BrightSpire Capital, Inc. (NYSE:BRSP) Q4 2022 Earnings Call Transcript

Mike Mazzei: That’s really I hate to say this, but that’s almost not really answerable right now. It’s so dynamic, it depends on the individual office asset as market as it always does. But then in terms of where rates are, where the CLO market is are going to be big driving factors. So, I am going to try to bring that back to a more concise answer. That is why today, that market is substantially frozen, and the transactions you are seeing really cannot persist. For instance, there was a CMBS securitization recently done with an office portfolio, with a debt yield was like in the high teens. I am going to throw out 18% is the number that sticks in my head, and like a sub-40% loan to value. That type of lending is going to happen in this market.

But those situations are going to be needles in the haystack and not representative of market. There is also some balance sheet lending that’s going on in the office market where assets are being lent on it. Basically land value and that is really a complete de-risking and that represent €“ what’s going on today is ostensibly due to a market being frozen and a state of flux. And as the dust settles over the next 1 year, 1.5 years, we think those loan to values that may have been 70% may kind of pull back to 60% of value. And then what value is at that time will be based on where the tenure settles out. My guess is that we are not going to see a tenure rate at one handle again, if we do, things are really bad. We are probably going to see tenure rates somewhere in the 3% handles, so you will probably see debt yields somewhere in the low-double digits.

Unidentified Analyst: Thank you. That’s helpful.

Operator: Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the floor back over to Mike Mazzei for closing comments. Over to you, sir.

Mike Mazzei: Thank you. Well, thank you for joining us today. And we look forward to our quarter one call with you early May. Thanks again and have a great day.

Operator: Thank you. Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.