Blackstone Mortgage Trust, Inc. Q3 FY2025 earnings call

• BXMT's strong third quarter results showed continued forward momentum in earnings power, credit, investment activity, and balance sheet optimization. Distributable earnings prior to charge-offs covered the dividend. • Book value was flat with no new impaired loans. • Robust investment activity across originations, portfolio acquisitions, and net lease, with $1 billion of total investments in Q3 and $1.7 billion in closing post quarter end. • Loan portfolio had $1.6 billion in repayments, no new impaired loans, resolved 2 impaired loans at a premium, and upgraded 8 loans. • Refinanced and extended over $2 billion of corporate debt, reducing cost of capital by 15 basis points in Q3. • Repurchased $16 million of common stock in Q3 and accelerated buybacks in Q4, with $140 million repurchased since 2024.

For the third quarter, BXMT reported GAAP net income of $0.37 per share and distributable earnings of $0.24 per share. Distributable earnings prior to charge-offs were $0.48 per share. The company had strong investment activity with $1 billion of total investments closed or in closing post quarter end. Loan originations were concentrated in multifamily and diversified industrial portfolios, with over 60% in international markets. Net lease portfolio grew to $222 million at BXMT's share, and they acquired a 50% interest in a $600 million portfolio of granular loans. The loan portfolio was 96% performing, with impaired loan balance declining 71% from last year's peak.

• Earnings expected to benefit from capital redeployment and resolutions of impaired loans, including unlocking earnings potential of recently resolved loans. • Continued share repurchases with Board approval to replenish $150 million buyback capacity. • Confidence in generating attractive, stable current income for investors through optimized financing structures and capital deployment.

• Market volatility and uncertainties outside the company's control could affect actual results. • Credit risks associated with impaired loans and REO portfolio if not resolved effectively. • Dependence on capital markets and potential changes in interest rates impacting cost of capital and investment returns.

Q: Can you provide more color on transaction activity recovery in U.S. and Europe and origination pivot to U.S. loans?

A: Liquidity returned to both U.S. and Europe markets, with U.S. having a stronger CMBS market. BXMT's platform looks across regions for relative value, with U.S. being the largest market for investment activity but both regions considered.

Q: Potential earnings uplift from REO portfolio and condition of New York City hotel?

A: REO assets have opportunity to drive additional earnings power when exited. New York City hotel is in good shape with no significant CapEx needed and $1.3 billion liquidity.

Q: How do you think about originating new loans vs buybacks and relative value math?

A: Continuously evaluate both, with share buybacks active when stock trades at attractive levels providing high return on investment.

Q: Spillover effects into CRE market and defensive measures?

A: No significant spillover seen in real estate credit, which is in recovery mode. Credit standards higher post downturn, with improved credit overall in BXMT portfolio.

Q: Pace of net deployment and target leverage?

A: Healthy repayment activity leading to new investment activity, with leverage at 3.5x, target range, and comfortable with balance sheet.

Q: Path to covering dividend and funding cost rate outlook?

A: Confident in long-term sustainable dividend with opportunity to redeploy capital in REO and impaired loan portfolio offsetting lower rate environment. Funding cost rate move only impacts about 150 basis points.

Q: Office market fundamentals and reserves?

A: Office market showing stability and improvement with 6 office loans upgraded, 2 removed from watch list. Reserves are appropriate and based on detailed asset-by-asset analysis.