Real Estate Securities

12 Months Ended

Dec. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Investments in Investing VIEs

In the fourth quarter of 2022, the Company sold its retained investments in the subordinate tranches of one securitization trust for $36.9 million in total proceeds. As a result, the Company did not hold any subordinate tranches of securitization trusts as of December 31, 2022. In connection with the sale, the Company recorded an unrealized gain of $0.9 million and realized loss of $0.9 million as the accumulated losses related to the retained investments were reversed. These amounts, when incurred, are recorded as unrealized and realized gain (loss) on mortgage loans and obligations held in securitization trusts, net in the consolidated statement of operations. The Company also recorded a realized gain of $1.4 million as the sale proceeds from the transaction exceeded the GAAP book value of the Company’s retained investments at the time of sale. This amount, when incurred, is recorded as other gain (loss), net on the Company’s consolidated statement of operations. The Company also deconsolidated the securitization trust with approximate gross assets and liabilities of $682.8 million and $646.6 million, respectively, which excludes accrued interest receivable and payable amounts of $0.3 million and $0.3 million, respectively.

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

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

During the year ended December 31, 2021, the Company recognized unrealized gains of $41.9 million and realized losses of $36.6 million. In the second quarter of 2021, the Company sold its retained investments in the subordinate tranches of one securitization trust for $28.7 million in total proceeds. In connection with the sale, the Company recognized an unrealized gain of $19.5 million. The Company also recognized a realized loss of $19.5 million when the accumulated losses related to the retained investment were reversed and subsequently recorded to realized loss on mortgage loans and obligations held in securitization trusts, net. The Company deconsolidated the securitization trust with gross assets and liabilities of approximately $830.9 million and $802.2 million, respectively, which excludes accrued interest receivable and payable amounts of $3.0 million and $2.8 million, respectively.

As of December 31, 2021, the mortgage loans and the related mortgage obligations held in the securitization trust had an unpaid principal balance of $783.8 million and $681.2 million, respectively. As of December 31, 2021, the underlying collateral of the securitization trust consisted of 62 underlying commercial mortgage loans, with a weighted average coupon of 4.9% and a weighted average loan to value ratio of 60.7%.

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


	December 31, 2021
Assets
Mortgage loans held in a securitization trust, at fair value	$	813,310
Receivables, net	3,325
Total assets	$	816,635
Liabilities
Mortgage obligations issued by a securitization trust, at fair value	$	777,156
Accrued and other liabilities	3,032
Total liabilities	$	780,188

The Company elected the fair value option to measure the assets and liabilities of the securitization trusts, which requires that changes in valuations of the securitization trusts be reflected in the Company’s consolidated statements of operations.

As of December 31, 2021, the difference between the carrying values of the mortgage loans held in securitization trusts and the carrying value of the mortgage obligations issued by securitization trusts was $36.2 million and approximates the fair value of the Company’s retained investments in the subordinate tranches of the securitization trusts, which are eliminated in consolidation. Refer to Note 13, “Fair Value” for a description of the valuation techniques used to measure fair value of assets and liabilities of the Investing VIEs.

The below table presents net income attributable to the Company’s common stockholders for the years ended December 31, 2022, 2021 and 2020 generated from the Company’s investments in the subordinate tranches of the securitization trusts (dollars in thousands):


	Year Ended December 31,
		2022		2021		2020
Statement of Operations
Interest expense		$	—	$	—	$	(427)
Interest income on mortgage loans held in securitization trusts		32,163		51,609		92,461
Interest expense on mortgage obligations issued by securitization trusts		(29,434)		(45,460)		(83,952)
Net interest income		2,729		6,149		8,082
Operating expense		(671)		(1,308)		(1,476)
Unrealized gain (loss) on mortgage loans and obligations held in securitization trusts, net		854		41,904		(50,521)
Realized loss on mortgage loans and obligations held in securitization trusts, net		(854)		(36,623)		—
Net income (loss) attributable to BrightSpire Capital, Inc. common stockholders		$	2,058	$	10,122	$	(43,915)