BrightSpire Capital (BRSP) risk factors, FY2025 10-K

Risks Related to Our Business and Our Investments

1. 01The real estate investment business is highly competitive and our success depends on our ability to compete, including attracting and retaining qualified executives and key personnel in our vertically integrated investment and asset management business structure
2. 02We may not be able to hire and retain qualified loan originators or grow and maintain our relationships with key loan brokers, and if we are unable to do so, our ability to implement our business and growth strategies could be limited
3. 03Our ability to achieve our investment objectives and to pay distributions depends in substantial part upon our performance and the performance of our third-party servicers
4. 04Our CRE debt, select equity and securities investments are subject to the risks typically associated with real estate
5. 05In addition, we also own and may acquire additional properties, including through foreclosure or deed-in-lieu of foreclosure of CRE investments, and therefore are directly subject to the foregoing risks of owning real estate
6. 06The mezzanine loan assets that we have acquired and may acquire in the future will involve greater risks of loss than senior loans secured by income-producing properties
7. 07Participating interests may not be available and, even if obtained, may not be realized
8. 08Any 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 proceedings26% rewritten
9. 09Provisions for loan losses and impairment charges are difficult to estimate, particularly in a challenging economic environment and if they turn out to be incorrect, our results of operations and financial condition could be materially and adversely impacted
10. 10Prepayment rates may adversely affect the value of our portfolio of assets
11. 11We invest in preferred equity interests, which involve a greater risk than conventional senior, junior or mezzanine debt financing
12. 12We invest in commercial properties, including those subject to net leases, which could subject us to losses
13. 13In addition, net leases typically have longer lease terms and, thus, there is an increased risk that contractual rental increases or renewal rights and associated rates in future years will fail to result in fair market rental rates during those years34% rewritten
14. 14We may invest in CRE securities, including CMBS and CDOs and CRE CLOs, which entail certain heightened risks and are subject to losses
15. 15Adverse changes in general economic conditions could adversely impact our business, financial condition and results of operations24% rewritten
16. 16Adverse changes in general economic conditions may also disrupt the debt and equity capital markets and lack of access to capital or prohibitively high costs of obtaining or replacing capital may materially and adversely affect our business
17. 17Inflation, along with government measures to control inflation, may have an adverse effect on our investments
18. 18Federal government decisions, actions and inactions regarding, among other things, Federal Reserve independence, immigration and tariffs, may adversely affect our businessNew
19. 19Any or all of these factors could materially and adversely affect our business, results of operations and financial condition and our ability to pay distributions to our stockholdersNew
20. 20We 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
21. 21We may not have control over certain of our loans and investments
22. 22Most of the commercial mortgage loans that we originate or acquire are non-recourse loans
23. 23We may be subject to risks associated with future advance or capital expenditure obligations, such as declining real estate values and operating performance
24. 24We may be unable to restructure our investments in a manner that we believe maximizes value, particularly if we are one of multiple creditors in a large capital structure
25. 25We have invested in, and may continue to invest in, certain assets with variable credit quality, which may increase our risk of losses and may reduce distributions to stockholders and may adversely affect the value of our common stock
26. 26Insurance may not cover all potential losses on CRE investments, which may impair the value of our assets
27. 27The leases at the properties underlying CRE debt investments or the properties held by us may not be relet or renewed on favorable terms, or at all, which may result in a reduction in our net income, and as a result we may be required to reduce or eliminate cash distributions to stockholders
28. 28Our investment strategy may not be successful, or there may be delays, in locating or allocating suitable investments, which could limit our ability to make distributions and lower the overall return on stockholders’ investment
29. 29The 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
30. 30Because real estate investments are relatively illiquid, we may not be able to vary our portfolio in response to changes in economic and other conditions, which may result in losses to us
31. 31Our joint venture partners could take actions that decrease the value of an investment to us and lower our overall return
32. 32Any investments that are not denominated in U.S. dollars subject us to currency rate exposure and may adversely impact our status as a REIT23% rewritten
33. 33Our recent operations in Europe and in the future, other foreign countries expose our business to risks inherent in conducting business in foreign markets
34. 34Concerns 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 foreign assets and obligations

Risks Related to Our Company and Our Structure

1. 35We have not established a minimum distribution payment level, and we cannot assure you of our ability to pay distributions in the future
2. 36No assurance can be given that we will continue to make distributions to our stockholders in the future or that the level of any distributions we do make to our stockholders will achieve a market yield or increase or even be maintained over time, any of which could materially and adversely affect us
3. 37Certain provisions of Maryland law may limit the ability of a third party to acquire control of us
4. 38Ownership limitations may delay, defer or prevent a transaction or a change in our control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders
5. 39Our 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
6. 40Our charter permits our Board of Directors to issue stock with terms that may subordinate the rights of our common stockholders or discourage a third party from acquiring us in a manner that could result in a premium price to stockholders
7. 41Failure to obtain, maintain or renew required licenses and authorizations necessary to operate our mortgage-related activities may have a material adverse effect on us
8. 42We are highly dependent on information systems and third-parties, and system failures or cybersecurity incidents incurred by us or the third-parties that we rely on could significantly disrupt our ability to operate our business

Risks Related to Our Financing Strategy

1. 43Our indebtedness may subject us to increased risk of loss and could adversely affect our results of operations and financial condition
2. 44Our master repurchase agreements impose, and additional lending facilities may impose, restrictive covenants, which would restrict our flexibility to determine our operating policies and investment strategy and to conduct our business
3. 45Interest rate fluctuations could reduce our ability to generate income on our investments and may cause losses
4. 46Hedging against interest rate and currency exposure, and conversely, closing out of such hedges, may adversely affect our earnings, limit our gains or result in losses, which could adversely affect cash available for distribution to our stockholders
5. 47We 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
6. 48Any warehouse facilities that we may obtain in the future may limit our ability to acquire assets, and we may incur losses if the collateral is liquidated

Risks Related to Regulatory Matters

1. 49The loss of our Investment Company Act exclusion could require us to register as an investment company or substantially change the way we conduct our business, either of which may have an adverse effect on us and the value of our common stock
2. 50We, 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

Risks Related to Taxation

1. 51We may pay taxable dividends in our common stock and cash, in which case stockholders may sell shares of our common stock to pay tax on such dividends, placing downward pressure on the market price of our common stock
2. 52Our qualification as a REIT involves complying with highly technical and complex provisions of the Code62% rewritten
3. 53assets 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 REITNew
4. 54We may incur adverse tax consequences if NorthStar I or NorthStar II were to have failed to qualify as a REIT prior to the Mergers
5. 55Dividends payable by REITs do not qualify for the preferential tax rates available for some dividends
6. 56REIT distribution requirements could adversely affect our ability to execute our business plan
7. 57Even if we continue to qualify as a REIT, we may face other tax liabilities that reduce our cash available for distribution to stockholders
8. 58Complying with REIT requirements may force us to forgo and/or liquidate otherwise attractive investment opportunities
9. 59The “taxable mortgage pool” rules may increase the taxes that we or our stockholders may incur, and may limit the manner in which we effect future securitizations
10. 60Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities
11. 61There is a risk of changes in the tax law applicable to REITs
12. 62Our ownership of assets and conduct of operations through our TRSs is limited and involves certain risks for us
13. 63Stockholders have limited control over changes in our policies and operations, which increases the uncertainty and risks they face as stockholders
14. 64If we are unable to implement and maintain effective internal controls over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected
15. 65Accounting 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
16. 66Environmental compliance costs and other potential environmental liabilities associated with our current or former properties or our CRE debt or real estate-related investments could materially impair the value of our investments and expose us to material liability59% rewritten
17. 67property damage). Some of our properties are or have been used for commercial or industrial purposes involving the use or presence of hazardous substances, materials or waste, which could have resulted in environmental impacts at or from these properties, including contamination of which we are not presently awareNew
18. 68These costs and liabilities, including for any required investigation, remediation, removal, fines, penalties, costs to comply with environmental law or personal or property injury or damages and our or our tenants’ or borrowers’ liability could significantly exceed the value of the property without any limits
19. 69Laws, regulations, corporate responsibility and/or sustainability-related initiatives or other issues related to climate change could have a material adverse effect on us75% rewritten
20. 70conduct operations. Furthermore, our reputation could be damaged if we violate climate change laws or regulations at the corporate and/or investment levelNew
21. 71The market price of our common stock may fluctuate significantly
22. 72We may issue additional equity securities, which may dilute your interest in us