BXMT - NYSE

At this time, I'd like to turn the conference over to Tim Hayes, Vice President, Shareholder Relations. Please go ahead.

Good morning, and welcome everyone to Blackstone Mortgage Trust first quarter 2026 earnings conference call. I'm joined today by Tim Johnson, Chief Executive Officer, Austin Peña, President, and Marcin Urbaszek, Chief Financial Officer. This morning, we filed our Form 10-Q and issued a press release of the presentation of our results, which are available on our website and have been filed with the SEC. I'd like to remind everyone that today's call may include forward-looking statements which are subject to risks, uncertainties, and other factors outside of the company's control. Actual results may differ materially. For a discussion of some of the risks that could affect results, please see the Risk Factors section of our most recent Form 10-K. We do not undertake any duty to update forward-looking statements.

We will also refer to certain non-GAAP measures on this call, and for reconciliations, you should refer to the press release and Form 10-Q. This audiocast is copyrighted material of Blackstone Mortgage Trust and may not be duplicated without our consent. For the first quarter, we reported a GAAP net loss of $0.04 per share, while distributable earnings were $0.21 per share and distributable earnings prior to realized gains and losses were $0.49 per share. A few weeks ago, we paid a dividend of $0.47 per share with respect to the first quarter. With that, I'll now turn the call over to Tim.

Thanks, Tim. BXMT's first quarter results clearly demonstrate the breadth of our platform and our ability to execute on both sides of the balance sheet amidst an ongoing real estate recovery. Our key competitive advantages drove distributable earnings prior to realized gains and losses of $0.49 per share, marking our third consecutive quarter of dividend coverage. We leveraged our scale and proprietary sourcing channels to capture attractive investments across a range of sectors, markets, and strategies, with a focus on several of our highest conviction themes, such as diversified industrial portfolios and essential use net lease properties. We also closed our first data center loan this quarter and invested in a diversified portfolio of low-leveraged loans originated by a leading U.K. bank. Investments offering compelling relative value, which Austin will detail further in his remarks.

Real estate fundamentals continue to recover, benefiting from steadily increasing values and the sharp decline in new supply across all major property types. The public equity markets recognize this, with REITs significantly outperforming the S&P 500 year to date. Despite recent global volatility driven by the conflict in the Middle East, real estate equity and debt markets have remained resilient. U.S. CMBS issuance is up nearly 15% from this time last year and on pace for yet another post-GFC record, and spreads sit 15 basis points tighter compared to the beginning of the year. In Europe, we've observed a slightly larger impact, with a slowdown in CMBS new issue activity and spreads modestly wider. However, real estate lending markets in the region remain open and active.

Just a few weeks ago, we were fully repaid on a GBP 177 million U.K. student housing loan that was refinanced by a bank syndicate. We are aware of several other large, recently awarded deals in the market. Importantly, we've observed no change in the fundamental performance across our U.K. and Europe portfolio. Today, BXMT is in an advantageous position. We have a well-invested portfolio generating strong in-place current income, allowing us to maximize return on new capital deployment. Leveraging our scaled platform of over 170 real estate debt professionals, we cast a wide net across the global real estate credit markets, both in terms of sourcing new opportunities and also driving strong capital markets execution, setting up diversified investments to generate highly compelling risk-adjusted returns.

To that end, our investments this quarter generated levered returns of 900 basis points over base rates, in line with our investment activity over the past year. We also accretively refinanced $700 million of corporate debt, issued $1.3 billion of securitized debt, and added a new non-mark-to-market credit facility to our 16 counterparty complex, all further demonstrating the strength and creativity of our dedicated capital markets team. Moving to the portfolio, we continue to be pleased with performance. We received over $600 million of repayments, with more than half in U.S. office. We resolved one impaired hospitality loan via foreclosure, and we executed on the sale of a multifamily property, the first from our owned real estate portfolio, as we capitalized on the supportive capital markets backdrop.

Thank you, Austin, and good morning, everyone. In the first quarter, BXMT reported GAAP net loss of $0.04 per share and distributable earnings or DE of $0.21 per share. DE included $46 million of realized losses related to the resolution of an impaired San Francisco hotel loan. We foreclosed on the property and now hold it on the balance sheet as owned real estate, with our basis representing an approximate 70% discount relative to the prior owner's cost basis. DE, prior to realized gains and losses, was $0.49 per share, covering our dividend for the third consecutive quarter. The $0.02 decline in this metric from the prior quarter was largely due to lower net operating income from owned real estate, reflecting the outsized seasonal benefit from hospitality properties recognized in the fourth quarter results, which we discussed on our last earnings call.

It is worth noting that we slightly amended our DE prior to charge off metrics this quarter to DE prior to realized gains and losses. This amendment reflects the evolving composition of our portfolio, though the spirit of the metric remains unchanged, which is to provide investors with a measure that we believe represents the ongoing earnings power of our business. Our own real estate portfolio generated $14 million of NOI this quarter and included a $3 million tax refund on one of our properties. Excluding this benefit, this represents an annualized asset yield on carrying value of approximately 3.5%, which we estimate is 250 to 300 basis points below yields we are achieving on new originations today. While some asset sales will take longer than others, rotating this capital provides further support to BXMT's earnings power over time.

Book value ended the first quarter at $20.20 per share, down modestly by 2.7% from the prior period, primarily due to a $0.33 per share increase in CECL reserves and $0.13 per share of depreciation and amortization or D&A related to our own real estate assets. In total, book value includes $0.57 per share of accumulated D&A and $1.80 per share of total CECL reserves, of which $1.30 per share is attributable to the general reserve. Turning to BXMT's capitalization, our balance sheet remains in excellent shape. We ended the quarter with $1 billion of liquidity. Our Q1 debt-to-equity ratio decreased to 3.7x from 3.9x in Q4 and remains squarely within our target range.

We were very active in the capital markets this quarter, taking advantage of robust liquidity and investor demand. We started by repricing approximately $700 million of our corporate term loan in early January, reducing our financing spread by 50 basis points. As a result of our proactive approach over the past few quarters, we ended Q1 with four years of weighted average remaining term on our corporate debt, with no maturities until 2027. Later in January, we issued our second reinvesting CLO, a $1 billion transaction, largely collateralized by new vintage investments. Reflecting this issuance and the addition of the new lending facility Tim mentioned earlier, total non-mark-to-market borrowings now represent about 86% of total debt, and we continue to have no capital markets mark-to-market provisions throughout our capital structure. In March, we closed our inaugural asset-backed securitization in our net lease joint venture.

The transaction was met with exceptional investor demand and was several times oversubscribed, driving an accretive execution and resulting in highly compelling structure and terms. Lastly, as Austin mentioned earlier, we also executed several senior loan syndications with attractive terms, underscoring our broad access to various sources of capital, which we believe is one of our key competitive advantages in the market. The benefits of our leading global real estate platform are driving results on both sides of our balance sheet and help position BXMT to deliver attractive risk-adjusted returns to our investors over time. Thank you again for joining us today, and I will now ask the operator to open the call to questions.

Thank you. As a reminder, please press star one to ask a question. We ask you limit yourself to one question and one follow-up question to allow as many callers to join the queue as possible. We will take our first question from Tom Catherwood with BTIG.

Got it. Appreciate the answers. Thanks, everyone.

Thank you. We'll take our next question from Rich Shane with JPMorgan.

Hey, guys. Thanks for taking my questions. Look, you have two loans in your top 10 that are maturing this year, New York Multi-Use and Chicago Office. One is rated three, one is rated four. Can you just talk a little bit about your strategy on those maturities and what we should expect?

Yeah. Thanks, Rick. I can take that. You know, I'd say we take a very active approach across our portfolio. You know, we're obviously in conversations with our borrowers about their plans in terms of capital markets execution, you know, really all the time. You know, we go through every loan every quarter. You know, in terms of, you know, those specific deals, you know, without getting into specifics, you know, we have dialogue with our borrowers, you know, around what their plans might be. I think, you know, we'll take a very proactive approach to the extent, you know, to the extent that their plans are evolving, you know, we will be quite active on that approach.

Okay. I understand you need to be a little bit circumspect on that. I get it. Second thing is you work through resolutions within the portfolio, and it sounds like you're gonna be pretty aggressive there. What should we think about as the sort of ambient?

CECL reserve rate, general reserve for new originations. We can sort of think about over time what the convergence back to general reserves would be.

Hey, Rick, it's Marcin. Thanks for joining us. Look, I think our general reserve right now, obviously there's a lot of factors that go into it. It's somewhere around 100 to 120 basis points. Obviously that's driven by, like I said, you know, the age of the portfolio, historical loss rates and things like that. We don't see that changing dramatically. Obviously, as, you know, we work through the resolutions and the realized losses become a little bit of a smaller factor over time, that might decline. Again, in the near term, we don't see that changing dramatically.

Got it. Okay. That's very helpful. Thank you, guys.

Thank you. We'll take our next question from Chris Muller with Citizens Capital Markets.

Hey, guys. Thanks for taking the questions. I'm hopping around calls this morning, so I apologize if I missed any of this. I wanted to ask about the bank loan portfolio acquisitions. I guess, what is driving these? Are the banks approaching you guys to reduce their CRE exposure? Do you expect more of this over 2026?

Sure. Thanks, Chris. It's Tim. I'd say, it's a bit multidimensional. It can depend on the situation. The bank loan portfolio, you know, this quarter was a little bit different in its structure, as an SRT structure versus an outright acquisition. In some cases, it's a capital relief transaction. In some cases, it's driven by M&A activity, which we would say is probably the main driver between in terms of the portfolio loan sale activity. That's banks in the U.S. predominantly, going through M&A. A lot of it kind of the fallout from what happened in the regional banking industry, in 2023. That M&A activity tends to accelerate loan sale activity.

So I'd say that's the biggest driver, but it does come from a few different dimensions. I'd say from a sourcing standpoint, this is one of the main areas we spend our time on, both within our real estate debt business and broadly at the firm, is working with financial institutions to help deliver them solutions across not just real estate, but the entirety of their, of their credit portfolio. It's a very, I'd say, diversified ecosystem of sourcing, and really built on the banking relationships we have at the firm over a really long time.

Got it. That's very helpful. I guess just a high-level one. The tenure keeps creeping higher. It's at 4.38 right now. How is that impacting borrower sentiment that you guys are seeing?

I'd say in terms of borrower sentiment, the good news is that, you know, even though, you know, the tenure has moved up, really as a result of, you know, the Middle East conflict and energy prices, the capital markets continue to be very, very active. CMBS issuance this year is up 15%, on top of a year last year that was a post GFC high. We continue to see borrowers coming to the market. I think that it might put a little bit of a potential slowdown on sales of real estate. That would be, you know, something that you might keep an eye on. In terms of the credit markets, year to date, CMBS spreads are actually 15 basis points tighter.

There's good credit availability and good capital availability, so borrowers are able to refinance their debt today, and are doing so quite actively.

Got it. Appreciate you guys taking the questions.

Thank you. We'll take our next question from Jade Rahmani with KBW.

Thank you very much. Can you give any further color on what drove the $55 million CECL provision? Perhaps you could parse out how much ballpark related to the studio downgrade and what the outlook is there.

Thank you.

Thank you. We'll take our next question from Harsh Hemnani with Green Street.

Got it. That's helpful. Thank you.

Thank you. We'll take our last question from Donald Fandetti with Wells Fargo.

Thank you.

Thank you. That will conclude our question and answer session. At this time, I'd like to turn the call back over to Tim Hayes for any additional or closing remarks.