BrightSpire Capital(US:BRSP)2020-11-06 23:08Part I. Financial Information This section provides the company's unaudited consolidated financial statements, management's discussion, market risk disclosures, and internal controls Financial Statements This section presents the unaudited consolidated financial statements, reflecting a net loss of $300.8 million and a decrease in total assets to $6.5 billion as of September 30, 2020 Consolidated Financial Statements Total assets decreased to $6.51 billion as of September 30, 2020, with a net loss of $314.3 million for the nine-month period Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2020 (Unaudited) | Dec 31, 2019 | | :--- | :--- | :--- | | Total Assets | $6,511,657 | $7,414,306 | | Loans and preferred equity held for investment, net | $2,103,414 | $2,576,332 | | Real estate, net | $1,133,318 | $1,484,796 | | Total Liabilities | $4,494,765 | $5,212,956 | | Credit facilities | $608,632 | $1,099,233 | | Total Stockholders' Equity | $1,703,385 | $2,119,022 | Consolidated Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $25,223 | $26,111 | $78,017 | $71,996 | | Total Expenses | $70,597 | $473,527 | $301,255 | $773,611 | | Provision for loan losses | $10,404 | $110,314 | $80,285 | $220,572 | | Impairment of operating real estate | $3,451 | $272,722 | $33,512 | $282,846 | | Net Income (Loss) | $6,430 | $(401,995) | $(314,295) | $(497,828) | | Net Income (Loss) per Share | $0.04 | $(2.77) | $(2.34) | $(3.51) | Notes to Consolidated Financial Statements The notes provide detailed explanations of the company's accounting policies and financial results, including the impact of COVID-19, CECL adoption, and segment realignment - The company operates as a commercial real estate (CRE) credit REIT, externally managed by a subsidiary of Colony Capital, Inc5254 - The COVID-19 pandemic has significantly impacted investments, especially in hospitality and retail, causing declines in operating cash flows and potential payment defaults5859 Impact of CECL Adoption on January 1, 2020 (in thousands) | Item | Impact Amount | | :--- | :--- | | CECL reserve on Loans and preferred equity held for investment, net | $21,093 | | CECL reserve on Accrued and other liabilities | $2,093 | | Total Impact on Accumulated Deficit | $23,186 | - In Q3 2019, the company realigned its business into two segments: the 'Core Portfolio' and the 'Legacy, Non-Strategic Portfolio'396401 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses business strategy, the significant impact of COVID-19, and actions taken to preserve cash and liquidity, including asset sales and debt reduction - The company's primary focus since COVID-19 has been on cash preservation and liquidity, including $531.6 million in debt reduction and dividend suspension, with resumption expected in 2021445449455 - In Q3 2020, the Core loan portfolio collected all interest payments, and the Core net leased portfolio collected 98% of rents, while the Legacy portfolio collected 86.5%452453 - The company recapitalized its Los Angeles Mixed-use project, converting mezzanine and preferred equity into a B-participation in an upsized mezzanine loan, eliminating future funding commitments450505 - As of November 5, 2020, the company had approximately $438 million in cash and $171.0 million available on its bank facility, enabling new investments457673 Quantitative and Qualitative Disclosures About Market Risk The company faces significant market risks, including interest rate, credit, and capital market risks, all exacerbated by the COVID-19 pandemic - A 100 basis point increase in interest rates would decrease annual net interest income by $13.1 million724 - Significant credit risk from loan defaults and tenant non-payments is actively managed through modifications and restructurings727728729 - Capital market disruptions from COVID-19 led to margin calls, mitigated by amended credit facilities and margin call holidays735736 - Foreign currency exposure of approximately $265.4 million in European investments means a 1.0% change in rates would result in a $2.7 million change in other comprehensive income739 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter743 - No material changes were made to the company's internal control over financial reporting during the third quarter of 2020744 Part II. Other Information This section covers legal proceedings, updated risk factors, and disclosures regarding unregistered sales of equity securities and use of proceeds Legal Proceedings The company is not currently subject to any material legal proceedings and anticipates no material adverse effects from ordinary course actions - As of the reporting date, the company is not involved in any material legal proceedings748 Risk Factors The COVID-19 pandemic significantly heightens existing risks, impacting asset valuations, capital access, borrower delinquencies, and the company's hedging strategy - The COVID-19 pandemic is a primary risk, negatively impacting asset values, access to capital, and the financial stability of borrowers and tenants749750 - Inability to access funding on attractive terms, exacerbated by market dislocations, could lead to forced asset sales at depressed prices to meet obligations like margin calls758760 - Termination of certain interest rate hedges has increased exposure to interest rate fluctuations, potentially negatively impacting results and liquidity764765 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered equity sales during the nine months ended September 30, 2020, despite an authorized $300.0 million stock repurchase program - The company has a $300.0 million stock repurchase program in place, extended until March 31, 2021773 - No shares were repurchased under the authorized program as of September 30, 2020339772