Proxy Summary |
PROPOSAL | BOARD RECOMMENDATION | FOR MORE INFORMATION | |||||||||
1 | Election of Directors | FOR all nominees | Page 15 | ||||||||
2 | To approve (on a non-binding basis) the compensation of our named executive officers as of December 31, | FOR | Page | ||||||||
3 | To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, | FOR | Page | ||||||||
Proxy Summary |
AGE (1) | COMMITTEE MEMBERSHIPS (2) | ||||||||||||||||||||||
NAME | DIRECTOR SINCE | INDEPENDENCE STATUS | OCCUPATION | AC | CC | NCG | |||||||||||||||||
Catherine D. Rice (3) | 63 | 2018 | Yes | Private Investor; Former Senior Managing Director of W.P. Carey | M, E | ||||||||||||||||||
Kim S. Diamond | 58 | 2021 | Yes | Former Founding Executive of Kroll Bond Rating Agency | M | M | |||||||||||||||||
Catherine Long | 66 | 2021 | Yes | Former Chief Financial Officer of Store Capital, Inc. | C, E | M | |||||||||||||||||
Vernon B. Schwartz | 72 | 2018 | Yes | Private Investor; Former Executive Vice President iStar | M, E | C | |||||||||||||||||
John E. Westerfield | 64 | 2018 | Yes | Chief Executive Officer of Mitsui Fudosan America, Inc. | M | C | |||||||||||||||||
Michael J. Mazzei | 61 | 2020 | No | Chief Executive Officer of BrightSpire Capital, Inc. |
AGE (1) | COMMITTEE MEMBERSHIPS (2) | ||||||||||||||||||||||
NAME | DIRECTOR SINCE | INDEPENDENCE STATUS | OCCUPATION | AC | CC | NCG | |||||||||||||||||
Catherine D. Rice (3) | 64 | 2018 | Yes | Private Investor; Former Senior Managing Director of W.P. Carey | M, E | ||||||||||||||||||
Kim S. Diamond | 59 | 2021 | Yes | Former Founding Executive of Kroll Bond Rating Agency | M | M | |||||||||||||||||
Catherine Long | 67 | 2021 | Yes | Former Chief Financial Officer of Store Capital, Inc. | C, E | M | |||||||||||||||||
Vernon B. Schwartz | 73 | 2018 | Yes | Private Investor; Former Executive Vice President iStar | M, E | C | |||||||||||||||||
John E. Westerfield | 65 | 2018 | Yes | Former Chief Executive Officer of Mitsui Fudosan America, Inc. | M | C | |||||||||||||||||
Michael J. Mazzei | 62 | 2020 | No | Chief Executive Officer of BrightSpire Capital, Inc. |
AC Audit Committee | CC Compensation Committee | NCG Nominating and Corporate Governance Committee | ||||||
C Committee Chair | M Committee Member | E Audit Committee Financial Expert |
Proxy Summary |
How to Vote / Authorize a Proxy | Stockholder of Record (Shares registered in your name with | Street Name Holders (Shares held through Broker, Bank or Other Nominee) | |||||||||
Visit the applicable voting website and follow the on-screen instructions: | www.voteproxy.com | Refer to voting instruction form. | |||||||||
BY INTERNET USING A COMPUTER | |||||||||||
Sign, date and return by mail: | Completed proxy card. | Refer to voting instruction form. | |||||||||
BY MAIL | |||||||||||
For instructions on attending the virtual | |||||||||||
DURING THE VIRTUAL MEETING |
About the Meeting (FAQs) |
About the Meeting (FAQs) |
About the Meeting (FAQs) |
Company Overview |
Company Overview |
Company Overview |
⇒ | 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 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. |
As of the date hereof, the Company’s Board is comprised of six members, including our five independent directors, led by Catherine D. Rice, our Independent Chairperson, Vernon Schwartz, John Westerfield, Kim S. Diamond, Catherine F. Long and Michael J. Mazzei, the Company’s Chief Executive Officer. Prospectively, we will have six directors assuming re-election at the |
Company Overview |
Importantly, since inception in 2018, gender and racial/ethnic diversity have been a priority of the Board. Assuming re-election at the |
Company Overview |
⇒ | Responsible Parties: We engaged a global leader in end-to-end IT solutions (the “BrightSpire IT Partner”) to advance and maintain a comprehensive cybersecurity program. Our cybersecurity program is designed with the BrightSpire IT Partner’s attention to and integration of certain information security standards issued by the SEC, the National Institute of Standards and Technology, and the International Organization for Standardization. We also have a dedicated senior employee to lead IT (“Head of IT”) oversight and functions, together with our Chief Financial Officer, General Counsel (together, the “Information Security Group”) and aforementioned BrightSpire IT Partner. Benefits provided by the Head of IT and BrightSpire IT Partner include a significant reduction in critical vulnerabilities, cost effective governance and risk services, current expertise/awareness to model, adaptation to and mitigation of new threats, leverage of internal team resources to focus on business priorities, and effectively meeting and managing evolving regulatory requirements in real time. Other members of management and team leaders assist in incident response efforts as well. |
Company Overview |
⇒ | Cybersecurity Risk Management (“CRM”) Program: The CRM program includes: (i) implementation of hardware and software infrastructure, primarily cloud based; (ii) “security first” approach to policies, processes and procedures (including general IT and security, information security, business continuity and incident response policies and plans); (iii) employee education, training and periodic testing and patching, including four to six sessions each calendar year (addressing spam, phishing, information security protocols, use of social media); and (iv) assessments of internal resources and diligence of external vendors and systems. Business continuity, disaster recovery and incident response procedures prioritize constant communication and follow a multi-step program including identification, preparation, implementation and resolution. | ||||
⇒ | Cloud Services: We migrated and maintain our company data and communication services to a leading cloud-based service provider, security systems and protected environment. Employees working from home may only connect and conduct business activities through a virtual private network (VPN). | ||||
⇒ | Security First Approach: Our cloud-based systems take a security first approach, including: (i) Perimeter Security (firewalls, antivirus, malware); (ii) Network Security (secure remote access, network patch management); (iii) Application Security (patch management, multi-factor authentication); (iv) Endpoint Security (email security/encryption, web filtering & URL defense, mobile device management); and (v) Data Security. |
⇒ | Our Audit Committee and Board of Directors play an active role in reviewing our cybersecurity initiatives. The BrightSpire IT Partner provides our Board an annual review of our cybersecurity governance and risk management program, security metrics relevant to the period in review (including findings on phishing campaigns and vulnerability patchwork initiatives) and provides the Audit Committee and Board updates regarding the cybersecurity threat landscape (for example, the impact of artificial intelligence). In coordination with the Information Security Group, the General Counsel provides reports of material cybersecurity incidents and cybersecurity threats (if any) at each quarterly meeting of the Audit Committee and Board. | ||||
⇒ | The BrightSpire IT Partner has established itself as a provider of managed services and technology solutions for over two decades, providing 24/7 oversight and services, including continuous testing and vulnerability scanning. The BrightSpire IT Partner also performs annual due diligence of key vendors on a rotating basis (including System and Organization Controls (SOC) report reviews, or alternatively solicit detailed questionnaires to evaluate such vendors cybersecurity preparedness and protections). | ||||
⇒ | Our Head of IT has over two decades of experience in IT and cybersecurity work and developed and implemented our cybersecurity program with the BrightSpire IT Partner. Together with our Head of IT, the Information Security Group considers current cybersecurity trends and threats, including through discussions with the BrightSpire IT Partner, outside cybersecurity counsel, our independent financial auditor and internal auditor. The Information Security Group undertakes table-top business disruption, disaster recovery and related response strategies and plans on a periodic basis and seeks to review and update applicable policies and procedures at least annually. | ||||
⇒ | As part of our 2023 integrated financial statement audit procedures (and previously 2022), our independent registered public accounting firm conducted inquiries of management to understand elements of our information security and cybersecurity policies, including cyber and information security risk, how we actively monitor our financial systems and networks, educate our workforce and others with access to financial information and systems, and how we report these considerations on an ongoing basis to management and to the Board of Directors. For 2023 and 2022, we did not engage our registered public accounting firm to provide a separate independent audit or certification of our information and cybersecurity programs or their overall maturity against industry standards. |
Company Overview |
⇒ | Diligence Priorities: Focus on sustainability certifications, energy management, air quality management, water and site management, natural and environmental concerns, and DEI policies, including governance codes of conduct (including anti-discrimination and harassment principles), unconscious bias and other training, and hiring, retention and leadership practices Efficiently Manage Resources: Integrate leading ESG practices throughout our operations while collaborating with service providers, tenants and communities | ||||||||||||||||
⇒ | Lead Transparently: Better understand counterparty commitment, measure and manage our business operations to improveenvironmental and financial performance | ||||||||||||||||
⇒ | Create a Positive Impact: Make a positive, lasting impact in our global communities by working to improve the health and well-being of our employees and supporting charitable activities, including through a commitment to diversity, equity and inclusion in hiring and engagement practices | ||||||||||||||||
⇒ | Invest Responsibly: Build a resilient portfolio that reduces risks and recognizes opportunities to preserve resources while enhancing economic value |
Company Overview |
Proposal No. 1: Election of Directors |
Board of Directors |
COMMITTEE | |||||||||||||||||||||||
AGE (1) | DIRECTOR | INDEPENDENCE | MEMBERSHIPS (2) | ||||||||||||||||||||
NAME | SINCE | STATUS | OCCUPATION | AC | CC | NCG | |||||||||||||||||
Catherine D. Rice (3) | 63 | 2018 | Yes | Private Investor; Former Senior Managing Director of W.P. Carey | M, E | ||||||||||||||||||
Kim S. Diamond | 58 | 2021 | Yes | Former Founding Executive of Kroll Bond Rating Agency | M | M | |||||||||||||||||
Catherine Long | 66 | 2021 | Yes | Former Chief Financial Officer of Store Capital, Inc. | C, E | M | |||||||||||||||||
Vernon B. Schwartz | 72 | 2018 | Yes | Private Investor; Former Executive Vice President iStar | M, E | C | |||||||||||||||||
John E. Westerfield | 64 | 2018 | Yes | Chief Executive Officer of Mitsui Fudosan America, Inc. | M | C | |||||||||||||||||
Michael J. Mazzei | 61 | 2020 | No | Chief Executive Officer of BrightSpire Capital, Inc. |
AGE (1) | COMMITTEE MEMBERSHIP (2) | ||||||||||||||||||||||
NAME | DIRECTOR SINCE | INDEPENDENCE STATUS | OCCUPATION | AC | CC | NCG | |||||||||||||||||
Catherine D. Rice (3) | 64 | 2018 | Yes | Private Investor; Former Senior Managing Director of W.P. Carey | M, E | ||||||||||||||||||
Kim S. Diamond | 59 | 2021 | Yes | Former Founding Executive of Kroll Bond Rating Agency | M | M | |||||||||||||||||
Catherine Long | 67 | 2021 | Yes | Former Chief Financial Officer of Store Capital, Inc. | C, E | M | |||||||||||||||||
Vernon B. Schwartz | 73 | 2018 | Yes | Private Investor; Former Executive Vice President iStar | M, E | C | |||||||||||||||||
John E. Westerfield | 65 | 2018 | Yes | Former Chief Executive Officer of Mitsui Fudosan America, Inc. | M | C | |||||||||||||||||
Michael J. Mazzei | 62 | 2020 | No | Chief Executive Officer of BrightSpire Capital, Inc. |
AC Audit Committee | CC Compensation Committee | NCG Nominating and Corporate Governance Committee | ||||||
C Committee Chair | M Committee Member | E Audit Committee Financial Expert |
Board of Directors |
Board of Directors |
CATHERINE D. RICE Independent Chairperson Director since 2018 Committee Membership ● Audit Committee | Catherine D. Rice. Catherine D. Rice is the Independent Chairperson of our Board. Ms. Rice has served as a director of RMG Acquisition Corporation III, a NASDAQ publicly listed company (NASDAQ: RMGCU), since its initial public offering in February 2021, and as a member of the Board of Trustees of Urban Edge Properties, a New York Stock Exchange publicly listed company (NYSE: UE), since March 2023. Ms. Rice served as a director and audit committee member at Store Capital Corporation, a New York Stock Exchange publicly listed company (NYSE: STOR), from November 2017 until its privatization in February 2023. Ms. Rice has over 30 years of experience in the real estate capital and investment markets and in the management and operation of public and private real estate companies. From June 2015 to February 2016, Ms. Rice was Senior Managing Director of W.P. Carey Inc. (“W.P. Carey”), a New York Stock Exchange publicly listed company (NYSE: WPC), one of the largest public global net-lease REITs. Prior to that role, from March 2013 to June 2015, Ms. Rice was Managing Director and Chief Financial Officer of W.P. Carey. While at W.P. Carey, Ms. Rice completed a comprehensive reorganization of the finance, accounting, and IT functions as well as the development of the investor relations and capital markets areas to facilitate the company’s growth plan. She was responsible for financial strategy, public capital-raising initiatives and company-wide strategic evaluation, and was also a member of the operating and investment committees. Prior to joining W.P. Carey, Ms. Rice was a partner and a Managing Director at Parmenter Realty Partners, a private real estate investment firm focused on distressed and value-add properties in the southern regions of the U.S. Her responsibilities included both capital raising and investing for the firm’s fourth fund. Prior to that, Ms. Rice was the Chief Financial Officer of iStar Inc. (“iStar”) (NYSE: STAR), a publicly traded finance company focused on the commercial real estate industry, where she was responsible for financial strategy and capital-raising initiatives, financial reporting and investor relations. Ms. Rice spent the first 16 years of her career as a professional in the real estate investment banking groups of Merrill Lynch, Lehman Brothers and Banc of America Securities. During her career as an investment banker, she was involved in numerous capital-raising and strategic advisory transactions, including REIT IPOs, public and private debt and equity offerings, mergers and acquisitions, leveraged buyouts, and asset and corporate acquisitions and dispositions. Ms. Rice received a Bachelor of Arts degree from the University of Colorado and a Master of Business Administration from Columbia University. Consideration for Ms. Rice's Recommendation: Ms. Rice’s extensive real estate and capital markets experience, her prior leadership as a chief financial officer of real estate and finance focused publicly listed companies, as well as her current and past service on the boards of real estate investment trusts and other real estate-based organizations, highlights her value to continue serving as an independent director and Chairperson of the Company. |
Board of Directors |
KIM S. DIAMOND Independent Director Director since 2021 Committee Membership ● Compensation Committee ● Nominating & Corporate Governance Committee | Kim S. Diamond. Kim S. Diamond is an independent director of the Company. Ms. Diamond has over 30 years of experience in the commercial real estate capital and structured finance debt capital markets industries. Prior to becoming a board member, Ms. Diamond was a Founding Principal and Head of Structuring and Credit at Crescit Capital Strategies (“Crescit”), a middle-market, commercial real estate debt fund from July 2017 until August 2021. Before joining Crescit, Ms. Diamond was a Founding Executive and Senior Managing Director at Kroll Bond Rating Agency, Inc. (“KBRA”). As a member of the KBRA executive team, Ms. Diamond played a pivotal role in the establishment, growth and ultimate sale of the start-up ratings firm. In addition to running all aspects of KBRA’s Structured Finance Ratings group, Kim was a member of the firm’s policy committee. Prior to joining KBRA, Ms. Diamond was a Managing Director at Standard and Poor’s (“S&P”). As an early member of S&P’s CMBS group, Ms. Diamond participated with other industry veterans in developing the standards and criteria that became the foundation for the US CMBS business. Ms. Diamond served as Practice Leader of S&P’s U.S. Commercial Mortgage Ratings Group and also helped develop S&P’s International CMBS and other Structured Finance efforts via short term management positions in the firm’s Melbourne, Australia and London, England offices. Ms. Diamond also served as the Interim Head of Structured Finance Ratings for S&P’s Asia/Pacific region in Tokyo, Japan. Ms. Diamond has served on the Board of Governors of the Commercial Real Estate Finance Council (“CREFC”), where she held positions as Programming Chair, Membership Chair and Treasurer and has been a recipient of the trade association’s prestigious Founder’s Award. She has also served on the Commercial Board of Governors (“COMBOG”) for the Mortgage Bankers Association (“MBA”). Ms. Diamond currently serves as an advisory board member of Ai SPARK, a start-up commercial real estate fintech firm and Ms. Diamond received a Bachelor of Arts degree from Cornell University and a Master of Business Administration from Columbia University. Consideration for Ms. Diamond’s Recommendation: Ms. Diamond’s extensive knowledge of commercial real estate credit, structured finance and risk management and oversight, her executive leadership and founding role in real estate related organizations, together presents a distinguishable skill set and positions her strongly to continue forward as an independent director of the Company. |
Board of Directors |
CATHERINE LONG Independent Director Director since 2021 Committee Membership ● Audit Committee (Chair) ● Nominating & Corporate Governance Committee | Catherine Long. Catherine Long is an independent director of the Company. Ms. Long has over 30 years of accounting, operating and financial management expertise. Most recently, Ms. Long was one of the founders of STORE Capital Corporation Prior to co-founding STORE, Ms. Long was Chief Financial Officer, Senior Vice President and Treasurer of Spirit Realty Capital, Inc. (“Spirit”) from its inception in August 2003 to February 2010. Prior to Spirit, Ms. Long served in various capacities with the Franchise Finance Corporation of America (“FFCA”) and its successor, GE Capital Franchise Finance. Ms. Long was also FFCA’s Principal Accounting Officer and actively participated in FFCA’s real estate limited partnership rollup, as well as numerous securitization transactions and business combinations. Prior to her employment with FFCA, Ms. Long was a senior manager specializing in the real estate industry with the international public accounting firm of Arthur Andersen in Phoenix, Arizona. Ms. Long was named CFO of the Year in 2008 by the Arizona chapter of Financial Executives International. From December 2019 to November 2021, Ms. Long served on the board of directors and audit committee of Oaktree Real Estate Income Trust, Inc., a non-traded, externally-managed REIT, formed to invest in income-producing commercial real estate assets and debt, primarily in the office, multifamily and industrial sectors. She received a Bachelor of Science in accounting with high honors from Southern Illinois University and has been a certified public accountant since 1980. Consideration for Ms. Long's Recommendation: Ms. Long’s career has been highlighted by a longstanding commitment to financial management, accounting and operating discipline and expertise, previously as a founder and chief financial officer of a New York Stock Exchange publicly traded real estate investment trust for 10+ years. With this prior financial expertise and executive experience in the real estate industry, Ms. Long is well positioned to serve as an independent director of the Company. |
Board of Directors |
VERNON B. SCHWARTZ Independent Director Director since 2018 Committee Membership ● Compensation Committee (Chair) ● Audit Committee | Vernon B. Schwartz. Vernon B. Schwartz is an independent director of the Company. Mr. Schwartz was an independent director of NorthStar Real Estate Income Trust, Inc. and a member of its Audit Committee, positions he held between March 2016 and January 2018. Mr. Schwartz served as Executive Vice President at iStar from 2005 to February 2017, where he was responsible for managing a portfolio of real estate investments, including iStar’s condominium portfolio and its European assets. He has also served as President of AutoStar, iStar’s platform focused on the auto dealership market. Mr. Schwartz has been active in real estate investment and development for almost 30 years. Previously, Mr. Schwartz was a founding partner and Chief Executive Officer of Falcon Financial, the predecessor of AutoStar before it was acquired by iStar in 2005. Prior to forming Falcon Financial, Mr. Schwartz was the Chief Executive Officer of Soros Real Estate Advisors, the advisor to Quantum Realty Partners, an offshore real estate investment fund sponsored by George Soros and Paul Reichmann. Mr. Schwartz previously served as Chairman, President and Chief Executive Officer of Catellus Development Corporation, the largest private landowner in the state of California, and also held executive positions at both Bank of Montreal and The Hahn Company, a developer, owner and operator of regional shopping centers. Mr. Schwartz has a Bachelor of Commerce in Economics and a Master of Business Administration from the University of the Witwatersrand in Johannesburg, South Africa. Consideration for Mr. Schwartz's Recommendation: Mr. Schwartz’s strengths include his knowledge of the real estate investment and finance industries, including his extensive experience in real estate development and portfolio management, both domestically and internationally. With prior executive experience for real estate related companies and his relevant real estate investment acumen, Mr. Schwartz is recommended to serve as an independent director of the Company. |
Board of Directors |
JOHN E. WESTERFIELD Independent Director Director since 2018 Committee Membership ● Nominating & Corporate Governance Committee (Chair) ● Compensation Committee | John E. Westerfield. John E. Westerfield is an independent director of the Company. From April 2015 to October 2023, Mr. Westerfield Mr. Westerfield spent the majority of his career as a managing director at Morgan Stanley, having joined the firm in 1985 upon graduation from business school. At Morgan Stanley, Mr. Westerfield worked in numerous roles in investment banking, fixed income and investment management, all with a specialization in commercial real estate finance and investment. In his last role at Morgan Stanley, Mr. Westerfield had responsibility for the firm’s global commercial mortgage finance business. Upon retirement from Morgan Stanley in June 2008, Mr. Westerfield formed and managed Braddock Capital Management LLC, a private company which invested in REITs and commercial real estate related assets, including various office, industrial, multi-family rental and condominium development projects, primarily in the New York area. Mr. Westerfield received a Master of Business Administration from Harvard Business School in 1985 and a Bachelor of Arts in Government from Dartmouth College in 1981. Consideration for Mr. Westerfield’s Recommendation: Mr. Westerfield's extensive knowledge of commercial real estate finance and investment, continuing leadership as a chief executive officer of a prominent U.S. focused real estate investment business, and expertise in strategic business planning and investment strategy, highlight attributes qualifying him to serve as an independent director of the Company. |
Board of Directors |
MICHAEL J. MAZZEI Director (Executive) Director since 2020 | Michael J. Mazzei. Michael J. Mazzei is the Company's Chief Executive Officer and a member of our Board. Since April 2020, Mr. Mazzei has led and overseen our operations, including investment and credit risk, capital raising and relationship management activities among stockholders, clients, partners, financing counterparties, research analysts and rating agencies. Mr. Mazzei served as a member of the board of directors of Ladder Capital Corp, (“Ladder”) from June 2017 through March 2020. Previously, Mr. Mazzei served as President of Ladder from June 2012 through June 2017. From September 2009 to June 2012, Mr. Mazzei served as Global Head of the CMBS and Bank Loan Syndication Group at Bank of America Merrill Lynch. Prior to that, Mr. Mazzei served as Co-Head of CMBS and Commercial Real Estate Debt Markets at Barclays Capital from March 2004 to June 2009. Prior to Barclays Capital, Mr. Mazzei spent 20 years at Lehman Brothers, including 18 years in commercial real estate finance-related functions. Having started in commercial mortgage trading in 1984, Mr. Mazzei became the head of CMBS in 1991 and served as the Co-Head of Global Real Estate Investment Banking from March 2002 to February 2004. Mr. Mazzei received a Bachelor of Science from Baruch College and a Juris Doctor from St. John’s University School of Law, and is a graduate of the New York University Real Estate Institute. Consideration for Mr. Mazzei’s Recommendation: Mr. Mazzei’s over 35 years of experience in commercial real estate finance and having served as executive officer, director and in other senior leadership positions at a series of commercial real estate financing and banking institutions qualify him to serve as a director of the Company. |
Executive Officers |
NAME | AGE (1) | POSITION | ||||||
Michael J. Mazzei | Chief Executive Officer | |||||||
Andrew E. Witt | President & Chief Operating Officer | |||||||
Frank V. Saracino | Chief Financial Officer, Treasurer and Executive Vice President | |||||||
David A. Palamé | General Counsel, Secretary and Executive Vice President |
Executive Officers |
Corporate Governance |
Corporate Governance |
Corporate Governance |
⇒ | diversity, age, background, skill and experience; | ||||
⇒ | personal qualities, high ethical standards and characteristics, accomplishments and reputation in the business community; | ||||
⇒ | knowledge and contacts in the communities in which the Company conducts business and in the Company’s industry or other industries relevant to the Company’s business; | ||||
⇒ | ability and willingness to devote sufficient time to serve on the Board and committees of the Board; | ||||
⇒ | knowledge and expertise in various areas deemed appropriate by the Board; and | ||||
⇒ | fit of the individual’s skills, experience and personality with those of other directors in maintaining an effective, collegial and responsive Board. |
Corporate Governance |
Information About Our Board of Directors and Its Committees |
AUDIT COMMITTEE | COMPENSATION COMMITTEE | NOMINATING AND CORPORATE GOVERNANCE COMMITTEE | |||||||||||||||||||||
INDEPENDENT DIRECTOR | |||||||||||||||||||||||
Catherine D. Rice (1) | M, E | M | M | ||||||||||||||||||||
Kim S. Diamond (2) | M | M | |||||||||||||||||||||
Catherine Long (3) | C, E | M | |||||||||||||||||||||
Vernon B. Schwartz (4) | M, E | C | M | ||||||||||||||||||||
John E. Westerfield (5) | M | M | C | ||||||||||||||||||||
Winston W. Wilson (3) | C, E | M | M | ||||||||||||||||||||
NUMBER OF MEETINGS HELD IN 2022 | 4 | 6 | 4 | ||||||||||||||||||||
C | Committee Chair | M | Committee Member | E | Audit Committee Financial Expert | ||||||||||||||||||
(1) Independent Chairperson. Ms. Rice transitioned off the Compensation Committee and Nominating & Corporate Governance Committee on May 5, 2022. (2) Ms. Diamond joined such committees on May 5, 2022. (3) Ms. Long began service as Chair of the Audit Committee and joined the Nominating & Corporate Governance Committee on May 5, 2022. Mr. Wilson retired as a member of the Board and committees (including as Chair of Audit Committee) upon completing his annual term of service ending concurrent with the 2022 Annual Meeting on May 5, 2022. (4) Mr. Schwartz transitioned off the Nominating & Corporate Governance Committee on May 5, 2022. (5) Mr. Westerfield transitioned off the Audit Committee on May 5, 2022. |
AUDIT COMMITTEE | COMPENSATION COMMITTEE | NOMINATING AND CORPORATE GOVERNANCE COMMITTEE | |||||||||||||||||||||
INDEPENDENT DIRECTOR | |||||||||||||||||||||||
Catherine D. Rice (1) | M, E | ||||||||||||||||||||||
Kim S. Diamond | M | M | |||||||||||||||||||||
Catherine Long | C, E | M | |||||||||||||||||||||
Vernon B. Schwartz | M, E | C | |||||||||||||||||||||
John E. Westerfield | M | C | |||||||||||||||||||||
NUMBER OF MEETINGS HELD IN 2023 | 4 | 5 | 4 | ||||||||||||||||||||
C | Committee Chair | M | Committee Member | E | Audit Committee Financial Expert | ||||||||||||||||||
(1) Independent Chairperson. |
Information About Our Board of Directors and Its Committees |
⇒ | our accounting and financial reporting processes; | ||||
⇒ | the integrity of our consolidated financial statements and financial reporting process; | ||||
⇒ | our systems of disclosure controls and procedures and internal control over financial reporting; | ||||
⇒ | our compliance with financial, legal and regulatory requirements and our ethics program; | ||||
⇒ | the evaluation of the qualifications, independence and performance of our independent registered public accounting firm; | ||||
⇒ | the performance of our internal audit function; and | ||||
⇒ | the Company’s overall risk profile and risk management practices. |
⇒ | identify and recommend to the full Board qualified candidates for election as directors and recommend nominees for election as directors at the annual meeting of stockholders; | ||||
⇒ | develop and recommend to the Board corporate governance guidelines and implement and monitor such guidelines; | ||||
⇒ | review and make recommendations on matters involving the general operation of the Board, including board size and composition, and committee composition and structure; | ||||
⇒ | recommend to the Board nominees for each committee of the Board; | ||||
⇒ | annually facilitate the assessment of the Board’s performance as a whole and of individual directors, as required by applicable law, regulations and the NYSE corporate governance listing standards; and | ||||
⇒ | oversee the Board’s evaluation of management. |
Information About Our Board of Directors and Its Committees |
⇒ | review and approve on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluate our Chief Executive Officer’s performance in light of such goals and objectives and determine and approve the compensation of our Chief Executive Officer based on such evaluation; | ||||
⇒ | review and approve the compensation, if any, of all of our executive officers, including our “named executive officers”; | ||||
⇒ | implement and administer our incentive compensation equity-based remuneration plans, including the Company’s 2022 Equity Incentive Plan, as amended (the “2022 Plan”); | ||||
⇒ | oversee and assist management in preparing the compensation disclosure and analysis for inclusion in our proxy statement and/or annual report; | ||||
⇒ | prepare and submit a report on executive compensation to be included in our proxy statement and/or annual report; and | ||||
⇒ | review, evaluate and recommend changes, if appropriate, to the compensation for directors. |
Director Compensation |
Annual | |||||||||||||||||||||||||||||||
Fees Earned | Annual | ||||||||||||||||||||||||||||||
or Paid in | Stock | ||||||||||||||||||||||||||||||
Name | Name | Cash $ | Awards $ (1) | Total $ | Name | Annual Fees Earned or Paid in Cash $ | Annual Stock Awards $ (1) | Total $ | |||||||||||||||||||||||
Catherine D. Rice | Catherine D. Rice | 100,000 | 100,126 | 200,126 | Catherine D. Rice | 100,000 | 105,599 | 205,599 | |||||||||||||||||||||||
Kim S. Diamond | Kim S. Diamond | 80,000 | 100,126 | 180,126 | Kim S. Diamond | 80,000 | 105,599 | 185,599 | |||||||||||||||||||||||
Catherine Long (2) | 93,150 | 100,126 | 193,276 | ||||||||||||||||||||||||||||
Catherine Long | Catherine Long | 100,000 | 105,599 | 205,599 | |||||||||||||||||||||||||||
Vernon B. Schwartz | Vernon B. Schwartz | 95,000 | 100,126 | 195,126 | Vernon B. Schwartz | 95,000 | 105,599 | 200,599 | |||||||||||||||||||||||
John E. Westerfield | John E. Westerfield | 95,000 | 100,126 | 195,126 | John E. Westerfield | 95,000 | 105,599 | 200,599 | |||||||||||||||||||||||
Winston W. Wilson | 34,247 | 0 | 34,247 |
(1) | Represents the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, of awards that were granted to our directors on May 17, 2023. The grant date fair value of awards granted to our independent directors was determined based on the closing price of our common stock on the date of grant as reported by the NYSE. As of December 31, 2023, the stock awards remain subject to vesting on May 17, 2024. As of December 31, 2023, each of Mses. Rice, Diamond and Long and Messrs. Schwartz and Westerfield owned 18,657 unvested shares of restricted common stock. |
(i) | 2023 Annual Incentive Plan: for 2023, adopted an annual cash incentive plan with (x) two-thirds (66.67%) weighted to fixed financial Company performance metrics and (y) one-third (33.33%) weighted toward subjective individual performance, for annual cash incentive award determinations (the “2023 Annual Incentive Plan”); and | ||||
(ii) | 2023 Long-Term Incentive Plan Awards with 3-Year Performance Restricted Stock Units: for long-term incentive plan awards in 2023, allocated between (x) 65% time-vesting restricted stock (vesting in equal annual installments over 3 years) and (y) 35% performance restricted stock units (testing total shareholder return over a 3-year testing period on a relative basis against a performance peer group). In 2024, equity awards were allocated between time-vesting restricted stock and performance restricted stock units on a 50% / 50% split basis. |
⇒ | Michael J. Mazzei, our Chief Executive Officer; | ||||
⇒ | Andrew E. Witt, our President and Chief Operating Officer; | ||||
⇒ | Frank V. Saracino, our Chief Financial Officer, Treasurer and Executive Vice President; and | ||||
⇒ | David A. Palamé, our General Counsel, Secretary and Executive Vice President. |
⇒ | reviewing Company performance and results for the applicable fiscal year;
Qualitative factors may include portfolio-related performance (including credit risk and analysis), operating performance, investment and asset management achievements, capital raising efforts, investor relations, business development, risk management policies and practices, legal, tax and regulatory compliance and maintaining sound information security and cybersecurity policies and controls. Individual factors may include contributions to the success and development of the Company, leadership and development efforts and corporate citizenship. Satisfaction of any single or all variables will not 34
necessarily be determinative alone at arriving at the overall award for any NEO and the Compensation Committee reserves its right in setting targets and issuing its judgment in determining whether targets are achieved and/or making equity awards, if any. Elements of Compensation Our executive compensation program consists of salary and a majority weighting toward variable pay components, including annual cash incentive and long-term incentive awards (which may include performance-based metrics).
Executive Compensation Program Highlights In summary, the Company’s executive compensation program INCLUDES:
____________ (1) Based on grant date fair value of
• •Performance Restricted Stock Units for 2023 and Subsequent Years: LTIP awards,
35
In addition, the executive compensation program is appropriately limiting with (DOES NOT INCLUDE):
Independent Compensation Consultant Peers and Peer Benchmarking LTIP equity-based consideration, focusing on implied equity market capitalization, total capitalization, and total return dynamics over certain periods. The “Executive Compensation Peers” include the following 11 companies:
Separately, executive management, the Board and the Compensation Committee regularly monitor the Company’s business performance among certain externally-managed and internally-managed commercial mortgage REITs. For comparative performance purposes, monitoring the below companies (the “Performance Peers”) is relevant because this group has more similar business plans, target assets, financing structures and performance objectives as the Company. The Compensation Committee evaluates performance among the Performance Peers when establishing targets for the 36
Employment Agreements In connection with the internalization in 2021 (and in effect as of December 31, 2023), the Company entered into an
The payment in respect of his bonus for the year of termination equal to his target annual bonus, prorated for the period of time worked during the year; and (e) full vesting of all then-outstanding and unvested LTIP awards (including the LTIP award granted as described above) (collectively, the “Severance Benefits”). All payments are to be made once the release is effective. In the event that Mr. Mazzei is terminated by the Company without cause or he terminates his employment for 37
Under the employment letters with Messrs. Witt, Saracino and Palamé, each are eligible to participate in the Company’s severance plan, which provides certain severance benefits in the event that their employment is terminated without On February 16, 2024, the Company entered into a second amended employment agreement with Mr. Mazzei, which among other things, extended the term of employment for an additional three years, expiring on March 31, 2027. On February 21, 2024, the Company entered into amended and restated letter agreements with each of our other NEOs, providing certain incremental severance terms beginning in 2024 as supplemental benefits to the Company’s amended severance plan. For additional information regarding such second amended employment agreement and amended and restated letter agreements, please refer to such agreements filed as exhibits to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Clawback Policy and Stock Ownership Guidelines The Board and Compensation Committee maintain additional executive compensation specific policies to advance a culture that emphasizes integrity and accountability at the Company and further align the long-term interests of the stockholders, executive officers and directors of the Company:
As of December 31, Results of On May
The Compensation Committee evaluated The Company paid base salary amounts for The Compensation Committee implemented the The 2023 Annual Incentive Plan Structure 39
Absolute ROAE (50% of Corporate Goals) The first corporate performance metric carries a one-third weight and evaluates the Company’s absolute ROAE (“Absolute ROAE”) for the year ended December 31, Relative ROAE (50% of Corporate Goals) The second corporate performance metric carries a one-third weight and evaluates the Company’s relative ROAE (“Relative ROAE”) for the year ended December 31, 40
The variable payout earned for each corporate measure is subject to linear interpolation consistent with the Absolute ROAE and Relative ROAE Percentile achieved, respectively, whether between Threshold and Target or Target and Maximum. For the year ended December 31, When combined with qualitative measures, the
In 2023, the Compensation Committee enhanced pay for performance measures applicable to NEO compensation to further align the interests of our NEOs and our stockholders. Specifically, the Compensation Committee added a performance restricted stock unit component to the annual LTIP Awards made in March On March 6, 2023, the Compensation Committee granted annual LTIP Awards to the NEOs allocated 65% to time-vesting restricted stock awards (“2023 Restricted Stock”) and 35% to three-year performance restricted stock unit awards (“2023 PRSUs”) as set forth below. The Compensation Committee believes introducing a 35% allocation of long-term incentive awards to performance restricted stock units
The 2023 Restricted Stock was issued in shares of our restricted Class A common stock and will vest in three substantially equal installments on each of March 15, 2024, March 15, 2025 and March 15, 2026. The 2023 PRSUs were awarded in restricted stock units with respect to our Class A common stock and have a three-year performance period (March 6, 2023 to March 6, 2026) with a payout opportunity ranging from 0% to 200% of the target units awarded, depending on the relative total stockholder return (“Relative TSR”) performance of the Company as compared to the Performance Peers. Recipients of the 2023 PRSUs will not be entitled to receive distributions or distribution equivalents before performance-based vesting has occurred. The 2023 PRSUs will convert into shares of our Class A common stock if and when earned and are generally 41
conditioned on continued employment by the recipient, subject to the applicable award agreement and the Company’s severance policy. For the 2023 PRSUs, the following table provides the scale which will be used to determine the payout percentage (if any) upon completion of the three-year performance cycle for such awards: The Compensation Committee determined that payouts for the 2023 PRSUs will be capped at 100% of target when the Company’s total shareholder return for the three-year performance cycle is negative. The variable payout earned is subject to linear interpolation consistent with the Relative TSR Percentile achieved, whether between Threshold and Target or Target and Maximum. 2024 Named Executive Officer Compensation – A Look Ahead On February 16, 2024, the Company entered into a second amended employment agreement with Mr. Mazzei, which among other things, extended the term of employment for an additional three years, expiring on March 31, 2027. On February 21, 2024, the Company entered into amended and restated letter agreements with each of our other named executive officers, providing certain incremental severance terms beginning in 2024 as supplemental benefits to the Company’s amended severance plan. The Compensation Committee approved an increased annual base salary for certain named executive officers of the Company effective March 1, 2024, as follows: (i) $500,000 for Andrew E. Witt, President and Chief Operating Officer and (ii) $425,000 for Frank V. Saracino, Chief Financial Officer. For additional information regarding such second amended employment agreement and amended and restated letter agreements, please refer to such agreements filed as exhibits to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. In addition, the Compensation Committee is in the process of implementing a 2024 annual incentive plan, subject to final compensation targets for each NEO and a majority-weighting to certain corporate performance targets. In 2024, the Compensation Committee granted annual LTIP Awards, including an increased allocation of 50% thereof to performance restricted stock units, as described in further detail below. 2024 LTIP Awards In March 2024, consistent with the Company’s annual grant cycle, the Compensation Committee granted annual LTIP Awards to the NEOs allocated 50% to time-vesting restricted stock awards (“2024 Restricted Stock”) and 50% to three-year performance restricted stock unit awards (“2024 PRSUs”) as set forth below. For 2024, the Compensation Committee believes that allocating 50% of long-term incentive awards to performance restricted stock units for each NEO represents an appropriate additional performance-based incentive.
The 2024 Restricted Stock was issued in shares of our restricted Class A common stock and will vest in three substantially equal installments on each of March 15, 2025, March 15, 2026 and March 15, 2027. The 2024 PRSUs were awarded in restricted stock units with respect to our Class A common stock and have a three-year performance period (March 6, 2024 to 42
March 6, 2027) with a payout opportunity ranging from 0% to 200% of the target units awarded, depending on the Relative TSR performance of the Company as compared to the Performance Peers. Recipients of the 2024 PRSUs will not be entitled to receive distributions or distribution equivalents before performance-based vesting has occurred. The 2024 PRSUs will convert into shares of our Class A common stock if and when earned and are generally conditioned on continued employment by the recipient, subject to the applicable award agreement and the Company’s severance policy. For the 2024 PRSUs, the following table provides the scale which will be used to determine the payout percentage (if any) upon completion of the three-year performance cycle for such awards: The Compensation Committee determined that payouts for the 2024 PRSUs will be capped at 100% of target when the Company’s total shareholder return for the three-year performance cycle is negative. The variable payout earned is subject to linear interpolation consistent with the Relative TSR Percentile achieved, whether between Threshold and Target or Target and Maximum. Tax and Accounting Considerations Deductibility of Executive Compensation Generally, Section 162(m) of the Code disallows public companies a tax deduction for federal income tax purposes of remuneration in excess of $1 million paid to so-called “covered employees,” which includes the chief executive officer, chief financial officer, certain other highly-compensated executive officers, and certain former executive officers. In approving the amount and form of compensation for our named executive officers, the Compensation Committee considers all elements of our cost of providing such compensation, including the potential impact of Section 162(m). The Compensation Committee may, in its judgment, approve compensation for our named executive officers that is not deductible for federal income tax purposes when it believes that such compensation is in the best interests of the Company and our stockholders. Accounting for Stock-Based Compensation We follow the Financial Accounting Standard Board’s Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”) for our stock-based compensation awards. FASB ASC Topic 718 requires us to measure the compensation expense for all share-based payment awards made to our employees and non-employee members of the Board of Directors, including options to purchase shares of our common stock and other stock awards, based on the grant date “fair value” of these awards. This grant date fair value is calculated using a variety of assumptions. This calculation is performed for financial reporting purposes and included in the executive compensation tables required by the federal securities laws, even though the recipient of the awards may never realize any value from their awards. FASB ASC Topic 718 also requires us to recognize the compensation cost of our share-based awards in our income statements over the period that an employee and non-employee member of the Board of Directors is required to render service in exchange for the award. Special Note Regarding Non-GAAP Measures This Compensation Discussion and Analysis contains certain non-GAAP financial measures which are described in more detail in the section entitled “Pay Versus Performance” in this Proxy Statement and that are derived from non-GAAP measures contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 43
COMPENSATION TABLES SUMMARY COMPENSATION TABLE FOR THE FISCAL YEAR ENDED DECEMBER 31, The following table sets forth the compensation for each of our named executive officers for the fiscal year ended December 31,
____________
44
GRANTS OF PLAN-BASED AWARDS DURING CALENDAR YEAR ENDED DECEMBER 31, The following table sets forth information concerning grants of plan-based awards made to the Company’s named executive officers during the calendar year ended December 31,
____________
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, The following table provides information regarding outstanding equity awards held by each of our named executive officers as of December 31,
____________
STOCK VESTED IN CALENDAR YEAR ENDED DECEMBER 31, The following table provides information regarding stock awards that vested during the year ended December 31,
____________
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL We may be required to make certain payments to our named executive officers in the event their services are terminated or we experience a change in control. Under the terms of the Pursuant to the form restricted stock award agreements used for awards made in 2021, 2022, and The table below sets forth the amount that we would have been required to pay each of the NEOs under the termination events described below or upon a change in control, assuming the termination or change in control occurred on December 31,
____________
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The following table presents information relating to securities remaining available for future issuance under the 2022 Plan as of the fiscal year ended December 31,
____________
CHIEF EXECUTIVE OFFICER PAY RATIO As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“the Dodd-Frank Act”), and Item 402(u) of Regulation S-K, for 2022, the median of the annual total compensation of all employees paid by the Company (other than our Chief Executive Officer), was 48
Based on this information, for 2022, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was To identify our median employee:
PAY VERSUS PERFORMANCE In accordance with the final rule adopted by the SEC in August 2022 implementing Section 953(a) of the Dodd-Frank Act, we are providing the following table that sets forth certain compensation measures for certain of our officers alongside certain performance metrics for the Company and certain of its industry peers. The disclosure included in this section is not incorporated by reference in Part III of the Company’s Annual Report on Form 10-K for the year ended December 31, The following tables sets forth information concerning the compensation actually paid to (1) certain prior chief executive officers, as applicable, and (2) our CEO and the average compensation among our other NEOs compared to Company performance for the years ended December 31, 2023, 2022, 2021 and 2020.
The graphs below reflect the relationship between “Compensation Actually Paid” to our Chief Executive Officer and the average compensation actually paid among other Named Executive Officers and (i) Total Shareholder Return (of our Company and the BBREIT Mortgage Index), (ii) Net Income, and (iii) Return on Average Equity (“ROAE”).
2020-2023 Compensation Actually Paid and Net Income 51
2020-2023 Compensation Actually Paid and Return on Average Equity The Compensation Committee considers certain financial performance metrics, along with other quantitative, qualitative and individual performance measures in determining the appropriate compensation for NEOs. In the Company’s assessment, the following list of performance measures represent the most important measures used to link compensation actually paid to our NEOs, for the most recently completed fiscal year, to Company Performance: NON-GAAP FINANCIAL MEASURES We refer to certain non-GAAP financial measures within this Proxy Statement. The below provides definitions for these measures. See also the Company’s Annual Report on Form 10-K for the year ended December 31, Return on Average Equity or (“ROAE”) is a measure of the Company’s (x) Adjusted Distributable Earnings for a particular fiscal year divided by (y) the average undepreciated book value of the Company for such fiscal year. “Adjusted Distributable Earnings” are Distributable Earnings (as defined below) excluding (i) realized gains and losses on asset sales, (ii) fair value adjustments, which represent mark-to-market adjustments to investments in unconsolidated ventures based on an exit price, defined as the estimated price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants, (iii) unrealized gains or losses, (iv) realized specific CECL reserves and (v) one-time gains or losses that in the judgement of management should not be included in Adjusted Distributable Earnings. We believe Adjusted Distributable Earnings is a useful indicator for investors to further evaluate and compare our operating performance to our peers and our ability to pay dividends, net of the impact of any gains or losses on assets sales or fair value adjustments, as described above. “Distributable Earnings” is defined as 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 52
whether such items are included in other comprehensive income or loss, or in net income, (ix) one-time events pursuant to changes in 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. 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 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. 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 GAAP adjustments that we believe are not necessarily indicative of our current portfolio and operations. 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 GAAP net income or an indication of our cash flows from operating activities determined in accordance with 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. “Undepreciated Book Value” is a non-GAAP financial metric which is defined as total stockholders’ equity (or “GAAP net book value”) excluding the impact of our pro rata share of accumulated depreciation and amortization on real estate investments (including related intangible assets and liabilities). The Company reports undepreciated book value in its quarterly and annual financial statements, including reconciliations to GAAP net book value. We believe that undepreciated book value is a more useful and consistent measure of the value of the Company’s current portfolio and operations. Average undepreciated book value represents the average of undepreciated book value across the four quarterly periods in any given fiscal year.
COMPENSATION COMMITTEE REPORT The Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” required by Item 402(b) of Regulation S-K under the Exchange Act with management. Based on such review and discussions, our Compensation Committee recommended to our Board that the “Compensation Discussion and Analysis” be included in this Proxy Statement. Compensation Committee: Vernon B. Schwartz, Chair Kim S. Diamond John E. Westerfield The information contained in this “Compensation Committee Report” is not to be deemed “soliciting material” or “filed” with the SEC, nor is such information to be incorporated by reference into any future filings under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act except to the extent that we specifically incorporate it by reference into such filings.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of March •each director; •each of our named executive officers; and •all of our directors and executive officers as a group. The following table also sets forth the number and percentage of shares of our common stock beneficially owned by each person, known to us, to be the beneficial owner of more than five percent (5%) of the outstanding shares of our common stock in each case, based solely on, and as of the date of, such person’s filing of statements filed with the SEC pursuant to Sections 13(d), 13(f) and 13(g) of the Exchange Act with respect to our common stock:
* Less than one percent.
PROPOSAL NO. 2: Advisory Vote On Executive Compensation In accordance with Section 14A of the Exchange Act and the related rules of the SEC, we are providing our stockholders an opportunity to indicate whether they support the compensation of our named executive officers, as described in this proxy statement. At our 2019 annual meeting of stockholders, our stockholders voted, on a non-binding advisory basis, to recommend that we hold a “say-on-pay” vote on an annual basis, and the Board approved such recommendation. This advisory vote, commonly referred to as “say on pay,” is not intended to address any specific item of compensation, but rather addresses the overall compensation of our named executive officers and our philosophy, policies and practices relating to their compensation as described in this proxy statement in accordance with the SEC’s compensation disclosure rules. Please see “Executive Compensation—Compensation Discussion and Analysis” in this proxy statement for additional details about our executive compensation programs, including information about the compensation of our named executive officers for The Board of Directors recommends that stockholders vote in favor of the following resolution: “RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED on an advisory basis.” Although this vote is advisory and is not binding on the Company, the Compensation Committee values the opinions of our stockholders. To the extent that there is any significant vote against the compensation of our named executive officers, we will consider our stockholders’ concerns, and the Compensation Committee will evaluate whether any actions are necessary to address those concerns. Vote Required and Recommendation The affirmative vote of a majority of the votes cast at the meeting is required for approval of the advisory “say on pay” resolution regarding the compensation of our named executive officers. For purposes of the vote on this proposal, abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote, although they will be considered present for the purpose of determining the presence of a quorum. See “About the Meeting (FAQs)—How many votes are required to approve the proposals?” for additional information regarding the required vote for this proposal. OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ADVISORY APPROVAL OF THE RESOLUTION APPROVING THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
PROPOSAL NO. 3: Ratification Of Appointment Of Our Independent Registered Public Accounting Firm The Audit Committee of our Board has appointed Ernst & Young LLP (“EY”) as our independent registered public accounting firm for the fiscal year ending December 31, Even if the appointment of EY as our independent registered public accounting firm is ratified, our Board and the Audit Committee may, in their discretion, change that appointment at any time during the year should they determine such a change would be in our and our stockholders’ best interests. In the event that the appointment of EY is not ratified, the Audit Committee will consider the appointment of another independent registered public accounting firm, but will not be required to appoint a different firm. Vote Required and Recommendation The affirmative vote of a majority of the votes cast at the meeting is required for approval of the ratification of the appointment of EY as our independent registered public accounting firm for the fiscal year ending December 31, OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31,
AUDIT COMMITTEE REPORT The Audit Committee operates under a written charter adopted by the Board, consistent with the corporate governance rules of the U.S. Securities and Exchange Commission, or the SEC, and the New York Stock Exchange, or the NYSE. A copy of the Audit Committee charter is available on the Company’s website at www.brightspire.com. The Board has determined that all members of the Audit Committee meet the independence standards established by the NYSE. The Audit Committee oversees the Company’s financial reporting process on behalf of the Board. The Company’s management has the primary responsibility for the preparation of the financial statements and the reporting process, including maintaining a system of internal control over financial reporting and disclosure controls and procedures. The Audit Committee is directly responsible for the appointment, compensation, retention, oversight and termination of the Company’s independent registered public accounting firm. The Audit Committee appointed Ernst & Young LLP, an independent registered public accounting firm, as the Company’s independent registered public accounting firm for the fiscal year ended December 31, In discharging its oversight role, the Audit Committee reviewed and discussed with the Company’s management and Ernst & Young LLP, the Company’s independent registered public accounting firm for the fiscal year ended December 31, In addition, the Audit Committee discussed with Ernst & Young LLP its independence from the Company and the Company’s management and Ernst & Young LLP provided to the Audit Committee the written disclosures and letter required from the independent registered public accounting firm by the applicable requirements of the Public Company Accounting Oversight Board for independent auditor communications with audit committees concerning independence. The Audit Committee discussed with Ernst & Young LLP the overall scope and plans for their audit. The Audit Committee met with Ernst & Young LLP, with and without management present, to discuss the results of their examinations, the evaluations of the Company’s internal control over financial reporting and the overall quality of the Company’s financial reporting. Based on such review and discussions, the Audit Committee recommended to the Board that the audited consolidated financial statements for the fiscal year ended December 31, Audit Committee: Catherine Long, Chair Catherine D. Rice Vernon B. Schwartz The report of the Audit Committee does not constitute “soliciting material” and will not be deemed “filed” or incorporated by reference into any of our filings under the Securities Act or the Exchange Act that might incorporate our SEC filings by reference, in whole or in part, notwithstanding anything to the contrary set forth in those filings.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S FEES INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee of our Board has engaged EY as the Company’s independent registered public accounting firm for the year ended December 31, Aggregate fees billed and expected to be billed by EY for the fiscal years ended December 31,
____________
All audit and audit-related services provided by EY in AUDIT COMMITTEE PRE-APPROVAL POLICY The Audit Committee’s policy is to review and pre-approve, either pursuant to the Audit Committee’s Audit and Non-Audit Services Pre-Approval Policy or through a separate pre-approval by the Audit Committee, any engagement of the Company’s independent auditor to provide any audit or permissible non-audit service to the Company. Pursuant to the Audit and Non-Audit Services Pre-Approval Policy, which will be reviewed and reassessed annually by the Audit Committee, a list of specific services within certain categories of services, including audit, audit-related, tax and other services, are specifically pre-approved for the upcoming or current fiscal year, subject to an aggregate maximum annual fee payable by the Company for each category of pre-approved services. Any service that is not included in the approved list of services must be separately pre-approved by the Audit Committee. In addition, all audit and permissible non-audit services in excess of the pre-approved fee level, whether or not included on the pre-approved list of services, must be separately pre-approved by the Audit Committee. The Audit Committee has delegated authority to its Chair to specifically pre-approve engagements for the performance of audit and permissible non-audit services, provided that the estimated cost for such services shall not exceed $250,000. The Chair must report all pre-approval decisions to the Audit Committee at its next scheduled meeting and provide a description of the terms of the engagement, including (1) the type of services covered by the engagement, (2) the dates the engagement is scheduled to commence and terminate, (3) the estimated fees payable by the Company pursuant to the engagement, (4) other material terms of the engagement, and (5) such other information as the Audit Committee may request.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS RELATED PERSON TRANSACTION POLICY On January 30, 2018, our Board adopted, and on June 24, 2021, amended and restated, a written related person transaction policy setting forth the policies and procedures for the review, approval or ratification of related person transactions. This policy covers, with certain exceptions set forth in Item 404 of Regulation S-K under the Securities Act, any financial transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, where the amount involved exceeds $120,000 and a related person had or will have a direct or indirect material interest. Under the policy, related person transactions will be approved or ratified by the Audit Committee or a majority of the disinterested members of our Board. INDEMNIFICATION AGREEMENTS We have entered into indemnification agreements with each of our executive officers and directors that obligate us to indemnify them to the maximum extent permitted by Maryland law. The indemnification agreements provide that if a director or executive officer is a party or is threatened to be made a party to any proceeding by reason of such director’s or executive officer’s status as our director, officer or employee, we must indemnify such director or executive officer for all expenses and liabilities actually and reasonably incurred by him or her, or on his or her behalf, unless it has been established that:
provided, however, that we will (i) have no obligation to indemnify such director or executive officer for a proceeding by or in the right of our Company, for expenses and liabilities actually and reasonably incurred by him or her, or on his or her behalf, if it has been adjudged that such director or executive officer is liable to us with respect to such proceeding and (ii) have no obligation to indemnify or advance expenses of such director or executive officer for a proceeding brought by such director or executive officer against the Company, except for a proceeding brought to enforce indemnification under Section 2-418 of the MGCL or as otherwise provided by our charter or bylaws, a resolution of the Board of Directors or an agreement approved by the Board of Directors. REGISTRATION RIGHTS AGREEMENT On January 31, 2018, the Company entered into a registration rights agreement with DigitalBridge Operating Company, LLC (f/k/a Colony Capital Operating Company, LLC) (“DigitalBridge”), DigitalBridge’s then wholly-owned subsidiary, NRF RED REIT Corp. (“NRF RED REIT”), and the other entities party thereto (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company filed a registration statement on Form S-3 (the “Resale Registration Statement”) that (i) registers for resale the Class A common stock the Class B-3 common stock that has converted to the Class A common stock, both of which were issued to DigitalBridge pursuant to that certain Master Combination Agreement dated as of August 25, 2017, as amended and restated on November 20, 2017 (the transactions contemplated thereby, the “Combination”) and (ii) registers the issuance or resale of the Class A common stock issued upon redemption of the OP Units issued in the Combination. On August 13, 2021 and March 3, 2023, pursuant to the Registration Rights Agreement, and at the request of DigitalBridge, the Company completed effecting the sales of 9,487,500 and 34,911,944 shares of DigitalBridge’s registered Class A common stock, respectively, through underwritten public offerings under the Resale Registration Statement (the “Secondary Offerings”). Further, on May 23, 2022, pursuant to the Company’s Second Amended and Restated Limited Liability Company Agreement, 60
the Company completed the redemption of all the 3.1 million OP Units held by NRF RED REIT for $25.4 million in cash (the “OP Unit Redemption”). Following the Secondary Offerings and the OP Unit Redemption, DigitalBridge and NRF RED REIT no longer owned any registrable securities under the Registration Rights Agreement and their rights thereunder have therefore terminated in accordance with its terms. 61
OTHER MATTERS STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR 2024 Proposals received from stockholders in accordance with Rule 14a-8 under the Exchange Act are eligible for consideration for inclusion in the proxy statement for the 2024 annual meeting of stockholders if they are received by the General Counsel, in writing addressed to our principal executive office, on or before Proposals received from stockholders submitted outside of Rule 14a-8 under the Exchange Act or for a director nomination must comply with the advance notice and other requirements set forth in our bylaws in order to be presented at an annual meeting. These requirements currently include, in part, the requirement that any such proposal or nomination must, with certain exceptions if the date of the In addition to satisfying the foregoing advance notice requirements under our bylaws, to comply with the universal proxy rules under the Securities Exchange Act of 1934, as amended, stockholders who intend to solicit proxies in support of director nominees other than the Company's nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act. ANNUAL REPORT This Proxy Statement and our Annual Report are available on our website at www.brightspire.com. In addition, our stockholders may access this information, as well as transmit their voting instructions, at www.proxyvote.com by having their proxy card and related instructions in hand. A copy of our Annual Report will be sent to any stockholder without charge (except for exhibits, if requested, for which a reasonable fee will be charged), upon written request to: BrightSpire Capital, Inc., 590 Madison Avenue, 33rd Floor, New York, New York 10022, Attn: General Counsel. If you would like to receive future stockholder communications via the Internet exclusively, and no longer receive any material by mail, please visit http://www.astfinancial.com and click on “Login” to enroll. Please enter your account number and tax identification number to log in, then select “Receive Company Mailings via E-Mail” and provide your e-mail address. HOUSEHOLDING OF PROXY MATERIALS If you and other residents at your mailing address own common stock in street name, your broker or bank may have sent you a notice that your household will receive only one annual report and proxy statement for each company in which you hold shares through that broker or bank. This practice of sending only one copy of proxy materials is known as “householding.” If you did not respond that you did not want to participate in householding, you were deemed to have consented to the process. If the foregoing procedures apply to you, your broker has sent one copy of our annual report and proxy statement to your address. You may revoke your consent to householding at any time by sending your name, the name of your brokerage firm and your account number to Broadridge Financial Solutions Inc., 51 Mercedes Way, Edgewood, NY 11717. WHERE YOU CAN FIND MORE INFORMATION We make available free of charge through our website at www.brightspire.com under the heading “Shareholders—SEC Filings” the periodic reports and other information we file with the SEC, as required by the Exchange Act. Copies may also be accessed electronically by means of the SEC home page on the Internet, at www.sec.gov. 590 Madison Avenue, 33rd Floor New York, New York 10022 www.brightspire.com |