Blackstone Mortgage Trust, Inc. (BXMT) Earnings

Management highlights

- Portfolio Turnover and Capital Reallocation • The firm received $1.2 billion in loan repayments in Q2 2026 (nearly all from pre-2023 seasoned loans), and an additional $1.4 billion in repayments in July 2026, all of pre-2023 vintage • $1.4 billion in new investments were closed in Q2, concentrated in high-conviction sectors with strong fundamentals: residential, industrial, and net lease • The firm has reduced total office exposure from 36% to 21% of the overall portfolio over the past year, improving portfolio composition • Over $1 billion of mostly office loans are in active sales processes, and a 686-key Hyatt Hotel in San Francisco is slated for sale to capitalize on improving market fundamentals and investor demand; sales will only proceed at management-identified attractive price points - New Sector Expansion • Entered the single-family homebuilder finance sector via a new joint venture, acquiring an initial $130 million portfolio of 36 granular loans across 10 U.S. states with an average commitment size of $12 million • The sector offers a $200 billion total addressable market, with mid-to-high teens levered risk-adjusted returns; banks have pulled back significantly from the sector, creating attractive market share opportunity • Continued deliberate organic growth of the net lease segment: the portfolio now stands at $661 million, with over $150 million in additional acquisitions closed or pending closing in July 2026 - Legacy Watch List and Asset Resolution • Achieved a 23% reduction in total watch list loans quarter-over-quarter, from $2.5 billion to $2 billion, via resolution of impaired assets and credit-enhancing modifications to the firm's largest watch list loan • Three new loan impairments were recorded in Q2: two traditional office loans and one mixed-use loan with a large office component, totaling ~$1 billion (5% of total investments), concentrated in underperforming office assets sensitive to elevated interest rates • Owned real estate portfolio totals 14 assets with $1.4 billion carrying value; the firm remains focused on reducing this exposure and reinvesting proceeds into target high-conviction investments - Capital Markets Activity • Issued $450 million of senior secured notes in May 2026, pre-funding the 2027 corporate debt maturity at the tightest new issue spread in firm history • After the 2027 notes are repaid, the firm will have a weighted average remaining corporate debt term of nearly five years, with no maturities until 2029 • 88% of total debt is now non-mark-to-market, with no mark-to-market provisions across the entire capital structure

Guidance

- Management maintained its long-standing target leverage range of 3.0x to 4.0x debt-to-equity; the slight Q2 2026 elevation to 3.9x is attributed to temporary timing differences in repayment and origination activity, and is not considered a shift in strategy - Distributable earnings for Q3 2026 are expected to face downward pressure from Q2 2026 loan impairments and the large volume of July 2026 repayments that have not yet been redeployed; no specific run-rate guidance is provided due to ongoing moving pieces in portfolio turnover - Dividend policy is tied to the long-term earnings power of the business, rather than short-term quarterly earnings volatility; the board will evaluate any potential adjustments based on updated portfolio fundamentals and deployment progress, with no predetermined changes announced at this time - Management expects ongoing tangible near-term results from portfolio repositioning initiatives, which are intended to create long-term shareholder value by transitioning the firm to a more diversified portfolio

Segment performance

Blackstone Mortgage Trust's total loan portfolio ended Q2 2026 at $17 billion across 133 loans, with an additional $1.4 billion in owned real estate carrying value, bringing total portfolio size to ~$20 billion. By sector allocation: office exposure makes up 21% of the total portfolio (down from 36% prior). Net lease investments total $661 million, representing 3% of the portfolio. The new single-family homebuilder finance segment holds $130 million of loan commitments in its initial joint venture portfolio. The majority of the current portfolio is allocated to residential/multifamily and industrial sectors, which have accounted for ~80% of total deployment over the past year. 97% of the loan portfolio was performing at quarter end, down 1% from Q1. Total watch list loans stood at $2 billion, a 23% reduction from Q1. Financial results: GAAP net loss was $0.48 per share, distributable earnings (DE) were $0.31 per share, and DE prior to realized gains/losses was $0.48 per share. Book value per share ended the quarter at $19.31, down 4% quarter-over-quarter. Total liquidity was $1.2 billion, with a debt-to-equity ratio of 3.9x.

Risks & headwinds

- Approximately $1 billion (5% of total investments) of watch list loans, mostly lower cash-flow office assets, face increased pressure from persistently elevated interest rates, which has already led to three new impairments in Q2 2026; borrowers may be less willing to inject additional subordinate capital going forward as assets approach maturities, potentially leading to further impairments or realized losses - Persistent fundamentals headwinds in specific office markets (such as Chicago) have already led to loan defaults, even after borrowers previously injected significant equity to support the assets - Near-term portfolio turnover and watch list resolution activities may create additional downward pressure on book value and quarterly earnings in upcoming quarters - Multifamily assets still face ongoing headwinds including negative year-over-year rent growth in some Sunbelt markets, and lingering new supply pressure through 2027 that could pressure borrower performance

Analyst Q&A

• Q: The firm has announced plans to market ~$1 billion of mostly office loans for sale. What is the status of pricing/reserving for these assets, and what are the capital allocation priorities for sale proceeds?

  A: The sales process is still in early stages. Proceeds will be rotated into the firm's highest conviction, best relative value strategies, including traditional lending, net lease, and the new homebuilder finance segment, in line with the firm's ongoing portfolio turnover strategy. Any sales will only proceed at attractive prices that make sense for long-term shareholder value.

• Q: Is the recent push to sell office loans driven by near-term earnings management, or long-term value creation? What is the firm's leverage plan if sales proceed?

  A: The decision is purely a long-term portfolio rotation strategy, not driven by near-term earnings. The leverage strategy remains unchanged, targeting a 3.0x to 4.0x debt-to-equity range, with temporary quarterly variability from timing of activity. There is no current plan to use sale proceeds to delever beyond this target range.

• Q: What is the outlook for multifamily credit risk, given ongoing rent pressure in some markets? Is M&A a planned activity for the firm amid recent industry restructuring?

  A: Multifamily broadly has very strong market liquidity, with $5 billion in repayments from 2021-2022 vintage loans, and improving fundamentals, including the strongest national net absorption in five years in H1 2026. Management always evaluates M&A opportunities that could deliver shareholder value, but is currently focused on executing its organic portfolio turnover strategy.

• Q: How does dividend policy interact with near-term earnings drag from portfolio repositioning? What are the plans for adjustments if shortfalls persist?

  A: Dividend policy is always set based on the long-term earnings power of the business, not short-term quarterly volatility. While recent impairments and redeployment lags may create near-term pressure, it is too early to determine if any adjustment will be needed, and the board will evaluate all relevant factors when making a quarterly decision.

• Q: What is the growth outlook and credit profile of the new homebuilder finance segment?

  A: The segment has a $200 billion total addressable market, with strong fundamentals from U.S. housing undersupply and large bank pullback creating opportunity. Loans are granular, geographically diverse, well-structured with strong recourse, and deliver attractive risk-adjusted returns. The firm has partnered with the sector's largest private lender to build out the segment, and is just getting started on growth.