	4/9/2027	67%	3
Loan 100	Senior	3/21/2022	Commerce, CA	10,983		11,040		Floating	3.3%	8.6%	4/9/2027	71%	3
Total/Weighted average industrial loans				$	51,332	$	51,675		3.3%	8.5%	4.2 years		3.0

Total/Weighted average senior and mezzanine loans and preferred equity - Our Portfolio				$	3,382,721	$	3,503,106		3.8%	8.8%	3.0 years		3.2

(1)Represents carrying values at our share as of March 31, ~~2022.~~2023.

(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 were ~~0.45%~~4.86% and ~~0.30%~~4.80%, respectively, as of March 31, ~~2022.~~2023.

(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 March 31, ~~2022,~~2023, 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 March 31, ~~2022.~~2023.

(6)Construction senior loans’ loan-to-value reflect the total commitment amount of the loan divided by 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.~~loan-to-value. 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)Subsequent to March 31, 2023, $14.5 million of unpaid principal balance relating to Loan ~~109 is~~24 was placed on nonaccrual status; as such, no income will be recognized on this portion of the loan beginning in April 2023.

(8)Subsequent to March 31, 2023, Loan 67 was placed on nonaccrual status; as such, no income will be recognized beginning in April 2023.

(9)Loan 68 was placed on nonaccrual status ~~as of March 31,~~in September 2022; as such, no income is being recognized.

~~(8)~~(10)~~Represents equity participation interest related to a preferred equity investment.~~Loan 76 was placed on nonaccrual status in February 2023; as such, no income is being recognized.

~~(9)~~(11)~~Weighted average calculation for preferred equity excludes equity participation interests.~~

~~The following table details the types of properties securing our senior~~Loan 89 has a payment-in-kind provision and ~~mezzanine loans and preferred equityand geographic distribution as of March 31, 2022 (dollars in thousands):~~

Book value (at BRSP share)
Collateral property type Count Senior mortgage loans Mezzanine loans and preferred equity Total % of Total
Multifamily 68 $ 1,936,506 $ 88,531 $ 2,025,037 53.6 %
Office 30 1,150,948 — 1,150,948 30.5 %
Hotel 6 396,467 41,034 437,501 11.6 %
Other (Mixed-use)(1)
3 120,465 — 120,465 3.2 %
Industrial 3 25,029 16,200 41,229 1.1 %
Total 110 $ 3,629,415 $ 145,765 $ 3,775,180 100.0 %
Book value (at BRSP share)
Region Count Senior mortgage loans Mezzanine loans and preferred equity Total % of Total
US West 43 $ 1,637,843 $ 112,965 $ 1,750,808 46.4 %
US Southwest 45 1,212,223 4,480 1,216,703 32.2 %
US Northeast 11 543,189 12,120 555,309 14.7 %
US Southeast 9 217,317 — 217,317 5.8 %
US Midwest 2 18,843 16,200 35,043 0.9 %
Total 110 $ 3,629,415 $ 145,765 $ 3,775,180 100.0 %
~~_________________________________________~~

~~(1)Other includes commercial and residential development and predevelopment assets.~~accrues interest at 13.0%.

6461

Table of Contents

At March 31, ~~2022,~~2023, our ~~current expected credit loss~~general CECL reserve ~~(“CECL”) calculated by our probability of default (“PD”)/loss given default (“LGD”) model~~ for our outstanding loans and future loan funding commitments is ~~$34.9~~$34.1 million, which is ~~0.85%~~0.97% of the aggregate commitment amount of our loan ~~portfolio.~~portfolio, excluding loans that were evaluated for specific CECL reserves. This represents a decrease of ~~$0.9~~$15.4 million from ~~$35.8~~$49.5 million or 1.34% of the aggregate commitment amount of our loan portfolio at December 31, ~~2021. The~~2022. This decrease was primarily driven by ~~loan repayments and improved operating performance~~the removal of two loans from the ~~underlying collateral on certain loans,~~general CECL reserve pool, which were evaluated individually for specific CECL reserves, partially offset by ~~day one~~increased reserves recorded on ~~newly originated loans during~~our portfolio of office loans. During the first ~~quarter.~~quarter of 2023, we recorded $55.0 million of specific CECL reserves related to two senior loans and one mezzanine loan. For further discussion on these specific CECL reserves see “Asset Specific Loan Summaries” below.

Asset Specific Loan 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(1)
Q1 Risk ranking
Loan 4 Senior Hotel 6/28/2018 $ 119,671 $ 120,000 Floating 3.2% 5.2% 7/9/2025 66% 4
Loan 105 Mezzanine Hotel 9/23/2019 28,915 28,915 Fixed 11.5% 11.5% 7/9/2025 66% -81% 4

~~(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 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 $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 steadily improved in 2021 at the Berkeley Hotel. Due to seasonality, cash flows during certain months have been insufficient to service the 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 2022. Given mutual cooperation and commitment by the borrower, we entered into an amendment to delay the debt service hurdle test until the loan maturity in July 2023 upon the borrower 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 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(1)
Q1 Risk ranking
Loan 11 Senior Office 5/29/2019 $ 66,712 $ 66,740 Floating 3.5% 5.9% 6/9/2024 59% 4
Loan 12 Senior Office 4/5/2019 65,759 65,759 Floating 3.3% 5.7% 4/9/2024 58% 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 67(2)

Senior

Office

4/5/2019

35,000

68,330

Floating

3.3%

8.3%

4/9/2024

58%

Loan 68

Senior

Office

5/29/2019

34,000

68,432

n/a/(3)

6/9/2024

59%

______________________________________

(1)Loan-to-value is calculated using the as-is value on the date of loan origination.

(2)Subsequent to March 31, 2023, Loan 67 was placed on nonaccrual status; as such, no income will be recognized beginning in April 2023.

(3)Loan 68 was placed on nonaccrual status in September 2022; as such, no income is being recognized.

We originated two senior ~~mortgage~~ loans on two transitional office properties to the same sponsorship group. ~~However, the~~The borrowing entities are unrelated and the loans are neither cross-collateralized nor cross defaulted.

The New York City (“NYC”) metro office markets have experienced ~~substantial increases in~~and continue to experience higher vacancy rates due to the ongoing impact of COVID-19 ~~pandemic.~~and the continued impact of employee work from home arrangements. The Long Island City market has ~~experienced further~~seen 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~~putting downward pressure on rents. ~~Currently there is increasing confidence among market participants that office demand~~

Loan 67

As of March 31, 2023, Loan 67 has in-place leases for 30% of the property and generates incremental revenue from license agreements for rooftop signage and antenna space. In the fourth quarter of 2022, the property received a certificate of eligibility for the industrial and commercial abatement program (“ICAP”) resulting in significant tax savings for the current year and will ~~increase~~result in lower real estate taxes for the ~~near future, once tenants solidify their return-to-work plans. However, the timeline may not be rapid enough~~next 15 years, subject to ~~remedy the negative impact~~renewal on ~~sponsor’s business plans and leasing activity for these two properties. As such, the underlying individual~~an annual basis.

The Loan 67 property cash flows are insufficient to cover ~~their respective~~the debt service payments. ~~Since~~In March 2021, and ~~as recently as~~again in January 2022, we ~~have worked with~~modified the loan, allowing the borrower ~~on Loan 11 and Loan 12, as applicable,~~ to use certain future funding advances from the tenant improvements and leasing costs account to ~~be used for~~cover interest carry and operations shortfalls, provided that the borrower ~~would deposit an~~made incremental ~~six months of~~ deposits for interest and carry reserves to support the property. Given the continued negative market conditions surrounding NYC metro office buildings, including the lack of leasing activity, we utilized the estimated fair value of the collateral to estimate a specific CECL reserve of $22.7 million during the third quarter of 2022.

Borrower reserves have been exhausted and the loan is in maturity default and was placed on ~~such loans~~nonaccrual status as of April 2023. In the first quarter of 2023, the borrower cooperated with a consensual sale process through a national commercial real estate sales advisor. Given recent events in the banking sector, the results of the sale process were not satisfactory. We are evaluating a potential hold of the asset until market conditions improve. The loan has a mezzanine component which would facilitate a timely foreclosure in a proceeding pursuant to the Uniform Commercial Code, if required.

During the first quarter of 2023, we recorded an additional ~~protection.~~specific CECL reserve of $10.6 million based on feedback from the sales process and the estimated value to be recovered following a potential sale.

Loan 68

As of March 31, 2023, Loan 68 has in-place leases for 10% of the property and generates incremental revenue from a license agreement from rooftop signage. In the second quarter of 2022, the property received a certificate of eligibility for the ICAP resulting in significant tax savings for the current year and will result in lower real estate taxes for the next 15 years, subject to renewal on an annual basis.

6562

Table of Contents

Loan 68 property cash flows are insufficient to cover the debt service payments. In ~~regard~~March 2021, and again in January 2022, we modified the loan, allowing the borrower to use certain future funding advances from the tenant improvements and leasing costs account to cover interest carry and operations shortfalls, provided that the borrower made incremental deposits for interest and carry reserves to support the property.

Borrower reserves have been exhausted and the loan has been in payment default since October 2022, and was placed on nonaccrual status as of ~~March 31, 2022, Loan 11 has in-place leases for 10%~~September 2022. Given the continued negative market conditions surrounding NYC metro office buildings, including the lack of leasing activity, we utilized the estimated fair value of the ~~property and Loan 12 has in-place leases for 30%~~collateral to estimate a specific CECL reserve of $34.5 million during the third quarter of 2022. The borrower is cooperating with a consensual sale process through a national commercial real estate sales advisor. Given recent events in the banking sector, the results of the ~~property. Additionally, both loans generate incremental revenue from license agreements for rooftop signage. Loan 12 also generates incremental revenue from~~sale process were not satisfactory. We are evaluating a ~~license agreement for antenna space. It is possible that uncertain~~potential hold of the asset until market conditions ~~and borrower actions may result~~improve. The loan has a mezzanine component which would facilitate a timely foreclosure in a ~~future valuation impairment or investment loss.~~proceeding pursuant to the Uniform Commercial Code, if required.

~~New York, New York Hotel Mezzanine~~Santa Clara, California Pre-development Senior 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(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% 5

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 1

Senior

Multifamily

6/18/2019

57,442

Floating

4.4%

9.5%

6/18/2024

65%

(1)Loan-to-value is calculated using the as-is value on the date of loan origination.

We originated a ~~$12.0~~$108.0 million ~~mezzanine~~senior mortgage loan in ~~2017~~2019 secured by a collection of six parcels totaling 14.5 acres in ~~conjunction~~Santa Clara, CA (the “Pre-development Senior Loan”). At the time of origination, the property was improved with ~~a third party first mortgage loan~~nine income-producing, low-rise structures across the two phases. The property is fully entitled for the development of ~~$60.0 million to finance the acquisition~~1,600 units (“DU”) in two phased assemblages, entitled for 700 DU and capital improvements of a 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 $95.0 million. In 2019, the hotel underwent a brand conversion.900 DU, respectively.

As ~~a result~~ of ~~COVID-19, hotel occupancy declined significantly starting in~~ March ~~2020. However, in May 2020~~31, 2023, the ~~hotel obtained a contract with a government housing authority to lease rooms. The contract~~underwritten pre-development for Phase I and Phase II 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 postponedcomplete, 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 onPre-development Senior Loan is fully funded. In June 2021, the sponsor did not qualify for their first extension option. The maturity was ultimately extended for twelve months to ~~support operating expenses~~June 2022 in exchange for certain lender required terms and ~~debt service out-of-pocket.~~conditions.

In June 2022, Phase I was released, the sponsor paid down the Pre-development Senior Loan by $50.6 million, and the Loan qualified for their second twelve month extension option. After the release of Phase I, our remaining collateral is the 900 DU in Phase II. The ~~sponsor~~sponsor’s current plan for Phase II is ~~currently unable~~ to ~~meet~~secure the ~~reserve funding required for~~necessary financing to repay the ~~extension~~remaining loan and complete the pre-development of Phase II. We are coordinating with the ~~March 2022 maturity date~~borrower on ~~both~~seeking new financing alternatives. Given the ~~senior and mezzanine loans. Default and reservation of rights letters have been issued by both lenders as a prudent measure. If~~uncertainty in the ~~past due payments are received,~~finance markets, it ~~is anticipated that there will be sufficient funds to bring the New York Hotel loan current and satisfy the extension requirements. It~~ is possible that ~~uncertain market conditions~~financing is unavailable to recapitalize the project and ~~borrower actions~~fund pre-development work for Phase II pursuant to the current business plan and may result in a future valuation impairment or investment loss.

Washington, D.C Office Senior 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(1)

Q1 Risk ranking

Loan 76

Senior

Office

7/12/2019

27,000

56,935

n/a/(2)

8/9/2024

68%

(1)Loan-to-value is calculated using the as-is value on the date of loan origination.

(2)Loan 76 was placed on nonaccrual status in February 2023; as such, no income is being recognized

We originated a $65.4 million senior mortgage loan in 2019 to finance the acquisition, capital improvements and leasing of a twelve story, 185,000 square foot, multi-tenant, Class-B office building located in the Dupont Circle neighborhood of Washington, D.C. (the “DC Office Loan”). Since acquisition, the sponsor has been converting a portion of the vacant office space into coworking space, which includes private offices, suites, and an amenity floor.

The Washington, D.C. (“DC”) office market, like many markets, was hit hard by the COVID-19 pandemic and remains distressed, with high overall vacancy rates due to the normalization of work from home and the hybrid attendance model. As a result of fewer employees commuting to their offices, businesses are re-evaluating their need for physical office space. The federal government has adopted a telework work from home program for many employees who are not critical for office attendance, which further compounds the issue for the DC office market. The federal government has been reducing their office requirements which is especially impacting the DC market area. As of March 2023, the DC Office Loan property is 51% leased and in addition to vacancy issues, the property has tenant leases that expire at the end of 2023, creating uncertainty around the ability to re-lease vacant space should these tenants elect not to renew.

Table of Contents

The DC Office Loan’s second maturity was in August 2022, and it did not pass the extension tests. The sponsor requested that we waive the debt service coverage and debt yield hurdles required for their twelve-month extension option. We granted the sponsor a sixty-day extension so the sponsor could raise equity for a paydown to extend their loan for twelve months. At the end of the sixty-day extension, the sponsor requested an additional ninety-day extension, which we granted.

At the end of the ninety-day extension, we were unable to reach extension terms with the borrower and as a result, the DC Office Loan defaulted in January 2023 and was placed on nonaccrual status as of February 2023. We completed a foreclosure filing in March 2023 and expect to complete the foreclosure process and take possession of the underlying property by the end of the second quarter of 2023. We are examining all options to maximize value including a potential change of use of the property. Given market conditions surrounding D.C. metro offices, including the lack of leasing activity, the value maximizing use of this asset may be a conversion to multifamily. We utilized the estimated fair value of the collateral and therefore recorded a specific CECL reserve of $29.9 million during the first quarter of 2023.

Milpitas, California Development 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(1)

Q1 Risk ranking

Loan 24

Mezzanine

Multifamily

12/3/2019

30,239

44,716

Fixed

8.0%

13.3%

12/3/2024

58% - 85%

(1)Loan-to-value is calculated using the as-is value on the date of loan origination.

We originated a $38.6 million mezzanine loan in 2019 to finance the development of a 213-unit luxury multifamily property, with 13,000 square feet of ground floor retail, located in Milpitas, California (the “Development Mezzanine Loan”). Our Development Mezzanine Loan sits behind a $84.0 million senior loan in the capital stack.

Construction of the property is complete, and the sponsor is currently leasing all available units. As of April 2023, the property’s multifamily component is 89% leased and no retail leases have been signed. The Development Mezzanine Loan’s initial maturity date was in December 2022, and it did not pass all required extension tests.

We, and the senior loan lender, extended the interim maturity date to effectuate a restructuring of the capital stack. In April 2023, we amended and restructured our Development Mezzanine Loan, bifurcating it into a $30.2 million Mezzanine A Note (the “Mezzanine A Note”) and a $14.5 million Mezzanine B Note (the “Mezzanine B Note”) to facilitate a new equity contribution from the borrower behind the Mezzanine A Note and ahead of the Mezzanine B Note. As part of the restructuring, we extended the terms of both Mezzanine A Note and Mezzanine B Note to be conterminous with the senior loan which was extended to March 2025, with an additional one-year extension option to March 2026. In connection with this amendment and restructuring of the loan in April 2023, during the first quarter of 2023, we recorded a specific CECL reserve of $14.5 million based on the estimated proceeds we expect to receive upon the resolution of the asset. Additionally, we placed the Mezzanine B Note on nonaccrual status in April 2023.

San Jose, California Hotel Senior 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(1)

Q1 Risk ranking

Loan 90

Senior

Hotel

1/2/2018

189,928

Floating

4.8%

9.6%

11/9/2026

79%

(1)Loan-to-value is calculated using the as-is value on the date of loan origination.

We originated a $173.5 million senior loan for the sponsor’s purchase of the San Jose Hotel (the “San Jose Hotel Loan”) in 2018. The San Jose Hotel 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.

Table of Contents

In November 2021 the borrower emerged from bankruptcy and the court confirmed the amended and restated senior mortgage loan terms in the amount of $184.9 million, an upsize which reflected accrued interest and fees, collapsed the prior preferred equity investment into the restated senior mortgage loan, and included certain other costs and expenses associated with bankruptcy. The San Jose hotel reopened in April 2022.

The San Jose Hotel Loan’s property performance continues to improve but not without its challenges. Office attendance in the city of San Jose is among the lowest among major cities in the nation. In February 2023 we upsized the $184.9 million loan by $7.0 million to fund renovations of all guest rooms and to fund debt service shortfalls anticipated until the hotel stabilizes later in 2023.

The 805-room property consists of a main hotel tower and a second expansion annex tower. The borrower has entered into a PSA to sell the 264-room hotel annex tower in third quarter of 2023. The prospective buyer is in the due diligence phase and the transaction is in early stages. If the transaction occurs, proceeds from the sale will be primarily applied to pay down the San Jose Hotel Loan, which will meaningfully improve the credit profile of our remaining investment. For the time being, the San Jose Hotel Loan remains risk rated four.

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~~two 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~~and own these operating real estate investments through joint ventures with one or more partners. ~~These~~Our properties are typically well-located with strong operating partners.

As of March 31, ~~2022, $824.9~~2023, $748.3 million or ~~17.8%~~18.1% of our assets were invested in net leased and other real estate properties and these properties were ~~97.0%~~96.7% occupied. The following table presents our net leased and other real estate investments as of March 31, ~~2022~~2023 (dollars in thousands):


		Count(1)	Carrying Value(2)		NOI for the year ended March 31, 2022(3)			Count(1)	Carrying Value(2)		NOI three months ended March 31, 2023(3)
Net leased real estate	Net leased real estate	8	$	660,561	$	12,934	Net leased real estate	8	$	589,411	$	12,365
Other real estate	Other real estate	2	164,380		4,159		Other real estate	2	158,876		3,905
Total/Weighted average net leased and other real estate	Total/Weighted average net leased and other real estate	10	$	824,941	$	17,093	Total/Weighted average net leased and other real estate	10	$	748,287	$	16,270

(1)Count represents the number of investments.

(2)Represents carrying values at our share as of March 31, ~~2022;~~2023; 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.~~

6665

Table of Contents

The following table provides asset-level detail of our net leased and other real estate as of March 31, ~~2022:~~2023:

Collateral type

City, State

Number of Properties

Rentable square feet (“RSF”) / units/keys(1)

Weighted average % leased(2)

Weighted average lease term (yrs)(3)

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

1,290,926 RSF

100%

8.4

Net lease 1

Industrial

Various - U.S.

2,787,343 RSF

100%

15.4

Net lease 2

Industrial

Various - U.S.

2,787,343 RSF

100%

16.4

Net lease 2

Office

Stavanger, Norway

1,290,926 RSF

100%

7.2

Net lease 3

Office

Aurora, CO

183,529 RSF

100%

0.6

Net lease 3

Office

Aurora, CO

183,529 RSF

100%

4.7

Net lease 4

Office

Indianapolis, IN

338,000 RSF

100%

8.9

Net lease 4

Office

Indianapolis, IN

338,000 RSF

100%

7.8

Net lease 5

Retail

Various - U.S.

319,600 RSF

100%

4.7

Net lease 5

Retail

Various - U.S.

319,600 RSF

100%

4.7

Net lease 6

Retail

Keene, NH

45,471 RSF

100%

6.8

Net lease 6

Retail

Keene, NH

45,471 RSF

100%

5.8

Net lease 7(4)

Retail

Fort Wayne, IN

50,000 RSF

100%

2.4

Net lease 7(4)

Retail

South Portland, ME

52,900 RSF

100%

8.8

Net lease 8

Retail

South Portland, ME

52,900 RSF

100%

9.1

Net lease 8

Retail

Fort Wayne, IN

50,000 RSF

100%

1.4

Total/Weighted average net leased real estate

5,067,769 RSF

100%

10.9

Total/Weighted average net leased real estate

5,067,769 RSF

100%

10.4

Other real estate

Other real estate 1(4)

Office

Creve Coeur, MO

847,604 RSF

87%

3.2

Other real estate 1(4)

Office

Creve Coeur, MO

847,604 RSF

87%

3.8

Other real estate 2(4)

Office

Warrendale, PA

496,414 RSF

82%

3.8

Other real estate 2(4)

Office

Warrendale, PA

496,414 RSF

84%

3.3

Total/Weighted average other real estate

1,344,018 RSF

85%

3.4

Total/Weighted average other real estate

1,344,018 RSF

85%

3.6

Total/Weighted average net leased and other real estate

(1)Rentable square feet based on ~~carry~~carrying value at our share as of March 31, ~~2022.~~2023.

(2)Represents the percent leased as of March 31, ~~2022.~~2023. Weighted average calculation based on carrying value at our share as of March 31, ~~2022.~~2023.

(3)Based on in-place leases (defined as occupied and paying leases) as of March 31, ~~2022~~2023, and assumes that no renewal options are exercised. Weighted average calculation based on carrying value at our share as of March 31, ~~2022.~~2023.

(4)The current maturity of the debt on Net lease 7 is June 2023, the debt on Other real estate 1 is October 2024 and the debt on Other real estate 2 is January 2025.

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 1,290,926 RSF 100% 8.4

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 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 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 2,787,343 RSF 100% 16.4

Collateral type

City, State

Number of Properties

Rentable square feet (“RSF”) / units/keys

Weighted average % leased

Weighted average lease term (yrs)

Net lease 1

Industrial

Various - U.S.

2,787,343 RSF

100%

15.4

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

~~Table of Contents~~

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~~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.~~2023. The Warehouse Distribution Portfolio Lease has a remaining lease term of ~~16.4~~15.4 years ending in 2038. The tenant has the option to extend the lease for nine ~~5-year~~five-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 tenant has recently announced a merger with another national grocer, which is pending regulatory approval. If the merger is approved, it is not expected to impact our lease agreement.

The Warehouse Distribution Portfolio has generated net operating income for the three months ended March 31, ~~2022~~2023, of ~~$5.1~~$5.0 million; and the asset value on our consolidated balance sheet is ~~$260.4~~$251.6 million as of March 31, ~~2022.~~2023.

~~CRE Debt Securities~~

Table of Contents

Stavanger, 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 2

Office

Stavanger, Norway

1,290,926 RSF

100%

7.2

In July 2018, we acquired a class A office campus in Stavanger, Norway (the “Norway Net Lease”) for $320 million (NOK 2.6 billion). This property is 100% occupied by a single tenant that is rated investment grade AA-/Aa2 from S&P and Moody’s, respectively. The ~~following table presents~~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 seven years and the tenant has the option to extend for two five-year periods at the same terms with rent adjusted to market rent, and there is a risk that the rent can decrease at that time. The Norway Net Lease also has annual rent increases based on the Norwegian CPI Index through 2030. The rent increase in 2023 was 6.1%. 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 $153.3 million (NOK 1.6 billion) with a fixed rate of 3.9%, which matures in June 2025, at which time there will be five years remaining on the initial lease term. The financing includes a provision for annual appraisal valuation each May with loan-to-value (“LTV”) tests declining from 75% LTV beginning in year five, to 70% LTV after year eight and 65% LTV after year nine. The most recent valuation in May of 2022 resulted in an ~~overview~~LTV of 67%. Market conditions could impact property valuations and continuing compliance with those annual tests, resulting in a cash trap subject to LTV rebalancing.

This five-year remaining lease term along with risk of a downward rent adjustment at the 2030 renewal, and the increase in interest rates, could adversely impact the refinancing or sale of the asset. Furthermore, we have no assurances that the tenant will remain at the property beyond 2030. 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 in order to minimize our ~~CRE debt securities as of March 31, 2022 (dollars~~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 ~~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~~forward curve rate. However, only the lease payments are hedged through May 2024. The net equity and lease payments beyond May 2024 are not hedged at this time. Therefore, the Norway Net Lease net book value ~~except for cash coupon which is weighted by principal balance.~~may be subject to fluctuations based on the USD-NOK impact on unhedged values.

6867

Table of Contents

Results of Operations

The following table summarizes our portfolio results of operations for the three months ended March 31, ~~2022~~2023, and December 31, ~~2021~~2022 (dollars in thousands):


		Three Months Ended March 31,		Three Months Ended December 31,				Increase (Decrease)		Three Months Ended March 31,		Three Months Ended December 31,		Q1’23 vs Q4’22
		2022		2021		Amount		%				2023		2022		Amount
Net interest income	Net interest income										Net interest income
Interest income	Interest income	$	44,570	$	49,469	$	(4,899)	(9.9)	%		Interest income	$	75,616	$	74,856	$	760
Interest expense	Interest expense	(16,072)		(15,035)		(1,037)		6.9	%		Interest expense	(42,662)		(41,336)		(1,326)
Interest income on mortgage loans held in securitization trusts	Interest income on mortgage loans held in securitization trusts	9,375		9,724		(349)		(3.6)	%		Interest income on mortgage loans held in securitization trusts	—		3,471		(3,471)
Interest expense on mortgage obligations issued by securitization trusts	Interest expense on mortgage obligations issued by securitization trusts	(8,488)		(8,504)		16		(0.2)	%		Interest expense on mortgage obligations issued by securitization trusts	—		(3,383)		3,383
Net interest income	Net interest income	29,385		35,654		(6,269)		(17.6)	%		Net interest income	32,954		33,608		(654)

Property and other income	Property and other income										Property and other income
Property operating income	Property operating income	24,168		25,737		(1,569)		(6.1)	%		Property operating income	22,551		21,978		573
Other income	Other income	276		232		44		19.0	%		Other income	3,056		3,382		(326)
Total property and other income	Total property and other income	24,444		25,969		(1,525)		(5.9)	%		Total property and other income	25,607		25,360		247

Expenses	Expenses										Expenses

Property operating expense	Property operating expense	6,724		8,151		(1,427)		(17.5)	%		Property operating expense	5,852		6,418		(566)
Transaction, investment and servicing expense	Transaction, investment and servicing expense	1,124		537		587		n.m.			Transaction, investment and servicing expense	835		397		438
Interest expense on real estate	Interest expense on real estate	7,556		7,900		(344)		(4.4)	%		Interest expense on real estate	5,509		6,997		(1,488)
Depreciation and amortization	Depreciation and amortization	8,594		8,015		579		7.2	%		Depreciation and amortization	7,996		8,213		(217)
Decrease of CECL reserve		(866)		(6,626)		5,760		(86.9)	%
Increase of CECL reserve											Increase of CECL reserve	39,613		20,609		19,004

Compensation and benefits	Compensation and benefits	8,225		7,406		819		11.1	%		Compensation and benefits	8,805		8,163		642
Operating expense	Operating expense	4,349		4,144		205		4.9	%		Operating expense	3,473		2,677		796

Total expenses	Total expenses	35,706		29,527		6,179		20.9	%		Total expenses	72,083		53,474		18,609

Other income (loss)
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	—		9,883		(9,883)		(100.0)	%		Unrealized gain on mortgage loans and obligations held in securitization trusts, net	—		854		(854)
Realized loss on mortgage loans and obligations held in securitization trusts, net	Realized loss on mortgage loans and obligations held in securitization trusts, net	—		(13,240)		13,240		(100.0)	%		Realized loss on mortgage loans and obligations held in securitization trusts, net	—		(854)		854
Other gain, net	Other gain, net	10,288		61,555		(51,267)		(83.3)	%		Other gain, net	655		40		615
Income before equity in earnings of unconsolidated ventures and income taxes		28,411		90,294		(61,883)		(68.5)	%
Income (loss) before equity in earnings of unconsolidated ventures and income taxes											Income (loss) before equity in earnings of unconsolidated ventures and income taxes	(12,867)		5,534		(18,401)
Equity in earnings of unconsolidated ventures	Equity in earnings of unconsolidated ventures	25		1,128		(1,103)		(97.8)	%		Equity in earnings of unconsolidated ventures	9,055		—		9,055
Income tax expense	Income tax expense	(36)		(6,146)		6,110		(99.4)	%		Income tax expense	(390)		(1,304)		914
Net income		$	28,400	$	85,276	$	(56,876)	(66.7)	%
Net income (loss)											Net income (loss)	$	(4,202)	$	4,230	$	(8,432)

Comparison of Three Months EndedMarch 31, ~~2022~~2023 and December 31, ~~2021~~2022

Net Interest Income

Interest income

Interest income ~~decreased~~increased by ~~$4.9~~$0.8 million to ~~$44.6~~$75.6 million for the three months ended March 31, ~~2022~~2023 as compared to the three months ended December 31, ~~2021.~~2022. The ~~decrease~~increase was primarily due to $6.4 million related to ~~$4.1~~higher LIBOR and SOFR interest rates partially offset by $4.9 million ~~received in non-recurring profit participation~~related to loan repayments and $0.5 million of higher yield maintenance and accelerated amortization income ~~received in~~recognized during the three months ended December ~~31, 2021 and $4.3 million due to loan repayments which was partially offset by $4.6 million in interest from new loan originations during the three months ended March~~ 31, 2022.

Interest expense

Interest expense increased by ~~$1.0~~$1.3 million to ~~$16.1~~$42.7 million for the three months ended March 31, ~~2022~~2023 as compared to the three months ended December 31, ~~2021.~~2022. The increase was ~~primarily due to $1.6~~driven by $3.4 million related to ~~financing for loan originations partially~~higher LIBOR and SOFR rates offset by ~~$0.3~~$2.3 million related to payoffs of ~~financing~~financings in connection with loan repayments.

6968

Table of Contents

Net interest income on mortgage loans and obligations held in securitization trusts, net

We did not hold any retained interests of securitization trusts, net during the three months ended March 31, 2023 following the sale of the retained interests of a securitization trust during the fourth quarter of 2022. We recorded $0.1 million of net interest income on mortgage loans and obligations held in securitization trusts, net during the three months ended December 31, 2022.

Property and other income

Property operating income

Property operating income increased by $0.6 million to $22.6 million for the three months ended March 31, 2023, as compared to the three months ended December 31, 2022, primarily due to an increase in rental income related to an office property.

Other income

Other income decreased by $0.3 million to $3.1 million during the three months ended March 31, 2023, as compared to the three months ended December 31, 2022, primarily due to lower reimbursement income related to an office property partially offset by higher income from money market investments.

Expenses

Property operating expense

Property operating expense decreased by $0.6 million to $5.9 million for the three months ended March 31, 2023, as compared to the three months ended December 31, 2022, primarily due to decreased expenses related to an office property.

Transaction, investment and servicing expense

Transaction, investment and servicing expense increased by $0.4 million to $0.8 million for the three months ended March 31, 2023 as compared to the three months ended December 31, 2022, primarily due to costs associated with a secondary offering of shares of our class A common stock.

Interest expense on real estate

Interest expense on real estate decreased by $1.5 million to $5.5 million for the three months ended March 31, 2023, as compared to the three months ended December 31, 2022. The decrease was primarily due to amortization recorded during the three months ended March 31, 2023.

Depreciation and amortization

Depreciation and amortization expense decreased by $0.2 million to $8.0 million for the three months ended March 31, 2023, as compared to the three months ended December 31, 2022. The decrease was primarily due to fully depreciating and amortizing assets associated with a retail property.

Increase (decrease) of CECL reserve

We recorded CECL reserves of $39.6 million for the three months ended March 31, 2023, as compared to reserves of $20.6 million for three months ended December 31, 2022. The increase was driven by specific CECL reserves related to two office senior loans and one development mezzanine loan. Refer to “Our Portfolio - Asset Specific Loan Summaries” section for further discussion.

Compensation and benefits

Compensation and benefits increased by $0.6 million to $8.8 million for the three months ended March 31, 2023, as compared to the three months ended December 31, 2022. This was primarily due to an increase in employee stock compensation expense and payroll taxes related to stock vesting events, which occur annually during the first quarter.

Operating expense

Operating expense increased by $0.8 million to $3.5 million for the three months ended March 31, 2023, as compared to the three months ended December 31, 2022. The increase was primarily due to higher third-party costs incurred during the first quarter of 2023.

Table of Contents

Other income (loss)

Unrealized gain on mortgage loans and obligations held in securitization trusts, net

During the three months ended December 31, 2022, we recorded a $0.9 million unrealized gain on mortgage loans and obligations held in securitization trusts, net due to the sale of the retained interests of a securitization trust during the fourth quarter of 2022.

Realized loss on mortgage loans and obligations held in securitization trusts, net

During the three months ended December 31, 2022, we recorded a $0.9 million realized loss on mortgage loans and obligations held in securitization trusts, net due to the sale of the retained interests of a securitization trust during the fourth quarter of 2022.

Other gain, net

During the three months ended March 31, 2023, we recorded other gain, net of $0.7 million, primarily due to gains related to foreign currency hedges. During the three months ended December 31, 2022, we recorded a de minimis gain primarily due to the gain on sale of a securitization trust offset by losses related to foreign currency hedges.

Equity in earnings of unconsolidated ventures

We realized a one-time gain from our ratable share of dispute resolution proceeds of approximately $9.0 million from the senior mezzanine lender of the Development Mezzanine Loan in connection with our prior Los Angeles, California mixed-use project and retained B-participation investment. In connection with the settlement, effective January 26, 2023, we have no further interest in the loan or investment. We did not record equity in earnings of unconsolidated ventures during the three months ended December 31, 2022.

Income tax benefit (expense)

Income tax expense decreased by $0.9 million to $0.4 million for the three months ended March 31, 2023, as compared to the three months ended December 31, 2022, due to return to provision adjustments booked in the quarter ended December 31, 2022.

Table of Contents


	Three Months Ended March 31,		Three Months Ended March 31,		Q1’23 vs Q1’22
	2023		2022		Amount
Net interest income
Interest income	$	75,616	$	44,570	$	31,046
Interest expense	(42,662)		(16,072)		(26,590)
Interest income on mortgage loans held in securitization trusts	—		9,375		(9,375)
Interest expense on mortgage obligations issued by securitization trusts	—		(8,488)		8,488
Net interest income	32,954		29,385		3,569

Property and other income
Property operating income	22,551		24,168		(1,617)
Other income	3,056		276		2,780
Total property and other income	25,607		24,444		1,163

Expenses

Property operating expense	5,852		6,724		(872)
Transaction, investment and servicing expense	835		1,124		(289)
Interest expense on real estate	5,509		7,556		(2,047)
Depreciation and amortization	7,996		8,594		(598)
Increase (decrease) of CECL reserve	39,613		(866)		40,479

Compensation and benefits	8,805		8,225		580
Operating expense	3,473		4,349		(876)

Total expenses	72,083		35,706		36,377

Other income


Other gain, net	655		10,288		(9,633)
Income (loss) before equity in earnings of unconsolidated ventures and income taxes	(12,867)		28,411		(41,278)
Equity in earnings of unconsolidated ventures	9,055		25		9,030
Income tax expense	(390)		(36)		(354)
Net income (loss)	$	(4,202)	$	28,400	$	(32,602)

Comparison of Three Months Ended March 31, 2023 andMarch 31, 2022

Net Interest Income

Interest income

Interest income increased by $31.0 million to $75.6 million for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The increase was primarily due to $25.2 million related to higher LIBOR and SOFR interest rates and $16.6 million related to loan originations, which was offset by $10.5 million following loan repayments.

Interest expense

Interest expense increased by $26.6 million to $42.7 million for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The increase was primarily due to $15.3 million related to higher LIBOR and SOFR rates and $12.8 million related to financings on new loans. This was partially offset by $2.1 million related to paydowns on financings.

Net interest income on mortgage loans and obligations held in securitization trusts, net ~~decreased by $0.3 million to $0.9 million for~~

We did not hold any retained interests of securitization trusts, net during the three months ended March 31, ~~2022, as compared to~~2023 following the sale of the retained interests of a securitization trust during the fourth quarter of 2022. We recorded $0.9 million of net interest income on mortgage loans and obligations held in securitization trusts, net during the three months ended ~~December~~March 31, ~~2021. The decrease was primarily due to decreased interest income on the retained investments in the subordinate tranches~~2022.

Table of ~~securitization trusts.~~Contents

Property and other income

Property operating income

Property operating income decreased by $1.6 million to ~~$24.2~~$22.6 million for the three months ended March 31, 2022, as compared to the three months ended December 31, 2021. The decrease was primarily due to 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~~ ~~was recorded for the three months ended March 31, 2022 and the three months ended December 31, 2021, respectively. This primarily relates to special servicing income associated with a securitization trust.~~

~~Expenses~~

~~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 December 31, 2021. The decrease was primarily due to two property sales in the first quarter of 2022.

~~Transaction, investment and servicing expense~~

Transaction, investment and servicing expense increased by $0.6 million to $1.1 million for the three months ended March 31, 2022, as compared to the three months ended December 31, 2021, primarily due to $0.5 million in expenses relating to a joint venture investment.

~~Interest expense on real estate~~

Interest expense on real estate decreased by $0.3 million to $7.6 million for the three months ended March 31, 2022, as compared to the three months ended December 31, 2021. The decrease was primarily due to repayments of mortgage loans secured by two properties sold.

~~Depreciation and amortization~~

Depreciation and amortization expense increased by $0.6 million to $8.6 million for the three months ended March 31, 2022, as compared to the three months ended 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 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 higher non-recurring costs incurred during the first quarter of 2022.

~~Table of Contents~~

~~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 December 31, 2021, we recorded an unrealized gain of $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 three months ended 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 experienced a $13.2 million realized loss onmortgage loans and obligations held in securitization trusts, net primarily due to the realized loss upon sale of an underlying loan in the securitization trust.~~

~~Other gain, net~~

During the three months ended 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 $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.

~~Table of Contents~~

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,~~2023, 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.

~~Table of Contents~~

~~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.~~2022. The decrease was primarily due to ~~the sale of an industrial portfolio in the first quarter of 2021 and two property sales~~real estate properties sold in the first quarter of 2022.

Other income

Other income of ~~$0.3~~increased by $2.8 million to $3.1 million ~~was recorded during~~for the three months ended March 31, ~~2022, which~~2023, primarily ~~relates~~due to ~~special servicing~~higher income ~~associated with a securitization trust. During the three months ended March 31, 2021, we recorded de minimis other income.~~from money market investments.

Expenses

~~Management fee~~Property operating expense

~~Management fee~~Property operating expense decreased by ~~$7.3~~$0.9 million to $5.9 million for the three months ended March 31, ~~2022,~~2023, 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.~~2022. The decrease was primarily due to ~~the sale of an industrial portfolio in the first quarter of 2021 and two property sales~~real estate properties sold in the first quarter of 2022.

Transaction, investment and servicing expense

Transaction, investment and servicing expense decreased by ~~$1.2~~$0.3 million to ~~$1.1~~$0.8 million for the three months ended March 31, ~~2022,~~2023, as compared to the three months ended March 31, ~~2021,~~2022 primarily due to ~~higher franchise tax refunds received~~lower tax-related costs incurred in the first quarter of ~~2021.~~2023.

Interest expense on real estate

Interest expense on real estate decreased by ~~$1.1~~$2.0 million to ~~$7.6~~$5.5 million for the three months ended March 31, ~~2022,~~2023, as compared to the three months ended March 31, ~~2021.~~2022. The decrease was primarily due to ~~repayments of mortgage loans secured by an industrial portfolio that was sold in~~amortization recorded during the ~~first quarter of 2021.~~three months ended March 31, 2023.

Depreciation and amortization

Depreciation and amortization expense decreased by ~~$0.9~~$0.6 million to ~~$8.6~~$8.0 million for the three months ended March 31, ~~2022,~~2023, as compared to the three months ended March 31, ~~2021.~~2022. The decrease was primarily due to fully depreciating and amortizing assets associated with a ~~hotel property classified as held for sale in the second quarter 2021.~~retail property.

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~~During the three months ended March 31, ~~2022 and the three months ended March 31, 2021, respectively. The reversal~~2023, we recorded CECL reserves of ~~CECL reserve for the three months ended March 31, 2022~~$39.6 million. This was driven by ~~improved operating performance of the underlying collateral of certain~~specific reserves related to two office senior loans and ~~repayments, partially offset by reserves on newly originated loans.~~one development mezzanine loan. Refer to “Our Portfolio - Asset Specific Loan Summaries” section for further discussion.

Compensation and benefits

Compensation and benefits increased by ~~$1.4~~$0.6 million to ~~$8.2~~$8.8 million for the three months ended March 31, ~~2022,~~2023, as compared to the three months ended March 31, ~~2021. The change is~~2022 primarily due to ~~our hiring~~an increase in employee stock compensation expense and payroll taxes related to stock vesting events.

Operating expense

Operating expense decreased by $0.9 million to $3.5 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The decrease was primarily due to lower legal, audit and insurance costs.

Other income (loss)

Other gain, net

Other gain, net decreased by $9.6 million to $0.7 million during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to realized gains associated with two property sales recorded in the first quarter of ~~employees following the termination of the Management Agreement in April 2021.~~2022.

7372

Table of Contents

~~Operating~~Equity in earnings of unconsolidated ventures

We realized a one-time gain from its ratable share of dispute resolution proceeds of approximately $9.0 million from the senior mezzanine lender at our prior Los Angeles, California mixed-use project construction mezzanine loan and retained B-participation investment. In connection with the settlement, effective January 26, 2023, we have no further interest in the loan or investment. We recorded de minimis equity in earnings of unconsolidated ventures during the three months ended March 31, 2022.

Income tax benefit (expense)

Income tax expense

~~Operating expense decreased~~ increased by ~~$1.5~~$0.4 million to ~~$4.3~~$0.4 million for the three months ended March 31, ~~2022,~~2023, 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~~an increase 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 on the sale of an industrial portfolio in the first quarter of 2021.

~~Equity in earnings (loss) of unconsolidated ventures~~

Equity in earnings (loss) of unconsolidated ventures increased by $2.5 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. This was primarily due to recording our proportionate share of fair value losses on 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 decreased by $1.8 million to an expense for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, primarily due to a tax capital loss carryback relating to private equity investments recorded in the first quarter of 2021.taxable income.

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):


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Stockholders’ Equity excluding noncontrolling interests in investment entities	Stockholders’ Equity excluding noncontrolling interests in investment entities	$	1,494,536	$	1,489,843	Stockholders’ Equity excluding noncontrolling interests in investment entities	$	1,353,418	$	1,387,768
Shares	Shares					Shares
Class A common stock	Class A common stock	129,633		129,769		Class A common stock	129,946		128,872
OP units		3,076		3,076
Total outstanding	Total outstanding	132,709		132,845		Total outstanding	129,946		128,872
GAAP book value per share	GAAP book value per share	$	11.26	$	11.22	GAAP book value per share	$	10.41	$	10.77
Accumulated depreciation and amortization per share	Accumulated depreciation and amortization per share	$	1.10	$	1.15	Accumulated depreciation and amortization per share	$	1.33	$	1.29
Undepreciated book value per share		$	12.36	$	12.37
Undepreciated book value per share(1)						Undepreciated book value per share(1)	$	11.74	$	12.06

_________________________________

(1)Excludes the impact of our pro rata share of accumulated depreciation and amortization on real estate investments (including related intangible assets and liabilities).

~~Table of Contents~~

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.

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) general 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 specific 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.

Table of Contents

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, (iv) realized specific CECL reserves and (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 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 months ended March 31, ~~2022~~2023 and ~~2021:~~2022:


	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	$	(4,127)	$	27,724
Adjustments:
Net income (loss) attributable to noncontrolling interest of the Operating Partnership	—		654
Non-cash equity compensation expense	2,295		1,880

Depreciation and amortization	6,556		8,603
Net unrealized loss (gain):

Other unrealized (gain) loss on investments	(550)		1,448
General CECL reserves	(15,394)		(866)
Gain on sales of real estate, preferred equity and investments in unconsolidated joint ventures	—		(10,503)
Adjustments related to noncontrolling interests	(258)		(165)
Distributable Earnings (Loss) attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership	$	(11,478)	$	28,775
Distributable Earnings (Loss) per share(1)	$	(0.09)	$	0.22

Adjustments:
Specific CECL reserves	$	55,007	$	—
Fair value adjustments	(9,055)		—




Adjusted Distributable Earnings attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership	$	34,474	$	28,775

Adjusted Distributable Earnings per share(1)	$	0.27	$	0.22
Weighted average number of common shares and OP units(1)	129,202		132,821

~~Table of Contents~~

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 months ended March 31, 2022 ~~and 2021, weighted average number of common shares includes~~included 3.1 million OP units.

Table of Contents

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.

~~Table of Contents~~

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 months ended March 31, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended March 31, 2022		Three Months Ended March 31, 2021				Three Months Ended March 31,
						2023		2022
Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	$	27,724	$	(92,314)		Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	$	(4,127)	$	27,724
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 non-net leased and other real estate portfolios(1)	7,636		(16,242)
Net income (loss) attributable to noncontrolling interests in investment entities	Net income (loss) attributable to noncontrolling interests in investment entities	22		(132)			Net income (loss) attributable to noncontrolling interests in investment entities	(75)		22
Amortization of above- and below-market lease intangibles	Amortization of above- and below-market lease intangibles	(41)		183			Amortization of above- and below-market lease intangibles	(139)		(41)
Interest income		—		9

Interest expense on real estate	Interest expense on real estate	7,556		8,632			Interest expense on real estate	5,509		7,556
Other income		—		(34)

Transaction, investment and servicing expense	Transaction, investment and servicing expense	100		(12)			Transaction, investment and servicing expense	35		100
Depreciation and amortization	Depreciation and amortization	8,551		9,539			Depreciation and amortization	7,938		8,551

Operating expense	Operating expense	32		31			Operating expense	1		32
Other gain on investments, net	Other gain on investments, net	(10,369)		(9,496)			Other gain on investments, net	(553)		(10,369)
Income tax expense (benefit)		69		(25)
Income tax expense							Income tax expense	345		69
NOI attributable to noncontrolling interest in investment entities	NOI attributable to noncontrolling interest in investment entities	(309)		(3,998)			NOI attributable to noncontrolling interest in investment entities	(300)		(309)
Total NOI, at share	Total NOI, at share	$	17,093	$	13,795		Total NOI, at share	$	16,270	$	17,093

(1)Net ~~loss~~income (loss) attributable to non-net leased and other real estate ~~portfolio~~portfolios includes net (income) loss on our senior and mezzanine loans and preferred equity, CRE debt securities and corporate business segments.

Liquidity and Capital Resources

Overview

Our 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 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 have sufficient sources of liquidity to meet our material cash commitments for the next 12 months and beyond.

Table of Contents

Financing Strategy

We have a multi-pronged financing strategy that ~~included~~includes an up to ~~$165~~$165.0 million secured revolving credit facility as of March 31, ~~2022,~~2023, up to approximately ~~$2.1~~$2.3 billion in secured revolving repurchase facilities, ~~$1.5~~$1.1 billion in non-recourse securitization financing, ~~$654~~$618.2 million in commercial mortgages and ~~$65~~$27.9 million in other asset-level financing 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.

~~Table of Contents~~

Debt-to-Equity Ratio

The following table presents our debt-to-equity ratio:

March 31, ~~2022~~2023

December 31, ~~2021~~2022

Debt-to-equity ratio(1)

~~2.1x~~2.0x

2.0x

(1)Represents (i) total outstanding secured debt less cash and cash equivalents of ~~$246.1~~$313.5 million and ~~$259.7~~$306.3 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, 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. 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~~As discussed in greater detail above under “Trends Affecting our Business,” and “Factors Impacting Our Operating ~~Results—Impact of~~Results”overall market uncertainty coupled with rising inflation and interest rates have tempered the ~~Russia-Ukraine conflict and increases in market interest rates,” a~~loan financing markets recently. 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~~would similarly adversely impact their ability to make their monthly mortgage payments and meet their loan obligations. Additionally, due to the current market conditions, warehouse lenders may take a more conservative stance by increasing funding costs, which may lead to margin calls.

Our primary sources of liquidity include borrowings available under our credit facilities, master repurchase facilities and ~~CMBS facilities and~~ monthly mortgage ~~payments.~~payments from our borrowers.

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 January 28, 2022, ~~BrightSpire Capital Operating Company, LLC (“BrightSpire OP”)~~the OP (together with certain subsidiaries of ~~BrightSpire~~the OP from time to time party thereto as borrowers, collectively, the “Borrowers”) entered into 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 $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~~Swiss francs. The Credit Agreement amended and restated ~~BrightSpire~~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 toof 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.

Table of Contents

adjusted net book value. As of ~~March 31, 2022,~~date hereof, the borrowing base valuation is sufficient to permit borrowings of up to ~~the entire~~ $165.0 ~~million commitment.~~million. 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

~~Table of Contents~~

under the Credit Agreement terminates on January 31, 2026, at which time ~~BrightSpire~~the 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 Credit Agreement, resulting in a latest termination date of January 31, 2027.

The obligations of the Borrowers under the Credit Agreement are guaranteed pursuant to a Guarantee and Collateral Agreement by substantially all material wholly owned subsidiaries of ~~BrightSpire~~the OP (the “Guarantors”) in favor of 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, 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 Credit 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 New York Stock Exchange, and limitations on debt, liens and restricted payments. In addition, the Credit Agreement includes the following financial covenants applicable to ~~BrightSpire~~the OP and its consolidated subsidiaries: (a) minimum consolidated tangible net worth of ~~BrightSpire~~the OP to be greater than or equal to the sum of (i) $1,112,000,000 and (ii) 70% of the net cash proceeds received by ~~BrightSpire~~the 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 ~~BrightSpire~~the OP, excluding any such proceeds that are contributed to ~~BrightSpire~~the OP within ninety (90) days of receipt and applied to acquire capital stock of ~~BrightSpire~~the OP; (b) ~~BrightSpire~~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) ~~BrightSpire~~the OP’s minimum interest coverage ratio to be not less than 3.00 to 1.00; and (d) ~~BrightSpire~~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 ~~BrightSpire~~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.

As of March 31, 2023, we were in compliance with all of our financial covenants under the Credit Agreement.

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.~~loans. 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 of favorable terms.

During the first quarter of 2022, we entered into amendments under our five 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, we entered into amendments under four of our Master Repurchase Facilities to expand the 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 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 March 31, 2022.

~~Table of Contents~~

The following table presents a summary of our Master Repurchase and Bank Credit Facilities as of March 31, ~~2022~~2023 (dollars in thousands):


		Maximum Facility Size		Current Borrowings		Weighted Average Final Maturity (Years)	Weighted Average Interest Rate(1)		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	$	126,015	4.0	LIBOR/SOFR + 1.89%	Bank 1	$	600,000	$	522,677	4.0	SOFR + 2.17%
Bank 2								Bank 2	600,000		309,113		3.0	LIBOR/SOFR + 1.88%
Bank 3	Bank 3	600,000		371,044		1.0	LIBOR/SOFR + 1.94%	Bank 3	400,000		236,718		4.2	SOFR + 1.74%
Bank 7		500,000		382,497		3.0	LIBOR/SOFR + 1.76%
Bank 8		250,000		158,503		1.2	LIBOR/SOFR + 2.18%
Bank 9		300,000		161,730		4.1	LIBOR/SOFR + 1.73%
Bank 4								Bank 4	400,000		223,668		4.3	SOFR + 1.86%
Bank 5								Bank 5	250,000		—		2.2	LIBOR/SOFR + 1.86%
Total Master Repurchase Facilities	Total Master Repurchase Facilities	2,050,000		1,199,789				Total Master Repurchase Facilities	2,250,000		1,292,176

Bank Credit Facility	Bank Credit Facility	165,000		—		4.8	SOFR + 2.25%	Bank Credit Facility	165,000		—		—	SOFR + 2.25%

Total Facilities	Total Facilities	$	2,215,000	$	1,199,789			Total Facilities	$	2,415,000	$	1,292,176

_________________________________________

(1)The Company utilized the Secured Overnight Financing Rate (“SOFR”) for all deals beginning January 1, 2022.

Table of Contents

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 our Master Repurchase ~~and~~Facilities, Bank Credit Facility and CMBS Credit Facilities ~~(dollars~~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


Quarter Ended	Quarterly Average UPB		End of Period UPB		Maximum UPB at Any Month-End
March 31, 2023	$	1,778,135	$	1,292,176	$	1,320,246
December 31, 2022	1,436,829		1,339,993		1,434,901
September 30, 2022	1,510,616		1,533,664		1,537,511
June 30, 2022	1,343,678		1,487,567		1,503,297
March 31, 2022	1,052,455		1,199,789		1,199,789

The ~~increase~~decrease in our end of period UPB from December 31, ~~2021~~2022 to March 31, ~~2022~~2023 was driven by ~~our 16 senior loan originations and financing obtained on a hotel loan partially offset by loan repayments~~payoffs of loans during the ~~first quarter of 2022.~~period.

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. As of March 31, 2022, the securitization reflects an advance rate of 82.8% at a weighted average cost of funds of adjusted term SOFR plus 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

~~Table of Contents~~

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~~pursuant to the indenture agreement. Term SOFR for any interest accrual period shall be the ~~one month~~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,~~2023, less than half of the CLNC 2019-FL1 mortgage assets are indexed to LIBOR and the borrowings under CLNC ~~2019-FL~~2019-FL1 are indexed to Term SOFR, creating an underlying benchmark index rate basis difference between a portion of the 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 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 included a two-year reinvestment feature that 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. The reinvestment period for CLNC 2019-FL1 expired on October 19, 2021. During the first quarter of ~~2022, two loans~~2023 and through May 2, 2023, one loan held in CLNC ~~2019-FL1~~2019-FL was fully repaid and one loan was partially repaid totaling ~~$54.4 million. Additionally, subsequent to March 31, 2022, two loans held in CLNC 2019-FL1 were repaid, totaling $44.9~~$36.2 million. The proceeds from the ~~four loan payoffs~~repayments were used to amortize the securitization bonds in accordance with the securitization priority of payments. As of May ~~4, 2022,~~2, 2023, the securitization advance rate was ~~81.7%~~ 73.8%

Table of Contents

at a weighted average cost of funds of Adjusted Term SOFR plus ~~1.64%~~1.87% (before transaction costs). At March 31, 2023, we had $632.6 million of unpaid principal balance of CRE debt investments financed with CLNC 2019-FL1.

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~~cost of funds of LIBOR plus 1.49% (before transaction expenses) and is collateralized by a pool of 3328 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 first quarter of ~~2022~~2023 and through May ~~4, 2022, one loan~~2, 2023, two loans held in BRSP 2021-FL1 ~~was~~were fully repaid, totaling ~~$11.7~~$48.0 million. We replaced the repaid ~~loan~~loans by contributing existing loan investments of equal value. At March 31, 2023, we had $800.0 million of unpaid principal balance of CRE debt investments financed with 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.

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.

~~Table of Contents~~

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.~~2023. This table excludes our obligations that are not fixed and determinable (dollars in thousands):


		Payments Due by Period											Payments Due by Period
		Total		Less than a Year		1-3 Years		3-5 Years		More than 5 Years			Total		Less than a Year		1-3 Years		3-5 Years		More than 5 Years
Bank credit facility(1)	Bank credit facility(1)	$	1,972	$	413	$	825	$	734	$	—	Bank credit facility(1)	$	1,554	$	413	$	825	$	316	$	—
Secured debt(2)	Secured debt(2)	2,190,154		245,501		699,059		951,881		293,713		Secured debt(2)	2,373,999		828,893		1,172,161		120,348		252,597
Securitization bonds payable(3)	Securitization bonds payable(3)	1,537,378		296,826		1,161,735		78,817		—		Securitization bonds payable(3)	1,168,256		723,943		444,313		—		—
Ground lease obligations(4)	Ground lease obligations(4)	29,125		3,105		5,083		4,144		16,793		Ground lease obligations(4)	26,020		2,947		4,265		3,741		15,067
Office leases	Office leases	8,829		877		2,578		2,638		2,736		Office leases	7,953		1,283		2,608		2,669		1,393
		$	3,767,458	$	546,722	$	1,869,280	$	1,038,214	$	313,242		$	3,577,782	$	1,557,479	$	1,624,172	$	127,074	$	269,057
Lending commitments(5)	Lending commitments(5)	333,459										Lending commitments(5)	256,252
Total	Total	$	4,100,917									Total	$	3,834,034

(1)Future interest payments were estimated based on the applicable index at March 31, ~~2022~~2023 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.~~2023.

(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.

Table of Contents

Share Repurchases

In April 2023, our board of directors authorized a stock repurchase program (“Stock Repurchase Program”) under which we may repurchase up to $50.0 million of our outstanding Class A common stock until April 30, 2024. The Stock Repurchase Program replaces the prior stock repurchase program authorization which expired on April 30, 2023. Under the Stock Repurchase Program, we may repurchase shares in open market purchases, in privately negotiated transactions or otherwise. We have a written trading plan as part of the Share Repurchase Program that provides for share repurchases in open market transactions that is intended to comply with Rule 10b-18 under the “Exchange Act”. The Stock Repurchase Program will be utilized at our discretion and in accordance with the requirements of the SEC. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate requirements and other conditions.

During the three months ended March 31, 2023, we did not make any share repurchases, and as of March 31, 2023, there was $81.7 million remaining available to make repurchases under the prior stock repurchase program.

Cash Flows

The following presents a summary of our consolidated statements of cash flows for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (dollars in thousands):


		Three Months Ended March 31,							Three Months Ended March 31,
Cash flow provided by (used in):	Cash flow provided by (used in):	2022		2021		Change		Cash flow provided by (used in):	2023		2022		Change
Operating activities	Operating activities	$	32,357	$	1,660	$	30,697	Operating activities	$	39,673	$	32,357	$	7,316
Investing activities	Investing activities	(218,802)		(38,334)		(180,468)		Investing activities	69,622		(218,802)		288,424
Financing activities	Financing activities	169,948		(18,533)		188,481		Financing activities	(114,408)		169,948		(284,356)

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. 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 provided net cash inflows of ~~$32.4~~$39.7 million and ~~$1.7~~$32.4 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. Net cash provided by operating activities increased ~~$30.7 million~~ for the three months ended March 31, ~~2022~~2023 compared to the three months ended March 31, ~~2021,~~2022 primarily due to higher ~~net interest~~ income earned ~~resulting from loan originations throughout 2021 and 2022 and lower operating expenses following the Internalization on April 30, 2021.~~as a result of higher interest rates.

We believe cash flows from operations, available cash balances and our ability to generate cash through 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 and 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~~

~~Table of Contents~~

~~capital received from unconsolidated ventures,~~ proceeds from sale of real estate, as well as proceeds from maturity or sale of securities.

Investing activities generated net cash inflows of $69.6 million for the three months ended March 31, 2023. Net cash provided by investing activities in 2023 resulted primarily from repayments on loans and preferred equity held for investment, net of $101.4 million, partially offset by future advances on our loans and preferred equity held for investment, net of $16.4 million.

Investing activities used net cash outflows of $218.8 million for the three months ended March 31, 2022. Net cash used in investing activities in 2022 resulted primarily from originations and future advances on our loans and preferred equity held for investment, net of $498.2 million partially offset by repayments on loans and preferred equity held for investment, net 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 held for investment, net of $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 loans and preferred equity held for investment of $41.3 million, repayment of principal in mortgage loans held in securitizations trusts as well as real estate securities, available for sale of $12.2 million, and distributions in excess of cumulative earnings from unconsolidated ventures of $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~~and through May 27, 2022, on distributions to our noncontrolling interests.

Table of Contents

Financing activities used net cash of $114.4 million for the three months ended March 31, 2023, which resulted primarily from repayment of credit facilities of $158.2 million, repayment of securitization bonds of $36.2 million, and distributions paid on common stock of $26.0 million partially offset by borrowings from credit facilities of $110.3 million.

Financing activities provided net cash of $169.9 million for the three months ended March 31, 2022, which resulted which resulted primarily from borrowings from credit facilities of $383.3 million partially offset by repayment of credit facilities of $88.7 million, repayment of mortgage notes of $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 $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 $10.8 million. This was partially offset by borrowings from credit facilities in the amount of $329.3 million.

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 investment strategy provides flexibility through economic cycles to achieve attractive risk-adjusted returns. This approach is driven by a disciplined investment strategy, focused on:

•leveraging long standing relationships, our organization structure and the experience of the team;

•the underlying real estate and market 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; and

•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.

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 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

~~Table of Contents~~

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 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.

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

Table of Contents

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 quality 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.

~~Table of Contents~~

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 and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

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 effects of the pandemic and containment measures, among others.ventures.

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.

Table of Contents

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 March 31, ~~2022,~~2023, a hypothetical 100 basis point increase or decrease in the applicable interest rate benchmark on our loan portfolio would increase or decrease interest income by ~~$0.5~~$8.0 million annually, net of interest expense.

See the ~~“Impact of the Russia-Ukraine conflict and increases in market interest rates”~~“Factors Impacting Our Operating Results” section in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations—Factors Impacting Our Operating Results”~~Operations” 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

~~Table of Contents~~

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~~any impact of COVID-19 on their 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,

Table of Contents

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 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 ongoing effects of 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 our underwriting due diligence and asset management processes and the ~~solutions oriented~~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~~our decisions on the amount, timing and terms of our borrowings.

~~Table of Contents~~

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 continued 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. WeFor the three months ended March 31, 2023, and through May 2, 2023, we have ~~timely met~~not received any margin calls ~~primarily~~ under our ~~CMBS Credit~~Master Repurchase 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 March 31, ~~2022,~~2023, we had approximately NOK ~~685.3~~615.8 million or a total of ~~$78.7~~$59.0 million, in net investments in our European subsidiaries. A 1.0% change in the foreign currency rate would result in a ~~$0.8~~$0.6 million increase or decrease in translation gain or loss included in other comprehensive income in connection with our European subsidiary.

A summary of the foreign exchange contracts in place at March 31, ~~2022,~~2023, including notional amount and key terms, is included in Note ~~15,~~14, “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 March 31, ~~2022,~~2023, we do not expect any counterparty to default on its obligations.

Table of Contents

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 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 March 31, ~~2022,~~2023, 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.

8785

Table of Contents

PART II—Other Information

Item 1. Legal Proceedings

The Company 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, ~~2021,~~2022, 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. 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, ~~2021.~~2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no sales of unregistered securities of our Company during the three months ended March 31, ~~2022, other than those previously disclosed in filings with the SEC.~~2023.

Purchases of Equity Securities by Issuer

The Company did not ~~purchase~~repurchase any of its Class A common stock during the three months ended March 31, ~~2022.~~2023.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

8886

Table of Contents

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., ~~dated~~ as ~~of June 23, 2021~~amended (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~~3.2*						~~Fourth~~Fifth 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~~						Amended and Restated Credit Agreement, dated as of January 28, 2022, by and among BrightSpire Capital Operating Company, LLC, as a borrower, the several lenders from time to time parties thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (No.001-38377) filed on January 31, 2022)
~~10.2~~						Second Amendment to Master Repurchase Agreement, dated as of February 8, 2022, by and between Barclays Bank PLC and BrightSpire Credit 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
10.1110.1†						~~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)~~Inc., ~~as advancing agent and U.S. Bank Trust Company, National Association, as trustee~~2022 Equity Incentive Plan Restricted Stock Agreement
10.2†*						BrightSpire Capital, Inc., 2022 Equity Incentive Plan Performance Restricted Stock Unit Agreement
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

† Denotes a management contract or compensatory plan, contract or arrangement.

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: May ~~5, 2022~~ 3, 2023


BRIGHTSPIRE CAPITAL, INC.

By:						/s/ Michael J. Mazzei
						Michael J. Mazzei
						Chief Executive Officer
						(Principal Executive Officer)

By:						/s/ Frank V. Saracino
						Frank V. Saracino
						Chief Financial Officer
						(Principal Accounting Officer)


	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


	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


	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


(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


(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


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


	Book value (at BRSP share)
Collateral property type	Count	Senior mortgage loans		Mezzanine loans and preferred equity		Total		% of Total
Multifamily	68	$	1,936,506	$	88,531	$	2,025,037	53.6	%
Office	30	1,150,948		—		1,150,948		30.5	%
Hotel	6	396,467		41,034		437,501		11.6	%
Other (Mixed-use)(1)	3	120,465		—		120,465		3.2	%
Industrial	3	25,029		16,200		41,229		1.1	%
Total	110	$	3,629,415	$	145,765	$	3,775,180	100.0	%


	Book value (at BRSP share)
Region	Count	Senior mortgage loans		Mezzanine loans and preferred equity		Total		% of Total
US West	43	$	1,637,843	$	112,965	$	1,750,808	46.4	%
US Southwest	45	1,212,223		4,480		1,216,703		32.2	%
US Northeast	11	543,189		12,120		555,309		14.7	%
US Southeast	9	217,317		—		217,317		5.8	%
US Midwest	2	18,843		16,200		35,043		0.9	%
Total	110	$	3,629,415	$	145,765	$	3,775,180	100.0	%


				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	—