Not all bad news at Blackstone Mortgage Trust Inc. (BXMT) latest earnings call
Blackstone Mortgage Trust Inc. (BXMT) reported a GAAP net loss of $0.38 per share, but distributable earnings were $0.49 per share, indicating strong operational performance despite challenges. The company declared a third-quarter dividend of $0.47 per share and authorized a $150 million common stock repurchase, reflecting confidence in long-term value creation. BXMT has a 90% performing portfolio at the end of the quarter, showing resilience and effective management. The company collected $1.7 billion in repayments through various lender profiles, indicating strong liquidity and repayment momentum.
However, BXMT faces ongoing financial challenges, particularly in the US office sector, where significant reserves represent 29% of impaired office assets. The company downgraded 12 loans, including three impairments, reflecting ongoing credit quality concerns. Near-term earnings are expected to be impacted by assets on non-accrual, and BXMT’s debt-to-equity ratio increased slightly to 3.9 times, indicating higher leverage and potential financial risk.
During the earnings call, executives provided insights into the company’s capital allocation strategy and portfolio management. When asked about the potential shrinkage of the portfolio, they emphasized that capital will be allocated where the best potential for risk-adjusted returns exists. Elevated repayments are seen as a positive sign of the portfolio’s refinanceability and credit quality. The partnership with M&T Realty Capital is expected to enhance BXMT’s business model, providing long-term income potential with minimal incremental cost.
Regarding the new dividend level, executives stated that the $0.47 per share dividend is based on sustainable long-term earnings. While individual quarters might vary, the focus remains on balancing near-term income for shareholders with the ability to allocate capital to new investments. In terms of credit quality, the company has proactively moved loans to the watch list, particularly in the US office sector. Away from the US office, the portfolio’s credit quality is improving, supported by market tailwinds and increased liquidity.