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 ~~June 30, 2022~~March 31, 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 ~~August~~May 2, ~~2022,~~2023, BrightSpire Capital, Inc. had ~~128,964,934~~129,946,184 shares of Class A common stock, par value $0.01 per share, outstanding.

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

FORM 10-Q

TABLE OF CONTENTS


Index		Page

Part I.		4
Item 1.	Financial Information	4
	Financial Statements	4
	Consolidated Balance Sheets as of ~~June 30, 2022~~March 31, 2023 (unaudited) and December 31, ~~2021~~2022	4
	Consolidated Statements of Operations (unaudited) for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~	6
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~	7
	Consolidated Statements of Equity (unaudited) for the three month s ended March 31, 2023 and ~~six months ended June 30, 2022 and 2021~~202 2	8
	Consolidated Statements of Cash Flows (unaudited) for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~	109
	Notes to Consolidated Financial Statements (unaudited)	1211
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6052
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	9082
Item 4.	Controls and Procedures	9285
Part ~~II.~~II.	Other Information	9386
Item 1.	Legal Proceedings	9386
Item 1A.	Risk Factors	9386
Item 2.	Unregistered Sales of Equity and Use of Proceeds	9386
Item 3.	Defaults Upon Senior Securities	9386
Item 4.	Mine Safety Disclosures	9386
Item 5.	Other Information	9386
Item 6.	Exhibits	9487
Signatures

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Special Note Regarding Forward-Looking Statements

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

Currently, one of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the adverse effect of the ~~current pandemic of the~~ 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 and government actions to mitigate its economic impact, as well~~such as changes in consumer behavior orand corporate policies ~~in response to~~that have affected the ~~coronavirus pandemic, have~~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.

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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 ~~June 30, 2022~~March 31, 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.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

BRIGHTSPIRE CAPITAL, INC.

CONSOLIDATED BALANCE SHEETS

(in Thousands, Except Share and Per Share Data)


		June 30, 2022 (Unaudited)		December 31, 2021			March 31, 2023 (Unaudited)		December 31, 2022
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	317,742	$	259,722	Cash and cash equivalents	$	313,520	$	306,320
Restricted cash	Restricted cash	91,674		86,841		Restricted cash	80,023		92,508
Loans held for investment		3,833,523		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	(44,378)		(36,598)		Current expected credit loss reserve	(145,836)		(106,247)
Loans held for investment, net		3,789,145		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	742,079		783,211		Real estate, net	714,725		732,468
Receivables, net	Receivables, net	52,582		54,499		Receivables, net	42,980		40,698
Deferred leasing costs and intangible assets, net	Deferred leasing costs and intangible assets, net	58,353		64,981		Deferred leasing costs and intangible assets, net	51,130		53,980
Assets held for sale		—		44,345
Other assets ($4,406 and $4,406 at fair value, respectively)		70,182		82,451
Mortgage loans held in securitization trusts, at fair value		718,335		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	$	5,840,092	$	5,638,369	Total assets	$	4,604,013	$	4,750,389
Liabilities	Liabilities					Liabilities
Securitization bonds payable, net	Securitization bonds payable, net	$	1,364,906	$	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	658,857		760,583		Mortgage and other notes payable, net	644,512		656,468
Credit facilities	Credit facilities	1,487,567		905,122		Credit facilities	1,292,176		1,339,993

Accrued and other liabilities	Accrued and other liabilities	86,493		99,814		Accrued and other liabilities	84,256		87,633
Intangible liabilities, net	Intangible liabilities, net	5,532		6,224		Intangible liabilities, net	4,494		4,839

Escrow deposits payable	Escrow deposits payable	75,414		73,344		Escrow deposits payable	65,323		79,055
Dividends payable	Dividends payable	25,793		23,912		Dividends payable	25,989		25,777
Mortgage obligations issued by securitization trusts, at fair value		682,181		777,156

Total liabilities	Total liabilities	4,386,743		4,147,054		Total liabilities	3,249,442		3,361,365
Commitments and contingencies (Note 15)	Commitments and contingencies (Note 15)	0		0		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 June 30, 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, 128,964,934 and 129,769,365 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		1,290		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	2,850,001		2,855,766		Additional paid-in capital	2,853,123		2,853,723
Accumulated deficit	Accumulated deficit	(1,398,773)		(1,410,562)		Accumulated deficit	(1,496,865)		(1,466,568)
Accumulated other comprehensive income		(510)		8,786
Accumulated other comprehensive income (loss)						Accumulated other comprehensive income (loss)	(4,139)		(676)
Total stockholders’ equity	Total stockholders’ equity	1,452,008		1,455,288		Total stockholders’ equity	1,353,418		1,387,768
Noncontrolling interests in investment entities	Noncontrolling interests in investment entities	1,341		1,472		Noncontrolling interests in investment entities	1,153		1,256
Noncontrolling interests in the Operating Partnership		—		34,555
Total equity	Total equity	1,453,349		1,491,315		Total equity	1,354,571		1,389,024
Total liabilities and equity	Total liabilities and equity	$	5,840,092	$	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.

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BRIGHTSPIRE CAPITAL, INC.

CONSOLIDATED BALANCE SHEETS

(in Thousands)

The following table presents assets and liabilities of securitization trusts and certain real estate properties that have noncontrolling interests as variable interest entities for which the Company is determined to be the primary beneficiary.


		June 30, 2022 (Unaudited)		December 31, 2021			March 31, 2023 (Unaudited)		December 31, 2022
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	4,879	$	6,720	Cash and cash equivalents	$	5,199	$	5,163
Restricted cash	Restricted cash	11,703		9,658		Restricted cash	6,759		7,831
Loans held for investment, net		1,628,192		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	168,788		170,201		Real estate, net	166,179		167,821
Receivables, net	Receivables, net	28,424		12,808		Receivables, net	12,716		11,869
Deferred leasing costs and intangible assets, net	Deferred leasing costs and intangible assets, net	12,806		15,105		Deferred leasing costs and intangible assets, net	9,921		10,956

Other assets	Other assets	21,541		38,101		Other assets	21,697		21,977
Mortgage loans held in securitization trusts, at fair value		718,335		813,310

Total assets	Total assets	$	2,594,668	$	2,847,425	Total assets	$	1,594,570	$	1,670,015
Liabilities	Liabilities					Liabilities
Securitization bonds payable, net	Securitization bonds payable, net	$	1,364,906	$	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	175,837		177,373		Mortgage and other notes payable, net	173,265		173,960

Accrued and other liabilities	Accrued and other liabilities	8,271		6,768		Accrued and other liabilities	5,946		5,026
Intangible liabilities, net	Intangible liabilities, net	5,532		6,224		Intangible liabilities, net	4,494		4,839

Escrow deposits payable	Escrow deposits payable	2,935		3,484		Escrow deposits payable	220		2,366
Mortgage obligations issued by securitization trusts, at fair value		682,181		777,156

Total liabilities	Total liabilities	$	2,239,662	$	2,471,904	Total liabilities	$	1,316,617	$	1,353,791

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

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BRIGHTSPIRE CAPITAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in Thousands, Except Per Share Data)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Net interest income	Net interest income										Net interest income
Interest income	Interest income	$	53,083	$	37,921	$	97,654	$	72,295		Interest income	$	75,616	$	44,570
Interest expense	Interest expense	(21,455)		(12,993)		(37,527)		(25,488)			Interest expense	(42,662)		(16,072)
Interest income on mortgage loans held in securitization trusts	Interest income on mortgage loans held in securitization trusts	9,721		11,390		19,095		31,079			Interest income on mortgage loans held in securitization trusts	—		9,375
Interest expense on mortgage obligations issued by securitization trusts	Interest expense on mortgage obligations issued by securitization trusts	(8,586)		(10,111)		(17,074)		(27,447)			Interest expense on mortgage obligations issued by securitization trusts	—		(8,488)
Net interest income	Net interest income	32,763		26,207		62,148		50,439			Net interest income	32,954		29,385

Property and other income	Property and other income										Property and other income
Property operating income	Property operating income	21,781		24,799		45,948		50,521			Property operating income	22,551		24,168
Other income	Other income	787		1,110		1,063		1,155			Other income	3,056		276
Total property and other income	Total property and other income	22,568		25,909		47,011		51,676			Total property and other income	25,607		24,444

Expenses	Expenses										Expenses
Management fee expense		—		2,338		—		9,596

Property operating expense	Property operating expense	5,266		6,758		11,990		14,869			Property operating expense	5,852		6,724
Transaction, investment and servicing expense	Transaction, investment and servicing expense	982		644		2,106		2,932			Transaction, investment and servicing expense	835		1,124
Interest expense on real estate	Interest expense on real estate	7,117		7,777		14,673		16,410			Interest expense on real estate	5,509		7,556
Depreciation and amortization	Depreciation and amortization	8,720		9,994		17,314		19,533			Depreciation and amortization	7,996		8,594
Increase (decrease) of current expected credit loss reserve	Increase (decrease) of current expected credit loss reserve	10,143		1,200		9,277		4,425			Increase (decrease) of current expected credit loss reserve	39,613		(866)

Compensation and benefits (including $2,286, $5,443, $4,166 and $9,705 of equity-based compensation expense, respectively)		8,269		10,053		16,494		16,839
Compensation and benefits (including $2,295 and $1,880 of equity-based compensation expense, respectively)											Compensation and benefits (including $2,295 and $1,880 of equity-based compensation expense, respectively)	8,805		8,225
Operating expense	Operating expense	4,070		4,000		8,419		9,809			Operating expense	3,473		4,349
Restructuring charges		—		150		—		109,321

Total expenses	Total expenses	44,567		42,914		80,273		203,734			Total expenses	72,083		35,706

Other income	Other income										Other income
Unrealized gain on mortgage loans and obligations held in securitization trusts, net		—		19,516		—		28,154
Realized loss on mortgage loans and obligations held in securitization trusts, net		—		(19,516)		—		(19,516)

Other gain, net	Other gain, net	24,332		836		34,620		9,203			Other gain, net	655		10,288
Income (loss) before equity in earnings of unconsolidated ventures and income taxes	Income (loss) before equity in earnings of unconsolidated ventures and income taxes	35,096		10,038		63,506		(83,778)			Income (loss) before equity in earnings of unconsolidated ventures and income taxes	(12,867)		28,411
Equity in earnings (loss) of unconsolidated ventures		—		(33,788)		25		(36,266)
Income tax benefit (expense)		(465)		134		(501)		1,935
Equity in earnings of unconsolidated ventures											Equity in earnings of unconsolidated ventures	9,055		25
Income tax expense											Income tax expense	(390)		(36)
Net income (loss)	Net income (loss)	34,631		(23,616)		63,030		(118,109)			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	15		3,459		(7)		3,685			Investment entities	75		(22)
Operating Partnership	Operating Partnership	(359)		437		(1,013)		2,390			Operating Partnership	—		(654)
Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	$	34,287	$	(19,720)	$	62,010	$	(112,034)		Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	$	(4,127)	$	27,724

Net income (loss) per common share - basic (Note 17)	Net income (loss) per common share - basic (Note 17)	$	0.26	$	(0.15)	$	0.48	$	(0.87)		Net income (loss) per common share - basic (Note 17)	$	(0.03)	$	0.21
Net income (loss) per common share - diluted (Note 17)	Net income (loss) per common share - diluted (Note 17)	$	0.26	$	(0.15)	$	0.47	$	(0.87)		Net income (loss) per common share - diluted (Note 17)	$	(0.03)	$	0.21

Weighted average shares of common stock outstanding - basic (Note 17)	Weighted average shares of common stock outstanding - basic (Note 17)	127,756		128,298		128,052		128,297			Weighted average shares of common stock outstanding - basic (Note 17)	126,665		128,758
Weighted average shares of common stock outstanding - diluted (Note 17)	Weighted average shares of common stock outstanding - diluted (Note 17)	129,595		128,298		129,669		128,297			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.

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BRIGHTSPIRE CAPITAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in Thousands)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Net income (loss)	Net income (loss)	$	34,631	$	(23,616)	$	63,030	$	(118,109)		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)	(9,810)		2,213		(9,134)		(6,319)			Foreign currency translation gain (loss)	(3,463)		676
Total other comprehensive income (loss)	Total other comprehensive income (loss)	(9,810)		2,213		(9,134)		(6,519)			Total other comprehensive income (loss)	(3,463)		676
Comprehensive income (loss)	Comprehensive income (loss)	24,821		(21,403)		53,896		(124,628)			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	15		3,123		(7)		4,125			Investment entities	75		(22)
Operating Partnership	Operating Partnership	(505)		526		(1,175)		2,694			Operating Partnership	—		(670)
Comprehensive income (loss) attributable to common stockholders	Comprehensive income (loss) attributable to common stockholders	$	24,331	$	(17,754)	$	52,714	$	(117,809)		Comprehensive income (loss) attributable to common stockholders	$	(7,590)	$	28,384

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

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~~BRIGHTSPIRE CAPITAL, INC.~~

~~CONSOLIDATED STATEMENTS OF EQUITY~~

~~(in Thousands)~~

~~(Unaudited)~~

Common 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
Shares Amount
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
Contributions — $ — $ — $ — $ — $ — $ 838 $ — $ 838
Distributions — — — — — — (13,148) — (13,148)
Issuance and amortization of equity-based compensation 41 — 5,443 — — 5,443 — — 5,443
Other comprehensive income — — — — 1,966 1,966 336 (89) 2,213
Dividends and distributions declared ($0.14 per share) — — — (18,166) — (18,166) — (431) (18,597)
Shares canceled for tax withholding on vested stock awards (131) — (1,141) — — (1,141) — — (1,141)
Reallocation of equity — — 129 — — 129 — (129) —
Net income (loss) — — — (19,720) — (19,720) (3,459) (437) (23,616)
Balance as June 30, 2021 129,759 $ 1,298 $ 2,851,916 $ (1,377,412) $ 48,812 $ 1,524,614 $ 227,380 $ 35,697 $ 1,787,691

~~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, 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)		Distributions		—			—								—			—					—					—					(28)					—					(28)
Issuance and amortization of equity-based compensation	Issuance and amortization of equity-based compensation	1,524	16				2,270			—			—			2,286			—			—			2,286			Issuance and amortization of equity-based compensation		1,527			15								2,280			—					—					2,295					—					—					2,295
Repurchase of common stock		(2,181)	(22)				(18,298)			—			—			(18,320)			—			—			(18,320)
Other comprehensive income		—	—				—			—			(9,956)			(9,956)			—			146			(9,810)
Dividends and distributions declared ($0.20) per share		—	—				—			(25,565)			—			(25,565)			—			—			(25,565)
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	(11)	—				(254)			—			—			(254)			—			—			(254)			Shares canceled for tax withholding on vested stock awards		(453)			(5)								(2,880)			—					—					(2,885)					—					—					(2,885)

OP Redemption		—	—				9,648			—			—			9,648			—			(35,159)			(25,511)
Net income		—	—				—			34,287			—			34,287			(15)			359			34,631
Balance as of June 30, 2022		128,965	$	1,290			$	2,850,001		$	(1,398,773)		$	(510)		$	1,452,008		$	1,341		$	—		$	1,453,349
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)


		Six Months Ended June 30,				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)	$	63,030	$	(118,109)		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)		35,624			Equity in (earnings) losses of unconsolidated ventures	—		(25)
Depreciation and amortization	Depreciation and amortization	17,314		19,533			Depreciation and amortization	7,996		8,594
Straight-line rental income	Straight-line rental income	(731)		(1,407)			Straight-line rental income	(467)		(391)
Amortization of above/below market lease values, net	Amortization of above/below market lease values, net	(103)		(26)			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	(6,912)		(2,582)			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	4,938		5,893			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	234		52			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	5,679		(4,240)			Paid-in-kind interest added to loan principal, net of interest received	(1,848)		2,719

Unrealized gain on mortgage loans and obligations held in securitization trusts, net		—		(28,154)
Realized loss on mortgage loans and obligations held in securitization trusts, net		—		19,516
Realized loss on securities from write-down to fair value		—		990
Realized gain 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 of current expected credit loss reserve		9,277		4,425

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

Amortization of equity-based compensation	Amortization of equity-based compensation	4,166		9,705			Amortization of equity-based compensation	2,295		1,880
Mortgage notes above/below market value amortization	Mortgage notes above/below market value amortization	98		63			Mortgage notes above/below market value amortization	(1,324)		53
Realized gain on sales of unconsolidated ventures		(21,900)		—
Deferred income tax benefit		(650)		(1,910)

Deferred income tax (benefit) expense							Deferred income tax (benefit) expense	159		(500)
Other (gain) loss, net	Other (gain) loss, net	(1,828)		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	(628)		(1,952)			Receivables, net	(1,835)		2,010
Deferred costs and other assets	Deferred costs and other assets	1,914		(22,937)			Deferred costs and other assets	770		472
Due to related party		—		(10,059)

Other liabilities	Other liabilities	(8,627)		(22,363)			Other liabilities	(769)		989
Net cash provided by (used in) operating activities		54,614		(128,611)
Net cash provided by operating activities							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	(815,466)		(822,834)			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	470,411		124,198			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	(1,577)		(2,612)			Acquisition of and additions to real estate, related intangibles and leasing commissions	(1,870)		(1,468)
Investments in unconsolidated ventures		—		(3,499)
Proceeds from sale of investments in unconsolidated ventures		38,100		—

Distributions in excess of cumulative earnings from unconsolidated ventures	Distributions in excess of cumulative earnings from unconsolidated ventures	(3)		21,433			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		—		210
Repayment of principal in mortgage loans held in securitization trusts		15,946		9,649
Proceeds from sale of beneficial interests of securitization trusts		—		28,662

Change in escrow deposits		2,069		30,498
Net cash used in investing activities		(234,920)		(277,213)
Repayment of principal in mortgage loans held in securitization trusts							Repayment of principal in mortgage loans held in securitization trusts	—		13,300

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	(48,033)		(12,864)			Distributions paid on common stock	(25,963)		(23,934)
Distributions paid on common stock to noncontrolling interests		(1,138)		(431)

Shares canceled for tax withholding on vested stock awards	Shares canceled for tax withholding on vested stock awards	(1,254)		(2,451)			Shares canceled for tax withholding on vested stock awards	(2,885)		(998)
Repurchase of common stock		(18,320)		—
Redemption of OP units		(25,383)		—
Borrowings from mortgage notes		—		3,069

Repayment of mortgage notes	Repayment of mortgage notes	(82,116)		(263,329)			Repayment of mortgage notes	(1,358)		(43,303)
Borrowings from credit facilities	Borrowings from credit facilities	698,700		675,429			Borrowings from credit facilities	110,324		383,334
Repayment of credit facilities	Repayment of credit facilities	(116,254)		(207,992)			Repayment of credit facilities	(158,216)		(88,667)

Repayment of securitization bonds	Repayment of securitization bonds	(138,369)		—			Repayment of securitization bonds	(36,171)		(40,736)
Repayment of mortgage obligations issued by securitization trusts	Repayment of mortgage obligations issued by securitization trusts	(15,947)		(9,649)			Repayment of mortgage obligations issued by securitization trusts	—		(13,300)
Payment of deferred financing costs	Payment of deferred financing costs	(7,863)		(4,186)			Payment of deferred financing costs	(126)		(2,338)
Contributions from noncontrolling interests		—		2,222

Distributions to noncontrolling interests	Distributions to noncontrolling interests	(138)		(23,942)			Distributions to noncontrolling interests	(28)		(110)
Net cash provided by financing activities		243,885		155,876

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	(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	(726)		1,937			Effect of exchange rates on cash, cash equivalents and restricted cash	(172)		496
Net increase (decrease) in cash, cash equivalents and restricted cash		62,853		(248,011)
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	$	409,416	$	292,019		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.

109

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(in Thousands)

(Unaudited)

Six Months Ended June 30,
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 $ 317,742 $ 210,182
Restricted cash 91,674 81,837
Total cash, cash equivalents and restricted cash, end of period $ 409,416 $ 292,019

Six Months Ended June 30,
2022 2021
Supplemental disclosure of non-cash investing and financing activities:
Deconsolidation of securitization trust (VIE asset/liability reductions) $ — $ (802,195)
Accrual of distribution payable (25,565) (18,597)
Right-of-use lease assets and operating lease liabilities 3,271 5,435


	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.

1110

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% was owned as noncontrolling interests. During the three months ended June 30, 2022, the Company redeemed the 2.3% of outstanding membership units in the OP for $25.4 million. Following this redemption, there were no noncontrolling interests in the OP at June 30, 2022.

~~Impact of COVID-19~~Business

The ~~COVID-19 pandemic has negatively impacted CRE credit REITs across~~global markets are currently characterized by volatility, driven by a tightening of monetary policy and geopolitical uncertainty, coupled with the ~~industry, as well as other companies that own and operate commercial real estate investments. Throughout 2020, continuing into the second quarter~~ongoing impacts 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, as well as changes in consumer behavior or corporate policies inIn response to heightened inflation, the ~~COVID-19 pandemic, have had a significant impact on~~Federal Reserve continues to raise interest rates, which has tempered the ~~global~~loan financing market and created further uncertainty for the 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 and 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 4, “Real Estate Securities,” Note 5, “Real Estate, net and Real Estate Held for Sale” and Note 13, “Fair Value.”hybrid attendance models.

~~The continuing 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.

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles in the United States of America (“GAAP”) for complete financial statements. These statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. However, the results of operations for the interim period presented are not necessarily indicative of the results that may be expected for the year ending December 31, ~~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 and from investment in unconsolidated ventures to other assets 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 US 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

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the related party to fund operating losses of the VIE; and the similarity and significance of the VIE’s business activities to those of the Company and the related party. The determination of whether an entity is a VIE, and whether the Company is the primary beneficiary, may involve significant judgment, including the determination of which activities most significantly affect the entities’ performance, and estimates about the current and future fair values and performance of assets held by the VIE.

Voting Interest Entities—Unlike VIEs, voting interest entities have sufficient equity to finance their activities and equity investors exhibit the characteristics of a controlling financial interest through their voting rights. The Company consolidates such entities when it has the power to control these entities through ownership of a majority of the entities’ voting interests or through other arrangements.

At each reporting period, the Company reassesses whether changes in facts and circumstances cause a change in the status of an entity as a VIE or voting interest entity, and/or a change in the Company’s consolidation assessment.

Changes in consolidation status are applied prospectively. An entity may be consolidated as a result of this reassessment, in which case, the assets, liabilities and noncontrolling interest in the entity are recorded at fair value upon initial consolidation. Any existing equity interest held by the Company in the entity prior to the Company obtaining control will be remeasured at fair value, which may result in a gain or loss recognized upon initial consolidation. However, if the consolidation represents an asset acquisition of a voting interest entity, the Company’s existing interest in the acquired assets, if any, is not remeasured to fair value but continues to be carried at historical cost. The Company may also deconsolidate a subsidiary as a result of this reassessment, which may result in a gain or loss recognized upon deconsolidation depending on the carrying values of deconsolidated assets and liabilities compared to the fair value of any interests retained.

As of ~~June 30, 2022~~March 31, 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. Following the redemption of the outstanding membership units in the OP held by an unaffiliated third party during the three months ended June 30, 2022, there were no noncontrolling interests in the OP at June 30, 2022 and as of June 30, 2022, the Company holds all of the membership interests in the OP and the OP is no longer a VIE. The Company is the managing member of the OP and exercises full responsibility, discretion and control over the day-to-day management of the OP and has the power to direct the core activities of the OP that most significantly affect the OP’s performance, and through its ownership 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. See “Noncontrolling Interests” below for further details on the redemption of OP units during the three months ended June 30, 2022.

~~Other consolidated~~Consolidated VIEs include the Investing VIEs (as defined and discussed below) and certain operating real estate properties that have noncontrolling interests. At ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the noncontrolling interests in the operating real

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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~~As of March 31, 2023, the ~~underlying debt collateral assets and distribute those payments to the securitization trust’s certificate holders, including the most subordinate~~Company did not hold any tranches of any securitization trusts. During the securitization trust. Generally, a securitization trust designates the most junior subordinate tranche outstanding as the controlling class, which entitles the holder of the controlling class to unilaterally appoint and remove the special servicer for the trust, and as such may qualify as the primary beneficiary of the trust.

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

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~~As of June 30,~~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 13, “Fair Value” for further discussion.

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

Unconsolidated VIEs

~~During the three months ended June 30, 2022,~~As of March 31, 2023, the Company ~~sold its 1~~did not hold, and had no remaining obligations to, any unconsolidated ~~VIE. Refer to Note 7, “Restricted Cash, Other Assets and Accrued and Other Liabilities” for further discussion of the sale.~~VIEs. As of December 31, 2021, 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 such VIEs. Accordingly, the VIEs are not consolidated in the Company’s financial statements as of December 31, 2021.

~~Assets of each of the VIEs may only be used to settle obligations of the respective VIE. Creditors of each of the VIEs have no recourse to the general credit of the Company. As of June 30,~~ 2022, the Company ~~has~~held one investment which had no ~~remaining obligations~~carrying value in an unconsolidated VIE to ~~unconsolidated VIEs.~~

~~The~~which the Company did not provide financial support ~~to the unconsolidated VIEs~~ during the ~~six months ended June 30, 2022 and the fiscal~~ year ended December 31, ~~2021. As of 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. ~~The carrying value and maximum exposure to loss of the investments in unconsolidated joint ventures at December 31, 2021 was $16.2 million.~~

Noncontrolling Interests

Noncontrolling Interests in Investment Entities—This represents interests in consolidated investment entities held by third party joint venture partners.

Allocation of net income or loss is generally based upon relative ownership interests held by equity owners in each investment entity, or based upon contractual arrangements that may provide for disproportionate allocation of economic returns among equity interests, including using a hypothetical liquidation at book value (“HLBV”) basis, where applicable and substantive. HLBV uses a balance sheet approach, which measures each party’s capital account at the end of a period assuming that the subsidiary was liquidated or sold at book value. Each party’s share of the subsidiary’s earnings or loss is calculated by measuring the change in the party’s capital account from the beginning of the period in question to the end of period, adjusting for effects of distributions and new investments.

Noncontrolling Interests in the Operating ~~Partnership (“OP”)—~~Partnership—~~Noncontrolling~~Prior to the May 2022 redemption of the noncontrolling interests in the OP ~~are~~held by third parties, noncontrolling interests in the OP were allocated a share of net income or loss in the OP based on their weighted average ownership interest in the OP during the period. Noncontrolling interests in the OP ~~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 one-for-one basis. At the end of each reporting period,

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~~election as managing member of the OP, through the issuance of shares of Class A common stock on a 1-for-one basis. At the end of each reporting period,~~ noncontrolling interests in the OP were adjusted to reflect their ownership percentage in the OP at the end of the period, through a reallocation between controlling and noncontrolling interests in the OP, as applicable.

Through February 2022, the noncontrolling interests in the OP were held by an affiliate of DigitalBridge, after which such entity was sold to an unaffiliated third party. During the three months ended June 30, 2022, the Company redeemed the 3.1 million outstanding membership units in the OP held by such entity at a price of $8.25 per unit for a total cost of $25.4 million. Following this redemption, the noncontrolling interests in the operating partnership were reclassified to additional paid-in capital and accumulated other comprehensive income on the Company’s consolidated balance sheet and thereThere are no ~~noncontrolling interests in the OP. As of June 30, 2022, there were no remaining~~ noncontrolling interests in the OP and the OP ~~was wholly-owned~~is owned by the Company directly, and indirectly through the Company’s ~~wholly-owned~~ 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.

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Business Combinations

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

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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 ~~June 30, 2022~~March 31, 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

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

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

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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 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 ~~June 30, 2022~~March 31, 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.

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


Real Estate Assets						Term
Building (fee interest)						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 5, “Real Estate, net and Real Estate Held for Sale” and Note 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 ~~June 30,~~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 5, “Real Estate, net and Real Estate Held for Sale” and Note 16, “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.

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Real Estate Securities

The Company classifies its CRE securities investments as available for sale on the acquisition date, which are carried at fair value. Unrealized gains (losses) are recorded as a component of accumulated OCI in the consolidated statements of equity. However, the Company has elected the fair value option for the assets and liabilities of its consolidated Investing VIEs, and as a result, any unrealized gains (losses) on the consolidated Investing VIEs are recorded in unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net in the consolidated statements of operations. ~~As of June 30,~~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 4, “Real Estate 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.

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.

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

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including the estimated timing and probabilities of the future cash flows of the unconsolidated joint venture, utilizing discount rates and capitalization rates.

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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 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.

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

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legally isolated; (2) the transferee has the right (free of conditions that constrain it from taking advantage of that right) to pledge

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

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.

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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 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

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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 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.

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

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

For the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company recorded income tax expense of ~~$0.5~~$0.4 million and ana de minimis income ~~tax benefit of $0.1 million, respectively. For the six months ended June 30, 2022 and 2021, the Company recorded income tax~~ expense, ~~of $0.5 million and income tax benefit of $1.9 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.~~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

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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.

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 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

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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 ~~which will be added~~under ASU 2022-02, and the impact was not material. Refer to ~~the financial statements as a part~~Note 3, “Loans and Preferred Equity Held for Investment, net.”

Table of ~~the adoption of the new guidance.~~Contents

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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):


		June 30, 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	$	2,092,924	$	2,080,438	5.5	%	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)	1,653,076		1,649,077		5.2	%	3.1	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		12.8	%	0.0	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

		3,758,000		3,741,635					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	92,052		91,888		12.2	%	3.0	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
		92,052		91,888					105,636		105,505						126,062		125,756					123,485		123,163
Loans held for investment	Loans held for investment	3,850,052		3,833,523					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		(44,378)					NA		(36,598)					CECL reserve	—		(145,836)					—		(106,247)
Loans held for investment, net		$	3,850,052	$	3,789,145				$	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.

The weighted average maturity, including extensions, of loans and preferred equity was ~~3.4~~3.0 years at ~~June 30, 2022.~~March 31, 2023. At December 31, ~~2021,~~2022, the weighted average maturity, including extensions, of loans was ~~3.6~~3.2 years.

The Company had ~~$12.1~~$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 ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. This is included in receivables, net on the Company’s consolidated balance sheets.

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

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~~

~~815,466~~

~~Loan maturities/principal repayments~~

~~(472,470)~~

~~Discount accretion/premium amortization~~

~~6,912~~

~~Capitalized interest~~

~~(1,992)~~

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

~~(9,031)~~

~~Charge-off~~

~~1,251~~

~~Balance at June 30, 2022~~

~~3,789,145~~


	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 $0.3~~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 ~~of June 30, 2022,~~ 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 June 30, 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(1)
Total Loans
June 30, 2022 $ 3,821,403 $ — $ — $ 12,120 $ 3,833,523
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~~mezzanine loan which iswas in maturity default as of March 2022. ~~However, because~~In January 2023, the ~~borrower has provided all interest payments through June 30, 2022, the~~New York, New York Hotel mezzanine loan ~~has not been placed on nonaccrual status.~~was extended to December 2023.

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

Current Expected Credit Loss Reserve

The following ~~tables provide~~table provides details on the changes in CECL reserves ~~for the three and six months ended June 30, 2022 and 2021~~ (dollars in thousands):


CECL reserve at December 31, 2022	~~Total~~$	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~~(2)~~(3)	(1,251)
CECL reserve at March 31, 2022	$	34,004
~~Increase (decrease) in CECL reserve(1)~~	~~10,374~~
~~CECL reserve at June 30, 2022~~	$	~~44,378~~

~~CECL reserve at December 31, 2020~~	$	~~37,191~~
~~Increase (decrease) in CECL reserve(1)~~	~~3,600~~
~~CECL reserve at March 31, 2021~~	$	~~40,791~~
~~Increase (decrease) in CECL reserve(1)~~	~~1,361~~
~~CECL reserve at June 30, 2021~~	$	~~42,152~~

(1)Excludes the increase (decrease) in CECL reserves related to unfunded commitments reported on the consolidated statement of ~~operations~~operations: a de minimis amount for the three months ~~ended:~~ended March 31, ~~2022:~~2023 and $0.5 million ~~June 30, 2022: $(0.3) million,~~for the three months ended March 31, ~~2021: $(0.4) million, June 30, 2021: $(0.2) million.~~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 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 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.

As of ~~June 30,~~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~~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”~~Loans and Preferred Equity” above. ~~There were no loans held for investment with contractual payments past due as of December 31, 2021.~~ For the ~~six~~three months ended ~~June 30,~~March 31, 2023 and March 31, 2022, ~~and June 30, 2021,~~ 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 ~~June 30, 2022~~March 31, 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, 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

2927

Table of Contents

BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

June 30, 2022
2022 2021 2020 2019 2018 and Earlier Total
Senior loans
Risk Rankings:
2 $ — $ 200,113 $ 58,880 $ 25,855 $ — $ 284,848
3 762,666 1,388,246 53,289 283,483 300,244 2,787,928
4 — — — 352,049 304,690 656,739
Total Senior loans 762,666 1,588,359 112,169 661,387 604,934 3,729,515
Mezzanine loans
Risk Rankings:
3 17,165 — — 41,459 4,474 63,098
4 — — — 28,790 — 28,790
5 — — — — 12,120 12,120
Total Mezzanine loans 17,165 — — 70,249 16,594 104,008
Total Loans held for investment $ 779,831 $ 1,588,359 $ 112,169 $ 731,636 $ 621,528 $ 3,833,523

As of ~~June 30, 2022,~~March 31, 2023, the weighted average risk ~~rating~~ranking for loans and preferred equity held for investment was ~~3.1.~~

December 31, 2021
2021 2020 2019 2018 2017 Total
Senior loans
Risk Rankings:
2 $ 242,850 $ 109,103 $ 70,811 $ — $ — $ 422,764
3 1,393,307 72,359 443,162 262,147 34,036 2,205,011
4 — — 396,395 304,477 — 700,872
5 — — 39,335 — — 39,335
Total Senior loans 1,636,157 181,462 949,703 566,624 34,036 3,367,982
Mezzanine loans
Risk Rankings:
3 — — 38,796 4,489 — 43,285
4 — — 62,220 — 12,120 74,340
Total Mezzanine loans — — 101,016 4,489 12,120 117,625
Total Loans held for investment $ 1,636,157 $ 181,462 $ 1,050,719 $ 571,113 $ 46,156 $ 3,485,607
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 June 30, 2022, assuming~~Assuming the terms to qualify for future advances, if any, had been met, total gross unfunded lending commitments were ~~$312.9 million.~~$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. ~~At June 30, 2022, the~~The Company recorded ~~a $0.7~~$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.

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

4. Real Estate Securities

Investments in Investing VIEs

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

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

As of June 30, 2022, the mortgage loans and the related mortgage obligations held in the securitization trust had an unpaid principal balance of $767.8 million and $665.2 million, respectively. As of DecemberMarch 31, 2021, the mortgage loans and the related mortgage obligations held in the securitization trusts had an unpaid principal balance of $783.8 million and $681.2 million, respectively. As of June 30, 2022, the underlying collateral of the securitization trust consisted of 61 underlying commercial mortgage loans, with a weighted average coupon of 4.9% and a weighted average loan-to-value ratio of 60.2%.

~~The following table presents the assets and liabilities recorded on the consolidated balance sheets attributable to the securitization trust as of June 30, 2022~~2023 and December 31, ~~2021 (dollars in thousands):~~

June 30, 2022 December 31, 2021
Assets
Mortgage loans held in a securitization trust, at fair value $ 718,335 $ 813,310
Receivables, net 3,214 3,325
Total assets $ 721,549 $ 816,635
Liabilities
Mortgage obligations issued by a securitization trust, at fair value $ 682,181 $ 777,156
Accrued and other liabilities 2,930 3,032
Total liabilities $ 685,111 $ 780,188
2022, the Company did not hold any assets or liabilities attributable to securitization trusts.

The Company ~~elected the fair value option~~did not generate net income attributable to measure the assets and liabilities of the securitization trusts, which requires that changes in valuations of the securitization trusts be reflected in the Company’s consolidated statements of operations.

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 as of June 30, 2022 and December 31, 2021, respectively, 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 13, “Fair Value”~~ for ~~a description of~~ the ~~valuation techniques used to measure fair value of assets and liabilities of the Investing VIEs.~~three months ended March 31, 2023.

3128

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 ~~and six~~ months ended ~~June 30,~~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 June 30, Six Months Ended June 30,
2022 2021 2022 2021
Statement of Operations
Interest income on mortgage loans held in securitization trusts $ 9,721 $ 11,390 $ 19,095 $ 31,079
Interest expense on mortgage obligations issued by securitization trusts (8,586) (10,111) (17,074) (27,447)
Net interest income 1,135 1,279 2,021 3,632
Operating expense (245) (161) (342) (927)
Unrealized gain on mortgage loans and obligations held in securitization trusts, net — 19,516 — 28,154
Realized loss on mortgage loans and obligations held in securitization trusts, net — (19,516) — (19,516)
Net income attributable to BrightSpire Capital, Inc. common stockholders $ 890 $ 1,118 $ 1,679 $ 11,343


	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 ~~June 30, 2022,~~March 31, 2023 and December 31, ~~2021~~2022 (dollars in thousands):


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Land and improvements	Land and improvements	$	128,426	$	134,453	Land and improvements	$	125,797	$	128,608
Buildings, building leaseholds, and improvements	Buildings, building leaseholds, and improvements	504,504		530,815		Buildings, building leaseholds, and improvements	493,020		505,297
Tenant improvements	Tenant improvements	17,168		17,944		Tenant improvements	18,989		17,851
Construction-in-progress		660		660

Subtotal	Subtotal	$	650,758	$	683,872	Subtotal	$	637,806	$	651,756
Less: Accumulated depreciation	Less: Accumulated depreciation	(77,467)		(70,861)		Less: Accumulated depreciation	(89,604)		(87,109)

Net lease portfolio, net	Net lease portfolio, net	$	573,291	$	613,011	Net lease portfolio, net	$	548,202	$	564,647

The following table presents the Company’s portfolio of other real estate as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (dollars in thousands):


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Land and improvements	Land and improvements	$	29,583	$	29,582	Land and improvements	$	29,790	$	29,582
Buildings, building leaseholds, and improvements	Buildings, building leaseholds, and improvements	152,186		152,180		Buildings, building leaseholds, and improvements	152,748		152,186
Tenant improvements	Tenant improvements	17,731		17,303		Tenant improvements	20,370		18,757
Furniture, fixtures and equipment	Furniture, fixtures and equipment	135		135		Furniture, fixtures and equipment	269		135
Construction-in-progress	Construction-in-progress	1,651		460		Construction-in-progress	864		3,011
Subtotal	Subtotal	$	201,286	$	199,660	Subtotal	$	204,041	$	203,671
Less: Accumulated depreciation	Less: Accumulated depreciation	(32,498)		(29,460)		Less: Accumulated depreciation	(37,518)		(35,850)

Other portfolio, net	Other portfolio, net	$	168,788	$	170,200	Other portfolio, net	$	166,523	$	167,821

~~For the six months ended June 30, 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 assets held for sale with a carrying value of $33.5 million.~~

~~Table of Contents~~

~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

Real Estate Held for Sale

~~Depreciation expense~~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 ~~was $6.4 million~~is recognized as a gain.

If circumstances arise that were previously considered unlikely and, ~~$7.0 million for~~as a result, the ~~three months ended June 30, 2022 and 2021, respectively. Depreciation expense on~~Company decides not to sell the real estate ~~was $12.5 million~~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 ~~$13.9 million~~(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.

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 ~~six months ended June 30, 2022, and 2021, respectively.~~

~~Property Operating Income~~

~~For the three and six months ended June 30, 2022 and 2021, the components of property operating income were as follows (dollars in thousands):~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Lease revenues(1)
Minimum lease revenue $ 19,334 $ 20,240 $ 39,068 $ 42,649
Variable lease revenue 2,388 2,449 5,214 5,229
$ 21,722 $ 22,689 $ 44,282 $ 47,878
Hotel operating income — 1,902 1,566 2,603
$ 21,722 $ 24,591 $ 45,848 $ 50,481

~~(1)~~Excludes net amortization income related to above and below-market leases of $0.1 million and de minimis income for the three and six months ended June 30, 2022, respectively. Excludes net amortization income related to above and below-market leases of $0.2 million and de minimis income for the three and six months ended June 30, 2021, respectively.

~~Minimum Future Rents~~

~~Minimum rental amounts due under leases~~properties. Foreclosed properties 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 overrecognized at the ~~next five years and thereafter as of June 30, 2022 (dollars in thousands):~~

Remainder of 2022 $ 37,034
2023 70,197
2024 65,515
2025 58,966
2026 52,100
2027 and thereafter 361,832
Total $ 645,644

The rental properties owned at June 30, 2022 are leased under noncancellable operating leases with current expirations ranging from 2022 to 2038, with certain tenant renewal rights. For certain properties,time the ~~tenants pay the Company, in addition to the contractual base rent, their pro rata share of~~ real estate ~~taxes~~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 ~~operating expenses. Certain lease agreements provide~~the cumulative reserve on the loan is charged off. The Company periodically evaluates foreclosed properties for ~~periodic rental increases and others provide for increases~~subsequent decrease in fair value, which is recorded as an additional impairment loss. Fair value of foreclosed properties is generally based on ~~the consumer~~third party appraisals, broker 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~~opinions, comparable sales or sublessee with expiration dates through 2050. Rents on certain ground leases are paid directly by the tenants. Ground rent expense for the three and six months ended June 30, 2022 was $0.8 million and $1.5 million, respectively. Ground rent expense for the three and six months ended June 30, 2021 was $0.8 million and $1.5 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 June 30, 2022.~~a combination thereof.

3317

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(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. During the year ended December 31, 2022, the Company sold its retained investments in the subordinate tranches of a securitization trust. In connection with the sale, the Company deconsolidated the securitization trust and recognized a realized gain. Refer to Note 4, “Real Estate Securities” for further discussion.

Impairment

Investments in Unconsolidated Ventures

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

Equity Method Investments

Impairment

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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.

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. 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.

Transfers of Financial Assets

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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, including the Company’s master repurchase facilities.

Derivative Instruments and Hedging Activities

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

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

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 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.

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(Unaudited)

Revenue Recognition

Property Operating Income

Property operating income includes the following:

Real Estate Securities

Foreign Currency

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(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

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

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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.

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(Unaudited)

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

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.”

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(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, 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.

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(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.

(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):


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, 2023 and $0.5 million for the three months ended March 31, 2022.

(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

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

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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 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

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(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.

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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

Real Estate Held for Sale

~~As of June 30, 2022, the Company did not have any properties~~Real estate is classified as held for ~~sale. As~~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 ~~December 31, 2021,~~ the ~~Company~~sale is probable within one year. Real estate held ~~1 net lease property and 1 hotel~~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. ~~These properties consisted~~At the time a sale is consummated, the excess, if any, of ~~$44.2 million~~sale price less selling costs over carrying value of the real estate is recognized as a gain.

At March 31, 2023 and December 31, 2022, there were no properties held for sale.

Foreclosed Properties

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(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. During the year ended December 31, 2022, the Company sold its retained investments in the subordinate tranches of a securitization trust. In connection with the sale, the Company deconsolidated the securitization trust and ~~$0.1 million~~recognized a realized gain. Refer to Note 4, “Real Estate Securities” for further discussion.

Impairment

Investments in Unconsolidated Ventures

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

Equity Method Investments

Impairment

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(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.

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. 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.

Transfers of Financial Assets

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(Unaudited)

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, including the Company’s master repurchase facilities.

Derivative Instruments and Hedging Activities

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

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 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Revenue Recognition

Property Operating Income

Property operating income includes the following:

Real Estate Securities

Foreign Currency

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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

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(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 ~~assets~~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.

In developing the CECL reserve for its loans held for ~~sale~~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:

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(Unaudited)

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

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 ~~sheet.~~sheets. See Note 3, “Loans and Preferred Equity Held for Investment, net” for further detail.

Accounting Standards Adopted in 2022

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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

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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

Credit Quality Monitoring

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(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

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(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.

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(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.

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(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 ~~six~~three months ended ~~June 30,~~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 and ~~is included in other gain, net on the consolidated statement of operations. The Company also sold 1~~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 ~~and is~~are included in other gain (loss), net on the consolidated statement of operations.

~~During the six months ended June~~

30 ~~2021, the Company completed the sale~~

Table of ~~an industrial portfolio for a total gross sales price of $335.0 million and a total net gain of $11.8 million.~~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 ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 are as follows (dollars in thousands):


		June 30, 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	$	75,437	$	(32,834)	$	42,603	In-place lease values	$	74,468	$	(36,692)	$	37,776
Deferred leasing costs	Deferred leasing costs	28,207		(14,371)		13,836		Deferred leasing costs	28,533		(16,457)		12,076
Above-market lease values	Above-market lease values	8,359		(6,445)		1,914		Above-market lease values	8,359		(7,081)		1,278
		$	112,003	$	(53,650)	$	58,353		$	111,360	$	(60,230)	$	51,130
Intangible Liabilities	Intangible Liabilities							Intangible Liabilities
Below-market lease values	Below-market lease values	$	16,074	$	(10,542)	$	5,532	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

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~~The following table summarizes the amortization of deferred leasing costs, ~~and~~ intangible assets and intangible liabilities ~~related to assets held~~ for ~~sale at December~~the three months ended March 31, ~~2021.~~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

3431

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table summarizes the amortization of deferred leasing costs, intangible assets and intangible liabilities for the three and six months ended June 30, 2022 and 2021 (dollars in thousands):

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Above-market lease values $ (286) $ (262) $ (574) $ (666)
Below-market lease values 346 470 677 692
Net increase (decrease) to property operating income $ 60 $ 208 $ 103 $ 26
In-place lease values $ 1,537 $ 1,862 $ 3,138 $ 3,627
Deferred leasing costs 748 935 1,554 1,556
Other intangibles — 129 — 172
Amortization expense $ 2,285 $ 2,926 $ 4,692 $ 5,355

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 ~~June 30, 2022~~March 31, 2023 (dollars in thousands):


		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	$	(521)	$	(571)	$	(443)	$	(265)	$	(86)	$	(28)	$	(1,914)	Above-market lease values	$	(431)	$	(448)	$	(270)	$	(91)	$	(38)	$	—	$	(1,278)
Below-market lease values	Below-market lease values	692		1,379		1,379		1,378		704		—		5,532		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	$	171	$	808	$	936	$	1,113	$	618	$	(28)	$	3,618	Net increase (decrease) to property operating income	$	603	$	931	$	1,108	$	612	$	(38)	$	—	$	3,216

In-place lease values	In-place lease values	$	2,932	$	5,054	$	4,754	$	4,068	$	3,235	$	22,560	$	42,603	In-place lease values	$	3,721	$	4,684	$	3,999	$	3,165	$	3,062	$	19,145	$	37,776
Deferred leasing costs	Deferred leasing costs	1,485		2,516		2,209		1,804		923		4,899		13,836		Deferred leasing costs	1,924		2,290		1,873		967		849		4,173		12,076
Amortization expense	Amortization expense	$	4,417	$	7,570	$	6,963	$	5,872	$	4,158	$	27,459	$	56,439	Amortization expense	$	5,645	$	6,974	$	5,872	$	4,132	$	3,911	$	23,318	$	49,852

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~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

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

The following table presents a summary of restricted cash as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (dollars in thousands):


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Restricted cash:	Restricted cash:					Restricted cash:
Borrower escrow deposits	Borrower escrow deposits	$	75,414	$	73,344	Borrower escrow deposits	$	65,323	$	79,055
Capital expenditure reserves	Capital expenditure reserves	9,829		8,921		Capital expenditure reserves	9,030		8,623
Real estate escrow reserves	Real estate escrow reserves	3,628		2,025		Real estate escrow reserves	2,623		1,583
Working capital and other reserves	Working capital and other reserves	2,003		2,310		Working capital and other reserves	2,186		2,145
Tenant lockboxes	Tenant lockboxes	800		241		Tenant lockboxes	861		1,102

Total	Total	$	91,674	$	86,841	Total	$	80,023	$	92,508

The following table presents a summary of other assets as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (dollars in thousands):


		June 30, 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	$	26,670	$	24,970	Right-of-use lease asset	$	24,219	$	25,237
Tax receivable and deferred tax assets	Tax receivable and deferred tax assets	22,338		26,194		Tax receivable and deferred tax assets	19,080		19,117
Deferred financing costs, net - credit facilities	Deferred financing costs, net - credit facilities	7,373		2,113		Deferred financing costs, net - credit facilities	3,086		4,630
Prepaid expenses		4,407		5,069
Investments in unconsolidated ventures ($4,406 and $4,406 at fair value, respectively)		4,406		20,591
Derivative asset		3,202		1,373
Other		1,786		2,141
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	$	70,182	$	82,451	Total	$	52,576	$	55,673

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table presents a summary of accrued and other liabilities as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (dollars in thousands):


		June 30, 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	$	27,153	$	25,205	Operating lease liability	$	24,997	$	25,961
Current and deferred tax liability	Current and deferred tax liability	27,080		34,612		Current and deferred tax liability	24,637		26,198
Accounts payable, accrued expenses and other liabilities		15,974		20,168
Interest payable	Interest payable	8,531		11,076		Interest payable	12,719		11,680
Prepaid rent and unearned revenue	Prepaid rent and unearned revenue	6,462		7,669		Prepaid rent and unearned revenue	12,251		7,688
Accounts payable, accrued expenses and other liabilities						Accounts payable, accrued expenses and other liabilities	8,358		15,087
Tenant security deposits						Tenant security deposits	661		411
Unfunded CECL loan allowance	Unfunded CECL loan allowance	678		432		Unfunded CECL loan allowance	414		389
Tenant security deposits		409		424
Other	Other	206		228		Other	219		219
Total	Total	$	86,493	$	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% ~~for the six months ended June 30,~~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.

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~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

Investments in Unconsolidated Ventures

~~During~~The Company realized a one-time gain from its ratable share of dispute resolution proceeds of approximately $9.0 million from the ~~three months ended June 30, 2022~~senior mezzanine lender at the ~~Company sold an~~Company’s prior Los Angeles, California mixed-use project construction mezzanine loan and retained B-participation investment, which is recorded in equity ~~method investment for a gross sales price~~in earnings of ~~$38.1 million and recognized a realized gain of $21.9 million. The realized gain is included in other gain, net~~unconsolidated ventures on the Company’s consolidated statements of operations. ~~Following~~In connection with the ~~sale,~~settlement, effective January 26, 2023, the Company ~~had~~has no ~~remaining equity method investments.~~further interest in the loan or investment.

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8. Debt

The following table presents debt as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (dollars in thousands):


								June 30, 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) + 1.66%		$	702,054	$	699,645	$	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		665,261		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							1,372,054		1,364,906		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%		22,840		22,840		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%		3,247		3,188		3,282		3,216
Net lease 4				Non-recourse	Nov-26	4.45%		7,005		6,877		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%		674		661		908		889
Net lease 5				Non-recourse	Aug-26	4.08%		30,376		30,199		30,639		30,442
Net lease 1(6)				Non-recourse	Nov-26	4.45%		17,631		17,309		17,823		17,465
Net lease 1(7)				Non-recourse	Mar-28	4.38%		11,648		11,211		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%		161,856		164,151		181,504		184,078
Net lease 3				Non-recourse	Sep-33	4.77%		200,000		198,733		200,000		198,689

Other real estate 1	Other real estate 1			Non-recourse	Oct-24	4.47%		104,306		104,589		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%		71,618		71,248		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%		27,851		27,851		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							659,052		658,857		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 + 1.82%	(14)	250,162		250,162		109,915		109,915

Bank 3 facility 3		600,000		Limited Recourse(12)	Apr-23(15)	LIBOR/SOFR + 1.95%	(14)	396,202		396,202		157,409		157,409
Bank 7 facility 1		600,000		Limited Recourse(12)	Apr-26(16)	LIBOR/SOFR + 1.79%	(14)	415,795		415,795		358,181		358,181
Bank 8 facility 1		250,000		Limited Recourse(12)	Jun-23(17)	LIBOR/SOFR + 2.18%	(14)	158,504		158,504		177,519		177,519
Bank 9 facility 1		400,000		(18)	June-27(19)	LIBOR/SOFR + 1.70%	(14)	266,904		266,904		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	$	2,250,000					1,487,567		1,487,567		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							1,487,567		1,487,567		905,122		905,122		Subtotal credit facilities							1,292,176		1,292,176		1,339,993		1,339,993

Total	Total							$	3,518,673	$	3,511,330	$	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.

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~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

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

(3)The Company, through indirect Cayman subsidiaries, securitized commercial mortgage loans originated by the Company. Senior notes issued by the securitization trusts were generally sold to third parties and subordinated notes retained by the Company. These securitizations are accounted for as

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(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~~As of March 31, 2023, the ~~first quarter~~outstanding principal of ~~2022 the property was sold and~~ 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 June 30, 2022, the outstanding principal of the mortgage payable was NOK 1.6 billion, which translated to $161.9 million.~~

~~(9)During the first quarter of 2022 the property was sold and the mortgage payable was repaid in full.~~

~~(10)~~The current maturity of the note payable is June 2023, with 1one one-year 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” within this note for more details.

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

~~(13)~~(11)~~During the second quarter of 2022, the~~The current maturity date ~~was~~is April ~~2023. In July 2022, the maturity date was extended to July 2024,~~2025, with 3two one-year extension options, which may be exercised upon the satisfaction of certain customary conditions set forth in the governing documents.

~~(14)~~(12)Represents the weighted average spread as of ~~June 30, 2022.~~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 ~~2.70%~~3.00%.

~~(15)~~During the second quarter of 2022, the maturity date was April 2023. In July 2022, the maturity date was extended to April 2025, with 2 one-year extension options, which may be exercised upon the satisfaction of certain customary conditions set forth in the governing documents.

~~(16)~~(13)The current maturity date is April 2025, with a one-year extension available at the option of the Company, which may be exercised upon the satisfaction of certain customary conditions set forth in the governing documents.

~~(17)The current maturity date is June 2023, with no extension currently available at the option of the Company.~~

~~(18)~~(14)Recourse is either 25.0% or 50.0% depending on loan metrics.

~~(19)~~(15)The current maturity date is June 2025, with 2two 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.

(16)The current maturity date is July 2024, with three one-year extension 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 2023, with a 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 agreements.

Future Minimum Principal Payments

The following table summarizes future scheduled minimum principal payments at ~~June 30, 2022~~March 31, 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		$	1,311	$	—	$	1,311	$	—
2023		557,272		—		2,566		554,706
Remaining 2023										Remaining 2023	$	1,906	$	—	$	1,906	$	—
2024	2024	134,376		—		134,376		—		2024	132,982		—		132,982		—
2025	2025	235,750		—		235,750		—		2025	226,086		—		226,086		—
2026	2026	720,557		—		54,600		665,957		2026	363,684		—		54,571		309,113
2027 and thereafter		1,869,407		1,372,054		230,449		266,904
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	$	3,518,673	$	1,372,054	$	659,052	$	1,487,567	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.

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~~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.

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(Unaudited)

The Credit Agreement also includes an option for the Borrowers to increase the maximum available principal amount 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 ~~June 30, 2022,~~March 31, 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 ~~June 30, 2022,~~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, 2023, the securitization reflects an advance rate of 73.75% at a weighted average cost of funds of Adjusted Term SOFR plus 1.87% (before transaction expenses) and is collateralized by a pool of 17 senior loan investments.

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grade notes. As of June 30, 2022, the securitization reflects an advance rate of 82.8% at a weighted average cost of funds of Adjusted Term SOFR plus 1.66% (before transaction expenses) and is collateralized by a pool of 21 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 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 ~~June 30, 2022,~~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 first quarter of ~~2022, 2 loans~~2023, one loan held in CLNC 2019-FL1 ~~were~~was fully repaid and one loan was partially repaid totaling ~~$54.4~~$36.2 million. ~~During~~At March 31, 2023, the ~~second quarter~~Company had $632.6 million of ~~2022, 3 loans held in~~unpaid principal balance of CRE debt investments financed with CLNC ~~2019-FL1 were repaid, totaling $84.0 million. The proceeds from the 5 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. ~~During~~For the ~~first~~ quarter ~~of 2022, 1 loan held in BRSP 2021-FL1 was fully repaid, totaling $11.7 million. During the second quarter of 2022 3~~ended March 31, 2023, two loans held in BRSP 2021-FL1 were fully repaid, totaling ~~$47.9~~$48.0 million. ~~Additionally, subsequent to June 30, 2022 and through August 2, 2022 1 loan held in BRSP 2021-FL1, totaling $14.2 million was fully repaid.~~ 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, 2023, the Company had $1.4 billion carrying value of CRE debt investments and other assets financed with $1.1 billion of securitization bonds payable, net. As of December 31, 2022, the Company had $1.5 billion carrying value of CRE debt investments financed with $1.2 billion of securitization bonds payable, net.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As of June 30, 2022, the Company had $1.6 billion carrying value of CRE debt investments and other assets financed with $1.4 billion of securitization bonds payable, net. As of December 31, 2021, the Company had $1.8 billion carrying value of CRE debt investments financed with $1.5 billion of securitization bonds payable, net.

Master Repurchase Facilities

As of ~~June 30, 2022,~~March 31, 2023, the Company, through subsidiaries, had entered into repurchase agreements with multiple global financial institutions to provide an aggregate principal amount of up to $2.3 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 new investments. As of ~~June 30, 2022,~~March 31, 2023, the Company was in compliance with all of its financial covenants under the Master Repurchase Facilities.

As of ~~June 30, 2022,~~March 31, 2023, the Company had ~~$2.0~~$1.8 billion carrying value of CRE debt investments financed with ~~$1.5~~$1.3 billion under the 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 under the master repurchase facilities.~~

~~During the three months ended June 30, 2022, the Company entered into amendments~~$1.3 billion under the Master Repurchase ~~Facility with~~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 ~~7 and Bank 9 to increase the facility sizes by $100 million and extend the maturity dates by one year for each facility.~~

~~Additionally, subsequent to June 30,~~1 was $211.8 million. As of December 31, 2022, the Company ~~entered into amendments under the~~did not hold any Master Repurchase ~~Facility with Bank 1 and Bank 3 to extend~~Facilities where the ~~maturity date~~collateral exceeded the amounts borrowed by ~~one year and four years, respectively.~~

~~CMBS Credit Facilities~~

Asmore than 10% of June 30, 2022, the Company had entered into 8 master repurchase agreements (collectively the “CMBS Credit Facilities”) to finance CMBS investments. The CMBS Credit Facilities are on a recourse basis and contain representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of this type. The CMBS Credit Facilities were undrawn as of June 30, 2022 and December 31, 2021.its total equity.

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 2, “Summary of Significant Accounting Policies,” 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 ~~and six~~ months ended ~~June 30, 2021, the total management fee expense incurred was $2.3 million~~March 31, 2023 and ~~$9.6 million, respectively.~~

~~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 and six months ended June 30, 2021.

~~Reimbursements of Expenses~~

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

For the three and six months ended June 30, 2021, the total reimbursements of expenses incurred by the Manager on behalf of the Company and reimbursable in accordance with the Management Agreement was $0.8 million and $2.8 million, respectively,

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~~(Unaudited)~~

and are included in operating expense on the consolidated statements of operations. As of June 30, 2022 and December 31, 2021, there were no unpaid expenses included in due to related party in the Company’s consolidated balance sheets.2022.

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. The shares granted in May 2020 to the independent directors of the Company under the 2018 Plan vested in May 2021. The shares granted in June 2021 to the independent directors, as well as in October and December to the 2 newly appointed independent directors of the Company under the 2018 Plan vested in May 2022. Shares granted to non-independent directors, officers and ~~the Manager under the 2018 Plan~~employees, if applicable, generally vest ratably in three annual ~~installments.~~

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

On May 5, 2022, the Company granted 1,456,366 shares of Class A common stock to certain of its ~~employees.~~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, ~~2023,~~2024, March 15, ~~2024~~2025 and March 15, ~~2025.~~2026.

On May 6, 2022, the Company granted 62,190 shares of Class A common stock to the independent directors of the Company which vest on May 6, 2023.

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(Unaudited)

Equity-Based Compensation Expense

In connection with the share grants, the Company recognized share-based compensation expense of $2.3 million and ~~$4.2~~$1.9 million within compensation and benefits in the consolidated statement of operations for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and March 31, 2022, respectively. The Company recognized share-based compensation expense of $5.4 million and $9.7 million within compensation and benefits in the consolidated statement of operations for the three and six months ended June 30, 2021, respectively.

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

Performance Stock Units (“PSU”)—PSUs are granted to certain employees of the Company and are subject to both a service condition and a performance condition. Following the end of the measurement period for the PSUs, the recipients of PSUs may

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~~(Unaudited)~~

be eligible to vest in all or a portion of PSUs granted, and be issued a number of shares of the Company’s Class A common stock, ranging from 0% to 200% of the number of PSUs granted and eligible to vest, to be determined based upon the performance of the Company’s Class A common stock relative to the Company’s GAAP book value at the end of a two-year measurement ~~period.~~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.

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(Unaudited)

The table below summarizes the Company’s awards granted, forfeited or vested under the 2022 Plan during the ~~six~~three months ended ~~June 30,~~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	1,524,482	—	1,524,482	8.59		—		Granted	1,391,217	384,378	1,775,595	6.90		9.69
Vested	Vested	(605,422)	—	(605,422)	9.18		—		Vested	(888,834)	(136,000)	(1,024,834)	8.46		11.96

Unvested shares at June 30, 2022		2,401,154	272,000	2,673,154	10.23		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 ~~six~~three months ended ~~June 30,~~March 31, 2023 and March 31, 2022, ~~and June 30, 2021,~~ determined based on their respective fair values at vesting date, was ~~$3.8~~$5.4 million and ~~$3.9~~$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 ~~June 30, 2022,~~March 31, 2023, aggregate unrecognized compensation cost for all unvested equity awards was ~~$17.4~~$23.7 million, which is expected to be recognized over a weighted-average period of ~~2.3~~2.4 years. At ~~June 30, 2021,~~March 31, 2022, aggregate unrecognized compensation cost for all unvested equity awards was ~~$11.0~~$7.0 million, which is expected to be recognized over a weighted-average period of ~~2.5~~1.8 years.

11. Stockholders’ Equity

Authorized Capital

As of ~~June 30, 2022,~~March 31, 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 ~~June 30, 2022.~~

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

~~(Unaudited)~~

March 31, 2023.

Dividends

During the ~~six~~three months ended ~~June 30,~~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

~~June 15, 2022~~

~~June 30, 2022~~

~~July 15, 2022~~

~~$0.20~~

Share Repurchases

In ~~May 2022,~~April 2023, the Company’s board of directors authorized a stock repurchase program (“Stock Repurchase Program”) under which the Company may repurchase up to ~~$100.0~~$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 ~~Securities~~ Exchange ~~Act of 1934, as amended (the “Exchange Act”).~~Act. The Stock Repurchase Program will be utilized at management’s discretion and in accordance with the requirements of the ~~Securities and Exchange Commission (“SEC”).~~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 and six months ended June 30, 2022, the~~

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(Unaudited)

The Company ~~repurchased 2.2 million~~did not repurchase any shares of its Class A common stock ~~at a weighted average price of $8.40 per share for an aggregate cost of $18.3 million. Additionally, and separate from~~during the Stock Repurchase Program, the Company redeemed the 3.1 million total outstanding membership units in the OP held by a third-party representing noncontrolling interests at a price of $8.25 per unit for a total cost of $25.4 million.

three months ended March 31, 2023. As of ~~June 30, 2022,~~March 31, 2023, there was $81.7 million remaining available to make repurchases under the ~~Stock Repurchase Plan.~~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
Other comprehensive income (loss) before OP reclassification — (9,810) (9,810)
Amounts reclassified from OP 710 (856) (146)
Net current period OCI 710 (10,666) (9,956)
AOCI at June 30, 2022 $ 18,603 $ (19,113) $ (510)


(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)

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~~(Unaudited)~~

(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
Other comprehensive income — — 1,966 1,966
AOCI at June 30, 2021 $ — $ 47,127 $ 1,685 $ 48,812


(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)
Other comprehensive income (loss) before Stockholders reclassification — — —
Amounts reclassified to Stockholders (710) 856 146
Net current period OCI (710) 856 146
AOCI at June 30, 2022 $ — $ — $ —

(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
Other comprehensive income (loss) — — (89) (89)
AOCI at June 30, 2021 $ — $ 1,403 $ (649) $ 754


(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)

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 $ — $ —
Other comprehensive income — —
AOCI at June 30, 2022 $ — $ —

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

~~(Unaudited)~~

(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
Other comprehensive income 336 336
AOCI at June 30, 2021 $ 1,753 $ 1,753

~~The following table presents the details of the reclassifications from AOCI for the six months ended June 30, 2021:~~

~~(in thousands)~~

~~Component of AOCI reclassified into earnings~~

Six Months Ended
June 30, 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~~


(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	$	—	$	—

12. Noncontrolling Interests

Operating Partnership

~~Noncontrolling~~Net income (loss) attributable to the noncontrolling interests ~~included~~was based on such members ownership percentage of the ~~aggregate limited liability 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. During~~OP. For the three months ended ~~June 30, 2022, the Company redeemed these membership units in the OP for $25.4 million. As of June 30, 2022,~~March 31, 2023, there were no ~~remaining~~ noncontrolling interests in the OP and the OP ~~was wholly-owned~~is owned by the Company directly, and indirectly through the Company’s ~~wholly-owned~~ subsidiary, BRSP-T Partner, LLC.

~~Net income (loss) attributable to the noncontrolling interests is based on such members ownership percentage of the OP.~~ Net income attributable to the noncontrolling interests of the OP was ~~$0.4 million and $1.0~~$0.7 million for the three ~~and six~~ months ended ~~June 30, 2022 and net loss attributable to the noncontrolling interests of the OP was $0.4 million and $2.4 million for the three and six months ended June 30, 2021.~~March 31, 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 and net~~ loss attributable to noncontrolling interests in the investment entities was ~~de minimis~~$0.1 million for ~~both~~

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(Unaudited)

the three ~~and six~~ months ended ~~June 30, 2022, respectively~~March 31, 2023 and ~~the~~ net ~~loss~~income attributable to noncontrolling interests ~~in the investment entities~~ was ~~$3.5 million and $3.7 million~~de minimis for the three ~~and six~~ months ended ~~June 30, 2021.~~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

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~~(Unaudited)~~

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 4, “Real Estate Securities,” 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

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(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 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 ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 by level within the fair value hierarchy (dollars in thousands):

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~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

June 30, 2022 December 31, 2021
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets:
Other assets - PE Investments $ — $ — $ 4,406 $ 4,406 $ — $ — $ 4,406 $ 4,406
Mortgage loans held in securitization trusts, at fair value — — 718,335 718,335 — — 813,310 813,310
Other assets - derivative assets — 3,202 — 3,202 — 1,373 — 1,373
Liabilities:
Mortgage obligations issued by securitization trusts, at fair value $ — $ 682,181 $ — $ 682,181 $ — $ 777,156 $ — $ 777,156
Other liabilities - derivative liabilities — — — — — 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 ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and year ended December 31, 2021~~ (dollars in thousands):


											Three Months Ended March 31,
		Six Months Ended June 30, 2022				Year Ended December 31, 2021					2023		2022
		Other assets - PE Investments		Mortgage loans held in securitization trusts(1)		Other assets - 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	—		(15,946)		(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	—		(79,029)		—		(8,375)		Unrealized loss in earnings	—		—		(45,431)
Realized loss in earnings		—		—		—		(36,623)

Ending balance	Ending balance	$	4,406	$	718,335	$	4,406	$	813,310	Ending balance	$	2,790	$	4,406	$	754,579

(1)For the ~~six~~three months ended ~~June 30,~~ March 31, 2022, the Company recorded an unrealized loss of ~~$79.0~~$45.4 million related to mortgage loans held in securitization trusts, at fair value and an unrealized gain of ~~$79.0~~$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 ~~June 30, 2022~~March 31, 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 ~~June 30, 2022~~March 31, 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 June 30, 2022, the key unobservable inputs used in the valuation of mortgage obligations issued by securitization trusts included a blended yield of 20.7% and a weighted average life of 4.9 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.

For the three and six months ended June 30, 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 and six months ended June 30, 2021, the Company recorded a net unrealized gain of $19.5 million and $28.2 million, respectively, 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.

For the three and six months ended June 30, 2021, the Company recorded a net realized loss of $19.5 million on mortgage loans held in and mortgage obligations issued by securitization trusts, at fair value, which represents the loss upon sale of the Company’s retained interests in the subordinate tranches of one securitization trust. This amount is recorded as realized loss on mortgage loans and obligations held in securitization trusts, net in the consolidated statement of operations.

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~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

Fair Value Option

The Company may elect to apply the fair value option of accounting for certain of its financial assets or liabilities due to the nature of the instrument at the time of the initial recognition of the investment. The Company elected the fair value option for PE Investments and eligible financial assets and liabilities of its consolidated Investing VIEs because management believes it is a more useful presentation for such investments. The Company determined recording the PE Investments based on the change in fair value of projected future cash flow from one period to another better represents the underlying economics of the respective investment. As of ~~June 30, 2022~~March 31, 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

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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 ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (dollars in thousands):


		June 30, 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)	$	3,850,052	$	3,789,145	$	3,805,674	$	3,500,658	$	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	$	1,372,054	$	1,364,906	$	1,372,054	$	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	659,052		658,857		659,052		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	1,487,567		1,487,567		1,487,567		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 ~~$312.9~~$256.3 million and ~~$264.9~~$263.4 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Disclosure about fair value of financial instruments is based on pertinent information available to management as of ~~June 30, 2022.~~March 31, 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.

Securitization Bonds Payable, Net

The Company’s securitization bonds payable, net bear floating rates of interest. As of ~~June 30, 2022,~~March 31, 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.

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~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

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 ~~June 30, 2022,~~March 31, 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.

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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 ~~June 30, 2022.~~

~~The following table summarizes assets carried at fair value on a nonrecurring basis as of~~March 31, 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.

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 risk management activities may be designated as qualifying hedge accounting relationships, designated hedges, or non-designated hedges.

As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, fair value of derivative assets and derivative liabilities were as follows (dollars in thousands):


		Non-Designated Hedges				Non-Designated Hedges
		June 30, 2022		December 31, 2021				March 31, 2023		December 31, 2022
Derivative Assets	Derivative Assets						Derivative Assets
Foreign exchange contracts	Foreign exchange contracts	$	3,200	$	1,373		Foreign exchange contracts	$	2,148	$	1,599

Interest rate contracts	Interest rate contracts	2		2			Interest rate contracts	1		2
Included in other assets	Included in other assets	$	3,202	$	1,373		Included in other assets	$	2,149	$	1,601
Derivative Liabilities

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

As of ~~June 30, 2022,~~March 31, 2023, the Company’s counterparties do not hold any cash collateral.

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(Unaudited)

The following table summarizes the Company’s FX forwards and interest rate contracts as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:

Type of Derivatives

Notional Currency

Notional Amount (in thousands)

Range of Maturity Dates

Non-Designated

~~June 30,~~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

~~182,748~~99,733

~~August 2022~~February 2023 - May 2024

Interest Rate Swap

USD

~~527~~285

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 for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (dollars in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		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	$	2,116	$	1,232	$	1,895	$	952	Non-designated foreign exchange contracts	$	651	$	(221)
Non-designated interest rate contracts	Non-designated interest rate contracts	4		5		12		18		Non-designated interest rate contracts	(1)		8
		$	2,120	$	1,237	$	1,907	$	970		$	650	$	(213)

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.

The following table sets forth derivative positions where the Company has a right of offset under netting arrangements with the same counterparty as of ~~June 30, 2022~~March 31, 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)
June 30, 2022
March 31, 2023								March 31, 2023
Derivative Assets	Derivative Assets							Derivative Assets
Foreign exchange contracts	Foreign exchange contracts	$	3,200		$	3,200		Foreign exchange contracts	$	2,148			$	2,148

Interest rate contracts	Interest rate contracts	2			2			Interest rate contracts	1				1
		$	3,202		$	3,202			$	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, 2023 and December 31, 2022.

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(Unaudited)

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

15. Commitments and Contingencies

Lending Commitments

Ground Lease Obligation

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

At ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the weighted average remaining lease term was ~~13.8~~13.7 years and ~~13.9~~13.7 years for ground leases, respectively.

The following table presents ground lease expense, included in property operating expense, for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (dollars in thousands):

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Operating lease expense:
Minimum lease expense $ 768 $ 761 $ 1,536 $ 1,529
Variable lease expense — — — —
$ 768 $ 761 $ 1,536 $ 1,529


	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 ~~June 30, 2022~~March 31, 2023 (dollars in thousands):


Remainder of 2022		$	1,554
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	28,352		Total lease payments	26,020
Less: Present value discount	Less: Present value discount	9,135		Less: Present value discount	8,419
Operating lease liability (Note 7)	Operating lease liability (Note 7)	$	19,217	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

At ~~June 30, 2022,~~March 31, 2023, the weighted average remaining lease term ~~was 6.6~~was 5.6 years for ~~the~~the office leases, which are located in New York, New York and Los Angeles, California.

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(Unaudited)

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, the following table summarizes lease expense, included in operating expense (dollars in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Corporate Offices	Corporate Offices									Corporate Offices
Operating lease expense:	Operating lease expense:									Operating lease expense:
Fixed lease expense	Fixed lease expense	$	315	$	133	$	591	$	133	Fixed lease expense	$	315	$	200

		$	315	$	133	$	591	$	133		$	315	$	200

The operating lease liability for the office leases were determined using a weighted average discount rate of 2.36%. As of ~~June 30, 2022,~~March 31, 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)		$	399
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	8,630		Total lease payments	7,953
Less: Present value discount	Less: Present value discount	694		Less: Present value discount	557
Operating lease liability (Note 7)	Operating lease liability (Note 7)	$	7,936	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 ~~June 30, 2022,~~March 31, 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.

~~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.

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.

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~~BRIGHTSPIRE CAPITAL, INC.~~

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

~~(Unaudited)~~

•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

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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 ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (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 June 30, 2022
Three Months Ended March 31, 2023												Three Months Ended March 31, 2023
Net interest income (expense)	Net interest income (expense)	$	32,064	$	1,134	$	—	$	(435)	$	32,763	Net interest income (expense)	$	33,243	$	—	$	—	$	(289)	$	32,954
Property and other income	Property and other income	78		219		21,806		465		22,568		Property and other income	—		—		22,551		3,056		25,607
Property operating expense	Property operating expense	—		—		(5,266)		—		(5,266)		Property operating expense	—		—		(5,852)		—		(5,852)
Transaction, investment and servicing expense	Transaction, investment and servicing expense	(961)		29		(52)		2		(982)		Transaction, investment and servicing expense	(501)		—		(24)		(310)		(835)
Interest expense on real estate	Interest expense on real estate	—		—		(7,117)		—		(7,117)		Interest expense on real estate	—		—		(5,509)		—		(5,509)
Depreciation and amortization	Depreciation and amortization	—		—		(8,664)		(56)		(8,720)		Depreciation and amortization	—		—		(7,938)		(58)		(7,996)
Increase of current expected credit loss reserve	Increase of current expected credit loss reserve	(10,143)		—		—		—		(10,143)		Increase of current expected credit loss reserve	(39,613)		—		—		—		(39,613)

Compensation and benefits	Compensation and benefits	—		—		—		(8,269)		(8,269)		Compensation and benefits	—		—		—		(8,805)		(8,805)
Operating expense	Operating expense	13		(245)		(56)		(3,782)		(4,070)		Operating expense	(4)		—		—		(3,469)		(3,473)

Other gain, net	Other gain, net	21,484		—		2,093		755		24,332		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	42,535		1,137		2,744		(11,320)		35,096		Income (loss) before equity in earnings of unconsolidated ventures and income taxes	(6,875)		—		3,883		(9,875)		(12,867)

Equity in earnings of unconsolidated ventures												Equity in earnings of unconsolidated ventures	9,055		—		—		—		9,055
Income tax expense	Income tax expense	(416)		—		(49)		—		(465)		Income tax expense	(40)		(5)		(345)		—		(390)
Net income (loss)	Net income (loss)	$	42,119	$	1,137	$	2,695	$	(11,320)	$	34,631	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

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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 June 30, 2021
Net interest income (expense) $ 25,926 $ 1,279 $ — $ (998) $ 26,207
Property and other income 181 — 24,808 920 25,909
Management fee expense — — — (2,338) (2,338)
Property operating expense — — (6,758) — (6,758)
Transaction, investment and servicing expense (563) — (62) (19) (644)
Interest expense on real estate — — (7,777) — (7,777)
Depreciation and amortization — — (9,948) (46) (9,994)
Increase of current expected credit loss reserve (1,200) — — — (1,200)
Compensation and benefits — — — (10,053) (10,053)
Operating expense (291) (166) — (3,543) (4,000)
Restructuring charges — — — (150) (150)
Unrealized gain on mortgage loans and obligations held in securitization trusts, net — 19,516 — — 19,516
Realized loss on mortgage loans and obligations held in securitization trusts, net — (19,516) — — (19,516)
Other gain (loss), net (400) — 1,236 — 836
Income (loss) before equity in earnings of unconsolidated ventures and income taxes 23,653 1,113 1,499 (16,227) 10,038
Equity in earnings (loss) of unconsolidated ventures (33,665) (123) — — (33,788)
Income tax benefit — 49 85 — 134
Net income (loss) $ (10,012) $ 1,039 $ 1,584 $ (16,227) $ (23,616)
~~_________________________________________~~

(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.

Senior and Mezzanine Loans and Preferred Equity CRE Debt Securities Net Leased and Other Real Estate
Corporate(1)
Total
Six Months Ended June 30, 2022
Net interest income (expense) $ 61,428 $ 2,021 $ — $ (1,301) $ 62,148
Property and other income 199 352 45,974 486 47,011
Property operating expense — — (11,990) — (11,990)
Transaction, investment and servicing expense (2,011) 29 (152) 28 (2,106)
Interest expense on real estate — — (14,673) — (14,673)
Depreciation and amortization — — (17,215) (99) (17,314)
Increase of current expected credit loss reserve (9,277) — — — (9,277)
Compensation and benefits — — — (16,494) (16,494)
Operating expense (139) (285) (88) (7,907) (8,419)
Other gain (loss), net 21,355 — 13,929 (664) 34,620
Income (loss) before equity in earnings of unconsolidated ventures and income taxes 71,555 2,117 15,785 (25,951) 63,506
Equity in earnings of unconsolidated ventures 25 — — — 25
Income tax expense (353) — (148) — (501)
Net income (loss) $ 71,227 $ 2,117 $ 15,637 $ (25,951) $ 63,030

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~~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
Six Months Ended June 30, 2021
Net interest income (expense) $ 48,845 $ 3,632 $ — $ (2,038) $ 50,439
Property and other income 180 53 50,605 838 51,676
Management fee expense — — — (9,596) (9,596)
Property operating expense — — (14,869) — (14,869)
Transaction, investment and servicing expense (1,252) (167) (177) (1,336) (2,932)
Interest expense on real estate — — (16,410) — (16,410)
Depreciation and amortization — — (19,487) (46) (19,533)
Increase of current expected credit loss reserve (4,425) — — — (4,425)
Compensation and benefits — — — (16,839) (16,839)
Operating expense (540) (946) (31) (8,292) (9,809)
Restructuring charges — — — (109,321) (109,321)
Unrealized gain on mortgage loans and obligations held in securitization trusts, net — 28,154 — — 28,154
Realized loss on mortgage loans and obligations held in securitization trusts, net — (19,516) — — (19,516)
Other gain (loss), net (400) (859) 10,462 — 9,203
Income (loss) before equity in earnings of unconsolidated ventures and income taxes 42,408 10,351 10,093 (146,630) (83,778)
Equity in earnings (loss) of unconsolidated ventures (36,066) (200) — — (36,266)
Income tax benefit — 1,826 109 — 1,935
Net income (loss) $ 6,342 $ 11,977 $ 10,202 $ (146,630) $ (118,109)

~~(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 June 30, 2022 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
June 30, 2022 $ 3,910,416 $ 741,747 $ 872,190 $ 315,739 $ 5,840,092
December 31, 2021 3,589,325 840,215 963,369 245,460 5,638,369

~~(1)Includes investments in unconsolidated ventures totaling $16.2 million as of December 31, 2021.~~

~~(2)~~Includes PE Investments totaling ~~$4.4~~$2.8 million and $3.0 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022, respectively.

~~(3)~~(2)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.

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~~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 June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Total income by geography:	Total income by geography:									Total income by geography:
United States	United States	$	80,758	$	67,564	$	154,202	$	138,515	United States	$	105,556	$	73,445
Europe	Europe	4,614		(26,132)		9,583		(19,731)		Europe	4,722		4,969

Total(1)	Total(1)	$	85,372	$	41,432	$	163,785	$	118,784	Total(1)	$	110,278	$	78,414


		June 30, 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	$	542,359	$	553,368	United States	$	528,266	$	532,380
Europe	Europe	258,073		294,824		Europe	237,589		254,068
Total(2)	Total(2)	$	800,432	$	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.

17. Earnings Per Share

The Company’s net income (loss) and weighted average shares outstanding for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ consist of the following (dollars in thousands, except per share data):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Net income (loss)	Net income (loss)	$	34,631	$	(23,616)	$	63,030	$	(118,109)	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	15		3,459		(7)		3,685		Investment Entities	75		(22)
Operating Partnership	Operating Partnership	(359)		437		(1,013)		2,390		Operating Partnership	—		(654)
Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	$	34,287	$	(19,720)	$	62,010	$	(112,034)	Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	$	(4,127)	$	27,724

Numerator:	Numerator:									Numerator:
Net (income) loss allocated to participating securities (non-vested shares)	Net (income) loss allocated to participating securities (non-vested shares)	$	(687)	$	—	$	(797)	$	—	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	$	33,600	$	(19,720)	$	61,213	$	(112,034)	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)	127,756		128,298		128,052		128,297		Weighted average shares outstanding - basic(1)	126,665		128,758
Weighted average shares outstanding - diluted(2)	Weighted average shares outstanding - diluted(2)	129,595		128,298		129,669		128,297		Weighted average shares outstanding - diluted(2)	126,665		129,745

Net income (loss) per common share - basic		$	0.26	$	(0.15)	$	0.48	$	(0.87)
Net income (loss) per common share - diluted		$	0.26	$	(0.15)	$	0.47	$	(0.87)
Net income (loss) per common share - basic and diluted										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 ~~2,401,154~~2,811,074 and ~~1,550,862~~981,632 of restricted stock awards as of ~~June 30,~~March 31, 2023 and March 31, 2022, ~~and June 30, 2021,~~ 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.

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BRIGHTSPIRE CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

18. Subsequent Events

Dividends

In ~~July 2022,~~April 2023, the Company paid a quarterly cash dividend of $0.20 per share of its Class A common stock for the quarter ended ~~June 30, 2022,~~March 31, 2023, to stockholders of record on ~~June 30, 2022.~~March 31, 2023.

Development Mezzanine Loan ~~Originations~~

~~Subsequent to~~ ~~June 30, 2022, the Company funded~~ 3 ~~senior mortgage loans with a total commitment of~~ ~~$91.4 million. The average initial funded amount was $27.7 million and had a weighted average spread of SOFR plus 3.52%.~~

~~Master Repurchase Facilities~~

In ~~July 2022,~~April 2023, the Company amended 1the 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 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, the Company 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 ~~Master~~outstanding Class A common stock until April 30, 2024. The Stock Repurchase ~~Facilities to extend~~Program replaces the ~~maturity date to~~prior repurchase program authorization which expired on April 2025, with 2 one-year extension options, and to replace LIBOR with SOFR as the benchmark applicable to loans entered into prior to January 1, 2022. Also in July 2022, the Company amended another 1 of its Master Repurchase Facilities to extend the maturity date to July 2024, with 3 one-year extension options, and to replace LIBOR with SOFR as the benchmark applicable to financings entered into prior to January 1, 2022.30, 2023.

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

The following discussion should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes thereto, which are included in Item 1 of this Quarterly Report, as well as the information contained in our Form 10-K for the year ended December 31, ~~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 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.~~

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% was owned as noncontrolling interest. During the three months ended June 30, 2022, we redeemed the 2.3% outstanding membership units in the OP for $25.4 million. Following this redemption, there were no noncontrolling interests in the OP.

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.

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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.

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

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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 ~~June 30, 2022,~~March 31, 2023, and through ~~August~~May 2, ~~2022,~~2023, significant developments affecting our business and results of operations of our portfolio included the following:

Capital Resources

•As of the date of this report, we have approximately ~~$438~~$424.0 million of liquidity, consisting of ~~$273~~$259.0 million cash on hand and ~~$165~~$165.0 million available on our Bank Credit Facility; and

•Declared and paid a ~~second~~first quarter $0.20 per share dividend on ~~July 15, 2022;~~April 17, 2023.

Our Portfolio

•Generated GAAP net loss of $4.1 million, or $(0.03) per basic and diluted share, Distributable Earnings (Loss) of $11.5 million, or $(0.09) per share and Adjusted Distributable Earnings of $34.5 million or $0.27 per share for the three months ended March 31, 2023;

•~~Repurchased 2.2~~For the three months ended March 31, 2023, we:

◦Recorded specific current expected credit loss (“CECL”) reserves of $55.0 million ~~shares~~related to two senior loans and one mezzanine loan; (refer to “Our Portfolio - Asset Specific Loan Summaries” section for further discussion);

◦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 our ~~Class A common stock at a weighted average price~~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;

◦Received loan repayment proceeds of ~~$8.40 for an aggregate cost of $18.3 million;~~$101.2 million from four loans;

•~~Redeemed 3.1~~In April 2023, we amended and restructured a development mezzanine loan to bifurcate it into a $30.2 million ~~operating partnership units at~~mezzanine A note and a ~~price of $8.25 per unit~~$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 ~~an aggregate cost of $25.4 million;~~further discussion); and

•~~We amended the below Master Repurchase Facilities as follows:~~

◦~~Increased the borrowing capacity of Bank 7 by $100 million and extended the maturity date to April 2025, with a one-year extension option;~~

◦~~Increased the borrowing capacity of Bank 9 by $100 million and extended the maturity date to June 2025, with two one-year extension options;~~

◦~~Extended the maturity date of Bank 3 to April 2025, with two one-year extension options, and replaced LIBOR with SOFR as the benchmark applicable to loans entered into prior to January 1, 2022;~~

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◦~~Extended the maturity date of Bank 1 to July 2024, with three one-year extension options, and replaced LIBOR with SOFR as the benchmark applicable to loans entered into prior to January 1, 2022.~~

~~Our Portfolio~~

•Generated U.S. GAAP net income of $34.3 million, or $0.26 per basic and diluted share and Distributable Earnings and Adjusted Distributable Earnings of $31.4 million, or $0.24 per share for the three months ended June 30, 2022;

•~~Funded nine senior mortgage loans with a total commitment of $306.5 million. The average initial funded amount was $31.3 million and had a weighted average spread of SOFR plus 3.82%;~~

•~~Received loan repayment proceeds of $247.9 million from nine loans;~~

•~~Sold one preferred equity investment for a gross sales price of $38.1 million and recognized a realized gain of $21.9 million;~~

•Subsequent to ~~June 30, 2022,~~March 31, 2023, we ~~funded three 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 $91.4 million. The average initial funded amount was $27.7 million and had a weighted average spread of SOFR plus 3.52%; and~~secured by office properties.

•~~Subsequent to June 30, 2022, we received loan repayment proceeds of $36.6 million from two 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~~assets may result in our recognizing an impairment charge or realizing losses upon the sale of such investments.

Changes in market interest rates

With respect to address the impact 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 mayour proposed business operations, increases in the future evaluate converting certain current interest payment obligations to payment-in-kind as a potential bridge period solution. We have in limited cases allowed some portions of current interest to convert to payment-in-kind.

The COVID-19 pandemic has created uncertainties that have and may continue to negatively impact our future operating results, liquidity and financial condition. However, we believe there are too many uncertainties to predict and quantify the continuing impact. The potential concerns and risks include, but are not limited to, mortgage borrowers’ 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.

~~Market Update~~

~~Overall market uncertainty and reports that the U.S. economy is in or will be in a recession, coupled with rising inflation and~~ interest rates, ~~have tempered the loan financing markets recently. There has been an overall slowdown~~ in commercial real estate transaction volumes, with many lenders being cautious, and transaction volumes are expected to remain muted for the foreseeable future. The rising LIBOR/SOFR and costly interest rate caps have contributed to borrowers accepting lower proceeds and exploring other interest rate options such as fixed interest rates.

During 2022, the Federal Open Market Committee (“FOMC”) of the Federal Reserve raised the target range for the federal funds rate four times. The two most recent rate hikes were significant: on June 15, 2022, the target range for federal funds rates was raised by 0.75% to a range of 1.50% to 1.75% and on July 27, 2022 the target range for federal funds rates was raised by another 0.75% to a range of 2.25% to 2.50%.

~~These economic factors have had and will continue to impact our business operations as follows:~~general, may 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 ~~may increase,~~to increase; and ~~there may be margin calls on our Master Repurchase Facilities;~~

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–•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;

–•~~bank warehouse lenders may take~~coupons on our floating and adjustable-rate mortgage loans to reset, although on a ~~more conservative stance by increasing funding costs, which may lead~~delayed basis, to ~~margin calls;~~lower interest rates; and

–•~~disrupt our borrowers’ and tenants’ ability~~to the extent we use leverage to finance ~~their activities or refinance properties,~~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 to make their monthly~~our operating results.

Size of investment portfolio

The size of our portfolio, as measured by the aggregate principal balance of our commercial mortgage ~~payments~~loans, other commercial real estate-related debt investments and ~~meet their loan obligations, 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 ~~requests for loan extensions.~~increased expenses to the extent that we incur additional interest expense to finance our assets.

In addition to economic conditions, political conditions are contributing to market uncertainty which may further negatively impact our business and results of operations. In February 2022, conflict escalated between Russia and Ukraine. In response, the U.S., the U.K., and the European Union governments, among others, imposed financial and economic sanctions targeting Russia that, among other things, restrict transactions with Russian entities and individuals and trade and financing to, from, or in Russia and certain regions of Ukraine. Although we do not conduct any business, and have not originated any loans secured by assets, in Russia or Ukraine, the ongoing 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 cost of goods 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.

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Our Portfolio

As of ~~June 30, 2022,~~March 31, 2023, our portfolio consisted of ~~125~~111 investments representing approximately ~~$4.7~~$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 and preferred loans and ~~mezzanine loans~~ had a weighted average cash coupon of ~~3.7%~~3.8% and a weighted average all-in unlevered yield of ~~5.9%~~8.8%. Our net leased and other real estate consisted of approximately 6.4 million total square feet of space and total ~~second~~first quarter ~~2022 net operating income (“NOI”)~~2023 NOI of that portfolio was approximately ~~$16.2~~$16.3 million. Refer to “Non-GAAP Supplemental Financial Measures” below for further information on NOI.

As of ~~June 30, 2022,~~March 31, 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		104	$	3,729,515	$	3,729,515	$	842,039	$	842,039
Senior loans											Senior loans	93	$	3,258,992	$	3,258,992	$	802,416	$	802,416
Mezzanine loans~~(5)~~	Mezzanine loans~~(5)~~	6	104,008		104,008		104,008		104,008		Mezzanine loans~~(5)~~	6	101,006		101,006		101,006		101,006
Preferred equity											Preferred equity	1	22,723		22,723		22,723		22,723
Subtotal	Subtotal	110	3,833,523		3,833,523		946,047		946,047		Subtotal	100	3,382,721		3,382,721		926,145		926,145
Net leased real estate	Net leased real estate	8	618,838		618,838		163,561		163,561		Net leased real estate	8	589,411		589,411		144,611		144,611
Other real estate	Other real estate	2	176,062		162,684		137		(147)		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	$	4,668,983	$	4,655,605	$	1,150,305	$	1,150,021	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 ~~June 30, 2022.~~March 31, 2023.

(3)Net ~~book~~carrying value represents ~~book~~carrying value less any associated financing as of ~~June 30, 2022.~~March 31, 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 ~~June 30, 2022~~March 31, 2023.

~~(5)Mezzanine loans include one investment in an unconsolidated venture whose underlying interest is in a loan.~~

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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:

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

2.Low Risk—The loan is performing as agreed. The underlying property performance has met or exceeds underwritten expectations with high occupancy at market rents, resulting in consistent cash flow to service the debt. Strong sponsor that is well capitalized with 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~~During the ~~long-term impacts~~first quarter of ~~the COVID-19 pandemic remain uncertain, and therefore continue~~2023, two loans changed to ~~represent~~ a risk ranking of 5 from a risk ranking of 4, two loans changed to ~~our portfolio. During the second quarter~~a risk ranking of ~~2022, we added nine new~~4 from a risk ranking of 3, and one loan changed to a risk ranking of 3 from a 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 ~~our portfolio~~a risk 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 ~~eight loans repaid, of which five loans had~~one mezzanine loan with a risk ranking of ~~2 and three loans had~~5 was resolved. As a ~~risk ranking of 3. Our~~result, our weighted average risk ranking at ~~June 30, 2022~~March 31, 2023 is unchanged from ~~March~~December 31, 2022 at ~~3.1.~~3.2.

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Senior and Mezzanine Loans and Preferred Equity

~~Our senior and mezzanine loans consists of senior mortgage loans and mezzanine loans. We did not have any preferred equity investments as of June 30, 2022.~~

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 ~~June 30, 2022~~March 31, 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		Total		% of Our Portfolio		Risk Ranking	Count	Senior loans(2)		Mezzanine loans		Preferred Equity		Total		% of Total

2	2	10	$	284,847	$	—	$	284,847	7.4	%	2	4	$	119,708	$	—	$	—	$	119,708	3.5	%
3	3	87	2,787,924		63,098		2,851,022		74.4	%	3	83	2,637,311		29,249		22,723		2,689,283		79.5	%
4	4	11	685,534		—		685,534		17.9	%	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	$	3,758,305	$	75,218	$	3,833,523	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 ~~June 30, 2022.~~March 31, 2023.

(2)Includes one mezzanine loan totaling ~~$28.8~~$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	%

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The following table provides asset level detail for our senior ~~and~~loans, mezzanine loans and preferred equity as of ~~June 30, 2022~~March 31, 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)		Q2 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%	6.5%	11/9/2026	79%		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	184,715		184,282		Floating	3.1%	5.5%	7/9/2024	75%		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%	6.2%	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

6558

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)		Q2 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	119,737	120,000	Floating	3.2%	5.2%	7/9/2025	66%		4
Loan 5		Office	2/17/2022	Boston, MA	80,172	81,000	Floating	3.8%	6.0%	3/9/2027	54%		3
Loan 6		Other (Mixed-use)	10/24/2019	Brooklyn, NY	75,818	75,818	Floating	4.0%	6.1%	11/9/2024	70%		3
Loan 7		Office	8/28/2018	San Jose, CA	73,147	73,147	Floating	2.5%	4.5%	8/28/2025	75%		3
Loan 8		Hotel	6/25/2018	Englewood, CO	73,000	73,000	Floating	3.5%	5.3%	2/9/2025	69%		3
Loan 9		Office	1/19/2021	Phoenix, AZ	72,035	72,460	Floating	3.6%	5.7%	2/9/2026	70%		3
Loan 10		Office	5/29/2019	Long Island City, NY	68,110	68,110	Floating	3.5%	5.8%	6/9/2024	59%		4
Loan 11		Office	4/5/2019	Long Island City, NY	66,298	66,298	Floating	3.3%	5.6%	4/9/2024	58%		4
Loan 12(6)		Multifamily	6/18/2019	Santa Clara, CA	57,440	57,440	Floating	4.4%	7.1%	6/18/2024	65%		4
Loan 13		Office	7/12/2019	Washington, D.C.	57,274	57,274	Floating	2.8%	5.5%	8/9/2024	68%		4
Loan 14		Office	2/13/2019	Baltimore, MD	55,942	55,942	Floating	3.5%	6.2%	2/9/2024	74%		4
Loan 15		Multifamily	5/17/2022	Las Vegas, NV	49,075	49,600	Floating	3.6%	5.7%	6/9/2027	74%		3
Loan 16		Multifamily	3/8/2022	Austin, TX	48,804	49,125	Floating	3.3%	5.6%	3/9/2027	75%		3
Loan 17		Multifamily	7/19/2021	Dallas, TX	48,547	48,699	Floating	3.3%	5.5%	8/9/2026	74%		3
Loan 18		Multifamily	5/26/2021	Las Vegas, NV	45,655	45,799	Floating	3.4%	5.6%	6/9/2026	70%		3
Loan 19		Other (Mixed-use)	1/13/2022	New York, NY	44,832	45,190	Floating	3.5%	5.7%	2/9/2027	67%		3
Loan 20		Multifamily	2/3/2021	Arlington, TX	43,254	43,270	Floating	3.6%	5.9%	2/9/2026	81%		2
Loan 21		Multifamily	11/30/2021	Phoenix, AZ	43,191	43,457	Floating	3.4%	5.9%	12/9/2026	74%		3
Loan 22		Multifamily	3/1/2021	Richardson, TX	42,981	43,227	Floating	3.4%	5.5%	3/9/2026	75%		3
Loan 23		Multifamily	7/15/2021	Jersey City, NJ	42,812	43,000	Floating	3.0%	5.1%	8/9/2026	66%		2
Loan 24		Multifamily	12/21/2020	Austin, TX	42,641	42,850	Floating	3.7%	5.8%	1/9/2026	54%		2
Loan 25		Multifamily	3/22/2021	Fort Worth, TX	40,327	40,470	Floating	3.5%	5.7%	4/9/2026	83%		3
Loan 26		Office	5/23/2022	Plano, TX	39,990	40,300	Floating	4.3%	6.3%	6/9/2027	64%		3
Loan 27		Office	4/27/2022	Plano, TX	38,994	39,270	Floating	4.1%	6.2%	5/9/2027	70%		3
Loan 28	Loan 28	Multifamily	3/25/2021	Fort Worth, TX	38,340	38,480	Floating	3.3%	5.5%	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	Office	11/23/2021	Tualatin, OR	38,338	38,660	Floating	3.9%	6.1%	12/9/2026	66%		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	Multifamily	12/7/2021	Denver, CO	37,821	38,108	Floating	3.2%	5.5%	12/9/2026	74%		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	7/15/2021	Dallas, TX	36,510	36,736	Floating	3.1%	5.4%	8/9/2026	77%		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	9/28/2021	Reston, VA	35,620	35,887	Floating	4.0%	6.3%	10/9/2026	71%		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	3/31/2022	Long Beach, CA	35,391	35,751	Floating	3.4%	5.6%	4/9/2027	74%		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	Office	11/17/2021	Dallas, TX	34,959	35,250	Floating	3.9%	6.1%	12/9/2025	61%		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	Multifamily	12/29/2020	Fullerton, CA	34,692	34,860	Floating	3.8%	5.9%	1/9/2026	70%		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	1/18/2022	Dallas, TX	34,510	34,699	Floating	3.5%	5.8%	2/9/2027	75%		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	1/12/2022	Los Angeles, CA	34,388	34,728	Floating	3.4%	5.4%	2/9/2027	65%		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	3/31/2022	Louisville, KY	34,269	34,550	Floating	3.7%	6.0%	4/9/2027	72%		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	Multifamily	9/28/2021	Carrollton, TX	34,118	34,395	Floating	3.1%	5.2%	10/9/2025	73%		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	Office	6/16/2017	Miami, FL	34,097	33,757	Floating	4.9%	6.6%	7/9/2022	68%		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	Office	4/7/2022	San Jose, CA	33,439	33,750	Floating	4.2%	6.3%	4/9/2027	70%		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	Multifamily	3/16/2021	Fremont, CA	33,206	33,380	Floating	3.5%	5.7%	4/9/2026	76%		3	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	6/2/2021	South Pasadena, CA	32,881	32,956	Floating	4.9%	7.2%	6/9/2026	69%		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	7/29/2021	Phoenix, AZ	31,656	31,895	Floating	3.3%	5.4%	8/9/2026	74%		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	3/31/2021	Mesa, AZ	30,994	31,107	Floating	3.7%	5.9%	4/9/2026	83%		3	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	4/30/2021	San Diego, CA	30,483	30,700	Floating	3.6%	5.7%	5/9/2026	55%		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	5/5/2021	Dallas, TX	29,622	29,749	Floating	3.4%	5.6%	5/9/2026	68%		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	4/29/2021	Las Vegas, NV	29,619	29,734	Floating	3.1%	5.2%	5/9/2026	76%		2	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	Multifamily	7/13/2021	Plano, TX	28,624	28,756	Floating	3.1%	5.2%	2/9/2025	82%		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	Multifamily	4/15/2022	Mesa, AZ	28,402	28,693	Floating	3.4%	5.4%	5/9/2027	75%		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	Office	11/19/2021	Gardena, CA	28,201	28,505	Floating	3.5%	5.6%	12/9/2026	69%		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	5/27/2021	Houston, TX	27,871	28,000	Floating	3.0%	5.2%	6/9/2026	67%		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	10/21/2021	Blue Bell, PA	27,853	27,930	Floating	3.7%	6.2%	11/9/2023	67%		3	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	5/19/2022	Denver, CO	27,624	27,919	Floating	3.5%	5.6%	6/9/2027	73%		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	Other (Mixed-use)	5/3/2022	Brooklyn, NY	27,536	27,801	Floating	4.4%	6.5%	5/9/2027	68%		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			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

6659

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)		Q2 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 56		Office	3/31/2022	Blue Bell, PA	27,208		27,447		Floating	4.2%	6.8%	4/9/2025	59%		3
Office														Office
Loan 57	Loan 57	Multifamily	8/31/2021	Glendale, AZ	26,324		26,536		Floating	3.2%	5.3%	9/9/2026	75%		3	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	Multifamily	12/16/2021	Fort Mill, SC	25,882		26,100		Floating	3.2%	5.3%	1/9/2027	71%		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	Office	2/26/2019	Charlotte, NC	25,855		26,052		Floating	3.3%	5.1%	7/9/2025	51%		2	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	2/17/2022	Long Beach, CA	25,308		25,556		Floating	3.4%	5.5%	3/9/2027	67%		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	5/13/2021	Phoenix, AZ	24,968		25,132		Floating	3.1%	5.2%	6/9/2026	76%		2	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	Office	9/26/2019	Salt Lake City, UT	24,864		24,903		Floating	2.7%	5.0%	10/9/2024	72%		4	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	Office	11/23/2021	Oakland, CA	24,800		25,000		Floating	4.2%	6.4%	12/9/2026	57%		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	12/7/2021	Hillsboro, OR	24,310		24,511		Floating	3.9%	6.1%	12/9/2024	71%		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	12/21/2021	Phoenix, AZ	24,307		24,528		Floating	3.5%	5.6%	1/9/2027	75%		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	1/29/2021	Charlotte, NC	23,432		23,558		Floating	3.5%	5.6%	2/9/2026	76%		3	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	7/1/2021	Aurora, CO	23,300		23,466		Floating	3.1%	5.2%	7/9/2026	73%		3
Loan 68		Multifamily	3/31/2022	Phoenix, AZ	23,035		23,265		Floating	3.7%	5.7%	4/9/2027	75%		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	Multifamily	3/8/2022	Glendale, AZ	23,025		23,260		Floating	3.5%	5.5%	3/9/2027	73%		3	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	9/16/2019	San Francisco, CA	22,951		22,951		Floating	3.2%	5.7%	10/9/2024	82%		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	3/25/2021	San Jose, CA	22,518		22,650		Floating	3.7%	5.8%	4/9/2026	70%		2	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	11/4/2021	Austin, TX	22,499		22,690		Floating	3.3%	5.4%	11/9/2026	71%		3	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	10/7/2021	Irving, TX	22,353		22,400		Floating	3.3%	5.5%	9/1/2024	70%		3	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	Office	8/27/2019	San Francisco, CA	22,121		22,121		Floating	2.8%	5.4%	9/9/2024	79%		4	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	Office	7/30/2021	Denver, CO	21,811		22,002		Floating	4.3%	6.4%	8/9/2026	66%		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	7/13/2021	Oregon City, OR	21,385		21,487		Floating	3.3%	5.4%	8/9/2026	73%		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	Multifamily	6/22/2021	Phoenix, AZ	21,107		21,262		Floating	3.2%	5.3%	7/9/2026	75%		2	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	3/31/2021	San Antonio, TX	20,026		20,148		Floating	3.1%	5.1%	4/9/2026	77%		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	9/22/2021	Denton, TX	19,248		19,351		Floating	3.2%	5.3%	10/9/2025	70%		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	Multifamily	12/21/2021	Gresham, OR	19,047		19,199		Floating	3.5%	5.8%	1/9/2027	74%		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	1/12/2022	Austin, TX	18,991		19,153		Floating	3.4%	5.5%	2/9/2027	75%		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	8/6/2021	La Mesa, CA	18,943		19,045		Floating	2.9%	5.1%	8/9/2025	70%		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	9/1/2021	Bellevue, WA	18,888		19,003		Floating	2.9%	5.2%	9/9/2025	64%		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	Office	10/29/2020	Denver, CO	18,598		18,708		Floating	3.6%	5.7%	11/9/2025	64%		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	Multifamily	6/24/2021	Phoenix, AZ	18,417		18,548		Floating	3.4%	5.6%	7/9/2026	63%		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	5/5/2022	Charlotte, NC	18,317		18,500		Floating	3.5%	5.7%	5/9/2027	61%		3	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	7/14/2021	Salt Lake City, UT	17,960		18,042		Floating	3.3%	5.4%	8/9/2026	73%		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	3/28/2022	Los Angeles, CA	17,220		17,390		Floating	3.6%	5.8%	4/9/2027	68%		3	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	Multifamily	6/25/2021	Phoenix, AZ	17,041		17,160		Floating	3.2%	5.3%	7/9/2026	75%		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	11/24/2020	Tucson, AZ	16,239		16,233		Floating	3.6%	5.7%	12/9/2025	75%		2
Loan 91		Multifamily	4/29/2022	Tacoma, WA	16,176		16,359		Floating	3.3%	5.5%	5/9/2027	72%		3
Loan 92		Industrial	3/25/2022	City of Industry, CA	16,058		16,234		Floating	3.4%	5.5%	4/9/2027	67%		3
Loan 93		Multifamily	3/5/2021	Tucson, AZ	15,834		15,864		Floating	3.7%	5.9%	3/9/2026	72%		2
Loan 94		Office	10/13/2021	Burbank, CA	15,391		15,538		Floating	3.9%	6.0%	11/9/2026	57%		3
Loan 95		Multifamily	6/15/2021	Phoenix, AZ	15,327		15,392		Floating	3.3%	5.4%	7/9/2026	74%		3
Loan 96		Office	11/16/2021	Charlotte, NC	14,624		14,771		Floating	4.4%	6.5%	12/9/2026	67%		3
Loan 97		Office	8/31/2021	Los Angeles, CA	14,440		14,570		Floating	5.0%	7.3%	9/9/2026	58%		3
Loan 98		Multifamily	5/27/2021	Phoenix, AZ	14,117		14,212		Floating	3.1%	5.2%	6/9/2026	72%		3
Loan 99		Multifamily	7/21/2021	Durham, NC	14,078		14,183		Floating	3.3%	5.4%	8/9/2026	58%		3
Loan 100		Multifamily	2/11/2021	Provo, UT	13,582		13,660		Floating	3.8%	5.9%	3/9/2026	71%		3
Loan 101		Multifamily	7/28/2021	San Antonio, TX	13,559		13,641		Floating	3.3%	5.6%	8/9/2024	76%		3
Loan 102		Office	11/10/2021	Richardson, TX	13,322		13,400		Floating	4.0%	6.3%	12/9/2026	71%		3
Loan 103		Multifamily	3/8/2022	Glendale, AZ	10,714		10,825		Floating	3.5%	5.5%	3/9/2027	73%		3
Loan 104		Industrial	3/21/2022	Commerce, CA	9,181		9,281		Floating	3.3%	5.4%	4/9/2027	71%		3
Total/Weighted average senior loans					$	3,729,515	$	3,746,010		3.6%	5.7%	1/11/2026	70%		3.1

Mezzanine loans
Loan 105(6)		Multifamily	12/3/2019	Milpitas, CA	$	41,459	$	41,500	Fixed	8.0%	13.3%	12/3/2024	49% – 71%		3
Loan 106		Hotel	9/23/2019	Berkeley, CA	28,790		28,790		Fixed	11.5%	11.5%	7/9/2025	66% – 81%		4
Loan 107(6)		Multifamily	2/8/2022	Las Vegas, NV	17,165		17,288		Fixed	7.0%	12.3%	2/8/2027	56% – 79%		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

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Collateral type Origination Date City, State
Carrying value(1)
Principal balance Coupon type
Cash Coupon(2)
Unlevered all-in yield(3)
Extended maturity date
Loan-to-value(4)
Q2 Risk ranking(5)
Loan 108 Hotel 1/9/2017 New York, NY 12,120 12,000 Floating 11.0% 12.8% 9/9/2022 63% – 76% 5
Loan 109 Multifamily 7/30/2014 Various - TX 4,474 4,474 Fixed 9.5% 9.5% 8/11/2024 71% – 83% 3
Loan 110(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 $ 104,008 $ 266,295 9.2% 12.4% 3/4/2025 59% – 77% 3.5
Total/Weighted average senior and mezzanine loans - Our Portfolio $ 3,833,523 $ 4,012,305 3.7% 5.9% 1/3/2026 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 ~~June 30, 2022.~~March 31, 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 ~~1.79%~~4.86% and ~~1.69%~~4.80%, respectively, as of ~~June 30, 2022.~~March 31, 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 ~~June 30, 2022,~~March 31, 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 are rated “1” through “5,” from less risk to greater risk. Represents risk ranking as of ~~June 30, 2022.~~March 31, 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 ~~110 is an investment~~24 was placed on nonaccrual status; as such, no income will be recognized on this portion of the loan beginning in ~~an unconsolidated venture whose underlying interest is~~April 2023.

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

(9)Loan 68 was placed on nonaccrual status ~~during~~ in ~~April 2020;~~September 2022; as such, no income is being recognized.

~~The following table details the types of properties securing our senior and mezzanine loans~~(10)~~and geographic distribution~~Loan 76 was placed on nonaccrual status in February 2023; as ~~of June 30, 2022 (dollars in thousands):~~

Book value (at BRSP share)
Collateral property type Count Senior mortgage loans Mezzanine loans Total % of Total
Multifamily 67 $ 1,940,265 $ 63,098 $ 2,003,363 52.3 %
Office 32 1,238,136 — 1,238,136 32.3 %
Hotel 5 377,689 40,910 418,599 10.9 %
Other (Mixed-use)(1)
4 148,186 — 148,186 3.9 %
Industrial 2 25,239 — 25,239 0.6 %
Total 110 $ 3,729,515 $ 104,008 $ 3,833,523 100.0 %
Book value (at BRSP share)
Region Count Senior mortgage loans Mezzanine loans Total % of Total
US West 44 $ 1,676,250 $ 87,414 $ 1,763,664 46.0 %
US Southwest 45 1,253,229 4,474 1,257,703 32.8 %
US Northeast 12 573,861 12,120 585,981 15.3 %
US Southeast 9 226,175 — 226,175 5.9 %
Total 110 $ 3,729,515 $ 104,008 $ 3,833,523 100.0 %
~~_________________________________________~~such, no income is being recognized.

~~(1)~~(11)~~Other includes commercial~~Loan 89 has a payment-in-kind provision and ~~residential development and predevelopment assets.~~accrues interest at 13.0%.

Table of Contents

At ~~June 30, 2022,~~March 31, 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 ~~$45.1~~$34.1 million, which is ~~1.08%~~0.97% of the aggregate commitment amount of our loan ~~portfolio.~~portfolio, excluding loans that were evaluated for specific CECL reserves. This represents ~~an increase~~a decrease of ~~$10.2~~$15.4 million from ~~$34.9~~$49.5 million or ~~0.85%~~1.34% of the aggregate commitment amount of our loan portfolio at ~~March~~December 31, 2022. This ~~change~~decrease was primarily driven by the ~~current macroeconomic outlook~~removal of two loans from the general CECL reserve pool, which were evaluated individually for specific CECL reserves, partially offset by increased reserves recorded on our portfolio of office loans. During the first quarter of 2023, we recorded $55.0 million of specific CECL reserves related to two senior loans and ~~new~~one mezzanine loan ~~originations.~~

~~Table of Contents~~. 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)
Q2 Risk ranking
Loan 4 Senior Hotel 6/28/2018 $ 119,737 $ 120,000 Floating 3.2% 5.2% 7/9/2025 66% 4
Loan 106 Mezzanine Hotel 9/23/2019 28,790 28,790 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, and during those months the borrower supported debt service out-of-pocket. Net cash flow was negative in January and February 2022 due to anticipated seasonality, however net cash flow exceeded debt service for March through June 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 in exchange for 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)
Q2 Risk ranking
Loan 10 Senior Office 5/29/2019 $ 68,110 $ 68,110 Floating 3.5% 5.8% 6/9/2024 59% 4
Loan 11 Senior Office 4/5/2019 66,298 66,298 Floating 3.3% 5.6% 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 and continue to experience higher vacancy rates due to the ongoing impact of COVID-19 ~~pandemic~~ and the ~~effects~~continued impact of employee work from home arrangements. The Long Island City market has 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. ~~While certain market participants project that office demand will increase in~~

Loan 67

As of March 31, 2023, Loan 67 has in-place leases for 30% of the near future, New York City office buildings continue to face headwinds to increase occupancy. As a result, the timeline may not be rapid enough to remedy the negative impact on our sponsor’s business plansproperty and leasing activity for these two properties. Currently, the underlying individual property cash flows are insufficient to cover their respective debt service payments. Since March 2021 and as recently as January 2022, we have worked with the borrower on both loans, as applicable, to use certain future funding advances from the tenant improvements and leasing costs account to be used for interest carry and operations shortfalls, provided that the borrower would deposit an incremental six months of deposits for interest and carry reserves on such loans as additional protection.

~~Both loans generate~~generates incremental revenue from license agreements for rooftop ~~signage. Loan 11 also generates incremental revenue from a license agreement for~~signage and antenna space. ~~Both Long Island City properties qualify~~In the fourth quarter of 2022, the property received a certificate of eligibility for the industrial and commercial abatement ~~programs~~program (“ICAP”) ~~which~~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. ~~Subsequent~~

The Loan 67 property cash flows are insufficient to ~~June~~cover the debt service payments. In March 2021, and again in January 2022, ~~Loan 10 property received~~we modified the ~~final certificate~~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. Given the continued negative market conditions surrounding NYC metro office buildings, including the lack of ~~eligibility resulting in~~leasing activity, we utilized the estimated fair value of the collateral to estimate a ~~savings~~specific CECL reserve of ~~$0.6~~$22.7 million ~~for the 2022/2023 tax year. Our Loan 11 property is expected to receive the final certificate of eligibility in~~during the third quarter of 2022.

Borrower reserves have been exhausted and the loan is in maturity default and was placed on 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 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, ~~which~~the property received a certificate of eligibility for the ICAP resulting in significant tax savings for the current year and will result in ~~significant tax savings.~~lower real estate taxes for the next 15 years, subject to renewal on an annual basis.

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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 ~~June 30, 2022, Loan 10 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 ~~property and Loan 11 has in-place leases for 30% of the property. There is a risk that Loan 10’s carrying value could exceed the~~estimated fair value of the ~~property if leasing activity does~~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 sale process were not ~~improve. These uncertain~~satisfactory. We are evaluating a 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)
Q2 Risk ranking
Loan 108 Mezzanine Hotel 1/9/2017 $ 12,120 $ 12,000 Floating 11.0% 12.8% 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~~March 31, 2023, the underwritten pre-development for Phase I and Phase II is complete, and the Pre-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 June 2022 in ~~March 2020. However,~~exchange for certain lender required terms and 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 ~~May 2020~~Phase II. The sponsor’s current plan for Phase II is to secure the ~~hotel obtained a contract~~necessary financing to repay the remaining loan and complete the pre-development of Phase II. We are coordinating with a government housing authority to lease rooms. The contract was on a month-to-month basis and as of June 30, 2022, the housing authority had vacated the hotel. The sponsor is currently undergoing a capital improvement plan, including purchasing certain furniture, bedding and towels, and plans to re-open on August 1, 2022. The borrower indicates forward bookings of 29% of room nights through December 2022. Additionally, the borrower ison seeking ~~a recapitalization to pay off~~new financing alternatives. Given the ~~senior and mezzanine loans and implement a new hotel brand property improvement plan. The sponsor was unable to meet~~uncertainty in the reserve funding required for the extension of the March 2022 maturity date on both the senior and mezzanine loans. Default and reservation of rights letters have been issued by both lenders as a prudent measure. The loan is currently past due for the July 2022 interest payment. Itfinance markets, 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.

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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.

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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. Additionally, we have two investments in direct ownership of commercial real estate and own these operating real estate investments through joint ventures with one or more partners. Our properties are typically well-located with strong operating partners.

As of ~~June 30, 2022, $781.5~~March 31, 2023, $748.3 million or ~~16.8%~~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 ~~June 30, 2022~~March 31, 2023 (dollars in thousands):


		Count(1)	Carrying Value(2)		NOI for the three months ended June 30, 2022(3)			Count(1)	Carrying Value(2)		NOI three months ended March 31, 2023(3)
Net leased real estate	Net leased real estate	8	$	618,838	$	12,420	Net leased real estate	8	$	589,411	$	12,365
Other real estate	Other real estate	2	162,684		3,739		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	$	781,522	$	16,159	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 ~~June 30, 2022;~~March 31, 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.

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The following table provides asset-level detail of our net leased and other real estate as of ~~June 30, 2022:~~March 31, 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

Stavanger, Norway

1,290,926 RSF

100%

8.2

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%

16.1

Net lease 2

Office

Stavanger, Norway

1,290,926 RSF

100%

7.2

Net lease 3

Office

Aurora, CO

183,529 RSF

100%

0.3

Net lease 3

Office

Aurora, CO

183,529 RSF

100%

4.7

Net lease 4

Office

Indianapolis, IN

338,000 RSF

100%

8.5

Net lease 4

Office

Indianapolis, IN

338,000 RSF

100%

7.8

Net lease 5

Retail

Various - U.S.

319,600 RSF

100%

4.4

Net lease 5

Retail

Various - U.S.

319,600 RSF

100%

4.7

Net lease 6

Retail

Keene, NH

45,471 RSF

100%

6.6

Net lease 6

Retail

Keene, NH

45,471 RSF

100%

5.8

Net lease 7(4)

Retail

Fort Wayne, IN

50,000 RSF

100%

2.2

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%

8.6

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%

10.8

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%

4.0

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%

3.2

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%

3.7

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 ~~June 30, 2022.~~March 31, 2023.

(2)Represents the percent leased as of ~~June 30, 2022.~~March 31, 2023. Weighted average calculation based on carrying value at our share as of ~~June 30, 2022.~~March 31, 2023.

(3)Based on in-place leases (defined as occupied and paying leases) as of ~~June 30, 2022,~~March 31, 2023, and assumes that no renewal options are exercised. Weighted average calculation based on carrying value at our share as of March 31, 2023.

(4)The current maturity of the debt on Net lease 7 is June ~~30, 2022.~~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

~~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 1 Office Stavanger, Norway 1 1,290,926 RSF 100% 8.2

In July 2018, we acquired a class A office campus in Stavanger, 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 eight 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 2022 was 5.1%. 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 $161.9 million 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 a 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 a potential increase in interest rates, could adversely impact the refinancing or sale of the asset.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. However, only the lease payments are hedged through May

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2024. The net equity and lease payments beyond May 2024 are not hedged at this time. Therefore, the Norway Net Lease net book value may be subject to fluctuations based on the USD-NOK impact on unhedged values.

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% 16.1

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 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 ~~16.1~~15.4 years ending in 2038. The tenant has the option to extend the lease for nine 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 ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, of ~~$9.2~~$5.0 million; and the asset value on our consolidated balance sheet is ~~$258.2~~$251.6 million as of March 31, 2023.

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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 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 ~~30, 2022.~~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 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.

~~CRE Debt Securities~~

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 ~~following table presents an overview~~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 June 30, 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 (yrs) Ratings
“B-pieces” of CMBS securitization pools 4 $ 36,154 2.8 % 12.9 % 4.9 —
Total/Weighted Average 4 $ 36,154 2.8 % 12.9 % 4.9 —

~~(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.

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Results of Operations

The following table summarizes our portfolio results of operations for the three months ended ~~June 30, 2022~~March 31, 2023, and ~~March~~December 31, 2022 (dollars in thousands):


		Three Months Ended June 30,		Three Months Ended March 31,				Increase (Decrease)		Three Months Ended March 31,		Three Months Ended December 31,		Q1’23 vs Q4’22
		2022		2022		Amount		%				2023		2022		Amount
Net interest income	Net interest income										Net interest income
Interest income	Interest income	$	53,083	$	44,570	$	8,513	19.1	%		Interest income	$	75,616	$	74,856	$	760
Interest expense	Interest expense	(21,455)		(16,072)		(5,383)		33.5	%		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	9,721		9,375		346		3.7	%		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	(8,586)		(8,488)		(98)		1.2	%		Interest expense on mortgage obligations issued by securitization trusts	—		(3,383)		3,383
Net interest income	Net interest income	32,763		29,385		3,378		11.5	%		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	21,781		24,168		(2,387)		(9.9)	%		Property operating income	22,551		21,978		573
Other income	Other income	787		276		511		n.m.			Other income	3,056		3,382		(326)
Total property and other income	Total property and other income	22,568		24,444		(1,876)		(7.7)	%		Total property and other income	25,607		25,360		247

Expenses	Expenses										Expenses

Property operating expense	Property operating expense	5,266		6,724		(1,458)		(21.7)	%		Property operating expense	5,852		6,418		(566)
Transaction, investment and servicing expense	Transaction, investment and servicing expense	982		1,124		(142)		(12.6)	%		Transaction, investment and servicing expense	835		397		438
Interest expense on real estate	Interest expense on real estate	7,117		7,556		(439)		(5.8)	%		Interest expense on real estate	5,509		6,997		(1,488)
Depreciation and amortization	Depreciation and amortization	8,720		8,594		126		1.5	%		Depreciation and amortization	7,996		8,213		(217)
Increase (decrease) of CECL reserve		10,143		(866)		11,009		n.m.
Increase of CECL reserve											Increase of CECL reserve	39,613		20,609		19,004

Compensation and benefits	Compensation and benefits	8,269		8,225		44		0.5	%		Compensation and benefits	8,805		8,163		642
Operating expense	Operating expense	4,070		4,349		(279)		(6.4)	%		Operating expense	3,473		2,677		796

Total expenses	Total expenses	44,567		35,706		8,861		24.8	%		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	—		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	—		(854)		854
Other gain, net	Other gain, net	24,332		10,288		14,044		n.m.			Other gain, net	655		40		615
Income before equity in earnings of unconsolidated ventures and income taxes		35,096		28,411		6,685		23.5	%
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		(25)		(100.0)	%		Equity in earnings of unconsolidated ventures	9,055		—		9,055
Income tax expense	Income tax expense	(465)		(36)		(429)		n.m.			Income tax expense	(390)		(1,304)		914
Net income		$	34,631	$	28,400	$	6,231	21.9	%
Net income (loss)											Net income (loss)	$	(4,202)	$	4,230	$	(8,432)

Comparison of Three Months Ended ~~June 30, 2022 and~~ March 31, 2023 and December 31, 2022

Net Interest Income

Interest income

Interest income increased by ~~$8.5~~$0.8 million to ~~$53.1~~$75.6 million for the three months ended ~~June 30, 2022~~March 31, 2023 as compared to the three months ended March 31, 2022. The increase was primarily related to $6.5 million in interest from new loan originations, $2.5 million from higher SOFR and LIBOR rates and $1.9 million from a non-recurring loan prepayment fee. The increase was partially offset by $2.4 million due to loan repayments.

~~Interest expense~~

~~Interest expense increased by $5.4 million to $21.5 million for the three months ended June 30, 2022 as compared to the three months ended March~~December 31, 2022. The increase was primarily due to ~~$3.3~~$6.4 million related to higher LIBOR and SOFR ~~and LIBOR~~interest rates ~~and $2.5~~partially offset by $4.9 million related to ~~financing~~loan repayments and $0.5 million of higher yield maintenance and accelerated amortization income recognized during the three months ended December 31, 2022.

Interest expense

Interest expense increased by $1.3 million to $42.7 million for ~~loan originations.~~the three months ended March 31, 2023 as compared to the three months ended December 31, 2022. The increase was ~~partially~~driven by $3.4 million related to higher LIBOR and SOFR rates offset by ~~$0.5~~$2.3 million related to payoffs of ~~financing~~financings in connection with loan repayments.

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

~~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 ~~$0.2~~$0.6 million to ~~$1.1~~$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 ~~June 30,~~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.

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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.

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	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

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 $0.9 million of net interest income ~~from our consolidated~~on mortgage loans and obligations held in securitization ~~trust.~~trusts, net during the three months ended March 31, 2022.

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Property and other income

Property operating income

Property operating income decreased by ~~$2.4~~$1.6 million to ~~$21.8~~$22.6 million for the three months ended ~~June 30, 2022,~~March 31, 2023, as compared to the three months ended March 31, 2022. The decrease was primarily ~~the result of two property sales during~~due to real estate properties sold in the first quarter of 2022.

Other income

Other income increased by ~~$0.5~~$2.8 million to ~~$0.8~~$3.1 million for the three months ended ~~June 30, 2022, as compared to the three months ended~~ March 31, ~~2022,~~2023, primarily due to ~~an increase in~~higher income from money market ~~investments during the second quarter of 2022.~~investments.

Expenses

Property operating expense

Property operating expense decreased by ~~$1.5~~$0.9 million to ~~$5.3~~$5.9 million for the three months ended ~~June 30, 2022,~~March 31, 2023, as compared to the three months ended March 31, 2022. The decrease was primarily ~~the result of two property sales~~due to real estate properties sold in the first quarter of 2022.

Transaction, investment and servicing expense

Transaction, investment and servicing expense decreased by ~~$0.1~~$0.3 million to ~~$1.0~~$0.8 million for the three months ended ~~June 30, 2022,~~March 31, 2023, as compared to the three months ended March 31, 2022 primarily due to ~~$0.5 million relating to~~lower tax-related costs ~~associated with the sale of a joint venture~~incurred in the first quarter ~~partially offset by $0.3 million~~ of ~~other costs in the second quarter of 2022.~~2023.

Interest expense on real estate

Interest expense on real estate decreased by ~~$0.4~~$2.0 million to ~~$7.1~~$5.5 million for the three months ended ~~June 30, 2022,~~March 31, 2023, as compared to the three months ended March 31, 2022. The decrease was primarily due to amortization recorded during the ~~repayment of a mortgage loan secured by one hotel property sold in the first quarter of 2022.~~three months ended March 31, 2023.

Depreciation and amortization

Depreciation and amortization expense ~~increased~~decreased by ~~$0.1~~$0.6 million to $8.7 million for the three months ended June 30, 2022, as compared to the three months ended March 31, 2022. The increase was primarily due to fixed asset and deferred leasing cost additions in the second quarter of 2022.

~~CECL Reserve~~

~~We recorded an increase of our CECL reserve of $10.1 million for the three months ended June 30, 2022 and a decrease of $0.9~~$8.0 million for the three months ended March 31, ~~2022. This increase was primarily driven by the current macroeconomic outlook and new loan originations.~~

~~Compensation and benefits~~

~~Compensation and benefits increased by a de minimis amount to $8.3 million for the three months ended June 30, 2022, as compared to the three months ended March 31, 2022.~~

~~Operating expense~~

~~Operating expense decreased by $0.3 million to $4.1 million for the three months ended June 30, 2022,~~2023, as compared to the three months ended March 31, 2022. The decrease was primarily due to ~~higher non-recurring costs incurred during the first quarter~~fully depreciating and amortizing assets associated with a retail property.

Increase (decrease) of ~~2022.~~CECL reserve

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~~Other income (loss)~~

~~Other gain, net~~

~~During the three months ended June 30, 2022, we recorded other gain, net of $24.3 million primarily due to the sale of a preferred equity investment in the second quarter of 2022.~~ During the three months ended March 31, ~~2022,~~2023, we recorded ~~other gain, net~~CECL reserves of ~~$10.3~~$39.6 million ~~primarily due~~. This was driven by specific reserves related to two ~~property sales in the first quarter of 2022.~~office senior loans and one development mezzanine loan. Refer to “Our Portfolio - Asset Specific Loan Summaries” section for further discussion.

~~Income tax expense~~Compensation and benefits

~~Income tax expense~~Compensation and benefits increased by ~~$0.4~~$0.6 million to $8.8 million for the three months ended ~~June 30, 2022,~~March 31, 2023, as compared to the three months ended March 31, 2022 primarily due to 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 ~~tax accrual~~(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 2022.

~~The following table summarizes our portfolio results of operations for the six months ended June 30, 2022 and June 30, 2021 (dollars in thousands):~~

Six Months Ended June 30, Increase (Decrease)
2022 2021 Amount %
Net interest income
Interest income $ 97,654 $ 72,295 $ 25,359 35.1 %
Interest expense (37,527) (25,488) (12,039) 47.2 %
Interest income on mortgage loans held in securitization trusts 19,095 31,079 (11,984) (38.6) %
Interest expense on mortgage obligations issued by securitization trusts (17,074) (27,447) 10,373 (37.8) %
Net interest income 62,148 50,439 11,709 23.2 %
Property and other income
Property operating income 45,948 50,521 (4,573) (9.1) %
Other income 1,063 1,155 (92) (8.0) %
Total property and other income 47,011 51,676 (4,665) (9.0) %
Expenses
Management fee expense — 9,596 (9,596) (100.0) %
Property operating expense 11,990 14,869 (2,879) (19.4) %
Transaction, investment and servicing expense 2,106 2,932 (826) (28.2) %
Interest expense on real estate 14,673 16,410 (1,737) (10.6) %
Depreciation and amortization 17,314 19,533 (2,219) (11.4) %
Increase (decrease) of CECL reserve 9,277 4,425 4,852 n.m.
Compensation and benefits 16,494 16,839 (345) (2.0) %
Operating expense 8,419 9,809 (1,390) (14.2) %
Restructuring charges — 109,321 (109,321) (100.0) %
Total expenses 80,273 203,734 (123,461) (60.6) %
Other income (loss)
Unrealized gain on mortgage loans and obligations held in securitization trusts, net — 28,154 (28,154) (100.0) %
Realized loss on mortgage loans and obligations held in securitization trusts, net — (19,516) 19,516 (100.0) %
Other gain, net 34,620 9,203 25,417 n.m.
Income (loss) before equity in earnings of unconsolidated ventures and income taxes 63,506 (83,778) 147,284 n.m.
Equity in earnings (loss) of unconsolidated ventures 25 (36,266) 36,291 n.m.
Income tax benefit (expense) (501) 1,935 (2,436) n.m.
Net income (loss) $ 63,030 $ (118,109) $ 181,139 n.m.

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~~Comparison of Six Months EndedJune 30, 2022 and June 30, 2021~~

~~Net Interest Income~~

~~Interest income~~

Interest income increased by $25.4 million to $97.7 million for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The increase was primarily due to $38.5 million in interest from new loan originations, $4.1 million in non-recurring profit participation income and $2.3 million received in non-recurring yield maintenance. This was partially offset by $18.0 million related to loan repayments.

~~Interest expense~~

Interest expense increased by $12.0 million to $37.5 million for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The increase was driven by $9.6 million related to financing for loan originations and $2.6 million related to the BRSP 2021-FL1 securitization.

~~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 $1.6 million for the six months ended June 30, 2022, as compared to the six months ended June 30, 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 $4.6 million to $45.9 million for~~ the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The decrease was primarily the result of the sale of an industrial portfolio in the first quarter of 2021 and two property sales in the first quarter of 2022.

~~Other income~~

Other income of $1.1 million was recorded during the six months ended June 30, 2022, which primarily relates to special servicing income associated with a securitization trust and income from money market investments. Other income of ~~$1.2 million~~ ~~was recorded during the six months ended June 30, 2021, which relates to a one-time reimbursement received on a previously resolved transaction.~~

~~Expenses~~

~~Management fee expense~~

Management fee expense decreased by $9.6 million for the six months ended June 30, 2022, as compared to the six months ended June 30, 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 $2.9 million to $12.0 million for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The decrease was primarily the result of two property sales in the first quarter of 2022 and the sale of an industrial portfolio in the first quarter of 2021.

~~Transaction, investment and servicing expense~~

Transaction, investment and servicing expense decreased by $0.8 million to $2.1 million for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, primarily due to higher franchise tax refunds received in the first quarter of 2021.

~~Interest expense on real estate~~

Interest expense on real estate decreased by $1.7 million to $14.7 million for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. This decrease was primarily due to the repayments of mortgage loans secured by two properties sold in the first quarter of 2022 and an industrial portfolio that was sold in the first quarter of 2021.

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~~Depreciation and amortization~~

Depreciation and amortization expense decreased by $2.2 million to $17.3 million for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The decrease was primarily the result of two property sales in the first quarter of 2022.

~~Increase (decrease) of CECL reserve~~

We recorded a CECL reserve of $9.3 million and $4.4 million for the six months ended June 30, 2022 and the six months ended June 30, 2021, respectively. This increase was primarily driven by the current macroeconomic outlook and new loan originations.

~~Compensation and benefits~~

Compensation and benefits decreased by $0.3 million to $16.5 million for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. This decrease was driven by higher stock compensation due to accelerated vesting of shares owned by employees of our former Manager following the internalization of our management in the second quarter of 2021.

~~Operating expense~~

Operating expense decreased by $1.4 million to $8.4 million for the six months ended June 30, 2022, as compared to the six months ended June 30, 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 six months ended June 30, 2021, we recorded $109.3 million in restructuring costs related to the termination of our Management Agreement with our previous Manager. This consisted of a one-time cash payment of $102.3 million to our previous Manager paid on April 30, 2021 and $7.0 million in additional restructuring costs consisting primarily of fees paid for legal and investment banking advisory services.

~~Other income (loss)~~

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

During the six months ended June 30, 2022, we recorded no unrealized gain or loss on mortgage loans and obligations held in securitization trusts, net. During the six months ended June 30, 2021, we recorded a reversal of an unrealized loss of $28.2 million primarily due to the sale of retained investments in the subordinate tranches of one securitization trust and the sale of two underlying loans held within one of our retained investments in the subordinate tranches of another securitization trust. Upon the sales, the accumulated unrealized losses related to the retained investments were reversed and realized.

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

During the six months ended June 30, 2022, we recorded no realized gain or loss on mortgage loans and obligations held in securitization trusts, net. During the six months ended June 30, 2021, we recorded a realized loss of $19.5 million on mortgage loans and obligations held in securitization trusts, net. This was due to the realized loss upon sale of the retained investments in the subordinate tranches of one securitization trust in the second quarter of 2021.

~~Other gain, net~~

During the six months ended June 30, 2022, we recorded other gain, net of $34.6 million, primarily due to realized gains on two property sales in the first quarter of 2022 and the sale of a preferred equity investment in the second quarter of 2022. During the six months ended June 30, 2021, we recorded other gain, net of $9.2 million primarily due to a realized gain on the sale of an industrial portfolio.

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

~~During~~We realized a one-time gain from its ratable share of dispute resolution proceeds of approximately $9.0 million from the ~~six months ended June 30, 2022, e~~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 ~~quity~~equity in earnings ~~(loss)~~ of unconsolidated ventures ~~increased by~~ ~~$36.3 million as compared to~~during the ~~six~~three months ended ~~June 30, 2021. This was primarily due to fair value loss adjustments recorded on three equity method investments during the second quarter of 2021.~~March 31, 2022.

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Income tax benefit (expense)

Income tax ~~benefit decreased~~expense increased by ~~$2.4~~$0.4 million to ~~an expense $0.5~~$0.4 million for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, as compared to the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, primarily due to ~~a one-time benefit from a tax capital loss carryback on private equity investments recorded during the six months ended June 30, 2021.~~an increase in 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):


		June 30, 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	$	1,452,008	$	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	128,965		129,769		Class A common stock	129,946		128,872
OP units		—		3,076
Total outstanding	Total outstanding	128,965		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	$	1.16	$	1.15	Accumulated depreciation and amortization per share	$	1.33	$	1.29
Undepreciated book value per share		$	12.42	$	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).

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.

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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

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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 ~~and six~~ months ended ~~June 30, 2022~~March 31, 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

Three Months Ended June 30,
2022 2021
Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders $ 34,287 $ (19,720)
Adjustments:
Net income (loss) attributable to noncontrolling interest of the Operating Partnership 359 (437)
Non-cash equity compensation expense 2,286 5,443
Transaction costs — 150
Depreciation and amortization 8,711 9,801
Net unrealized loss (gain):
Other unrealized gain on investments (1,940) (23,310)
CECL reserves 10,143 1,201
Gain on sales of real estate, preferred equity and investments in unconsolidated joint ventures (22,210) —
Adjustments related to noncontrolling interests (191) (192)
Distributable Earnings attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership $ 31,445 $ (27,064)
Distributable Earnings (Loss) per share(1)
$ 0.24 $ (0.20)
Adjustments:
Fair value adjustments — 32,039
Realized loss on CRE debt securities sales — 22,075
Adjusted Distributable Earnings attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership $ 31,445 $ 27,050
Adjusted Distributable Earnings per share(1)
$ 0.24 $ 0.20
Weighted average number of common shares and OP units(1)
131,522 132,788
~~________________________________________~~

(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 ~~June 30, 2021, weighted average number of common shares includes~~March 31, 2022 included 3.1 million OP units. ~~For the three months ended June 30, 2022 includes 3.1 million OP units until their redemption in May 2022.~~

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Six Months Ended June 30,
2022 2021
Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders $ 62,010 $ (112,034)
Adjustments:
Net income (loss) attributable to noncontrolling interest of the Operating Partnership 1,013 (2,390)
Non-cash equity compensation expense 4,166 9,705
Transaction costs — 109,321
Depreciation and amortization 17,314 19,559
Net unrealized loss (gain):
Other unrealized gain on investments (492) (31,682)
CECL reserves 9,277 4,426
Gain on sales of real estate, preferred equity and investments in unconsolidated joint ventures (32,713) (9,782)
Adjustments related to noncontrolling interests (355) (367)
Distributable Earnings attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership $ 60,220 $ (13,244)
Distributable Earnings (Loss) per share(1)
$ 0.46 $ (0.10)
Adjustments:
Fair value adjustments — 35,344
Realization of CRE debt securities mark-to-market loss — 990
Realized loss on CRE debt securities sales — 21,944
Adjusted Distributable Earnings attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership $ 60,220 $ 45,034
Adjusted Distributable Earnings per share(1)
$ 0.46 $ 0.34
Weighted average number of common shares and OP units(1)
132,168 132,755

~~(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 six months ended June 30, 2021, weighted average number of common shares includes 3.1 million OP units. For the six months ended June 30, 2022 includes 3.1 million OP units until their redemption in May 2022.

NOI

We believe NOI to be a useful measure of operating performance of our net leased and other real estate portfolios as they are more closely linked to the direct results of operations at the property level. NOI excludes historical cost depreciation and amortization, which are based on different useful life estimates depending on the age of the properties, as well as adjustments for the effects of real estate impairment and gains or losses on sales of depreciated properties, which eliminate differences arising from investment and disposition decisions. Additionally, by excluding corporate level expenses or benefits such as interest expense, any gain or loss on early extinguishment of debt and income taxes, which are incurred by the parent entity and are not directly linked to the operating performance of the Company’s properties, NOI provides a measure of operating performance independent of the Company’s capital structure and indebtedness. However, the exclusion of these items as well as others, such as capital expenditures and leasing costs, which are necessary to maintain the operating performance of the Company’s properties, and transaction costs and administrative costs, may limit the usefulness of NOI. NOI may fail to capture significant trends in these components of ~~U.S.~~ GAAP net income (loss) which further limits its usefulness.

NOI should not be considered as an alternative to net income (loss), determined in accordance with ~~U.S.~~ GAAP, as an indicator of operating performance. In addition, our methodology for calculating NOI involves subjective judgment and discretion and may differ from the methodologies used by other companies, when calculating the same or similar supplemental financial measures and may not be comparable with other companies.

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The following tables present a reconciliation of net income (loss) on our net leased and other real estate portfolios attributable to our common stockholders to NOI attributable to our common stockholders (dollars in thousands) for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		Three Months Ended June 30,					Three Months Ended March 31,
		2022		2021			2023		2022
Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders	$	34,287	$	(19,720)	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)	(31,577)		21,166		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	(15)		23		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	(59)		(208)		Amortization of above- and below-market lease intangibles	(139)		(41)
Interest income		—		9

Interest expense on real estate	Interest expense on real estate	7,117		7,777		Interest expense on real estate	5,509		7,556
Other income		(17)		36

Transaction, investment and servicing expense	Transaction, investment and servicing expense	52		63		Transaction, investment and servicing expense	35		100
Depreciation and amortization	Depreciation and amortization	8,664		9,949		Depreciation and amortization	7,938		8,551

Operating expense	Operating expense	56		61		Operating expense	1		32
Other gain on investments, net	Other gain on investments, net	(2,101)		(1,237)		Other gain on investments, net	(553)		(10,369)
Income tax expense (benefit)		49		(86)
Income tax expense						Income tax expense	345		69
NOI attributable to noncontrolling interest in investment entities	NOI attributable to noncontrolling interest in investment entities	(297)		(3,968)		NOI attributable to noncontrolling interest in investment entities	(300)		(309)
Total NOI, at share	Total NOI, at share	$	16,159	$	13,865	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.

Six Months Ended June 30,
2022 2021
Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders $ 62,010 $ (112,034)
Adjustments:
Net (income) loss attributable to non-net leased and other real estate portfolios(1)
(47,505) 122,578
Net income (loss) attributable to noncontrolling interests in investment entities 7 (109)
Amortization of above- and below-market lease intangibles (101) (25)
Interest income — 18
Interest expense on real estate 14,673 16,410
Other income (17) 2
Transaction, investment and servicing expense 407 51
Depreciation and amortization 17,215 19,488
Operating expense 247 92
Other gain on investments, net (13,196) (10,733)
Income tax expense (benefit) 118 (111)
NOI attributable to noncontrolling interest in investment entities (606) (7,966)
Total NOI, at share $ 33,252 $ 27,661

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

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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.

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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 ~~June 30, 2022,~~March 31, 2023, up to approximately $2.3 billion in secured revolving repurchase facilities, ~~$1.4~~$1.1 billion in non-recourse securitization financing, ~~$631~~$618.2 million in commercial mortgages and ~~$28~~$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.

Debt-to-Equity Ratio

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

~~June 30, 2022~~March 31, 2023

December 31, ~~2021~~2022

Debt-to-equity ratio(1)

~~2.2x~~2.0x

2.0x

(1)Represents (i) total outstanding secured debt less cash and cash equivalents of ~~$317.7~~$313.5 million and ~~$259.7~~$306.3 million at ~~June 30, 2022~~March 31, 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.

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,”~~ Results”overall market uncertainty coupled with rising inflation and interest rates have tempered the 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 ~~also~~ 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.~~

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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.

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adjusted net book value. As of ~~June 30, 2022,~~date hereof, the borrowing base valuation is sufficient to permit borrowings of up to $165.0 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 ~~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 ~~June 30, 2022,~~March 31, 2023, we were in compliance with all of our financial covenants under the Credit Agreement.

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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.

During the second quarter of 2022, we entered into amendments under our Master Repurchase Facility with Bank 7 and Bank 9 to increase the facility sizes by $100 million and extend the maturity dates by one year for each facility.

~~Subsequent to June 30, 2022, we entered into amendments under our Master Repurchase Facility with Bank 1 and Bank 3 to extend the maturity date by one year and four years, respectively.~~

As of June 30, 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 June 30, 2022.

The following table presents a summary of our Master Repurchase and Bank Credit Facilities as of ~~June 30, 2022~~March 31, 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	$	250,162	3.8	LIBOR/SOFR + 1.82%	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		396,202		0.8	LIBOR/SOFR + 1.95%	Bank 3	400,000		236,718		4.2	SOFR + 1.74%
Bank 7		600,000		415,795		3.8	LIBOR/SOFR + 1.79%
Bank 8		250,000		158,504		0.9	LIBOR/SOFR + 2.18%
Bank 9		400,000		266,904		4.9	LIBOR/SOFR + 1.70%
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	2,250,000		1,487,567				Total Master Repurchase Facilities	2,250,000		1,292,176

Bank Credit Facility	Bank Credit Facility	165,000		—		4.5	SOFR + 2.25%	Bank Credit Facility	165,000		—		—	SOFR + 2.25%

Total Facilities	Total Facilities	$	2,415,000	$	1,487,567			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.

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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
June 30, 2022 $ 1,343,678 $ 1,487,567 $ 1,503,297
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 ~~March~~December 31, 2022 to ~~June 30, 2022~~March 31, 2023 was driven by ~~the origination~~payoffs of ~~new~~ loans during the 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.

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 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 ~~June 30, 2022,~~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. 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 ~~half~~quarter of ~~2022, five loans~~2023 and through May 2, 2023, one loan held in CLNC ~~2019-FL1 were~~2019-FL was fully repaid and one loan was partially repaid totaling ~~$138.4~~$36.2 million. The proceeds from the ~~five loan payoffs~~repayments were used to amortize the securitization bonds in accordance with the securitization priority of payments. As of ~~August~~May 2, ~~2022,~~2023, the securitization advance rate was ~~80.9%~~ 73.8%

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at a weighted average cost of funds of Adjusted Term SOFR plus ~~1.66%~~1.87% (before transaction costs).

~~Table~~ At March 31, 2023, we had $632.6 million of ~~Contents~~

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 ~~half~~quarter of ~~2022~~2023 and through ~~August~~May 2, ~~2022, five~~2023, two loans held in BRSP 2021-FL1 were fully repaid, totaling ~~$73.8~~$48.0 million. We replaced the repaid 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.

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 ~~June 30, 2022.~~March 31, 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)	$	1,868	$	413	$	825	$	630	$	—	Bank credit facility(1)	$	1,554	$	413	$	825	$	316	$	—
Secured debt(2)	Secured debt(2)	2,426,754		257,127		688,285		1,190,628		290,714		Secured debt(2)	2,373,999		828,893		1,172,161		120,348		252,597
Securitization bonds payable(3)	Securitization bonds payable(3)	1,429,410		169,389		1,244,650		15,371		—		Securitization bonds payable(3)	1,168,256		723,943		444,313		—		—
Ground lease obligations(4)	Ground lease obligations(4)	28,352		3,108		4,845		4,036		16,363		Ground lease obligations(4)	26,020		2,947		4,265		3,741		15,067
Office leases	Office leases	8,630		797		2,586		2,647		2,600		Office leases	7,953		1,283		2,608		2,669		1,393
		$	3,895,014	$	430,834	$	1,941,191	$	1,213,312	$	309,677		$	3,577,782	$	1,557,479	$	1,624,172	$	127,074	$	269,057
Lending commitments(5)	Lending commitments(5)	312,903										Lending commitments(5)	256,252
Total	Total	$	4,207,917									Total	$	3,834,034

(1)Future interest payments were estimated based on the applicable index at ~~June 30, 2022~~March 31, 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 ~~June 30, 2022.~~March 31, 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.

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Share Repurchases

In ~~May 2022,~~April 2023, our board of directors authorized a stock repurchase program (“Stock Repurchase Program”) under which we may repurchase up to ~~$100.0~~$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 ~~Securities Exchange Act of 1934, as amended (the~~ “Exchange Act”). The Stock Repurchase Program will be utilized at our discretion and in accordance with the requirements of the ~~Securities and Exchange Commission (“SEC”).~~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 ~~June 30, 2022,~~March 31, 2023, we ~~repurchased 2.2 million shares~~did not make any share repurchases, and as of Class A common stock at a weighted average price of $8.40 per share for an aggregate cost of $18.3 million. Additionally, and separate from the Stock Repurchase Program, we redeemed the 3.1 million total outstanding membership units in the OP held by a third-party representing noncontrolling interests at a price of $8.25 per unit for a total cost of $25.4 million.

~~As of June 30, 2022,~~March 31, 2023, there was $81.7 million remaining available to make repurchases under the ~~Stock Repurchase Plan.~~prior stock repurchase program.

Cash Flows

The following presents a summary of our consolidated statements of cash flows for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (dollars in thousands):


		Six Months Ended June 30,							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	$	54,614	$	(128,611)	$	183,225	Operating activities	$	39,673	$	32,357	$	7,316
Investing activities	Investing activities	(234,920)		(277,213)		42,293		Investing activities	69,622		(218,802)		288,424
Financing activities	Financing activities	243,885		155,876		88,009		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 ~~$54.6~~$39.7 million and ~~net cash outflows of $128.6~~$32.4 million for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. Net cash provided by operating activities increased ~~$183.2 million~~ for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 compared to the ~~six~~three months ended ~~June 30, 2021,~~March 31, 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 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 ~~$234.9~~$218.8 million for the ~~six~~three months ended ~~June 30,~~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 ~~$815.5~~$498.2 million partially offset by repayments on loans and preferred equity held for investment, net of ~~$470.4~~$215.3 million, proceeds from sales of real estate of $55.6 ~~million, proceeds from sales of investments in unconsolidated ventures of $38.1~~ million and repayments of principal in mortgage loans held in securitization trusts of ~~$15.9 million.~~

Investing activities used net cash outflows of $277.2 million for the six months ended June 30, 2021. Net cash used in investing activities in 2021 resulted primarily from originations and future advances on our loans and preferred equity held for investment, net of $822.8 million partially offset by proceeds from sales of real estate of $332.0 million, repayments on loan

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~~and preferred equity held for investment of $124.2 million and proceeds from sales of mortgage loans held in securitization trusts of $28.7~~$13.3 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 and through May 27, 2022, on distributions to our noncontrolling interests.

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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 ~~$243.9~~$169.9 million for the ~~six~~three months ended ~~June 30,~~March 31, 2022, which resulted which resulted primarily from borrowings from credit facilities of ~~$698.7~~$383.3 million partially offset by repayment of ~~securitization bonds of $138.4 million, repayment of~~ credit facilities of ~~$116.3~~$88.7 million, repayment of mortgage notes of ~~$82.1~~$43.3 million, repayment of securitization bonds of $40.7 million, distributions paid on common stock of ~~$49.2 million, redemption of OP units of $25.4 million, repurchase of common stock of $18.3~~$23.9 million and repayment of mortgage obligations issued by securitization trusts of ~~$15.9 million.~~

Financing activities provided net cash of $155.9 million for the six months ended June 30, 2021. Net cash provided by financing activities in 2021 resulted primarily from borrowings from credit facilities in the amount of $675.4 million, partially offset by repayment of mortgage notes of $263.3 million, repayment of credit facilities of $208.0 million, and distributions to noncontrolling interests in the amount of $23.9$13.3 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 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

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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

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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.

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.”

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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.

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As U.S. Treasury securities are priced to a higher yield and/or the spread to U.S. Treasuries used to price the assets increases, the price at which we could sell some of our fixed rate financial assets may decline. Conversely, as U.S. Treasury securities are priced to a lower yield and/or the spread to U.S. Treasuries used to price the assets decreases, the value of our fixed rate financial assets may increase. Fluctuations in LIBOR and SOFR may affect the amount of interest income we earn on our floating rate borrowings and interest expense we incur on borrowings indexed to LIBOR and SOFR, including under credit facilities and investment-level financing.

We utilize a variety of financial instruments on some of our investments, including interest rate swaps, caps, floors and other interest rate exchange contracts, in order to limit the effects of fluctuations in interest rates on their operations. The use of these types of derivatives to hedge interest-earning assets and/or interest-bearing liabilities carries certain risks, including the risk that losses on a hedge position will reduce the funds available for distribution and that such losses may exceed the amount invested in such instruments. A hedge may not perform its intended purpose of offsetting losses of rising interest rates. Moreover, with respect to certain of the instruments used as hedges, there is exposure to the risk that the counterparties may cease making markets and quoting prices in such instruments, which may inhibit the ability to enter into an offsetting transaction with respect to an open position. Our profitability may be adversely affected during any period as a result of changing interest rates.

As of ~~June 30, 2022,~~March 31, 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 ~~$6.4~~$8.0 million annually, net of interest expense.

See the “Factors Impacting Our Operating Results” section in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of 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 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

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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,

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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.

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.

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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 ~~June 30, 2022,~~March 31, 2023, we had approximately NOK ~~686.9~~615.8 million or a total of ~~$69.5~~$59.0 million, in net investments in our European subsidiaries. A 1.0% change in the foreign currency rate would result in a ~~$0.7~~$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 ~~June 30, 2022,~~March 31, 2023, including notional amount and key terms, is included in Note 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 ~~June 30, 2022,~~March 31, 2023, we do not expect any counterparty to default on its obligations.

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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 ~~June 30, 2022,~~March 31, 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.

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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 ~~six~~three months ended ~~June 30, 2022, other than those previously disclosed in filings with the SEC.~~March 31, 2023.

Purchases of Equity Securities by Issuer

The ~~following table summarizes the~~Company did not repurchase any of its Class A common stock ~~for~~during the three months ended ~~June 30, 2022 (in thousands, except per share data).~~

Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs
Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs(1)
April 1-30, 2022 — $ — — $ —
May 1-31, 2022 1,861 8.34 1,861 84,473
June 1-30, 2022 320 8.72 320 81,680
Total 2,181 $ 8.40 2,181 $ 81,680

~~(1)In May 2022, the Company’s board of directors authorized the repurchase of up to an aggregate of $100.0 million of its outstanding Class A common stock until April 30,~~March 31, 2023.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~Amendment to Master Repurchase Facility - Citibank, N.A.~~

On July 28, 2022, NSREIT CB Loan, LLC, CB Loan NT-II, LLC, BrightSpire Credit 3, LLC, BrightSpire Credit 4, LLC, BrightSpire Credit 3EU, LLC and BrightSpire Credit 3UK, LLC (collectively, “CB Seller”), each an indirect wholly-owned subsidiary of the Company, and the OP entered into a Fourth Amendment (“Fourth Amendment to Citi Repurchase Agreement”) to that certain Amended and Restated Master Repurchase Agreement dated April 26, 2019, extending the maturity date by one year to July 28, 2024, replacing LIBOR with SOFR as the benchmark rate applicable to loans and providing CB Seller with three successive one year extension options, which may be exercised upon the satisfaction of certain conditions set forth in the repurchase agreement.

The foregoing summary does not purport to be a complete description and is qualified in its entirety by reference to the Fourth Amendment to Citi Repurchase Agreement, which is filed as Exhibit 10.5 to this Quarterly Report on Form 10-Q.

None.

9386

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Item 6. Exhibits

EXHIBIT INDEX


Exhibit Number						Description of Exhibit
~~2.1~~						Amended and Restated Master Combination Agreement, dated as of November 20, 2017, among Colony Capital Operating Company, LLC, NRF RED REIT Corp., NorthStar Real Estate Income Trust, Inc., NorthStar Real Estate Income Trust Operating Partnership, LP, NorthStar Real Estate Income II, Inc., NorthStar Real Estate Income Operating Partnership II, LP, Colony NorthStar Credit Real Estate, Inc. and Credit RE Operating Company, LLC (incorporated by reference to Exhibit 2.1 to the Company’s Registration Statement on Form S-4 (No. 333-221685) effective December 6, 2017)
3.1						Articles of Amendment and Restatement of BrightSpire Capital, Inc., ~~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~~10.1†*						BrightSpire Capital, Inc., 2022 Equity Incentive Plan ~~dated May 5, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (No. 001-38377) filed on May 5, 2022)~~Restricted Stock Agreement
~~10.2~~10.2†*						~~Form of Restricted Stock Award Agreement to the~~ BrightSpire Capital, Inc., 2022 Equity Incentive Plan ~~(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (No. 001-38377) filed on May 5, 2022)~~
~~10.3~~						~~Third Amendment to Master Repurchase~~Performance Restricted Stock Unit Agreement dated as of June 1, 2022, by and between Barclays Bank PLC and BrightSpire Credit 7, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (No. 001-38377) filed on June 6, 2022)
10.4*						~~Fourth Amendment to Master Repurchase Agreement, dated as of July 7, 2022, by and between Barclays Bank PLC and BrightSpire Credit 7, LLC (f/k/a CLNC Credit 7, LLC)~~
10.5*						Fourth Amendment to Amended and Restated Master Repurchase Agreement, dated as of July 28, 2022 by and among NSREIT CB Loan, LLC, CB Loan NT-II, LLC, BrightSpire Credit 3, LLC, BrightSpire Credit 4, LLC, BrightSpire Credit 3EU, LLC and BrightSpire Credit 3UK, LLC, BrightSpire Capital Operating Company, LLC and Citibank, N.A.
~~10.6~~						Amendment No. 4 to Master Repurchase and Securities Contract, dated as of June 22, 2022, by and between BrightSpire Credit 8, LLC and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (No. 001-38377) filed on June 23, 2022)
~~10.7~~						Fourth Amendment to Guarantee Agreement, dated as of June 22, 2022, by and between BrightSpire Capital Operating Company, LLC and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (No. 001-38377) filed on June 23, 2022)
~~10.8~~						Eighth Omnibus Amendment to Transaction Documents, dated as of July 11, 2022, by and between BrightSpire Capital Operating Company, LLC and Morgan Stanley, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (No. 001-38377) filed on July 13, 2022)
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
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.

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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: ~~August~~May 3, ~~2022~~ 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(1)		Total Loans
June 30, 2022	$	3,821,403	$	—	$	—	$	12,120	$	3,833,523
December 31, 2021	3,485,607		—		—		—		3,485,607


Remainder of 2022	$	37,034
2023	70,197
2024	65,515
2025	58,966
2026	52,100
2027 and thereafter	361,832
Total	$	645,644


(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
Other comprehensive income	—		—		1,966		1,966


AOCI at June 30, 2021	$	—	$	47,127	$	1,685	$	48,812


(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
Other comprehensive income (loss)	—		—		(89)		(89)


AOCI at June 30, 2021	$	—	$	1,403	$	(649)	$	754


Total Assets	Senior and Mezzanine Loans and Preferred Equity(1)		CRE Debt Securities(2)		Net Leased and Other Real Estate		Corporate(3)		Total
June 30, 2022	$	3,910,416	$	741,747	$	872,190	$	315,739	$	5,840,092
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		Total		% of Total
Multifamily	67	$	1,940,265	$	63,098	$	2,003,363	52.3	%
Office	32	1,238,136		—		1,238,136		32.3	%
Hotel	5	377,689		40,910		418,599		10.9	%
Other (Mixed-use)(1)	4	148,186		—		148,186		3.9	%
Industrial	2	25,239		—		25,239		0.6	%
Total	110	$	3,729,515	$	104,008	$	3,833,523	100.0	%


	Book value (at BRSP share)
Region	Count	Senior mortgage loans		Mezzanine loans		Total		% of Total
US West	44	$	1,676,250	$	87,414	$	1,763,664	46.0	%
US Southwest	45	1,253,229		4,474		1,257,703		32.8	%
US Northeast	12	573,861		12,120		585,981		15.3	%
US Southeast	9	226,175		—		226,175		5.9	%

Total	110	$	3,729,515	$	104,008	$	3,833,523	100.0	%


				Weighted Average(1)
CRE Debt Securities by ratings category	Number of Securities	Book value		Cash coupon		Unlevered all-in yield		Remaining term (yrs)	Ratings

“B-pieces” of CMBS securitization pools	4	$	36,154	2.8	%	12.9	%	4.9	—
Total/Weighted Average	4	$	36,154	2.8	%	12.9	%	4.9	—


Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs(1)
April 1-30, 2022	—	$	—	—	$	—
May 1-31, 2022	1,861	8.34		1,861	84,473
June 1-30, 2022	320	8.72		320	81,680
Total	2,181	$	8.40	2,181	$	81,680