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Earnings call: BrightSpire Capital Q3 2023 Results Show Solid Liquidity and Low Leverage Amid Loan Portfolio Downgrades

EditorHari Govind
Published 01/11/2023, 07:40
BRSP
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BrightSpire Capital (NYSE:BRSP) reported a GAAP net income of $12.4 million, or $0.09 per share, and distributable earnings of $31 million, or $0.24 per share, for the third quarter of 2023. The firm also revealed an adjusted distributable income of $35.8 million, or $0.28 per share. Amid rising interest rates and Treasury market volatility, the company's liquidity stands at approximately $348 million with a leverage ratio of 1.9 times. Despite some multifamily loans being downgraded due to execution issues at the property level, the company's balance sheet remains robust with no debt or facility maturities until 2026.

Key takeaways from the call include:

  • The company's total assets stood at approximately $4.5 billion as of September 30, 2023, with a debt-to-assets ratio of 63% and a debt-to-equity ratio of 1.9 times.
  • BrightSpire Capital is closely monitoring 16% of the loan portfolio carrying value that has a risk ranking of 4.
  • The company plans to foreclose on a building in November and convert it to residential use, anticipating a related charge-off in the fourth quarter.
  • BrightSpire Capital is focusing on maintaining liquidity and closing the gap between market and book value, rather than engaging in stock buybacks.
  • A potential sale of a portion of the San Jose hotel is being considered, which would result in a significant paydown of the mortgage loan.

BrightSpire Capital is maintaining a cautious approach to its loan portfolio, downgrading loans in cases where there are execution issues at the property level. The company is currently in discussions with borrowers on extensions for two office properties in Miami and Blue Bell and expects to foreclose on a building in November to convert it to residential use.

In terms of capital allocation, the company's focus is on maintaining liquidity and closing the gap between market and book value. BrightSpire Capital expects opportunities to arise as regional banks cut back on construction loans. The company is also considering a potential sale of a portion of the San Jose hotel, which would result in a significant paydown of the mortgage loan.

The company provided an update on the Long Island City assets, stating that there has been solid interest in the Paragon building, and they are working on potential leases before considering a sale. The goal is to sell both the Paragon and Blanchard buildings as soon as economically beneficial, without holding them for a long-term lease-up. The call concluded with an invitation to contact the company for more details and a reminder to have a great holiday season.

InvestingPro Insights

In line with the latest real-time data from InvestingPro, BrightSpire Capital has a market capitalization of 735.72M USD. The company's P/E Ratio stands at -24.98, reflecting its current unprofitability. However, the PEG Ratio, which measures a stock's valuation while considering the company's earnings growth, is at a low 0.17, suggesting that BRSP's stock might be undervalued given its growth prospects. The company's revenue as of Q2 2023 was 410.43M USD, indicating a growth of 10.47% in the last twelve months.

Turning to InvestingPro Tips, it's important to note that BrightSpire Capital is expected to see growth in its net income this year. This aligns with the prediction from analysts that the company will turn profitable this year, as reflected in the upward revisions of earnings by 2 analysts. Despite the anticipated sales decline, the company's liquid assets exceed its short-term obligations, providing a degree of financial stability. Moreover, BRSP pays a significant dividend to shareholders, boasting a dividend yield of 14.13% as of September 2023.

For those interested in further insights and tips, InvestingPro provides a comprehensive list of additional tips for BRSP and various other companies.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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