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What changed in BrightSpire Capital, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BrightSpire Capital, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+340 added−384 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-21)

Top changes in BrightSpire Capital, Inc.'s 2023 10-K

340 paragraphs added · 384 removed · 262 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

22 edited+2 added−4 removed80 unchanged
Biggest changeWe seek to attract and retain the most relevant and skilled employees by offering competitive compensation and benefits, including fixed and variable pay, including base salary, cash bonuses, equity-based compensation consistent with employee position and seniority, 401(k) matching and opportunities for merit-based increases. 10 Table of Contents We maintain policies that reinforce and enhance its commitment to high ethical standards, corporate governance and internal controls, to provide the best and most competitive service to our customers in order to enhance stockholder value.
Biggest changeWe seek to attract and retain the most relevant and skilled employees by offering competitive compensation and benefits, including fixed and variable pay, including base salary, cash bonuses, equity-based compensation consistent with employee position and seniority, 401(k) matching and opportunities for merit-based increases.
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.
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 continue to target net leased equity investments on a selective basis.
However, the Company’s board of directors (“Board of Directors”) has adopted the following investment guidelines: • no investment shall be made that would cause the Company to fail to qualify as a REIT for U.S. federal income tax purposes; • no investment shall be made that would cause the Company or any subsidiary to be required to be registered as an investment company under the Investment Company Act; • until appropriate investments can be identified, we may invest the proceeds of any future offerings of the Company in interest-bearing, short-term investments, including money market accounts and/or U.S. treasury securities, that are consistent with the Company’s intention to qualify as a REIT and maintain its exemption from registration under the Investment Company Act; • any investment with a total net commitment by the OP of greater than 5% of the OP’s net equity (computed using the most recently available publicly filed balance sheet) shall require the approval of the Board of Directors or a duly constituted committee of the Board of Directors (with total net commitment by the OP being the aggregate amount of funds directly or indirectly committed by the OP to such investment net of any upfront fees received by the Company or any subsidiary in connection with such investment); and 7 Table of Contents • any investment with a total net commitment by the OP of between 3% and 5% of the OP’s net equity (computed using the most recently available publicly filed balance sheet) shall require the approval of the Board of Directors or a duly constituted committee of the Board of Directors (with total net commitment by the OP being the aggregate amount of funds directly or indirectly committed by the OP to such investment net of any upfront fees received by the Company or any subsidiary in connection with such investment), unless the investment falls within specific parameters approved by the Board of Directors and in effect at the time such commitment is made.
However, the Company’s board of directors (“Board of Directors”) has adopted the following investment guidelines: • no investment shall be made that would cause the Company to fail to qualify as a REIT for U.S. federal income tax purposes; • no investment shall be made that would cause the Company or any subsidiary to be required to be registered as an investment company under the Investment Company Act; • until appropriate investments can be identified, we may invest the proceeds of any future offerings of the Company in interest-bearing, short-term investments, including money market accounts and/or U.S. treasury securities, that are consistent with the Company’s intention to qualify as a REIT and maintain its exemption from registration under the Investment Company Act; 7 Table of Contents • any investment with a total net commitment by the OP of greater than 5% of the OP’s net equity (computed using the most recently available publicly filed balance sheet) shall require the approval of the Board of Directors or a duly constituted committee of the Board of Directors (with total net commitment by the OP being the aggregate amount of funds directly or indirectly committed by the OP to such investment net of any upfront fees received by the Company or any subsidiary in connection with such investment); and • any investment with a total net commitment by the OP of between 3% and 5% of the OP’s net equity (computed using the most recently available publicly filed balance sheet) shall require the approval of the Board of Directors or a duly constituted committee of the Board of Directors (with total net commitment by the OP being the aggregate amount of funds directly or indirectly committed by the OP to such investment net of any upfront fees received by the Company or any subsidiary in connection with such investment), unless the investment falls within specific parameters approved by the Board of Directors and in effect at the time such commitment is made.
We believe that events in the financial markets from time to time, including the 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 events in the financial markets from time to time, including the 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.
For our subsidiaries that maintain this exclusion or another exclusion or exception under the Investment Company Act (other than Section 3(c)(1) or Section 3(c)(7) thereof), our interests in these subsidiaries do not and will not constitute “investment securities.” 8 Table of Contents Our subsidiaries that rely on the exclusion provided for in Section 3(c)(6) do so because they are primarily engaged, directly or through majority-owned subsidiaries, in Section 3(c)(5)(C) businesses or in one or more of such businesses (from which not less than 25 percent of such company’s gross income during its last fiscal year was derived) together with an additional business or businesses other than investing, reinvesting, owning, holding, or trading in securities.
For our subsidiaries that maintain this exclusion or another exclusion or exception under the Investment Company Act (other than Section 3(c)(1) or Section 3(c)(7) thereof), our interests in these subsidiaries do not and will not constitute “investment securities.” Our subsidiaries that rely on the exclusion provided for in Section 3(c)(6) do so because they are primarily engaged, directly or through majority-owned subsidiaries, in Section 3(c)(5)(C) businesses or in one or more of such businesses (from which not less than 25 percent of such company’s gross income during its last fiscal year was derived) together with an additional business or businesses other than investing, reinvesting, owning, holding, or trading in securities.
We may also conduct limited subsurface investigations and test for substances of concern where the result of the 9 Table of Contents first phase of the environmental assessments or other information indicates possible contamination or where our consultants recommend such procedures. We are not currently aware of any environmental liabilities that could materially affect the Company.
We may also conduct limited subsurface investigations and test for substances of concern where the result of the first phase of the environmental assessments or other information indicates possible contamination or where our consultants recommend such procedures. We are not currently aware of any environmental liabilities that could materially affect the Company.
Unless the SEC or its staff issues guidance with respect to CMBS, we intend to treat CMBS as a real estate-related asset. To the extent that the SEC staff publishes new or different guidance with respect to these matters, we may be required to adjust our strategy accordingly.
Unless the SEC or 8 Table of Contents its staff issues guidance with respect to CMBS, we intend to treat CMBS as a real estate-related asset. To the extent that the SEC staff publishes new or different guidance with respect to these matters, we may be required to adjust our strategy accordingly.
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.
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 corporate and other.
We believe that our diverse portfolio, our ability to originate, acquire and manage our target assets and the flexibility of our investment strategy 5 Table of Contents 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.
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. 5 Table of Contents Our Target Assets Our investment strategy is to originate and selectively acquire our target assets, which consist of the following: • Senior Loans.
Our portfolio is composed of a diverse set of CRE assets across the capital stack, including senior loans as well as select mezzanine loans and preferred equity. We will also occasionally invest in single tenant net leased properties.
We are a large publicly-traded CRE credit/mortgage REIT. Our portfolio is composed of a diverse set of CRE assets across the capital stack, including senior loans as well as select mezzanine loans and preferred equity. We will also occasionally invest in single tenant net leased properties.
We promote a workplace that is free of harassment and discriminatory and retaliatory practices. In keeping with these priorities, we maintain an open-door policy for conflict management and requires periodic (no less frequent than annual) interactive harassment prevention training for both managers and employees consistent with applicable state and local laws.
In keeping with these priorities, we maintain an open-door policy for conflict management and requires periodic (no less frequent than annual) interactive harassment prevention training for both managers and employees consistent with applicable state and local laws.
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.
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.
Our Financing Strategy We have a multi-pronged financing strategy that included an up to $165 million secured revolving credit facility as of December 31, 2022, up to approximately $2.3 billion in secured revolving repurchase facilities, $1.2 billion in non-recourse securitization financing, $628.7 million in commercial mortgages and $27.9 million in other asset-level financing structures.
Our Financing Strategy We have a multi-pronged financing strategy that included an up to $165 million secured revolving credit facility as of December 31, 2023, up to approximately $2.0 billion in secured revolving repurchase facilities, $913.9 million in non-recourse securitization financing, $617.4 million in commercial mortgages and $34.5 million in other asset-level financing structures.
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.
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.
Absent participating in management or succeeding to ownership, operation or other control of real property, a secured lender is not likely to be directly subject to any of these forms of environmental liability, although a borrower could be subject to these liabilities impacting its ability to make loan payments.
Absent participating in management or succeeding to ownership, operation or other control of real property, a secured lender is not likely to be directly subject to any of these forms of environmental liability, although a borrower could be subject to these liabilities impacting its ability to make loan payments. 9 Table of Contents Prior to closing any property acquisition, we obtain environmental assessments in a manner we believe prudent in order to attempt to identify potential environmental concerns with respect to such properties.
Human Capital Management Experienced Management and Employees On December 31, 2022, we had 54 employees, all of which are full-time employees.
Human Capital Management Experienced Management and Employees On December 31, 2023, we had 54 full-time employees and one part-time employee.
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.
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. 6 Table of Contents Our Competitive Strengths We believe that we distinguish ourselves from other CRE finance and investment companies in a number of ways, including the following: Large diversified portfolio.
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.
We believe our investment strategy provides flexibility through economic cycles to achieve attractive risk-adjusted returns.
References to “Digital Bridge” refers to DigitalBridge Group, Inc., formerly known as Colony Capital, Inc. a Maryland corporation, and its subsidiaries. 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.
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.
Employee Matters and Culture We are committed to maintaining a positive work environment in which employee accountability, growth, advancement, diversity, inclusion and equal employment opportunity are very important. We strive to recognize and reward noteworthy performance, evaluated through periodic (no less frequent than annual) reviews with each employee.
We strive to recognize and reward noteworthy performance, evaluated through periodic (no less frequent than annual) reviews with each employee.
Our Target Assets Our investment strategy is to originate and selectively acquire our target assets, which consist of the following: • Senior Loans. Our primary focus is originating and selectively acquiring senior loans that are backed by CRE assets.
Our primary focus is originating and selectively acquiring senior 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.
Our 54 employees are located throughout the United States as follows: 30 in New York, New York at our Headquarters, 19 in Los Angeles, California, two in Florida, one in Dallas, Texas, one in Atlanta, Georgia and one in Boston, Massachusetts.
Our 55 employees are located throughout the United States as follows: 32 in New York, New York at our Headquarters, 19 in Los Angeles, California, one in Florida, one in Texas, one in Georgia and one in New Hampshire. 10 Table of Contents Employee Matters and Culture We are committed to maintaining a positive work environment in which employee accountability, growth, advancement, diversity, inclusion and equal employment opportunity are very important.
Removed
We conduct all our activities and hold substantially all our assets and liabilities through our operating subsidiary, BrightSpire Capital Operating Company, LLC. 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.
Added
We conduct all our activities and hold substantially all our assets and liabilities through our operating subsidiary, BrightSpire Capital Operating Company, LLC. 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.
Removed
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 Investment Strategy Our objective is to generate consistent and attractive risk-adjusted returns to our stockholders.
Added
We maintain policies that reinforce and enhance our commitment to high ethical standards, corporate governance and internal controls, to provide the best and most competitive service to our customers in order to enhance stockholder value. We promote a workplace that is free of harassment and discriminatory and retaliatory practices.
Removed
Our Competitive Strengths We believe that we distinguish ourselves from other CRE finance and investment companies in a number of ways, including the following: 6 Table of Contents Large diversified portfolio. We are a large publicly-traded CRE credit/mortgage REIT.
Removed
Prior to closing any property acquisition, we obtain environmental assessments in a manner we believe prudent in order to attempt to identify potential environmental concerns with respect to such properties.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

86 edited+10 added−17 removed393 unchanged
Biggest changeWhile market participants have proposed certain methods to interpolate and transition between LIBOR and SOFR, there can be no assurance that SOFR (including a term SOFR or compounded SOFR) will perform in the same way as LIBOR would have at any time, including, without limitation, as a result of changes in interest and yield rates in the market, market volatility or global or regional economic, financial, political, 37 Table of Contents regulatory, judicial or other events.
Biggest changeWe can provide no assurance that SOFR, or rates derived from SOFR, will perform in the same or a similar way as LIBOR would have performed at any time, and there is no assurance that SOFR-based rates will be a suitable substitute for LIBOR.
We generally must distribute annually at least 90% of our REIT taxable income (subject to certain adjustments and excluding any net capital gain), in order to qualify as a REIT, and any REIT taxable income that we do not distribute will be subject to U.S. corporate income tax at regular rates.
We generally must distribute annually at least 90% of our REIT taxable income (subject to certain adjustments and excluding any net capital gain), in order to qualify as a REIT, and any REIT taxable income that we do not distribute will be subject to U.S. corporate income tax at regular rates.
Some of the factors that could negatively affect the market price of our common stock include: • our actual or projected operating results, financial condition, cash flows and liquidity, or changes in business strategy or prospects; • equity issuances by us, or resales of our shares by our stockholders, or the perception that such issuances or resales may occur; • loss of a major funding source; • actual or anticipated accounting problems; • publication of research reports about us or the real estate industry; • changes in market valuations of similar companies; • adverse market reaction to the level of leverage we employ; • additions to or departures of our key personnel or adverse effects on the business or operations of DigitalBridge; 38 Table of Contents • speculation in the press or investment community; • our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts; • increases in market interest rates, which may lead investors to demand a higher distribution yield for our common stock and would result in increased interest expenses on our debt; • a compression of the yield on our investments and an increase in the cost of our liabilities; • failure to operate in a manner consistent with our intention to qualify as a REIT or exclusion from registration under the Investment Company Act; • price and volume fluctuations in the overall stock market from time to time; • general market and economic conditions and trends including inflationary concerns, and the current state of the credit and capital markets; • significant volatility in the market price and trading volume of securities of publicly traded REITs or other companies in our sector, which is not necessarily related to the operating performance of these companies; • changes in law, regulatory policies or tax guidelines, or interpretations thereof, particularly with respect to REITs; • changes in the value of our portfolio; • any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts; • operating performance of companies comparable to us; • short-selling pressure with respect to shares of our common stock or REITs generally; and • uncertainty surrounding the strength of the U.S. economic recovery, particularly in light of the recent debt ceiling and budget deficit concerns, and other U.S. and international political and economic affairs.
Some of the factors that could negatively affect the market price of our common stock include: • our actual or projected operating results, financial condition, cash flows and liquidity, or changes in business strategy or prospects; • equity issuances by us, or resales of our shares by our stockholders, or the perception that such issuances or resales may occur; • loss of a major funding source; • actual or anticipated accounting problems; • publication of research reports about us or the real estate industry; • changes in market valuations of similar companies; • adverse market reaction to the level of leverage we employ; 38 Table of Contents • additions to or departures of our key personnel or adverse effects on the business or operations of DigitalBridge; • speculation in the press or investment community; • our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts; • increases in market interest rates, which may lead investors to demand a higher distribution yield for our common stock and would result in increased interest expenses on our debt; • a compression of the yield on our investments and an increase in the cost of our liabilities; • failure to operate in a manner consistent with our intention to qualify as a REIT or exclusion from registration under the Investment Company Act; • price and volume fluctuations in the overall stock market from time to time; • general market and economic conditions and trends including inflationary concerns, and the current state of the credit and capital markets; • significant volatility in the market price and trading volume of securities of publicly traded REITs or other companies in our sector, which is not necessarily related to the operating performance of these companies; • changes in law, regulatory policies or tax guidelines, or interpretations thereof, particularly with respect to REITs; • changes in the value of our portfolio; • any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts; • operating performance of companies comparable to us; • short-selling pressure with respect to shares of our common stock or REITs generally; and • uncertainty surrounding the strength of the U.S. economic recovery, particularly in light of the recent debt ceiling and budget deficit concerns, and other U.S. and international political and economic affairs.
If we do obtain additional debt or financing, the substantial debt could subject us to many risks that, if realized, would materially and adversely affect us, including the risk that: • our cash flow from operations may be insufficient to make required payments of principal of and interest on our debt or we may fail to comply with covenants contained in our debt agreements, which is likely to result in (1) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision), which we then may be unable to repay from internal funds or to refinance on favorable terms, or at all, (2) our inability to borrow undrawn 26 Table of Contents amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements, which would result in a decrease in our liquidity, and/or (3) the loss of some or all of our collateral assets to foreclosure or sale; • our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that investment yields will increase in an amount sufficient to offset the higher financing costs; • we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, future business opportunities, stockholder distributions or other purposes; • we may not be able to refinance any debt that matures prior to the maturity (or realization) of an underlying investment it was used to finance on favorable terms or at all; and • we will have increased exposure to risks if the counterparties of our debt obligations are impacted by credit market turmoil or exposure to financial or other pressures.
If we do obtain additional debt or financing, the substantial debt could subject us to many risks that, if realized, would materially and adversely affect us, including the risk that: • our cash flow from operations may be insufficient to make required payments of principal of and interest on our debt or we may fail to comply with covenants contained in our debt agreements, which is likely to result in (1) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision), which we then may be unable to repay from internal funds or to refinance on favorable terms, or at all, (2) our inability to borrow undrawn amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements, which would result in a decrease in our liquidity, and/or (3) the loss of some or all of our collateral assets to foreclosure or sale; • our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that investment yields will increase in an amount sufficient to offset the higher financing costs; • we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, future business opportunities, stockholder distributions or other purposes; • we may not be able to refinance any debt that matures prior to the maturity (or realization) of an underlying investment it was used to finance on favorable terms or at all; and • we will have increased exposure to risks if the counterparties of our debt obligations are impacted by credit market turmoil or exposure to financial or other pressures.
Interest rate and/or currency hedging may fail to protect or could adversely affect us because, among other things: • interest rate and/or currency hedging can be expensive, particularly during periods of rising and volatile interest rates; • available interest rate and/or currency hedging may not correspond directly with the interest rate risk for which protection is sought; • the duration of the hedge may not match the duration of the related liability or asset; • our hedging opportunities may be limited by the treatment of income from hedging transactions under the rules determining REIT qualification; • the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; • the counterparties with which we trade may cease making markets and quoting prices in such instruments, which may render us unable to enter into an offsetting transaction with respect to an open position; • the party owing money in the hedging transaction may default on its obligation to pay; • we may purchase a hedge that turns out not to be necessary (i.e., a hedge that is out of the money); and • we may enter into hedging arrangements that would require us to fund cash payments in certain circumstances (such as the early termination of the hedging instrument caused by an event of default or other early termination event, or the decision by a counterparty to request margin securities it is contractually owed under the terms of the hedging instrument).
Interest rate and/or currency hedging may fail to protect or could adversely affect us because, among other things: • interest rate and/or currency hedging can be expensive, particularly during periods of rising and volatile interest rates; • available interest rate and/or currency hedging may not correspond directly with the interest rate risk for which protection is sought; 26 Table of Contents • the duration of the hedge may not match the duration of the related liability or asset; • our hedging opportunities may be limited by the treatment of income from hedging transactions under the rules determining REIT qualification; • the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; • the counterparties with which we trade may cease making markets and quoting prices in such instruments, which may render us unable to enter into an offsetting transaction with respect to an open position; • the party owing money in the hedging transaction may default on its obligation to pay; • we may purchase a hedge that turns out not to be necessary (i.e., a hedge that is out of the money); and • we may enter into hedging arrangements that would require us to fund cash payments in certain circumstances (such as the early termination of the hedging instrument caused by an event of default or other early termination event, or the decision by a counterparty to request margin securities it is contractually owed under the terms of the hedging instrument).
Our CRE debt, select equity and securities investments are subject to the risks typically associated with real estate, including: • tenant mix; • real estate conditions, such as an oversupply of or a reduction in demand for real estate space in an area; • lack of liquidity inherent in the nature of the assets; • borrower/tenant/operator mix and the success of the borrower/tenant/operator business; • success of tenant businesses; • ability to collect interest/loan obligation/principal, including income recognition and recovery of payment-in-kind interest on applicable loan investments; • property management decisions; • property location, condition and design; • competition from comparable types of properties; • changes in laws that increase operating expenses or limit rents that may be charged; • changes in national, regional or local economic conditions and/or specific industry segments, including the credit and securitization markets; 16 Table of Contents • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • increases in interest rates, real estate tax rates and other operating expenses; • compliance with environmental laws; • costs of remediation and liabilities associated with environmental conditions; • the potential for uninsured or underinsured property losses; • changes in governmental laws and regulations, including fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance; and • acts of God, terrorist attacks, social unrest and civil disturbances.
Our CRE debt, select equity and securities investments are subject to the risks typically associated with real estate, including: • tenant mix; • real estate conditions, such as an oversupply of or a reduction in demand for real estate space in an area; • lack of liquidity inherent in the nature of the assets; • borrower/tenant/operator mix and the success of the borrower/tenant/operator business; • success of tenant businesses; • ability to collect interest/loan obligation/principal, including income recognition and recovery of payment-in-kind interest on applicable loan investments; • property management decisions; • property location, condition and design; • competition from comparable types of properties; 12 Table of Contents • changes in laws that increase operating expenses or limit rents that may be charged; • changes in national, regional or local economic conditions and/or specific industry segments, including the credit and securitization markets; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • fluctuations (including increases) in interest rates, real estate tax rates and other operating expenses; • compliance with environmental laws; • costs of remediation and liabilities associated with environmental conditions; • the potential for uninsured or underinsured property losses; • changes in governmental laws and regulations, including fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance; and • acts of God, terrorist attacks, social unrest and civil disturbances.
GAAP”)); • unexpected changes in regulatory requirements; • the impact of different business cycles and economic instability; 25 Table of Contents • inflation and governmental measures to control inflation; • political instability and civil unrest; • legal and logistical barriers to enforcing our contractual rights, including in perfecting our security interests, collecting accounts receivable, foreclosing on secured assets and protecting our interests as a creditor in bankruptcies in certain geographic regions; • share ownership restrictions on foreign operations; • compliance with U.S. laws affecting operations outside of the United States, including sanctions laws, or anti-bribery laws such as the Foreign Corrupt Practices Act (“FCPA”); and • geographic, time zone, language and cultural differences between personnel in different areas of the world.
GAAP”)); 21 Table of Contents • unexpected changes in regulatory requirements; • the impact of different business cycles and economic instability; • inflation and governmental measures to control inflation; • political instability and civil unrest; • legal and logistical barriers to enforcing our contractual rights, including in perfecting our security interests, collecting accounts receivable, foreclosing on secured assets and protecting our interests as a creditor in bankruptcies in certain geographic regions; • share ownership restrictions on foreign operations; • compliance with U.S. laws affecting operations outside of the United States, including sanctions laws, or anti-bribery laws such as the Foreign Corrupt Practices Act (“FCPA”); and • geographic, time zone, language and cultural differences between personnel in different areas of the world.
To the extent that our stock owned by “disqualified organizations” is held in street name by a broker-dealer or other nominee, the broker-dealer or nominee would be liable for a tax at the highest corporate rate on the portion of our excess inclusion income allocable to the stock held on behalf of the “disqualified organizations.” A regulated investment company or other pass-through entity owning our stock may also be subject to tax at the highest corporate tax rate on any excess inclusion income allocated to their record name owners that are “disqualified organizations.” Excess inclusion income could result if a REIT held a residual interest in a real estate mortgage investment conduit (“REMIC”).
To the extent that our stock owned by “disqualified organizations” is held in street name by a broker-dealer or other nominee, the broker-dealer or nominee would be liable for a tax at the highest 32 Table of Contents corporate rate on the portion of our excess inclusion income allocable to the stock held on behalf of the “disqualified organizations.” A regulated investment company or other pass-through entity owning our stock may also be subject to tax at the highest corporate tax rate on any excess inclusion income allocated to their record name owners that are “disqualified organizations.” Excess inclusion income could result if a REIT held a residual interest in a real estate mortgage investment conduit (“REMIC”).
Difficulty accessing debt and equity capital on attractive terms, or at all, and severe disruption or instability in the global financial markets or deteriorations in credit and financing conditions caused by the COVID-19 pandemic may affect our ability to access capital necessary to fund business operations or replace liabilities on a timely basis.
Difficulty accessing debt and equity capital on attractive terms, or at all, and severe disruption or instability in the global financial markets or deteriorations in credit and financing conditions caused by the COVID-19 pandemic or other pandemics may affect our ability to access capital necessary to fund business operations or replace liabilities on a timely basis.
For example, • we may be required to accrue income from mortgage loans, MBSs, and other types of debt securities or interests in debt securities before we receive any payments of interest or principal on such assets; 32 Table of Contents • we may acquire distressed debt investments that are subsequently modified by agreement with the borrower, which could cause us to have to recognize gain in certain circumstances; • we may recognize substantial amounts of “cancellation of debt” income for U.S. federal income tax purposes (but not for U.S.
For example, • we may be required to accrue income from mortgage loans, MBSs, and other types of debt securities or interests in debt securities before we receive any payments of interest or principal on such assets; • we may acquire distressed debt investments that are subsequently modified by agreement with the borrower, which could cause us to have to recognize gain in certain circumstances; • we may recognize substantial amounts of “cancellation of debt” income for U.S. federal income tax purposes (but not for U.S.
If the IRS challenged our treatment of these assets as real estate assets for purposes of the REIT asset tests, and if such a challenge were sustained, we could fail to meet the asset tests applicable to REITs and thus fail to qualify as a REIT. • The fact that we own direct or indirect interests in a number of entities that have elected to be taxed as REITs under the U.S. federal income tax laws (each, a “Subsidiary REIT”), further complicates the application of the REIT requirements for us.
If the IRS challenged our treatment of these assets as real estate 29 Table of Contents assets for purposes of the REIT asset tests, and if such a challenge were sustained, we could fail to meet the asset tests applicable to REITs and thus fail to qualify as a REIT. • The fact that we own direct or indirect interests in a number of entities that have elected to be taxed as REITs under the U.S. federal income tax laws (each, a “Subsidiary REIT”), further complicates the application of the REIT requirements for us.
We believe that a change in any one of the following factors could adversely affect our results of operations and cash flows and impair our ability to make distributions to our stockholders: • our ability to make attractive investments; • margin calls or other expenses that reduce our cash flows; 13 Table of Contents • defaults or prepayments in our investment portfolio or decreases in the value of our investment portfolio; and • the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates.
We believe that a change in any one of the following factors could adversely affect our results of operations and cash flows and impair our ability to make distributions to our stockholders: • our ability to make attractive investments; • margin calls or other expenses that reduce our cash flows; • defaults or prepayments in our investment portfolio or decreases in the value of our investment portfolio; and • the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates.
Pursuant to this revenue procedure, effective for distributions declared on or after August 11, 2017, the IRS will treat 30 Table of Contents the distribution of stock pursuant to an elective stock dividend as a distribution of property under Section 301 of the Code (i.e., as a dividend to the extent of our earnings and profits), as long as at least 20% of the total dividend is available in cash and certain other requirements outlined in the revenue procedure are met.
Pursuant to this revenue procedure, effective for distributions declared on or after August 11, 2017, the IRS will treat the distribution of stock pursuant to an elective stock dividend as a distribution of property under Section 301 of the Code (i.e., as a dividend to the extent of our earnings and profits), as long as at least 20% of the total dividend is available in cash and certain other requirements outlined in the revenue procedure are met.
Such investments may involve risks not otherwise present with other methods of investment, including, for instance, the following risks: • our joint venture partner in an investment could become insolvent or bankrupt; • fraud or other misconduct by our joint venture partners; • we may share decision-making authority with our joint venture partners regarding certain major decisions affecting the ownership of the joint venture and the joint venture investment, such as the management of the CRE debt, sale of the property or the making of additional capital contributions for the benefit of the loan or property, which may prevent us from taking actions that are opposed by our joint venture partner; • such joint venture partner may at any time have economic or business interests or goals that are or that become in conflict with our business interests or goals, including for example the management of the CRE debt or operation of the properties; • such joint venture partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives; 24 Table of Contents • our joint venture partners may be structured differently than us for tax purposes and this could create conflicts of interest and risk to our REIT status; • we may rely upon our joint venture partners to manage the day-to-day operations of the joint venture and underlying loans or assets, as well as to prepare financial information for the joint venture and any failure to perform these obligations may have a negative impact our performance and results of operations; • our joint venture partner may experience a change of control, which could result in new management of our joint venture partner with less experience or conflicting interests to ours and be disruptive to our business; • the terms of our joint ventures could restrict our ability to sell or transfer our interest to a third party when we desire on advantageous terms, which could result in reduced liquidity; and • our joint venture partners may not have sufficient personnel or appropriate levels of expertise to adequately support our initiatives Any of the above might subject us to liabilities and thus reduce our returns on our investment with that joint venture partner.
Such investments may involve risks not otherwise present with other methods of investment, including, for instance, the following risks: • our joint venture partner in an investment could become insolvent or bankrupt; • fraud or other misconduct by our joint venture partners; • we may share decision-making authority with our joint venture partners regarding certain major decisions affecting the ownership of the joint venture and the joint venture investment, such as the management of the CRE debt, sale of the property or the making of additional capital contributions for the benefit of the loan or property, which may prevent us from taking actions that are opposed by our joint venture partner; • such joint venture partner may at any time have economic or business interests or goals that are or that become in conflict with our business interests or goals, including for example the management of the CRE debt or operation of the properties; 20 Table of Contents • such joint venture partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives; • our joint venture partners may be structured differently than us for tax purposes and this could create conflicts of interest and risk to our REIT status; • we may rely upon our joint venture partners to manage the day-to-day operations of the joint venture and underlying loans or assets, as well as to prepare financial information for the joint venture and any failure to perform these obligations may have a negative impact our performance and results of operations; • our joint venture partner may experience a change of control, which could result in new management of our joint venture partner with less experience or conflicting interests to ours and be disruptive to our business; • the terms of our joint ventures could restrict our ability to sell or transfer our interest to a third party when we desire on advantageous terms, which could result in reduced liquidity; and • our joint venture partners may not have sufficient personnel or appropriate levels of expertise to adequately support our initiatives.
However, a portion of our distributions may be designated by us as (i) “capital gain dividends” to the extent that they are attributable to capital gain income recognized by us, (ii) “qualified dividend income,” or (iii) may constitute a return of capital to the extent that they exceed our current earnings and profits as determined for U.S. federal income tax purposes.
However, a portion of our distributions may be designated by us as (i) “capital gain 22 Table of Contents dividends” to the extent that they are attributable to capital gain income recognized by us, (ii) “qualified dividend income,” or (iii) may constitute a return of capital to the extent that they exceed our current earnings and profits as determined for U.S. federal income tax purposes.
As haircuts are increased, we will be required to post additional collateral. We may also be forced to sell assets at significantly depressed prices to meet such margin calls and to maintain adequate liquidity. As a result of the ongoing COVID-19 pandemic, we experienced and may in the future experience 27 Table of Contents margins calls well beyond historical norms.
As haircuts are increased, we will be required to post additional collateral. We may also be forced to sell assets at significantly depressed prices to meet such margin calls and to maintain adequate liquidity. As a result of the ongoing COVID-19 pandemic, we experienced and may in the future experience margins calls well beyond historical norms.
Indoor air quality issues also can stem from inadequate ventilation, chemical contamination from indoor or outdoor sources and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants above certain levels can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions.
Indoor air quality issues also can stem from inadequate ventilation, chemical contamination from indoor or outdoor sources and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants 36 Table of Contents above certain levels can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions.
These alternatives could increase our costs, reduce our equity, and/or result in stockholders being taxed on distributions of shares of stock without receiving cash sufficient to pay the resulting taxes. Thus, compliance with the REIT distribution requirements may hinder our ability to grow, which could adversely affect the value of our common stock.
These alternatives could increase our costs, reduce our equity, and/or result in stockholders being taxed on 31 Table of Contents distributions of shares of stock without receiving cash sufficient to pay the resulting taxes. Thus, compliance with the REIT distribution requirements may hinder our ability to grow, which could adversely affect the value of our common stock.
Moreover, certain actions taken by U.S. or other governmental authorities, including the Federal Reserve, that are intended to ameliorate the macroeconomic effects of COVID-19 may harm our business.
Moreover, certain actions taken by U.S. or other governmental authorities, including the Federal Reserve, that are intended to ameliorate the macroeconomic effects of COVID-19 or other pandemic events may harm our business.
Our Board of Directors, in its sole discretion, may exempt (prospectively or retroactively) a person from this limitation if it obtains such representations, covenants and undertakings as it deems appropriate to conclude that granting the exemption will not cause us to lose our status 14 Table of Contents as a REIT.
Our Board of Directors, in its sole discretion, may exempt (prospectively or retroactively) a person from this limitation if it obtains such representations, covenants and undertakings as it deems appropriate to conclude that granting the exemption will not cause us to lose our status as a REIT.
While our investment strategy focuses primarily on investments in “performing” real estate-related interests, our investment program may include making distressed investments from time to time (e.g., investments in defaulted, out-of-favor or distressed 17 Table of Contents bank loans and debt securities) or may involve investments that become “non-performing” following our acquisition thereof.
While our investment strategy focuses primarily on investments in “performing” real estate-related interests, our investment program may include making distressed investments from time to time (e.g., investments in defaulted, out-of-favor or distressed bank loans and debt securities) or may involve investments that become “non-performing” following our acquisition thereof.
If general interest rates or credit spreads decline at the same time, the proceeds of such prepayments received during such periods are likely to be reinvested by us in assets yielding less than the yields on the assets that were prepaid. Conversely, prepayment rates generally decrease in periods of increasing or high interest rates.
If general interest rates or credit spreads decline at the same time, the proceeds of such prepayments received during such periods are likely to be reinvested by us in assets yielding less than the 14 Table of Contents yields on the assets that were prepaid. Conversely, prepayment rates generally decrease in periods of increasing or high interest rates.
Subject to market conditions and availability, we may incur a significant amount of debt through bank credit facilities (including term loans and revolving facilities), warehouse facilities and structured financing arrangements, public and private debt issuances and derivative instruments, in addition to transaction or asset-specific funding arrangements and additional repurchase agreements.
Subject to market conditions and availability, we may incur a significant amount of debt through bank credit facilities (including term loans and revolving 24 Table of Contents facilities), warehouse facilities and structured financing arrangements, public and private debt issuances and derivative instruments, in addition to transaction or asset-specific funding arrangements and additional repurchase agreements.
However, in situations where there are multiple creditors in large capital structures, it can be particularly difficult to assess the most likely course of action that a lender group or the borrower may take and it may also be difficult to achieve consensus among the lender group as to major decisions.
However, in situations where there are multiple creditors in large capital structures, it can be particularly difficult to assess the most likely course of action that a lender group or the borrower may take and it may also be 18 Table of Contents difficult to achieve consensus among the lender group as to major decisions.
However, we cannot assure you that the Internal Revenue Service (the “IRS”) will not challenge such characterization. In the event that any such sale-leaseback transaction is challenged and recharacterized as a financing transaction or loan for U.S. federal income tax purposes, deductions for depreciation and cost recovery relating to such property would be disallowed.
However, we cannot assure 15 Table of Contents you that the Internal Revenue Service (the “IRS”) will not challenge such characterization. In the event that any such sale-leaseback transaction is challenged and recharacterized as a financing transaction or loan for U.S. federal income tax purposes, deductions for depreciation and cost recovery relating to such property would be disallowed.
In the event that securitization financings become available, we may utilize, if available, warehouse facilities pursuant to which we would accumulate mortgage loans in anticipation of a securitization financing, which assets would be pledged as collateral 29 Table of Contents for such facilities until the securitization transaction is consummated.
In the event that securitization financings become available, we may utilize, if available, warehouse facilities pursuant to which we would accumulate mortgage loans in anticipation of a securitization financing, which assets would be pledged as collateral for such facilities until the securitization transaction is consummated.
Although these laws and regulations have not had any known material adverse effect on us to date, they could limit our ability to develop properties or result in substantial costs, including compliance costs, retrofit costs and construction costs, monitoring and reporting costs and capital expenditures for environmental control facilities and other new equipment.
Although these laws and regulations have not had any known material adverse effect on us to date, they could limit our ability to operate our business, maintain our investments or to develop properties or result in substantial costs, including compliance costs, retrofit costs and construction costs, monitoring and reporting costs and capital expenditures for environmental control facilities and other new equipment.
In addition, in general, no more than 5% of the 33 Table of Contents value of our assets (other than qualified 75% asset test assets) can consist of the securities of any one issuer, and no more than 20% of the value of our total assets can be represented by stock or securities of one or more TRSs.
In addition, in general, no more than 5% of the value of our assets (other than qualified 75% asset test assets) can consist of the securities of any one issuer, and no more than 20% of the value of our total assets can be represented by stock or securities of one or more TRSs.
Therefore, even if we are successful in making investments that provide for participating interests, there can be no assurance that such interests will result in additional payments to us. Any distressed loans or investments we make, or loans and investments that later become distressed, may subject us to losses and other risks relating to bankruptcy proceedings.
Therefore, even if we are successful in making investments that provide for participating interests, there can be no assurance that such interests will result in additional payments to us. 13 Table of Contents Any distressed loans or investments we make, or loans and investments that later become distressed, may subject us to losses and other risks relating to bankruptcy proceedings.
As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a remediation program to contain or remove the mold or other airborne contaminants from the affected property or 36 Table of Contents increase indoor ventilation.
As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a remediation program to contain or remove the mold or other airborne contaminants from the affected property or increase indoor ventilation.
While we maintain cybersecurity specific insurance for both first-party losses (breach response, ransomware, data loss, business interruption, contingent business interruption, social engineering 15 Table of Contents coverage, system failure and hardware replacement) and third-party losses (breach demands, regulatory penalties, media liability), such insurance may not be sufficient to address any such losses.
While we maintain cybersecurity specific insurance for both first-party losses (breach response, ransomware, data loss, business interruption, contingent business interruption, social engineering coverage, system failure and hardware replacement) and third-party losses (breach demands, regulatory penalties, media liability), such insurance may not be sufficient to address any such losses.
We expect that some commercial properties subject to net leases in which we invest generally will be occupied by a single tenant and, therefore, the success of these investments will be materially dependent on the financial stability of each such tenant and, in certain circumstances, renewing or extending its lease.
Some commercial properties subject to net leases in which we invest are and will be occupied by a single tenant and, therefore, the success of these investments will be materially dependent on the financial stability of each such tenant and, in certain circumstances, renewing or extending its lease.
Our master repurchase agreements also grant certain consent rights to the lenders thereunder, which give them the right to consent to certain modifications to the pledged collateral. This could limit our ability to manage a pledged investment in a way that we think would provide the best outcome for our stockholders.
Our master repurchase agreements also grant certain consent rights to the lenders thereunder, which give them the right to consent to 25 Table of Contents certain modifications to the pledged collateral. This could limit our ability to manage a pledged investment in a way that we think would provide the best outcome for our stockholders.
If we originate or acquire mortgage-related 18 Table of Contents securities or a pool of mortgage securities, we anticipate that the underlying mortgages will prepay at a projected rate generating an expected yield.
If we originate or acquire mortgage-related securities or a pool of mortgage securities, we anticipate that the underlying mortgages will prepay at a projected rate generating an expected yield.
That deficiency dividend procedure could require us to make significant distributions to our stockholders and to pay significant interest to the IRS. Dividends payable by REITs do not qualify for the preferential tax rates available for some dividends.
That deficiency dividend procedure could require us to make significant distributions to our stockholders and to pay significant interest to the IRS. 30 Table of Contents Dividends payable by REITs do not qualify for the preferential tax rates available for some dividends.
In addition, these laws and regulations could lead to increased costs for the electricity that our tenants require to conduct operations. Furthermore, our reputation could be damaged if we violate climate change laws or regulations.
In addition, these laws and regulations could lead to increased costs for the electricity that our tenants require to conduct operations. Furthermore, our reputation could be damaged if we violate climate change laws or regulations at the corporate and/or investment level.
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. As of December 31, 2022, our portfolio had $629 million of total mortgage financing.
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. As of December 31, 2023, our portfolio had $617.4 million of total mortgage financing.
An externally caused information security incident or an internally caused issue, such as failure to control access to sensitive systems, could materially interrupt business operations or cause disclosure or modification of sensitive or confidential information and could result in material financial loss, loss of competitive position, regulatory actions, breach of contracts, reputational harm or legal liability.
An externally caused information security incident or an internally caused issue, such as failure to control access to sensitive systems, could materially interrupt business operations, interfere with our ability to comply with financial reporting requirements or cause disclosure or modification of sensitive or confidential information and could result in material financial loss, loss of competitive position, regulatory actions, breach of contracts, reputational harm or legal liability.
Technology and work from home policies have and will continue to impact the use of office space and the adaption and evolution of such policies and technology have accelerated due to the restrictions and lockdowns associated with the COVID-19 pandemic.
Technology and work from home policies have and will continue to impact the use of office space and the adaption and evolution of such policies and technology have accelerated due to the lasting impact of the COVID-19 pandemic.
Changes in the level of interest rates also may affect our ability to originate and acquire assets, the value of our assets and our ability to realize gains from the disposition of assets. Changes in interest rates may also affect borrower default rates.
Changes in the level of interest rates also may affect our ability to originate and acquire assets, the value of our assets and our ability to realize gains from the disposition of assets. Changes in interest rates may also affect our borrowers’ default rates and their ability to refinance loans.
Risks Related to COVID-19 The ongoing COVID-19 pandemic, measures intended to prevent its spread and government actions to mitigate its economic impact have had and may continue to have a material adverse effect on our business, results of operations and financial condition.
Risks Related to COVID-19 and Pandemics The COVID-19 pandemic and risks of other pandemics, measures intended to prevent their spread and government actions to mitigate economic impacts have had and may continue to have a material adverse effect on our business, results of operations and financial condition.
In recent periods, and accelerated by the restrictions and lockdowns associated with the COVID-19 pandemic, sales by online retailers have increased, and many retailers operating brick and mortar stores have made online sales a vital piece of their businesses. Some of our debt and equity investments involve exposure to the ongoing operations of brick and mortar retailers.
In recent periods, sales by online retailers have increased, and many retailers operating brick and mortar stores have made online sales a vital piece of their businesses, which have been influenced by consumer habits associated with COVID-19. Some of our debt and equity investments involve exposure to the ongoing operations of brick and mortar retailers.
Moreover, many risk factors set forth in this Annual Report on Form 10-K should be interpreted as heightened risks as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic.
The same adverse impacts would occur as a result of other similar pandemics in the future. Moreover, many risk factors set forth in this Annual Report on Form 10-K should be interpreted as heightened risks as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic and future pandemics, if any.
Consequently, there could be a wide range of potential principal recovery outcomes, the timing of which can be unpredictable, based on the strategy pursued by a lender group or other applicable parties. These multiple creditor situations tend to be associated with larger loans.
Consequently, there could be a wide range of potential principal recovery outcomes, the timing of which can be unpredictable, based on the strategy pursued by a lender group or other applicable parties. These multiple creditor situations tend to be associated with larger loans. If we are one of a group of lenders, we may not independently control the decision-making.
We are subject to significant competition, and we may not be able to compete successfully for investments, which could have a material adverse effect on our business, financial condition and results of operations.
As a result of the foregoing, the value of our debt and equity investments, and results of operations could be adversely affected. We are subject to significant competition, and we may not be able to compete successfully for investments, which could have a material adverse effect on our business, financial condition and results of operations.
Our ability to manage our portfolio of loans and investments may be limited by the form in which they are made.
We may not have control over certain of our loans and investments. Our ability to manage our portfolio of loans and investments may be limited by the form in which they are made.
There are substantial risks associated with such an investment. Laws, regulations or other issues related to climate change could have a material adverse effect on us.
There are substantial risks associated with such an investment. Laws, regulations, corporate responsibility and/or environmental, social and governance (“ESG”) initiatives or other issues related to climate change could have a material adverse effect on us.
If we issue and sell additional shares of our common stock, the ownership interests of our existing stockholders will be diluted to the extent they do not participate in the offering.
If we issue and sell additional shares of our common stock, the ownership interests of our existing stockholders will be diluted to the extent they do not participate in the offering. Item 1B. Unresolved Staff Comments None. 39 Table of Contents
If we are required to register as an investment company under the Investment Company Act, we would become subject to substantial regulation with respect to our capital structure (including our ability to use leverage), management, operations, transactions with affiliated persons (as defined in the Investment Company Act), portfolio composition, including restrictions with respect to diversification and industry concentration and other matters.
If we are required to register as an investment company under the Investment Company Act, we would become subject to substantial regulation with respect to our capital structure (including our ability to use leverage), management, operations, transactions with affiliated persons (as defined in the Investment Company Act), portfolio composition, including restrictions with respect to diversification and industry concentration and other matters. 28 Table of Contents We, through our subsidiary, are subject to extensive regulation, including as an investment adviser in the United States, which could adversely affect our ability to manage our business.
We have invested in, and may continue to invest in, certain assets with lower credit quality, which will increase our risk of losses and may reduce distributions to stockholders and may adversely affect the value of our common stock.
Consequently, we may be unable to restructure an investment in a manner that we believe would maximize value. We have invested in, and may continue to invest in, certain assets with lower credit quality, which will increase our risk of losses and may reduce distributions to stockholders and may adversely affect the value of our common stock.
High 20 Table of Contents inflation in the United States and other countries in which we conduct our investment activities and hold our investments could increase our expenses and we may not be able to pass these increased costs on to our borrowers.
The introduction of governmental policies to curb inflation can have an adverse effect on our business. High inflation in the United States and other countries in which we conduct our investment activities and hold our investments could increase our expenses and we may not be able to pass these increased costs on to our borrowers.
The federal government and some of the states and localities in which we operate have enacted certain climate change laws and regulations and/or have begun regulating carbon footprints and greenhouse gas emissions.
Other countries have enacted climate change laws and regulations, and the United States has been involved in discussions and agreements regarding international climate change treaties. The federal government and some of the states and localities in which we operate have enacted certain climate change laws and regulations and/or have begun regulating carbon footprints and greenhouse gas emissions.
Any legislative action may prospectively or retroactively modify our tax treatment and, therefore, may adversely affect our taxation or our stockholders. We urge you to consult with your tax advisor with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares.
We urge you to consult with your tax advisor with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares.
In a weakening economic environment, we would generally expect credit quality and the value of the investment that serves as collateral for our financing arrangements to decline, and in such a scenario, it is likely that the terms of our financing arrangements would require partial repayment from us, which could be substantial.
In a weakening economic environment, we would generally expect credit quality and the value of the investment that serves as collateral for our financing arrangements to decline, and in such a scenario, it is likely that the terms of our financing arrangements would require partial repayment from us, which could be substantial. 27 Table of Contents These facilities may also be restricted to financing certain types of assets, such as first mortgage loans, which could impact our asset allocation.
CRE securities such as CMBS may be subject to particular risks, including lack of standardized terms and payment of all or substantially all of the principal only at maturity rather than regular amortization of principal.
For example, the equity interests of CDOs are illiquid and often must be held by a REIT. CRE securities such as CMBS may be subject to particular risks, including lack of standardized terms and payment of all or substantially all of the principal only at maturity rather than regular amortization of principal.
However, these ownership limits might also delay, defer or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders or result in the transfer of shares acquired in excess of the ownership limits to a trust for the benefit of a charitable beneficiary and, as a result, the forfeiture by the acquirer of the benefits of owning the additional shares.
However, these ownership limits might also delay, defer or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders or result in the transfer of shares acquired in excess of the ownership limits to a trust for the benefit of a charitable beneficiary and, as a result, the forfeiture by the acquirer of the benefits of owning the additional shares. 23 Table of Contents Our charter contains provisions that make removal of our directors difficult, which makes it more difficult for our stockholders to effect changes to our management and may prevent a change in control of our Company that is otherwise in the best interests of our stockholders.
We have invested and may invest in a variety of CRE securities, including CMBS, CDOs and other subordinate securities. The market for CRE securities is dependent upon liquidity for refinancing and may be negatively impacted by a slowdown in new issuance. For example, the equity interests of CDOs are illiquid and often must be held by a REIT.
We invest in CRE securities, including CMBS and CDOs, which entail certain heightened risks and are subject to losses. We have invested and may invest in a variety of CRE securities, including CMBS, CDOs and other subordinate securities. The market for CRE securities is dependent upon liquidity for refinancing and may be negatively impacted by a slowdown in new issuance.
Inflation, along with governmental measures to control inflation, coupled with public speculation about possible future governmental measures to be adopted, has had significant negative effects on national, regional and local economies in the past and this could occur again in the future. The introduction of governmental policies to curb inflation can have an adverse effect on our business.
The United States and other countries have in the past experienced extremely high rates of inflation. Inflation, along with governmental measures to control inflation, coupled with public speculation about possible future governmental measures to be adopted, has had significant negative effects on national, regional and local economies in the past and this could occur again in the future.
SOFR is a secured rate backed by government securities, while LIBOR is an unsecured rate that incorporates bank credit risk, and SOFR is an overnight rate, while LIBOR is a forward-looking rate that represents interbank funding over different maturities.
SOFR is a secured rate backed by government securities, while LIBOR is an unsecured rate that that incorporates bank credit risk, and SOFR is an overnight rate, while LIBOR is a forward-looking rate that represents interbank funding over different maturities. SOFR has been more volatile than other benchmark or market rates, including LIBOR, during certain periods.
The United States may enact new laws, regulations and interpretations relating to climate change, including potential cap-and-trade systems, carbon taxes and other requirements relating to reduction of carbon footprints and/or greenhouse gas emissions. Other countries have enacted climate change laws and regulations, and the United States has been involved in discussions and agreements regarding international climate change treaties.
The United States may enact new laws, regulations and interpretations relating to climate change, corporate responsibility and/or ESG initiatives, including potential cap-and-trade systems, carbon taxes and other requirements relating to reduction of carbon footprints and/or greenhouse gas emissions.
Concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations. These concerns could materially adversely affect the value of our euro-denominated assets and obligations. In addition, the United Kingdom completed its withdrawal from the European Union effective as of January 1, 2021.
Concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations. These concerns could materially adversely affect the value of our euro-denominated assets and obligations.
In addition, losses in our TRS will generally not provide any tax benefit, except for being carried forward against future taxable income in the TRS. 34 Table of Contents There is a risk of changes in the tax law applicable to REITs.
In addition, losses in our TRS will generally not provide any tax benefit, except for being carried forward against future taxable income in the TRS. There is a risk of changes in the tax law applicable to REITs. The IRS, the United States Treasury Department and Congress frequently review U.S. federal income tax legislation, regulations and other guidance.
If a sale-leaseback transaction were so recharacterized, we might fail to satisfy the REIT qualification “asset tests” or “income tests” and, consequently, lose 19 Table of Contents our REIT status effective with the year of recharacterization.
If a sale-leaseback transaction were so recharacterized, we might fail to satisfy the REIT qualification “asset tests” or “income tests” and, consequently, lose our REIT status effective with the year of recharacterization. Alternatively, the amount of our REIT taxable income could be recalculated, which might also cause us to fail to meet the REIT distribution requirement for a taxable year.
In a period of rising interest rates, our interest expense could increase, while the interest we earn on our fixed-rate debt investments would not change, adversely affecting our profitability. Our operating results depend in large part on differences between the income from our assets, net of credit losses, and our financing costs.
In a period of rising interest rates, our interest expense could increase, while the interest we earn on our fixed-rate debt investments would not change, adversely affecting our profitability.
Furthermore, the enforceability of agreements underlying derivative transactions may depend on compliance with applicable statutory, commodity and other regulatory requirements and, depending on the identity of the counterparty, applicable international requirements.
Consequently, there are no regulatory or statutory requirements with respect to record keeping, financial responsibility or segregation of customer funds and positions. Furthermore, the enforceability of agreements underlying derivative transactions may depend on compliance with applicable statutory, commodity and other regulatory requirements and, depending on the identity of the counterparty, applicable international requirements.
If we are able to identify suitable investments, it may not be successful in consummating the investment, resulting in increased costs and diversion in the investment professionals’ time, or if consummated, the returns on the investments may be below expectations. 23 Table of Contents The due diligence process that we undertake in regard to investment opportunities may not reveal all facts that may be relevant in connection with an investment and if we incorrectly evaluate the risks of our investments, we may experience losses.
If we are able to identify suitable 19 Table of Contents investments, it may not be successful in consummating the investment, resulting in increased costs and diversion in the investment professionals’ time, or if consummated, the returns on the investments may be below expectations.
There is no assurance that we, or the third parties that facilitate our business activities, have not or will not experience a breach.
Even with appropriate security measures and procedures in place, not every breach can be prevented or detected. There is no assurance that we, or the third parties that facilitate our business activities, have not or will not experience a breach.
We could also become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources. 35 Table of Contents Accounting standards prescribe a model to measure expected credit losses (“CECL”) that may require us to increase our level of allowance for loan losses, which may affect our business, financial condition and results of operations.
We could also become subject to investigations by the stock 35 Table of Contents exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
Unless we were entitled to relief under certain Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year in which we failed to qualify as a REIT. 31 Table of Contents We may incur adverse tax consequences if NorthStar I or NorthStar II were to have failed to qualify as a REIT for U.S. federal income tax purposes prior to the Mergers.
Unless we were entitled to relief under certain Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year in which we failed to qualify as a REIT.
We are mindful of all of these limitations and analyze and structure the income and operations of our TRSs to mitigate these costs and risks to us to the extent practicable, but we may not always be successful in all cases.
If the IRS successfully challenged that tax treatment, it would reduce the amount that those foreign TRSs would have available to pay to their creditors and to distribute to us. 33 Table of Contents We are mindful of all of these limitations and analyze and structure the income and operations of our TRSs to mitigate these costs and risks to us to the extent practicable, but we may not always be successful in all cases.
We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. 21 Table of Contents We may not have control over certain of our loans and investments.
We can provide no assurance that we will be able to identify and originate loans or make investments that are consistent with our investment objectives. We cannot assure 17 Table of Contents you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations.
Nevertheless, COVID-19 and the current financial, economic and capital 12 Table of Contents markets environment, and future developments in these and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows.
Nevertheless, the current financial, economic and capital markets environment, and future developments in these and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows. 34 Table of Contents Our inability to access funding or the terms on which such funding is available could have a material adverse effect on our financial condition, particularly in light of ongoing market dislocations resulting from the COVID-19 pandemic or other pandemics.
We, through our subsidiary, are subject to extensive regulation, including as an investment adviser in the United States, which could adversely affect our ability to manage our business. Our subsidiary, BrightSpire Capital Advisors, LLC (“BrightSpire Advisors”) is subject to regulation as an investment adviser by various regulatory authorities.
Our subsidiary, BrightSpire Capital Advisors, LLC (“BrightSpire Advisors”) is subject to regulation as an investment adviser by various regulatory authorities.
We rely heavily on financial, accounting and other data processing systems maintained by us and by third parties with whom we contract for information technology, network, data storage and other related services.
Computer malware, viruses, computer hacking and phishing attacks have become more prevalent in our industry and we may be subject to such attempted attacks from time to time. We rely heavily on financial, accounting and other data processing systems maintained by us and by third parties with whom we contract for information technology, network, data storage and other related services.
These facilities may also be restricted to financing certain types of assets, such as first mortgage loans, which could impact our asset allocation. In addition, such short-term borrowing facilities may limit the length of time that any given asset may be used as eligible collateral.
In addition, such short-term borrowing facilities may limit the length of time that any given asset may be used as eligible collateral. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on assets.
These potential impacts may include changes in rainfall and storm patterns and intensities, water shortages, changing sea levels and changing temperatures, any of which could increase our or our borrowers’ operating costs. Any of these matters could have a material adverse effect on us.
Lastly, the potential physical impacts of climate change on our operations are highly uncertain, and would be particular to the geographic circumstances in areas in which we operate. These potential impacts may include changes in rainfall and storm patterns and intensities, water shortages, changing sea levels and changing temperatures, any of which could increase our or our borrowers’ operating costs.
We cannot predict how future laws and regulations, or future interpretations of current laws and regulations, related to climate change will affect our business, results of operations, liquidity and financial condition. Lastly, the potential physical impacts of climate change on our operations are highly uncertain, and would be particular to the geographic circumstances in areas in which we operate.
We cannot predict how future laws and regulations, or future interpretations of current laws and regulations, related to climate change, corporate responsibility and/or ESG initiatives will affect our business, results of operations, liquidity and financial condition.
These trends could continue to cause an increase in vacancy rates and a decrease in demand for new supply, and could impact the value of our debt and equity investments. Technology platforms such as AirBnB and VRBO have provided leisure and business travelers with lodging options outside of the hotel industry.
The continuing impact of technology could result in tenant downsizings upon renewal, or in tenants seeking office space outside of the typical central business district. These trends could continue to cause an increase in vacancy rates and a decrease in demand for new supply, and could impact the value of our debt and equity investments.
These services effectively have increased the supply of rooms available in many major markets. This additional supply could negatively impact the occupancy and room rates at more traditional hotels. As a result of the foregoing, the value of our debt and equity investments, and results of operations could be adversely affected.
Technology platforms such as AirBnB and VRBO have provided leisure and business travelers with lodging options outside of the hotel industry. These services effectively have increased the supply of rooms available in many major markets. This additional supply could negatively impact the occupancy and room rates at more traditional hotels.
Our hedging activities, if not undertaken in compliance with certain U.S. federal income tax requirements, 28 Table of Contents could also adversely affect our ability to qualify for taxation as a REIT.
Our hedging activities, if not undertaken in compliance with certain U.S. federal income tax requirements, could also adversely affect our ability to qualify for taxation as a REIT. In addition, hedging instruments involve risk since they often are not traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Information regarding our investment properties at December 31, 2022 are included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations —Net Leased and Other Real Estate” and “Item 15. Exhibits and Financial Statement Schedules—Schedule III. Real Estate and Accumulated Depreciation” of this Annual Report.
Biggest changeItem 2. Properties Information regarding our investment properties at December 31, 2023 are included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations —Net Leased and Other Real Estate” and “Item 15. Exhibits and Financial Statement Schedules—Schedule III. Real Estate and Accumulated Depreciation” of this Annual Report.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeCommon Stock 2022 Ordinary income $ 0.64 Return of capital 0.13 Total $ 0.77 2021 Ordinary income $ 0.29 Return of capital 0.11 Total $ 0.40 2020 Ordinary income $ 0.30 Return of capital 0.10 Total $ 0.40 For the year ended December 31, 2022, we paid aggregate dividends of $100.5 million to our Class A common stockholders.
Biggest changeCommon Stock 2023 Ordinary income $ — Return of capital 0.80 Total $ 0.80 2022 Ordinary income $ 0.64 Return of capital 0.13 Total $ 0.77 2021 Ordinary income $ 0.29 Return of capital 0.11 Total $ 0.40 For the year ended December 31, 2023, we paid aggregate dividends of $104.0 million to our Class A common stockholders.
Stock Performance Graph The following graph compares the cumulative total return on our class A common stock with the cumulative total returns on the Russell 2000 Index (the “Russell 2000”) and the Bloomberg REIT Mortgage Index (the “BBREMTG Index”), a published industry index from February 1, 2018 to December 31, 2022.
Stock Performance Graph The following graph compares the cumulative total return on our class A common stock with the cumulative total returns on the Russell 2000 Index (the “Russell 2000”) and the Bloomberg REIT Mortgage Index (the “BBREMTG Index”), a published industry index from January 1, 2019 to December 31, 2023.
The cumulative total return on our class A common stock as presented is not necessarily indicative of future performance of our class A common stock.
The cumulative total return on our class A common stock as presented is not necessarily indicative of future performance of our class A common stock. Item 6. Reserved. 43 Table of Contents
Unregistered Sales of Equity Securities and Use of Proceeds There were no sales of unregistered securities of our Company during the year ended December 31, 2022, other than those previously disclosed in filings with the SEC. 41 Table of Contents Purchases of Equity Securities by Issuer The Company did not repurchase any of its Class A common stock during the three months ended December 31, 2022.
Unregistered Sales of Equity Securities and Use of Proceeds There were no sales of unregistered securities of our Company during the year ended December 31, 2023. 42 Table of Contents Purchases of Equity Securities by Issuer The Company did not repurchase any of its Class A common stock during the three months ended December 31, 2023.
As of February 17, 2023, the closing price of our Class A common stock was $7.34 and we had approximately 128.9 million shares of Class A common stock outstanding held by a total of 3,138 holders of record. This figure does not reflect the beneficial ownership of shares held in nominee name.
As of February 20, 2024, the closing price of our Class A common stock was $6.63 and we had approximately 130.0 million shares of Class A common stock outstanding held by a total of 2,932 holders of record. This figure does not reflect the beneficial ownership of shares held in nominee name.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCarrying value (at BRSP share) Collateral property type Count Senior loans Mezzanine loans Preferred Equity Total % of Total Multifamily 59 $ 1,633,323 $ 72,376 $ 22,497 $ 1,728,196 49.1 % Office 32 1,169,853 — — 1,169,853 33.3 % Hotel 5 377,821 40,410 — 418,231 11.9 % Other (Mixed-use) (1) 4 151,307 — — 151,307 4.3 % Industrial 3 50,236 — — 50,236 1.4 % Total 103 $ 3,382,540 $ 112,786 $ 22,497 $ 3,517,823 100.0 % _________________________________________ (1) Other includes commercial and residential development and predevelopment assets. 47 Table of Contents Carrying value (at BRSP share) Region Count Senior loans Mezzanine loans Preferred Equity Total % of Total US West 44 $ 1,508,617 $ 96,207 $ 22,497 $ 1,627,321 46.3 % US Southwest 39 1,147,428 4,459 — 1,151,887 32.7 % US Northeast 12 523,173 12,120 — 535,293 15.2 % US Southeast 8 203,322 — — 203,322 5.8 % Total 103 $ 3,382,540 $ 112,786 $ 22,497 $ 3,517,823 100.0 % The following table provides asset level detail for our senior loans, mezzanine loans and preferred equity as of December 31, 2022 (dollars in thousands): 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) Q4 Risk ranking (5) Multifamily Loan 1 (6) Senior 6/18/2019 Santa Clara, CA $ 57,439 $ 57,439 Floating 4.4% 9.0% 6/18/2024 65% 4 Loan 2 Senior 3/8/2022 Austin, TX 49,908 50,103 Floating 3.3% 8.2% 3/9/2027 75% 3 Loan 3 Senior 7/19/2021 Dallas, TX 49,750 49,773 Floating 3.4% 8.2% 8/9/2026 74% 3 Loan 4 Senior 5/17/2022 Las Vegas, NV 49,377 49,758 Floating 3.6% 8.4% 6/9/2027 74% 3 Loan 5 Senior 5/26/2021 Las Vegas, NV 46,056 46,101 Floating 3.5% 8.2% 6/9/2026 70% 3 Loan 6 Senior 11/30/2021 Phoenix, AZ 44,482 44,572 Floating 3.4% 8.5% 12/9/2026 74% 3 Loan 7 Mezzanine 12/3/2019 Milpitas, CA 43,861 43,861 Fixed 8.0% 13.3% 12/3/2024 58% -85% 4 Loan 8 Senior 2/3/2021 Arlington, TX 43,643 43,580 Floating 3.7% 8.6% 2/9/2026 81% 3 Loan 9 Senior 3/1/2021 Richardson, TX 43,239 43,411 Floating 3.4% 8.1% 3/9/2026 75% 3 Loan 10 Senior 7/15/2021 Jersey City, NJ 42,883 43,000 Floating 3.0% 7.7% 8/9/2026 66% 2 Subtotal top 10 multifamily $ 470,638 $ 471,598 13% of total loans Loan 11 Senior 12/21/2020 Austin, TX $ 42,712 $ 42,851 Floating 3.7% 8.4% 1/9/2026 54% 2 Loan 12 Senior 3/22/2021 Fort Worth, TX 41,213 41,286 Floating 3.6% 8.3% 4/9/2026 83% 3 Loan 13 Senior 12/7/2021 Denver, CO 39,010 39,196 Floating 3.2% 8.1% 12/9/2026 74% 3 Loan 14 Senior 7/15/2021 Dallas, TX 38,659 38,781 Floating 3.1% 8.0% 8/9/2026 77% 3 Loan 15 Senior 3/31/2022 Long Beach, CA 36,572 36,829 Floating 3.4% 8.3% 4/9/2027 74% 3 Loan 16 Senior 7/12/2022 Irving, TX 36,356 36,654 Floating 3.6% 8.5% 8/9/2027 73% 3 Loan 17 Senior 3/31/2022 Louisville, KY 35,892 36,069 Floating 3.7% 8.6% 4/9/2027 72% 3 Loan 18 Senior 9/28/2021 Carrollton, TX 35,724 35,939 Floating 3.1% 7.8% 10/9/2025 73% 3 Loan 19 Senior 1/18/2022 Dallas, TX 35,490 35,575 Floating 3.5% 8.4% 2/9/2027 75% 3 Loan 20 Senior 1/12/2022 Los Angeles, CA 35,203 35,476 Floating 3.4% 8.0% 2/9/2027 65% 3 Subtotal top 20 multifamily $ 847,469 $ 850,254 24% of total loans Loan 21 Senior 12/29/2020 Fullerton, CA $ 34,748 $ 34,860 Floating 3.8% 8.5% 1/9/2026 70% 3 Loan 22 Senior 3/16/2021 Fremont, CA 33,492 33,550 Floating 3.5% 8.3% 4/9/2026 76% 3 Loan 23 Senior 7/29/2021 Phoenix, AZ 32,084 32,265 Floating 3.4% 8.1% 8/9/2026 74% 3 Loan 24 Senior 3/31/2021 Mesa, AZ 31,377 31,434 Floating 3.8% 8.6% 4/9/2026 83% 3 48 Table of Contents 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) Q4 Risk ranking (5) Loan 25 Senior 4/29/2021 Las Vegas, NV 29,672 29,736 Floating 3.2% 7.9% 5/9/2026 76% 2 Loan 26 Senior 4/15/2022 Mesa, AZ 28,939 29,177 Floating 3.4% 8.0% 5/9/2027 75% 3 Loan 27 Senior 7/13/2021 Plano, TX 28,911 28,994 Floating 3.2% 7.9% 2/9/2025 82% 3 Loan 28 Senior 5/19/2022 Denver, CO 28,055 28,270 Floating 3.5% 8.3% 6/9/2027 73% 3 Loan 29 Senior 5/27/2021 Houston, TX 27,941 28,000 Floating 3.0% 7.9% 6/9/2026 67% 3 Loan 30 Senior 2/17/2022 Long Beach, CA 27,210 27,401 Floating 3.4% 8.2% 3/9/2027 67% 3 Loan 31 Senior 8/31/2021 Glendale, AZ 27,162 27,326 Floating 3.3% 8.0% 9/9/2026 75% 3 Loan 32 Senior 12/16/2021 Fort Mill, SC 26,462 26,637 Floating 3.3% 8.0% 1/9/2027 71% 3 Loan 33 Senior 5/13/2021 Phoenix, AZ 25,201 25,323 Floating 3.2% 7.9% 6/9/2026 76% 2 Loan 34 Senior 12/21/2021 Phoenix, AZ 24,352 24,529 Floating 3.6% 8.3% 1/9/2027 75% 3 Loan 35 Senior 7/12/2022 Irving, TX 24,214 24,416 Floating 3.6% 8.5% 8/9/2027 72% 3 Loan 36 (6) Mezzanine 2/8/2022 Las Vegas, NV 24,056 24,155 Fixed 7.0% 12.3% 2/8/2027 56% - 79% 3 Loan 37 Senior 7/1/2021 Aurora, CO 23,628 23,753 Floating 3.2% 7.9% 7/9/2026 73% 3 Loan 38 Senior 3/8/2022 Glendale, AZ 23,342 23,533 Floating 3.5% 8.1% 3/9/2027 73% 3 Loan 39 Senior 3/31/2022 Phoenix, AZ 23,077 23,265 Floating 3.7% 8.3% 4/9/2027 75% 3 Loan 40 Senior 11/4/2021 Austin, TX 22,812 22,962 Floating 3.4% 8.1% 11/9/2026 71% 3 Loan 41 Senior 3/25/2021 San Jose, CA 22,556 22,650 Floating 3.7% 8.4% 4/9/2026 70% 2 Loan 42 Preferred 11/30/2022 Milpitas, CA 22,497 22,720 Fixed 6.0% 12.1% 12/1/2032 n/a 3 Loan 43 Senior 7/13/2021 Oregon City, OR 21,701 21,764 Floating 3.4% 8.1% 8/9/2026 73% 3 Loan 44 Senior 6/22/2021 Phoenix, AZ 21,145 21,262 Floating 3.3% 8.0% 7/9/2026 75% 2 Loan 45 Senior 1/12/2022 Austin, TX 19,658 19,769 Floating 3.4% 8.2% 2/9/2027 75% 3 Loan 46 Senior 8/6/2021 La Mesa, CA 19,400 19,456 Floating 3.0% 7.8% 8/9/2025 70% 3 Loan 47 Senior 12/21/2021 Gresham, OR 19,354 19,455 Floating 3.6% 8.5% 1/9/2027 74% 3 Loan 48 Senior 9/22/2021 Denton, TX 19,282 19,351 Floating 3.3% 8.0% 10/9/2025 70% 3 Loan 49 Senior 9/1/2021 Bellevue, WA 19,243 19,308 Floating 2.9% 7.8% 9/9/2025 64% 3 Loan 50 Senior 6/24/2021 Phoenix, AZ 19,006 19,071 Floating 3.4% 8.2% 7/9/2026 63% 3 Loan 51 Senior 5/5/2022 Charlotte, NC 18,370 18,500 Floating 3.5% 8.4% 5/9/2027 61% 3 Loan 52 Senior 7/14/2021 Salt Lake City, UT 18,264 18,315 Floating 3.4% 8.1% 8/9/2026 73% 3 Loan 53 Senior 4/29/2022 Tacoma, WA 17,595 17,728 Floating 3.3% 8.2% 5/9/2027 72% 3 Loan 54 Senior 6/25/2021 Phoenix, AZ 17,174 17,263 Floating 3.2% 7.9% 7/9/2026 75% 3 Loan 55 Senior 7/21/2021 Durham, NC 15,070 15,150 Floating 3.3% 8.0% 8/9/2026 58% 3 Loan 56 Senior 7/28/2021 San Antonio, TX 14,122 14,166 Floating 3.3% 8.2% 8/9/2024 76% 3 Loan 57 Senior 2/11/2021 Provo, UT 14,028 14,082 Floating 3.9% 8.6% 3/9/2026 71% 3 Loan 58 Senior 3/8/2022 Glendale, AZ 11,068 11,158 Floating 3.5% 8.1% 3/9/2027 73% 3 Loan 59 Mezzanine 7/30/2014 Various - TX 4,459 4,459 Fixed 9.5% 9.5% 8/11/2024 71% - 83% 3 Total/Weighted average multifamily loans $ 1,728,196 $ 1,735,467 3.6% 8.5% 3.6 years 3.0 49 Table of Contents 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) Q4 Risk ranking (5) Office Loan 60 (7) Senior 12/7/2018 Carlsbad, CA $ 115,500 $ 115,500 Floating 4.4% 8.9% 12/9/2023 73% 3 Loan 61 Senior 2/17/2022 Boston, MA 80,734 81,310 Floating 3.8% 8.7% 3/9/2027 54% 3 Loan 62 Senior 8/28/2018 San Jose, CA 73,147 73,147 Floating 2.5% 7.1% 8/28/2025 75% 3 Loan 63 Senior 1/19/2021 Phoenix, AZ 72,166 72,461 Floating 3.7% 8.4% 2/9/2026 70% 3 Loan 64 Senior 7/12/2019 Washington, D.C. 56,935 56,935 Floating 2.8% 7.5% 8/9/2024 68% 4 Loan 65 Senior 2/13/2019 Baltimore, MD 56,421 56,421 Floating 3.5% 8.1% 2/9/2024 74% 4 Loan 66 Senior 4/5/2019 L.I.
Biggest changeCarrying value (at BRSP share) Region Count Senior loans Mezzanine loans Total % of Total US West 35 $ 1,184,293 $ 59,855 $ 1,244,148 42.4 % US Southwest 34 1,059,000 4,425 1,063,425 36.2 % US Northeast 10 398,894 16,452 415,346 14.1 % US Southeast 8 213,587 — 213,587 7.3 % Total 87 $ 2,855,774 $ 80,732 $ 2,936,506 100.0 % 48 Table of Contents The following table provides asset level detail for our senior and mezzanine loans as of December 31, 2023 (dollars in thousands): 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) Q4 Risk ranking (5) Multifamily Loan 1 (6) Senior 6/18/2019 Santa Clara, CA $ 57,244 $ 57,443 Floating 5.5% 10.9% 6/18/2024 69% 3 Loan 2 Senior 5/17/2022 Las Vegas, NV 53,871 53,966 Floating 3.6% 9.4% 6/9/2027 74% 4 Loan 3 Senior 3/8/2022 Austin, TX 50,381 50,323 Floating 3.3% 9.2% 3/9/2027 75% 3 Loan 4 Senior 7/19/2021 Dallas, TX 50,333 50,200 Floating 3.4% 8.7% 8/9/2026 74% 3 Loan 5 Senior 5/26/2021 Las Vegas, NV 46,944 46,798 Floating 3.5% 9.2% 6/9/2026 70% 4 Loan 6 Senior 2/3/2021 Arlington, TX 44,418 44,207 Floating 3.7% 9.6% 2/9/2026 81% 4 Loan 7 Senior 3/1/2021 Richardson, TX 43,387 43,411 Floating 3.5% 9.2% 3/9/2026 75% 3 Loan 8 Senior 7/15/2021 Jersey City, NJ 43,025 43,000 Floating 3.1% 8.8% 8/9/2026 66% 3 Loan 9 Senior 12/21/2020 Austin, TX 42,840 42,850 Floating 3.8% 9.5% 1/9/2026 54% 3 Loan 10 Senior 3/31/2022 Louisville, KY 42,208 42,176 Floating 3.7% 9.6% 4/9/2027 72% 3 Subtotal top 10 multifamily $ 474,651 $ 474,374 16% of total loans Loan 11 Senior 3/22/2021 Fort Worth, TX $ 42,109 $ 42,046 Floating 3.6% 9.3% 4/9/2026 83% 3 Loan 12 Senior 7/15/2021 Dallas, TX 40,011 40,011 Floating 3.2% 8.6% 8/9/2026 77% 3 Loan 13 Senior 12/7/2021 Denver, CO 39,598 39,598 Floating 3.3% 9.0% 12/9/2026 74% 3 Loan 14 Senior 3/31/2022 Long Beach, CA 38,848 38,900 Floating 3.4% 9.3% 4/9/2027 74% 3 Loan 15 Senior 7/12/2022 Irving, TX 37,848 37,946 Floating 3.6% 9.5% 8/9/2027 73% 3 Loan 16 Senior 1/18/2022 Dallas, TX 36,584 36,460 Floating 3.5% 9.4% 2/9/2027 75% 3 Loan 17 Senior 9/28/2021 Carrollton, TX 36,190 36,282 Floating 3.2% 8.9% 10/9/2025 73% 3 Loan 18 Senior 1/12/2022 Los Angeles, CA 36,017 36,159 Floating 3.4% 9.0% 2/9/2027 65% 3 Loan 19 Senior 7/29/2021 Phoenix, AZ 33,044 33,117 Floating 3.4% 9.0% 8/9/2026 74% 3 Loan 20 (6) Mezzanine 12/9/2019 Milpitas, CA 32,643 32,643 Fixed n/a 10.2% 3/3/2026 58% - 79% 3 Subtotal top 20 multifamily $ 847,543 $ 847,536 29% of total loans Loan 21 Senior 3/31/2021 Mesa, AZ $ 31,482 $ 31,434 Floating 3.8% 9.6% 4/9/2026 83% 3 Loan 22 Senior 4/29/2021 Las Vegas, NV 30,114 30,079 Floating 3.2% 8.9% 5/9/2026 76% 3 Loan 23 Senior 4/15/2022 Mesa, AZ 29,917 30,049 Floating 3.4% 9.0% 5/9/2027 75% 3 49 Table of Contents 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) Q4 Risk ranking (5) Loan 24 Senior 7/13/2021 Plano, TX 29,154 29,142 Floating 3.2% 8.9% 2/9/2025 77% 3 Loan 25 Senior 2/17/2022 Long Beach, CA 29,077 29,120 Floating 3.4% 9.2% 3/9/2027 67% 3 Loan 26 (7) Senior 5/19/2022 Denver, CO 28,809 28,809 n/a (7) n/a (7) n/a (7) 6/9/2027 73% 5 Loan 27 Senior 8/31/2021 Glendale, AZ 28,191 28,262 Floating 3.3% 8.9% 9/9/2026 75% 3 Loan 28 Senior 5/27/2021 Houston, TX 28,000 28,000 Floating 3.1% 8.5% 6/9/2026 67% 3 Loan 29 Senior 12/16/2021 Fort Mill, SC 27,347 27,366 Floating 3.3% 8.9% 1/9/2027 71% 3 Loan 30 (6) Mezzanine 2/8/2022 Las Vegas, NV 27,211 27,263 Fixed 7.0% 12.3% 2/8/2027 56% - 79% 3 Loan 31 Senior 12/21/2021 Phoenix, AZ 25,350 25,442 Floating 3.6% 9.3% 1/9/2027 75% 3 Loan 32 Senior 7/12/2022 Irving, TX 25,097 25,165 Floating 3.6% 9.5% 8/9/2027 72% 3 Loan 33 Senior 3/8/2022 Glendale, AZ 24,797 24,900 Floating 3.5% 9.1% 3/9/2027 73% 3 Loan 34 Senior 7/1/2021 Aurora, CO 23,956 24,002 Floating 3.2% 8.9% 7/9/2026 73% 3 Loan 35 Senior 3/31/2022 Phoenix, AZ 23,586 23,691 Floating 3.7% 9.3% 4/9/2027 75% 3 Loan 36 Senior 11/4/2021 Austin, TX 23,207 23,279 Floating 3.4% 9.0% 11/9/2026 71% 3 Loan 37 Senior 6/22/2021 Phoenix, AZ 22,093 22,136 Floating 3.3% 8.9% 7/9/2026 75% 3 Loan 38 Senior 7/13/2021 Oregon City, OR 21,774 21,764 Floating 3.4% 9.1% 8/9/2026 73% 3 Loan 39 Senior 1/12/2022 Austin, TX 20,178 20,187 Floating 3.4% 9.2% 2/9/2027 75% 3 Loan 40 Senior 9/22/2021 Denton, TX 19,758 19,761 Floating 3.3% 9.0% 10/9/2025 70% 3 Loan 41 Senior 8/6/2021 La Mesa, CA 19,752 19,752 Floating 3.0% 8.3% 8/9/2025 70% 3 Loan 42 Senior 12/21/2021 Gresham, OR 19,447 19,455 Floating 3.6% 9.5% 1/9/2027 74% 3 Loan 43 Senior 9/1/2021 Bellevue, WA 19,308 19,308 Floating 3.0% 8.4% 9/9/2025 64% 3 Loan 44 Senior 6/24/2021 Phoenix, AZ 19,236 19,236 Floating 3.5% 8.8% 7/9/2026 63% 4 Loan 45 Senior 5/5/2022 Charlotte, NC 18,474 18,500 Floating 3.5% 9.4% 5/9/2027 61% 3 Loan 46 Senior 7/14/2021 Salt Lake City, UT 18,323 18,315 Floating 3.4% 9.1% 8/9/2026 73% 3 Loan 47 Senior 4/29/2022 Tacoma, WA 18,077 18,110 Floating 3.3% 9.2% 5/9/2027 72% 3 Loan 48 Senior 6/25/2021 Phoenix, AZ 17,488 17,518 Floating 3.2% 8.9% 7/9/2026 75% 3 Loan 49 Senior 7/21/2021 Durham, NC 15,199 15,228 Floating 3.4% 9.1% 8/9/2026 58% 3 Loan 50 Senior 3/8/2022 Glendale, AZ 11,434 11,482 Floating 3.5% 9.1% 3/9/2027 73% 3 Loan 51 Mezzanine 7/30/2014 Various - TX 4,425 4,425 Fixed 9.5% 9.5% 8/11/2024 71% - 83% 3 Total/Weighted average multifamily loans $ 1,547,804 $ 1,548,716 53% of total loans 3.4% 9.1% 2.6 years 3.1 50 Table of Contents 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) Q4 Risk ranking (5) Office Loan 52 Senior 2/17/2022 Boston, MA $ 87,450 $ 87,533 Floating 3.8% 9.7% 3/9/2027 54% 3 Loan 53 Senior 12/7/2018 Carlsbad, CA 75,604 75,581 Floating 3.9% 9.7% 12/9/2024 75% 3 Loan 54 Senior 8/28/2018 San Jose, CA 74,071 74,071 Floating 2.6% 7.9% 8/28/2025 75% 3 Loan 55 Senior 1/19/2021 Phoenix, AZ 73,574 73,616 Floating 3.7% 9.3% 2/9/2026 70% 3 Loan 56 Senior 2/13/2019 Baltimore, MD 59,154 59,154 Floating 3.6% 9.0% 2/9/2025 74% 3 Loan 57 Senior 5/23/2022 Plano, TX 40,491 40,494 Floating 4.3% 10.0% 6/9/2027 64% 3 Loan 58 Senior 4/27/2022 Plano, TX 39,852 39,825 Floating 4.1% 9.8% 5/9/2027 70% 3 Loan 59 Senior 11/23/2021 Tualatin, OR 39,432 39,372 Floating 4.0% 12.1% 12/9/2026 66% 4 Loan 60 Senior 9/28/2021 Reston, VA 38,165 38,165 Floating 4.1% 9.5% 10/9/2026 71% 4 Loan 61 Senior 11/17/2021 Dallas, TX 36,967 36,967 Floating 4.0% 9.3% 12/9/2025 61% 4 Subtotal top 10 office loans $ 564,760 $ 564,778 19% of total loans Loan 62 Senior 6/2/2021 South Pasadena, CA $ 33,893 $ 33,808 Floating 5.0% 10.4% 6/9/2026 69% 3 Loan 63 Senior 4/7/2022 San Jose, CA 33,861 33,906 Floating 4.2% 10.0% 4/9/2027 70% 3 Loan 64 Senior 4/30/2021 San Diego, CA 33,109 33,148 Floating 3.6% 9.3% 5/9/2026 55% 3 Loan 65 Senior 6/16/2017 Miami, FL 30,348 30,008 Floating 5.8% 11.1% 4/9/2024 73% 3 Loan 66 Senior 3/31/2022 Blue Bell, PA 28,555 28,555 Floating 4.2% 9.5% 4/9/2025 59% 3 Loan 67 Senior 10/21/2021 Blue Bell, PA 28,210 28,210 Floating 3.8% 9.1% 4/9/2025 78% 3 Loan 68 Senior 2/26/2019 Charlotte, NC 26,441 26,490 Floating 3.3% 8.7% 7/9/2025 51% 3 Loan 69 Senior 12/7/2021 Hillsboro, OR 25,953 25,953 Floating 4.0% 9.6% 12/9/2024 71% 3 Loan 70 Senior 7/30/2021 Denver, CO 23,873 23,931 Floating 4.4% 10.1% 8/9/2026 66% 3 Loan 71 Senior 9/16/2019 San Francisco, CA 23,543 23,543 Floating 3.3% 8.6% 10/9/2024 77% 3 Subtotal top 20 office loans $ 852,546 $ 852,330 29% of total loans Loan 72 Senior 8/27/2019 San Francisco, CA $ 22,121 $ 22,121 Floating 2.9% 8.3% 9/9/2024 79% 3 Loan 73 Senior 10/29/2020 Denver, CO 19,937 19,937 Floating 3.7% 9.1% 11/9/2025 64% 3 Loan 74 Senior 10/13/2021 Burbank, CA 16,584 16,639 Floating 4.0% 9.7% 11/9/2026 57% 3 Loan 75 Senior 8/31/2021 Los Angeles, CA 15,888 15,888 Floating 4.1% 9.5% 9/9/2026 58% 3 Loan 76 Senior 11/16/2021 Charlotte, NC 15,407 15,466 Floating 4.5% 10.2% 12/9/2026 67% 3 Loan 77 Senior 11/10/2021 Richardson, TX 13,679 13,648 Floating 4.1% 9.8% 12/9/2026 71% 4 Loan 78 Mezzanine 2/13/2023 Baltimore, MD 4,002 4,002 Fixed n/a (8) 13.0% 2/7/2025 74% - 75% 3 Total/Weighted average office loans $ 960,164 $ 960,031 33% of total loans 3.8% 9.6% 2.1 years 3.1 51 Table of Contents 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) Q4 Risk ranking (5) Hotel Loan 79 Senior 1/2/2018 San Jose, CA $ 135,979 $ 135,979 Floating 4.8% 10.1% 11/9/2026 73% 4 Loan 80 Senior 6/25/2018 Englewood, CO 73,000 73,000 Floating 3.5% 8.9% 2/9/2025 62% 3 Loan 81 Mezzanine 1/9/2017 New York, NY 12,450 12,330 Floating 11.0% 16.4% 4/9/2024 67% - 80% 3 Total/Weighted average hotel loans $ 221,429 $ 221,309 4.7% 10.0% 2.1 years 3.6 Other (Mixed-use) Loan 82 Senior 10/24/2019 Brooklyn, NY $ 77,802 $ 77,802 Floating 4.2% 9.5% 11/9/2024 70% 3 Loan 83 Senior 1/13/2022 New York, NY 46,071 46,090 Floating 3.5% 9.4% 2/9/2027 67% 3 Loan 84 Senior 5/3/2022 Brooklyn, NY 28,627 28,665 Floating 4.4% 10.2% 5/9/2027 68% 3 Total/Weighted average other (mixed-use) loans $ 152,500 $ 152,557 4.0% 9.6% 2.0 years 3.0 Industrial Loan 85 Senior 7/13/2022 Ontario, CA $ 23,556 $ 23,680 Floating 3.3% 9.0% 8/9/2027 66% 3 Loan 86 Senior 3/25/2022 City of Industry, CA 19,693 19,719 Floating 3.4% 9.2% 4/9/2027 67% 3 Loan 87 Senior 3/21/2022 Commerce, CA 11,360 11,374 Floating 3.3% 9.1% 4/9/2027 71% 3 Total/Weighted average industrial loans $ 54,609 $ 54,773 3.3% 9.1% 3.4 years 3.0 Total/Weighted average senior and mezzanine loans - Our Portfolio $ 2,936,506 $ 2,937,386 3.7% 9.3% 2.4 years 3.2 _________________________________________ (1) Represents carrying values at our share as of December 31, 2023.
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.
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.
Other income (loss) Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net During the year ended December 31, 2022, we recorded an unrealized gain of $0.9 million on mortgage loans and obligations held in securitization trusts, net due to the sale of retained investments in the subordinate tranches of one securitization trust.
Other income (loss) Unrealized gain on mortgage loans and obligations held in securitization trusts, net During the year ended December 31, 2022, we recorded an unrealized gain of $0.9 million on mortgage loans and obligations held in securitization trusts, net due to the sale of retained investments in the subordinate tranches of one securitization trust.
In addition, the Credit Agreement includes the following financial covenants applicable to BrightSpire OP and its consolidated subsidiaries: (a) minimum consolidated tangible net worth of BrightSpire 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 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 OP, excluding any such proceeds that are contributed to BrightSpire OP within ninety (90) days of receipt and applied to acquire capital stock of BrightSpire OP; (b) BrightSpire OP’s ratio of EBITDA plus lease expenses to fixed charges for any period of four consecutive fiscal quarters to be not less than 1.50 to 1.00; (c) BrightSpire OP’s minimum interest coverage ratio to be not less than 3.00 to 1.00; and (d) BrightSpire OP’s ratio of consolidated total debt to consolidated total assets to be not more than 0.80 to 1.00.
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 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 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, we measure the CECL reserve on an individual instrument basis. The determination of whether a particular financial instrument should be included in a pool can change over time.
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, we measure 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.
Loans under the Credit Agreement may be advanced in U.S. dollars and certain foreign currencies, including euros, pounds sterling and Swiss francs. The Credit Agreement amended and restated BrightSpire OP’s prior $300.0 million revolving credit facility that would have matured on February 1, 2022.
Loans under the Credit Agreement may be advanced in U.S. dollars and certain foreign currencies, including euros, pounds sterling and Swiss francs. The Credit Agreement amended and restated the OP’s prior $300.0 million revolving credit facility that would have matured on February 1, 2022.
We define Distributable Earnings 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) 62 Table of Contents 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 GAAP and (x) certain material non-cash income or expense items that in the judgment of management should not be included in Distributable Earnings.
We define Distributable Earnings 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 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.
We also consider 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.
We also consider qualitative 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.
Other gain (loss), net During the year ended December 31, 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.
Other gain, net During the year ended December 31, 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.
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.
If we determine that a proposed acquisition presents excessive concentration risk, we 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.
Credit Losses The current expected credit loss (“CECL”) reserve for our 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.
Current Expected Credit Loss (“CECL” reserve) The CECL reserve for our 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.
The occurrence of an event of default will limit the ability of BrightSpire OP and its subsidiaries to make distributions and may result in the termination of the credit facility, acceleration of repayment obligations and the exercise of remedies by the Lenders with respect to the collateral.
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.
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.
BRSP 2021-FL1 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 $670.0 million of investment grade notes.
Our model principally utilizes historical loss rates derived from a commercial mortgage-backed securities database with historical losses from 1998 through December 2022 provided by a third party, Trepp LLC, forecasting the loss parameters using a scenario-based statistical approach over a reasonable and supportable forecast period of twelve months, followed by a straight-line reversion period of twelve-months back to average historical losses.
Our model principally utilizes historical loss rates derived from a commercial mortgage-backed securities database with historical losses from 1998 through December 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.
Market conditions could impact property valuations and continuing compliance with those annual tests, resulting in a cash trap subject to LTV rebalancing. This five-year remaining lease term along with risk of a downward rent adjustment at the 2030 renewal, and the increase in interest rates, could adversely impact the refinancing or sale of the asset.
Market conditions could impact property valuations and continuing compliance with these annual tests, resulting in a cash trap subject to LTV rebalancing. This five-year remaining lease term along with risk of a downward rent adjustment at the 2030 renewal, and the increase in interest rates, could adversely impact the refinancing or sale of the asset.
(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 December 31, 2022. (3) The timing of future principal payments was estimated based on expected future cash flows of underlying collateral loans.
(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 December 31, 2023. (3) The timing of future principal payments was estimated based on expected future cash flows of underlying collateral loans.
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.
To the extent certain of our borrowers are experiencing significant financial dislocation as a result of economic conditions, we have and may continue to use interest and other reserves and/or replenishment obligations of the borrower and/or guarantors to meet current interest payment obligations for a limited period.
Beginning in 2021, our investment and portfolio management and risk assessment practices diligence the environmental, social and governance (“ESG”) standards of our business counterparties, including borrowers, sponsors 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.
Beginning in 2021, our investment and portfolio management and risk assessment practices diligence the environmental, social and governance (“ESG”) standards of our business counterparties, including borrowers, sponsors and that of our investment assets and underlying collateral, which may include sustainability 71 Table of Contents 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.
(2) Represents the percent leased as of December 31, 2022. Weighted average calculation based on carrying value at our share as of December 31, 2022. (3) Based on in-place leases (defined as occupied and paying leases) as of December 31, 2022, and assumes that no renewal options are exercised.
(2) Represents the percent leased as of December 31, 2023. Weighted average calculation based on carrying value at our share as of December 31, 2023. (3) Based on in-place leases (defined as occupied and paying leases) as of December 31, 2023, and assumes that no renewal options are exercised.
Our net interest income, which includes the amortization of purchase premiums and the accretion of purchase discounts, varies primarily as a result of changes in market interest rates, prepayment rates on our CRE loans, prepayment speeds and the ability of our borrowers to make scheduled interest payments.
Our net interest income, which includes the amortization of purchase premiums and the accretion of purchase discounts, varies primarily 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.
Factors considered by us 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.
Factors considered by us when 72 Table of Contents 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.
As of December 31, 2022, we were in compliance with all of our financial covenants under the Credit Agreement. Master Repurchase Facilities Currently, our primary source of financing is our Master Repurchase Facilities, which we use to finance the origination of senior loans.
As of December 31, 2023, we were in compliance with all of our financial covenants under the Credit Agreement. Master Repurchase Facilities Currently, our primary source of financing is our Master Repurchase Facilities, which we use to finance the origination of senior loans.
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, pursuant to the indenture agreement.
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.
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.
In conjunction with this review, we assess the risk factors of each senior and mezzanine loan 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.
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.
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 64 Table of Contents performance independent of the Company’s capital structure and indebtedness.
During the term of a repurchase agreement, we receive the principal and interest on the related loans 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 term of a repurchase agreement, we receive the principal and interest on the related loans 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.
During 2022, we reviewed and evaluated our critical accounting policies and estimates and we believe they are appropriate. The following is a summary of our credit losses policy, which we believe is the most affected by our judgments, estimates, and assumptions.
During 2023, we reviewed and evaluated our critical accounting policies and estimates and we believe they are appropriate. The following is a summary of our credit losses policy, which we believe is the most affected by our judgments, estimates, and assumptions.
(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 December 31, 2022.
(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 December 31, 2023.
We maintain a series of USD-NOK forward swaps in order to minimize our foreign currency cash flow risk. These forward swaps occur quarterly 55 Table of Contents 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 2024.
We maintain a series of USD-NOK forward swaps 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 2024.
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 65 Table of Contents or more interests in a whole loan.
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.
Our net property operating income depends on our ability to maintain the historical occupancy rates of our real estate equity investments, lease currently available space and continue to attract new tenants. Changes in fair value of our assets We consider and treat our assets as long-term investments.
Our net property operating income depends on our ability to maintain the historical occupancy rates of our real estate equity investments, lease currently available space and continue to attract new tenants. 45 Table of Contents Changes in fair value of our assets We consider and treat our assets as long-term investments.
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.
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 63 Table of Contents needs.
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.
CLNC 2019-FL1 In October 2019, we executed a securitization transaction through our wholly-owned subsidiaries, CLNC 2019-FL1, Ltd. and CLNC 2019-FL1, LLC, 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.
(2) Carrying value at our share represents the proportionate carrying value based on ownership by asset as of December 31, 2022. (3) Net carrying value represents carrying value less any associated financing as of December 31, 2022.
(2) Carrying value at our share represents the proportionate carrying value based on ownership by asset as of December 31, 2023. (3) Net carrying value represents carrying value less any associated financing as of December 31, 2023.
(2) Represents carrying values at our share as of December 31, 2022; includes real estate tangible assets, deferred leasing costs and other intangible assets less intangible liabilities.
(2) Represents carrying values at our share as of December 31, 2023; includes real estate tangible assets, deferred leasing costs and other intangible assets less intangible liabilities.
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 December 31, 2022.
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 December 31, 2023.
(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.
(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 for the in place collateral as of the date of the most recent as-is appraisal. Mezzanine loans include attachment loan-to-value and detachment loan-to-value, respectively.
NOI may fail to capture significant trends in these components of GAAP net income (loss) which further limits its usefulness. 64 Table of Contents NOI should not be considered as an alternative to net income (loss), determined in accordance with GAAP, as an indicator of operating performance.
NOI may fail to capture significant trends in these components of 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 GAAP, as an indicator of operating performance.
The increase was primarily due to a net increase of $44.9 million on two Long 58 Table of Contents Island City, New York office senior loans recorded during the third quarter of 2022 and an increase in reserves on office loans during the fourth quarter of 2022.
The increase was primarily due to a net increase of $44.9 million on two Long Island City, New York office senior loans recorded during the third quarter of 2022 and an increase in reserves on office loans during the fourth quarter of 2022.
As of June 17, 2021, the 68 Table of Contents 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.
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.
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.
If through this analysis of credit quality, the asset management team encounters declines in credit quality not in accordance with the original business plan, the team evaluates the risks and determines 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.
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.
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.
On January 28, 2022, BrightSpire Capital Operating Company, LLC (“BrightSpire OP”) (together with certain subsidiaries of BrightSpire 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.
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.
For the year ended December 31, 2022 includes 3.1 million OP units until their redemption in May 2022. For the years ended December 31, 2021 and 2020, weighted average number of common shares includes 3.1 million OP units.
For the year ended December 31, 2022 includes 3.1 million OP units until their redemption in May 2022. For the year ended December 31, 2021 weighted average number of common shares includes 3.1 million OP units.
As a result, a resolution has the potential to result in a future valuation impairment or investment loss. Net Leased and Other Real Estate Our net leased real estate investment strategy focuses on direct ownership in commercial real estate with an emphasis on properties with stable cash flow, which may be structurally senior to a third-party partner’s equity.
The sale resolution may result in a valuation impairment or investment loss. Net Leased and Other Real Estate Our net leased real estate investment strategy focuses on direct ownership in commercial real estate with an emphasis on properties with stable cash flow, which may be structurally senior to a third-party partner’s equity.
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.
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 for the in place collateral as of the date of the most recent appraisal.
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.
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 for the in place collateral as of the date of the most recent appraisal.
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%.
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 2023 resulted in an LTV above the current 70% threshold.
Given the uncertainty in the office market, there is risk of future valuation impairment or investment loss on our loans secured by office properties. 44 Table of Contents Factors Impacting Our Operating Results Our results of 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 senior loans, mezzanine loans, preferred equity, debt securities, net leased properties and our other assets, and the level of our net operating income (“NOI”).
Factors Impacting Our Operating Results Our results of 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 senior loans, mezzanine loans, preferred equity, debt securities, net leased properties and our other assets, and the level of our net operating income (“NOI”).
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 has a weighted average remaining lease term of six years and the tenant has the option to extend for two five-year periods at the same terms with rent adjusted to market rent, with the ability to reduce their total occupied space, and there is a risk that the rent can decrease at that time.
Debt-to-Equity Ratio The following table presents our debt-to-equity ratio: December 31, 2022 December 31, 2021 Debt-to-equity ratio (1) 2.0x 2.0x _________________________________________ (1) Represents (i) total outstanding secured debt less cash and cash equivalents of $306.3 million and $259.7 million at December 31, 2022 and December 31, 2021, respectively to (ii) total equity, in each case, at period end.
Debt-to-Equity Ratio The following table presents our debt-to-equity ratio: December 31, 2023 December 31, 2022 Debt-to-equity ratio (1) 1.9x 2.0x _________________________________________ (1) Represents (i) total consolidated outstanding secured debt less cash and cash equivalents of $257.5 million and $306.3 million at December 31, 2023 and December 31, 2022, respectively to (ii) total equity, in each case, at period end.
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.
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 2. Low Risk 3. Medium Risk 4.
Financing on the Norway Net Lease consists of a mortgage payable of $162.4 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.
Financing on the Norway Net Lease consists of a mortgage payable of $157.2 million (NOK 1.6 billion) with a fixed rate of 3.9%, which matures in June 2025, at which time there will be five years remaining on the initial lease term.
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.
BRSP 2021-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 BRSP 2021-FL1, subject to the satisfaction of certain conditions set forth in the indenture. The reinvestment period for BRSP 2021-FL1 expired on July 20, 2023.
We apply a discounted cash flow (“DCF”) methodology for financial instruments where the borrower is experiencing financial difficulty based on our assessment at the reporting date, and the repayment is expected to be provided substantially through the operation or sale of the collateral.
We apply a discounted cash flow (“DCF”) methodology to determine the fair value of the collateral where it is probable that we will foreclose or the borrower is experiencing financial difficulty based on our assessment at the reporting date, and the repayment is expected to be provided substantially through the operation or sale of the collateral.
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: 46 Table of Contents 1. Very Low Risk— The loan is performing as agreed.
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: 1. Very Low Risk 2. Low Risk 3. Medium Risk 47 Table of Contents 4.
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.
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.
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 date hereof, the borrowing base valuation is sufficient to permit borrowings of up to $165.0 million.
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.
This was primarily due to an increase in employee compensation following the internalization of our management and operating functions (the “Internalization”) on April 30, 2021, partially offset by lower stock compensation expense during the year ended December 31, 2022.
This was primarily due to an increase in employee compensation following the internalization of our management and operating functions (the “Internalization”) on April 30, 2021, partially offset by lower stock compensation expense during the year ended December 31, 2022. 61 Table of Contents Operating expense Operating expense decreased by $3.2 million to $14.6 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021.
Cash Flows The following presents a summary of our consolidated statements of cash flows for the years ended December 31, 2022, 2021 and 2020 (dollars in thousands): Year Ended December 31, Cash flow provided by (used in): 2022 2021 2020 Operating activities $ 125,277 $ (21,270) $ 96,356 Investing activities 89,337 (555,789) 1,002,742 Financing activities (161,451) 384,356 (754,062) 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.
Cash Flows The following presents a summary of our consolidated statements of cash flows for the years ended December 31, 2023, 2022 and 2021 (dollars in thousands): Year Ended December 31, Cash flow provided by (used in): 2023 2022 2021 Operating activities $ 137,624 $ 125,277 $ (21,270) Investing activities 384,160 89,337 (555,789) Financing activities (558,600) (161,451) 384,356 Operating Activities Cash inflows from operating activities are generated primarily through interest received from loans and preferred equity held for investment, and property operating income from our real estate portfolio.
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.
This property is 100% occupied by a creditworthy single tenant. 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.
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 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 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 years ended December 31, 2022, 2021 and 2020: Year Ended December 31, 2022 2021 2020 Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders $ 45,788 $ (101,046) $ (353,299) Adjustments: Net (income) loss attributable to non-net leased and other real estate portfolios (1) (32,342) 109,565 330,987 Net income (loss) attributable to noncontrolling interests in investment entities (12) (79) (7,201) Amortization of above- and below-market lease intangibles (364) (97) (415) Interest income — 18 (15) Interest expense on real estate 28,717 32,278 48,860 Other income (18) (3) (949) Transaction, investment and servicing expense 681 (35) 864 Depreciation and amortization 33,886 36,162 59,766 Impairment of operating real estate — — 42,814 Operating expense 231 233 379 Other gain on investments, net (10,287) (4,691) (11,829) Income tax expense (benefit) 231 (68) (327) NOI attributable to noncontrolling interest in investment entities (1,200) (15,323) (11,680) Total NOI, at share $ 65,311 $ 56,914 $ 97,955 ________________________________________ (1) Net income (loss) attributable to non-net leased and other real estate portfolios includes net (income) loss on our senior and mezzanine loans and preferred equity, CRE debt securities and corporate business segments.
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 years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders $ (15,549) $ 45,788 $ (101,046) Adjustments: Net (income) loss attributable to non-net leased and other real estate portfolios (1) 14,426 (32,342) 109,565 Net income attributable to noncontrolling interests in investment entities (70) (12) (79) Amortization of above- and below-market lease intangibles (126) (364) (97) Interest income (71) — 18 Interest expense on real estate 26,024 28,717 32,278 Other income (437) (18) (3) Transaction, investment and servicing expense 317 681 (35) Depreciation and amortization 33,321 33,886 36,162 Impairment of operating real estate 7,590 — — Operating expense 95 231 233 Other (gain) loss on investments, net 1,660 (10,287) (4,691) Income tax (benefit) expense 527 231 (68) NOI attributable to noncontrolling interest in investment entities (1,204) (1,200) (15,323) Total NOI, at share $ 66,503 $ 65,311 $ 56,914 ________________________________________ (1) Net (income) loss attributable to non-net leased and other real estate portfolios includes net (income) loss on our senior and mezzanine loans and preferred equity and corporate and other business segments.
The increase was driven by $69.8 million related to 2022 financings and the full-year impact of 2021 financings for new loan originations, as well as higher LIBOR and SOFR interest rates.
Interest expense Interest expense increased by $56.3 million to $111.8 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021. The increase was driven by $69.8 million related to 2022 financings and the full-year impact of 2021 financings for new loan originations, as well as higher interest rates.
Refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” for additional details. 72 Table of Contents Critical Accounting Policies and Estimates Preparation of financial statements in accordance with U.S. generally accepted accounting principles requires the use of estimates and assumptions that involve the exercise of judgment and that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Critical Accounting Policies and Estimates Preparation of financial statements in accordance with U.S. generally accepted accounting principles requires the use of estimates and assumptions that involve the exercise of judgment and that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
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% 15.7 In August 2018 we acquired two warehouse distribution facilities located in Tracy, California and Tolleson, Arizona (the “Warehouse Distribution Portfolio”) for $292 million.
Asset Specific Net Leased and Other Real Estate Summaries 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) Principal amount of debt Final debt maturity date Net lease 1 Industrial Various - U.S. 2 2,787,343 RSF 100% 14.6 $ 200,000 Sep-33 In August 2018 we acquired two warehouse distribution facilities located in Tracy, California and Tolleson, Arizona (the “Warehouse Distribution Portfolio”) for $292 million.
Changes in market interest rates With respect to our proposed business operations, increases in interest rates, in general, may over time cause: • the value of our fixed-rate investments to decrease; • prepayments on certain assets in our portfolio 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 to reset, although on a delayed basis, to higher interest rates; • interest rate caps required by our borrowers to increase in cost; • to the extent we use leverage to finance our assets, the interest expense associated with our borrowings to increase; and • to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to increase.
Changes in market interest rates With respect to our business operations, increases in interest rates, in general, may over time cause: • the value of our fixed-rate investments to decrease; • prepayments on certain assets in our portfolio 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 to reset, although on a delayed basis, to higher interest rates; • interest rate caps required by our borrowers to increase in cost; • borrowers’ unwillingness to purchase new interest rate caps at loan maturity to qualify for an extension; • financial hardship to our borrowers, whose ability to service their debt as it is due and payable and to pass maturity extension tests may be materially adversely impacted, resulting in foreclosures; • to the extent we use leverage to finance our assets, the interest expense associated with our borrowings to increase; and • to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to increase.
Realized loss on mortgage loans and obligations held in securitization trusts, net During the year ended December 31, 2021, we recorded a $36.6 million realized loss on mortgage loans and obligations held in securitization trusts, net, primarily due to the $19.5 million realized loss upon sale of the retained investments in the subordinate tranches of one securitization trust in the second quarter of 2021.
Realized loss on mortgage loans and obligations held in securitization trusts, net During the year ended December 31, 2022, we recorded a realized loss of $0.9 million on mortgage loans and obligations held in securitization trusts, net due to the sale of retained investments in the subordinate tranches of a securitization trust.
Investing Activities Investing activities include cash outlays for acquisition of real estate, disbursements on new and/or existing loans, and contributions to unconsolidated ventures, which are partially offset by repayments and sales of loan receivables, distributions of capital received from unconsolidated ventures, proceeds from sale of real estate, as well as proceeds from maturity or sale of securities.
Investing Activities Investing activities include cash outlays for acquisition of real estate and disbursements on new and/or existing loans, which are partially offset by repayments and sales of loans and preferred equity held for investment, proceeds from sale of real estate, as well as proceeds from maturity or sale of securities.
This is partially offset by payment of interest expenses for credit 70 Table of Contents 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.
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. 70 Table of Contents Our operating activities provided net cash inflows of $137.6 million and $125.3 million for the years ended December 31, 2023 and 2022, respectively.
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% 7.7 In July 2018, we acquired a class A office campus in Stavanger, Norway (the “Norway Net Lease”) for $320 million.
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) Principal amount of debt Final debt maturity date Net lease 2 Office Stavanger, Norway 1 1,290,926 RSF 100% 6.4 $ 157,216 Jun-25 In July 2018, we acquired a class A office campus in Stavanger, Norway (the “Norway Net Lease”) for $320 million (NOK 2.6 billion).
Restructuring Charges During the year ended December 31, 2021, we recorded $109.3 million in restructuring costs related to the termination of our Management Agreement with our previous Manager.
This decrease was due to lower operating expenses following the Internalization on April 30, 2021. Restructuring Charges During the year ended December 31, 2021, we recorded $109.3 million in restructuring costs related to the termination of our Management Agreement with our previous Manager.
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 $3.4 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021, due to the sale of the retained interests of two securitization trusts in April 2021 and November 2022.
Net interest income on mortgage loans and obligations held in securitization trusts, net Net interest income on mortgage loans and obligation held in securitization trusts, net decreased by $2.7 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022 due to the sale of our final retained interest in a securitization trust in November 2022.
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.
As of date hereof, the borrowing base valuation is sufficient to permit borrowings of up to 66 Table of Contents $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.
Changes in the CECL reserve for our financial instruments are recorded in increase/decrease in current expected credit loss reserve on the consolidated statements 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 our consolidated balance sheets.
Loans are charged off when all or a portion of the principal amount is determined to be uncollectible. 73 Table of Contents Changes in the CECL reserve for our 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 held for investment or as a component of other liabilities for future loan fundings recorded on our consolidated balance sheets.
During the three months ended December 31, 2022, we did not make any share repurchases, and as of December 31, 2022, there was $81.7 million remaining available to make repurchases under the Stock Repurchase Plan.
During the year ended December 31, 2023, we did not make any share repurchases, and as of December 31, 2023, there was $50.0 million remaining available to make repurchases under the prior stock repurchase program.
During the year ended December 31, 2021 e quity in earnings (loss) of unconsolidated ventures was $131.1 million, primarily due to fair value loss adjustments recorded on three equity method investments during the second quarter of 2021. 59 Table of Contents Income tax benefit (expense) Income tax expense decreased by $3.8 million to $2.4 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021.
During the year ended December 31, 2021 e quity in earnings (loss) of unconsolidated ventures was $131.1 million , primarily due to fair value loss adjustments recorded on three equity method investments during the second quarter of 2021.
We have a written trading plan as part of the Share Repurchase Program that provides for share repurchases in open market transactions that is intended to comply with Rule 10b-18 under the “Exchange Act”. The Stock Repurchase Program will be utilized at our discretion and in accordance with the requirements of the SEC.
Under the Stock Repurchase Program, we may repurchase shares in open market purchases, in privately negotiated transactions or otherwise. We have a written trading plan as part of the Share Repurchase Program that provides for share repurchases in open market transactions that is intended to comply with Rule 10b-18 under the “Exchange Act”.
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. 63 Table of Contents 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 years ended December 31, 2022, 2021 and 2020: Year Ended December 31, 2022 2021 2020 Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders $ 45,788 $ (101,046) $ (353,299) Adjustments: Net income (loss) attributable to noncontrolling interest of the Operating Partnership 1,013 (1,803) (8,361) Non-cash equity compensation expense 7,888 14,016 4,367 Transaction costs — 109,321 3,294 Depreciation and amortization 33,949 36,447 59,159 Net unrealized loss (gain): Impairment of operating real estate and preferred equity — — 42,814 Other unrealized (gain) loss on investments (1,155) (47,352) 40,732 General CECL reserves 13,692 (2,684) 15,317 Loss (gain) on sales of real estate, preferred equity and investments in unconsolidated joint ventures (30,709) (66,827) 432 Adjustments related to noncontrolling interests (730) 1,254 (9,400) Distributable Earnings (Loss) attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership $ 69,736 $ (58,674) $ (204,945) Distributable Earnings (Loss) per share (1) $ 0.53 $ (0.44) $ (1.56) Adjustments: Fair value adjustments $ — $ 133,200 $ 158,776 Realized loss (gain) on hedges — 1,466 25,459 Realized loss on CRE debt securities and B-piece 797 38,842 74,759 Specific CECL reserves 56,944 1,251 92,126 PE Investments income tax benefit — — (13,025) Adjusted Distributable Earnings attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership $ 127,477 $ 116,085 $ 133,150 Adjusted Distributable Earnings per share (1) $ 0.98 $ 0.87 $ 1.01 Weighted average number of common shares and OP units (1) 130,539 132,807 131,623 ________________________________________ (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).
The following tables present 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 years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders $ (15,549) $ 45,788 $ (101,046) Adjustments: Net income (loss) attributable to noncontrolling interest of the Operating Partnership — 1,013 (1,803) Non-cash equity compensation expense 14,056 7,888 14,016 Transaction costs — — 109,321 Depreciation and amortization 32,050 33,949 36,447 Net unrealized loss (gain): Impairment of operating real estate 7,590 — — Other unrealized loss (gain) on investments 1,747 (1,155) (47,352) General CECL reserves 26,983 13,692 (2,684) Gain on sales of real estate, preferred equity and investments in unconsolidated joint ventures — (30,709) (66,827) Adjustments related to noncontrolling interests (805) (730) 1,254 Distributable Earnings (Loss) attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership $ 66,072 $ 69,736 $ (58,674) Distributable Earnings (Loss) per share (1) $ 0.51 $ 0.53 $ (0.44) Adjustments: Specific CECL reserves $ 81,166 $ 56,944 $ 1,251 Fair value adjustments (9,055) — 133,200 Realized loss on hedges — — 1,466 Realized loss on CRE debt securities and B-piece — 797 38,842 Adjusted Distributable Earnings attributable to BrightSpire Capital, Inc. common stockholders and noncontrolling interest of the Operating Partnership $ 138,183 $ 127,477 $ 116,085 Adjusted Distributable Earnings per share (1) $ 1.06 $ 0.98 $ 0.87 Weighted average number of shares of Class A common stock and OP units (1) 129,794 130,539 132,807 ________________________________________ (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).
Comparison of Year Ended December 31, 2021 and Year Ended December 31, 2020 Net Interest Income Interest income Interest income increased by $12.0 million to $168.8 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020.
Comparison of Year Ended December 31, 2022 and Year Ended December 31, 2021 Net Interest Income Interest income Interest income increased by $67.3 million to $236.2 million for the year ended December 31, 2022, as compared to the year ended December 31, 2021.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeForeign 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.
Biggest changeChanges 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.
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.
Fluctuations in SOFR may affect the amount of interest income we earn on our floating rate borrowings and interest expense we incur on borrowings indexed to SOFR, including under credit facilities and investment-level financing.
Financial Statements The financial statements and the supplementary financial data required by this item appear in Item 6 and Item 15 of this Annual Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None.
Financial Statements The financial statements and the supplementary financial data required by this item appear in Item 15 of this Annual Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None.
A summary of the foreign exchange contracts in place at December 31, 2022, including notional amount and key terms, is included in Note 14, “Derivatives,” to Part IV, Item 15, “Exhibits and Financial Statements Schedules.” The maturity dates of these instruments approximate the projected dates of related cash flows for specific investments.
A summary of the foreign exchange contracts in place at December 31, 2023, including notional amount and key terms, is included in Note 14, “Derivatives,” to Part IV, Item 15, “Exhibits and Financial Statements Schedules.” The maturity dates of these instruments approximate the projected dates of related cash flows for specific investments.
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 December 31, 2022, we do not expect any counterparty to default on its obligations. Item 8.
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 December 31, 2023, we do not expect any counterparty to default on its obligations. Item 8.
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 75 Table of Contents macroeconomic factors beyond our control, including the COVID-19 pandemic, which have and may continue to affect occupancy rates, capitalization rates and absorption rates.
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.
Default rates are subject to a wide variety of factors, including, but not limited to, borrower financial condition, property performance, property management, supply/demand factors, construction trends, consumer behavior, regional economics, interest rates, the strength of the U.S. economy and other factors beyond our control, all of which have and may continue to be detrimentally impacted by the COVID-19 pandemic.
Default rates are subject to a wide variety of factors, including, but not limited to, borrower financial condition, property performance, property management, supply/demand factors, construction trends, consumer behavior, regional economics, interest rates, the strength of the U.S. economy and other factors beyond our control, all of which have and may continue to be 74 Table of Contents detrimentally impacted by the COVID-19 pandemic.
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. For the year ended December 31, 2022, and through February 17, 2023, we have not received any margin calls under our Master Repurchase Facilities.
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. For the year ended December 31, 2023, and through February 20, 2024, we have not received any margin calls under our Master Repurchase Facilities.
Moreover, with respect to certain of the instruments used as hedges, there is exposure to the risk that the counterparties may cease making 74 Table of Contents markets and quoting prices in such instruments, which may inhibit the ability to enter into an offsetting transaction with respect to an open position.
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 December 31, 2022, 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 $8.5 million annually, net of interest expense.
Our profitability may be adversely affected during any period as a result of changing interest rates. As of December 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 $7.4 million annually, net of interest expense.
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.
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. 75 Table of Contents Foreign Currency Risk We have foreign currency rate exposures related to our foreign currency-denominated investments held by our foreign subsidiaries.
A 1.0% change in the foreign currency rate would result in a $0.6 million increase or decrease in translation gain or loss included in other comprehensive income in connection with our European subsidiary.
At December 31, 2023, we had approximately NOK 588.9 million or a total of $57.9 million, in net investments in our European subsidiaries. A 1.0% change in the foreign currency rate would result in a $0.6 million increase or decrease in translation gain or loss included in other comprehensive income in connection with our European subsidiary.
Removed
The type of hedging instruments that we employ on our foreign subsidiary investments are put options. At December 31, 2022, we had approximately NOK 602.5 million or a total of $61.2 million, in net investments in our European subsidiaries.

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