Blackstone Mortgage Trust Q1 2025 Earnings Report

Blackstone Mortgage Trust EPS Results

• Actual EPS: N/A
• Consensus EPS: $0.29
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Blackstone Mortgage Trust Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $104.69 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Blackstone Mortgage Trust Announcement Details

• Quarter: Q1 2025
• Date: 4/30/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, April 30, 2025
• Conference Call Time: 9:00AM ET

Blackstone Mortgage Trust (NYSE:BXMT), a real estate finance company, originates senior loans collateralized by commercial properties in North America, Europe, and Australia. The company originates and acquires senior floating rate mortgage loans that are secured by a first-priority mortgage on commercial real estate assets. It operates as a real estate investment trust for federal income tax purposes. The company was formerly known as Capital Trust, Inc. and changed its name to Blackstone Mortgage Trust, Inc. in May 2013. Blackstone Mortgage Trust, Inc. was incorporated in 1998 and is headquartered in New York, New York.

Blackstone Mortgage Trust Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good day, and welcome to Blackstone Mortgage Trust First Quarter twenty twenty five Investor Call.

[Operator]

Today's conference is being recorded. At this time, all participants are in a listen only mode. At this time, I'd like to turn the conference over to Tim Hayes, Vice President Vice President, Shareholder Relations. Please go ahead.

[Tim Hayes, VP, Shareholder Relations at Blackstone Mortgage Trust]

Good morning, and welcome, everyone, to Blackstone Mortgage Trust's first quarter twenty twenty five earnings conference call. I'm joined today by Tim Johnson, global head of breads Katie Keenan, chief executive officer Tony Marrone, chief financial officer and Austin Pena, executive vice president of investments. This morning, we filed our 10 Q and issued a press release with a 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, are subject to risks, uncertainties, and other factors outside of the company's control. Actual results may differ materially.

[Tim Hayes, VP, Shareholder Relations at Blackstone Mortgage Trust]

For a discussion of some of the risks that could affect results, please see the Risk Factors section of our most recent 10 ks. 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 10 Q. This audio cast is copyrighted material of Blackstone Mortgage Trust and may not be duplicated without our consent.

[Tim Hayes, VP, Shareholder Relations at Blackstone Mortgage Trust]

For the first quarter, we reported a GAAP net loss of effectively zero and distributable earnings of zero one seven dollars per share. Distributable earnings prior to charge offs were $0.42 per share. A few weeks ago, paid a dividend of $0.47 per share with respect to the first quarter. Please let me know if have any questions following today's call. And with that, I'll now turn things over to Katie.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

Thanks, Tim. Amidst a dynamic backdrop, the SNC's first quarter results demonstrate continued progress across every aspect of our business, building on the momentum from last quarter. As outlined then, BXMT's forward trajectory is propelled by three key drivers. One, portfolio turnover through repayments and redeployment into high quality new credit opportunities. Two, resolution of impaired loans.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

And three, optimization of our balance sheet. All play a critical role in unlocking future earnings potential and further positioning BXMT for performance, and we took a proactive approach on each this quarter, putting the company on very strong footing in the current environment. Starting on the macro. While tariff policy has created greater uncertainty and a slowdown could weigh on the broader market over time, we believe that real estate is well positioned to outperform. In contrast to other sectors, real estate already went through its cycle with values resetting lower and many challenged deals addressed.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

We're still in the recovery phase, far from the pitfalls of over leverage or overbuilding that preceded prior real estate downturns. Though tariffs may pressure goods prices, other key components of inflation are coming down. And critically, real estate cash flows over time should benefit from diminished supply, which is already at historically low levels and likely to fall even further. Real estate capital markets have functioned well through this period. Capital is broadly available.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

And while spreads have widened marginally, overall cost of capital is still around 40% lower than peak. Many banks, insurance companies, and investors are under allocated to real estate, underpinning continued lending demand. The public markets, which react most quickly, have already started to digest, with spreads settling down and several CMBS and RMBS deals pricing into healthy demand in the last week. And on the private side, new financings continue to attract robust bidding pools, both on the direct lending and back leverage side. Notably, for well positioned investors, volatility creates opportunity.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

And here at BXMT, we are capitalizing. In a turbulent market, we provide certainty and can grow our share while benefiting from the incrementally better risk adjusted returns available as the market retrenches. And our large scale global origination footprint gives us a tremendous advantage in identifying the most compelling investment opportunities as the market evolves. We took a big step forward in portfolio turnover in Q1, the first of our key priorities, with $1,800,000,000 of repayments, including 86% in office, and $1,600,000,000 of new investments, our highest level of quarterly originations in more than two years. We have another $2,000,000,000 closed or in closing so far in Q2.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

Our investment strategy in this environment has been clear. Minimize credit risk while leveraging our platform and cost of capital advantages to generate target returns. And we are executing. Looking at the total $3,500,000,000 of 2025 activity, 90% is backed by multifamily properties or cross collateralized industrial portfolios. These deals set up to an attractive levered return of 900 basis points over base rates on average, with well protected credit profiles, 64% average LTV on today's reset value, benefiting from a combination of diversification, premier sponsorship, and robust underlying fundamentals.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

Our capital allocation strategy has translated to improved credit composition on our overall asset base. Our portfolio is 95% performing today, up from 88% at the trough. US office exposure, once nearly 40%, is down to just 21% today, while multifamily, industrial, and self storage are now nearly half. 2Q closings will further this trend. We are well diversified geographically, with over 40% of our investments abroad.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

And while macro volatility may slow repayments some, we have consistently seen that our short duration, quality assets show continued liquidity, even in markets far more dislocated than this one. Our repayments averaged over $750,000,000 per quarter through the slowest period of the rate hike cycle. We're harvesting differentiated opportunities from across our broad sourcing channels in The U. S, Europe, Canada, and Australia. And this quarter, we also commenced our net lease investment strategy, acquiring 27 properties.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

The profile of these deals is highly attractive, concentrated in defensive businesses in the essential use and service retail sectors with average eighteen year lease terms, 2% rent bumps, three times in place EBITDAR coverage, and 7% to eight percent cap rates. Net lease is a naturally resilient sector in periods of volatility and complementary with our broader lending business, creating another cylinder for enhancing and diversifying our overall portfolio positioning. Turning to our second key driver, resolution of impaired assets. We had another quarter of strong forward progress. With $400,000,000 of resolutions closed this quarter, we've now addressed $1,500,000,000 of impaired assets in the last six months at a premium to aggregate carrying value.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

This relentless approach to asset management has reduced our impaired loan balance by 58% from the peak and recaptured a significant tailwind to earnings power. And over this period, resolutions have collectively contributed to a $64,000,000 reversal in our CECL reserve, providing incremental book value support and contributing to a positive economic shareholder return. Our impaired loan balance is now at its lowest level in seven quarters. And while we are mindful of potential macro driven risks on the horizon, we also see incremental resolutions ahead, including one closed just this week and another under hard contract for sale. Finally, turning to the further optimization of our balance sheet.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

We're in great shape today. We ended the quarter with $1,600,000,000 of liquidity and 3.4 times DE, our lowest leverage level in three years. We have 14 credit facility lenders with market leading structure and pricing earned via our strong track record as a borrower over time. Our robust balance sheet is a critical advantage in this environment, providing both staying power and firepower to propel investment activity and asset management execution. Over the past two quarters, we have moved nimbly and aggressively to execute on our capital markets priorities, terming out our corporate debt in November and closing a $1,000,000,000 reinvesting CLO in March.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

With deep capital markets expertise and a talented, dedicated team, we can act quickly when market conditions are favorable, a competitive advantage particularly in a world of quickly shifting crosswinds. As a result, we benefit today from a well structured balance sheet, which is nearly 70% non mark to market, a laddered corporate debt structure with no material maturities until 2027, and substantial dry powder. Our banks remain highly supportive of our investment activity, continuing to quote and close deals constructively throughout the last month. Today, many of our largest banks are seeking to grow their lending books, having collected substantial repayments in the last several quarters. Credit facility financing to large scale platforms like BXMT is one of their best ways to rebuild exposure and earnings power efficiently and at optimal capital charges, with the confidence in the strong credit performance they've seen in this product new cycle.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

As a result, our house lenders are looking to grow and new lenders are looking to enter the space, together yielding a strong competitive dynamic for our borrowing activity. To conclude, BXMT has demonstrated the strength of its cycle tested business model several times over in just the last five years. Today, BXMT's competitive advantages and balance sheet positioning once again set us up well for a wide range of macro scenarios. Scale, insight, capitalization, portfolio, and quality of platform always drive value, but never more so than in periods of change. And here at Blackstone, we have shown time and again the ability to outperform in volatility and emerge stronger.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

Thank you. And with that, I will turn it over to Tony.

[Anthony Marone, CFO & Managing Director of Finance at Blackstone Mortgage Trust]

Thank you, Katie, and good morning, everyone. In the first quarter, BXMT reported a GAAP net loss of effectively zero and distributable earnings, or DE, of $0.17 per share. DE prior to charge offs, which excludes a realized loss from an impaired loan resolution, was $0.42 per share. As Katie outlined, GXMT continues to make significant progress on the key initiatives that we expect will drive the long term earnings potential of our platform as we move past near term headwinds. I will highlight two of these headwinds in the context of this quarter's results.

[Anthony Marone, CFO & Managing Director of Finance at Blackstone Mortgage Trust]

The first is the timing mismatch between when repayments are received and capital is subsequently redeployed into new investments. In the first quarter, we collected $1,800,000,000 of repayments, which on average closed two weeks into the quarter, while $1,700,000,000 of loan fundings were closed an average of eight weeks into the quarter. As a result, our average portfolio size was nearly $1,000,000,000 lower than our threethirty one balance, which had a notable impact on DE for the quarter. With $2,000,000,000 of loans closed during closing so far in the second quarter, we are firmly playing offense and expect the timing headwinds we face this quarter will shift the tailwinds in 2Q, all else equal. The second earnings headwind is the drag from the remaining capital invested in our nonearning assets.

[Anthony Marone, CFO & Managing Director of Finance at Blackstone Mortgage Trust]

We continue to demonstrate significant momentum with impaired loan resolutions, completing $1,500,000,000 over the past two quarters at a premium to our aggregate carrying values. Q1 resolutions of $4.00 $6,000,000 included one new cash flowing REO asset and two loan restructurings, where we received nearly $50,000,000 of incremental cash equity from our borrowers and have significantly reset the basis of our A Notes at well protected levels. As we execute our resolution strategies, we expect to see immediate positive impacts on earnings as we begin to recognize income from these previously non earning assets, with even greater long term upside potential as capital is redeployed into new investments at target returns over time. Our impaired loans today represent $970,000,000 or 5% of the portfolio and remained burdened by $07 of interest expense in Q1. Expanding on credit, trends in our portfolio remained positive in Q1, with performance improving to 95% from 93% quarter over quarter, driven by limited new credit migration and continued execution of loan resolutions.

[Anthony Marone, CFO & Managing Director of Finance at Blackstone Mortgage Trust]

We upgraded seven loans this quarter, including two risk rated four office loans, where our credit position was enhanced by a large paydown in one and continued business plan execution supporting property cash flow on

[Anthony Marone, CFO & Managing Director of Finance at Blackstone Mortgage Trust]

the other.

[Anthony Marone, CFO & Managing Director of Finance at Blackstone Mortgage Trust]

By contrast, we downgraded only three loans this quarter, including one new impairment of an Atlanta office loan. We foreclosed on one previously impaired loan in Q1, bringing the acquisition date fair value of our REO portfolio to $691,000,000 across eight assets. Our REO assets stand at just 3% of our overall portfolio and generated $7,000,000 of DE in Q1, with further potential upside in the future. Our CECL reserve ended the quarter at $754,000,000 or 3.9% of our portfolio, both stable versus twelvethirty one. Our general reserve increased modestly by $33,000,000 quarter over quarter due to strong new origination activity, which was largely offset by the net decline in

[Anthony Marone, CFO & Managing Director of Finance at Blackstone Mortgage Trust]

our asset specific reserve. In addition,

[Anthony Marone, CFO & Managing Director of Finance at Blackstone Mortgage Trust]

we continue to reduce our basis in impaired loans with $19,000,000 of cash interest received this quarter and applied as cost recovery proceeds, reflecting the 76% of impaired loans that remain current on contractual interest payments. Book value ended the quarter at $21.42 per share, which benefited from accretive impaired loan resolutions and $32,000,000 of common stock repurchase at a discount to book value, bringing total repurchases to over $60,000,000 since establishing our program in 2024. Considering the change in book value and our $0.47 per share dividend, DXMT delivered a positive economic return for the second consecutive quarter. Turning to the balance sheet. We continue to maintain best in class liabilities, which we believe are particularly valuable in more turbulent market conditions.

[Anthony Marone, CFO & Managing Director of Finance at Blackstone Mortgage Trust]

In a market environment where investors naturally have concerns around rate volatility, capital markets volatility, and foreign currency volatility, we benefit from rate and duration match financings with no capital markets mark to market provisions and a capital structure that is fully hedged against foreign exchange rates. DXMT achieved several balance sheet milestones this quarter. We issued a $1,000,000,000 CLO, our fifth transaction, but the first with a thirty month reinvestment feature. We believe this feature will be particularly valuable as we continue to collect repayments of our existing loans and actively deploy capital in today's attractive environment. We closed the CLO in late March, locking in well priced, non recourse, non mark to market financing and enhancing the optionality and diversity of our capital structure.

[Anthony Marone, CFO & Managing Director of Finance at Blackstone Mortgage Trust]

With this new CLO, our debt to equity ratio declined to 3.4 times, its lowest level in three years. Taken together with our strong liquidity of $1,600,000,000 BXMT has the flexibility to navigate volatility and capitalize on attractive investment opportunities across real estate credit markets globally. Considering our Q1 results and position going forward, we believe BXMT is a compelling investment in this uncertain market environment with our strong balance sheet, ample dry powder, and an origination platform informed by the insights and experience of Blackstone's global real estate business. This dynamic has driven the outperformance of our stock year to date, which continues to offer attractive value with a trading price of approximately 10% below book value and a 10% dividend yield. Thank you for joining today's call.

[Anthony Marone, CFO & Managing Director of Finance at Blackstone Mortgage Trust]

I will now ask the operator to open the call to questions.

[Operator]

Thank We'll take our first question from Rick Shane with JPMorgan.

[Rick Shane, Vice President-Commercial Banker at JP Morgan]

Hey guys, thanks for taking my questions this morning. Look, I think you talked about the migration of, I believe it was three four rated loans back to three this quarter. When we think about the four book, how many loans are currently in that category? What's the value? And when you think about the path on fours, is what's sort of the historical transition from four to five versus four to three?

[Rick Shane, Vice President-Commercial Banker at JP Morgan]

Because I think for sort of the in between zone and they ultimately wind up in one bucket or the other.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

Sure. So, I think as we look at our four book, our main focus, as we've said in the past, is really on the non modified four rated office. The rest of it, we've either modified loans with very significant capital in the door, or to your question, a lot of fours have really just persisted as fours for a long time. I would say in general, we're pretty conservative with our risk ratings. And as a result, we have fours that we moved to that category in COVID over time.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

And they've sort of continued performing, continued ticking along. We don't see material upticks in performance, and so we keep them as forced, but we also don't see material downticks in performance. I'd say on the non modified four rated office, that's around 500,000,000 It's down significantly from a year ago. It was 1,000,000,000. It was higher than that before.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

And that's really where we focus our attention. It's where we're focused on mods. We have mods ongoing and conversations on a couple of those deals that should move them into the sort of post modification category. There's others that we'll see which way they go. But it's really a very diminishing universe of assets that I think are truly in that sort of cusp zone.

[Rick Shane, Vice President-Commercial Banker at JP Morgan]

Got it. Okay. Thank you. And again, I'm assuming that with the of a non sequitur, but given the thirty month reinvestment period on the new CLO and favorable terms, that's going to allow you to really be forward leaning in terms of originations from here.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

Yes, I mean, I think we have many, many options for accretive financing of our new originations. We have great relationships with our lenders. They're very active in wanting to lend to us. We also now have the reinvesting CLO. So I think what it really gives us is optionality, which as you know, we love diversification.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

We love optionality in terms of how we finance our new originations. And I think that having one more tool, one more avenue of optionality is always a good thing. But I say generally, we see very good liquidity, very good capital markets access for various ways to finance the new originations that we're pursuing.

[Rick Shane, Vice President-Commercial Banker at JP Morgan]

Got it. And at the risk of annoying my peers who are listening, I'm assuming given the timing of that transaction, it probably couldn't be recreated as easily today in this volatile environment as it was at the March.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

Yes, mean, we're obviously really pleased to have gotten it done. I think it's a testament to how quickly we moved, seeing the market was open, sort of capacity and strength of our team getting that deal up and down very quickly as early as we could in the first quarter. The market's settling down, so I won't be surprised to see the CLO market sort of return over the coming months if the trajectory continues. But certainly looking at it today, we're very happy to have executed that transaction. And I think it'll be a good one for our CLO investors as well.

[Rick Shane, Vice President-Commercial Banker at JP Morgan]

Great. Thank you for taking all my questions.

[Operator]

We'll take our next question from Tom Catherwood with BTIG.

[Tom Catherwood, Managing Director at BTIG]

Thank you and good morning everybody. It was great to see originations ramping. Obviously, repayments in 1Q were boosted by the spiral refinancing. When you look out over the next three quarters of twenty twenty five and assuming repayments moderate, how much do you think you can grow your loan book from here?

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

Yes. So I mean, I think that it's interesting. The pace of repayments clearly impacted by overall capital markets liquidity. But I would tell you, again, as we sit today, the pace of repayments is continuing. We've had $200,000,000 so far this quarter.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

Nothing that we anticipated repaying has fallen out. We continue to have repayments tracking. So, I think in terms of the premise, if we think about whether things have changed materially, it doesn't feel that way today. That being said, I think that we're underinvested today, as Tony mentioned. We have 2,000,000,000 in closing.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

We'll continue to look for great new investment opportunities. And I think that in terms of growth, we're looking to grow the portfolio from here up towards that $20,000,000,000 number we talked about last quarter. And we'll obviously be very mindful around credit as we mentioned on the scripts. That's our primary focus obviously, but we're seeing a lot of opportunities.

[Tom Catherwood, Managing Director at BTIG]

Got it. Appreciate that. And maybe beyond the $2,000,000,000 that's in closing that you mentioned, Katie, how is your origination pipeline shifted since tariff announcements, either in terms of volume or sector or geography?

[Austin Peña, EVP, Investments & Managing Director at Blackstone Mortgage Trust]

Yeah, I can take that, Tom. So, Austin. I think really it hasn't shifted per se. I think our strategy has been consistent. As alluded to, or as mentioned earlier, 90% of our activity is in profiles that we think are quite resilient, multifamily, cross portfolios of industrial and storage.

[Austin Peña, EVP, Investments & Managing Director at Blackstone Mortgage Trust]

These are the types of investments that we wanted to do going back several months. And I think that still remains the case today. And if you look at our pipeline, that's also very, very similar in profile. So, I think our strategy remains consistent. I think in a more uncertain world, that strategy feels even better.

[Austin Peña, EVP, Investments & Managing Director at Blackstone Mortgage Trust]

But I don't think it's really changed very much over the last few weeks.

[Tom Catherwood, Managing Director at BTIG]

Got it. Appreciate the answers. Thanks, everyone.

[Operator]

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

[Jade Rahmani, Managing Director at Keefe, Bruyette & Woods (KBW)]

Thank you very much. First question would be on the repo market. A huge strength for BXMT has been its relationship with credit facility providers. Could you talk to what trends you're seeing with respect to BXMT's own counterparties and its relationships, but then perhaps the broader market? I suspect that BXMT's wherewithal has continued to demonstrate itself, but there could be some turbulence with other smaller, less well capitalized lenders.

[Jade Rahmani, Managing Director at Keefe, Bruyette & Woods (KBW)]

So if you could comment on any trends you're seeing, that would be helpful. Thank you.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

Sure. Thanks, Jade. Appreciate the comments. I definitely we're really pleased by our relationships with our lenders and how we've seen that through this period, especially, and really throughout the last couple of years. I would tell you that the dynamic that we've heard from banks around desire to generally grow their credit facility exposure because of how well it works from their capital charge perspective, because of how well it works in their overall business model.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

We have not seen any change in that either in word or indeed. They're saying the same things, and they're doing the same things in terms of quoting deals. We're out to the market constantly with our pipeline. We're constantly getting multiple quotes at competitive levels from different banks. We have new facilities sort of in closing where banks are looking to grow relationships with us.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

And I think it is all driven by certainly our performance and our track record, but also the broader trend towards this being a very high quality product for the banks. And I can't speak too much to other people's experiences, but I think that the large banks like this business, they're looking to expand it. The sort of more medium sized banks are curious about it and looking to get into it. And I think that's gonna benefit the space, but I agree with you that sort of how that plays through will be across the spectrum, depending on the strength of the platform, the strength of the performance in the various platforms.

[Jade Rahmani, Managing Director at Keefe, Bruyette & Woods (KBW)]

Thank you very much. Secondly, you mentioned real estate has already gone through its cycle. But really, what we went through was an interest rate shock, and then stress in the office sector that had been building for years, especially post COVID. Hospitality, multifamily, and industrial, however, were pretty strong despite the interest rate hikes. We saw operating performance hold up well.

[Jade Rahmani, Managing Director at Keefe, Bruyette & Woods (KBW)]

So could you comment on those three sectors and what you're seeing there? Is performance holding up? And maybe start with hospitality since that's the most interest rate I mean, sorry, economically sensitive.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

Sure. So I think for sure, as we look across the sectors today and think about areas of potential impact with the macro, I think hospitality is probably the area we're most focused on. It obviously resets most quickly, most correlated with overall economic activity. Now, I think the good news for us is that our hospitality exposure has come down quite a lot. Our U.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

S. Hospitality is only 6.5% of the portfolio as a whole. We've got a couple of big cross portfolios in Europe that are doing very well. But I think that it's something that we're watching. The various you have transient, you have leisure versus business, you obviously have currency impacts.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

The weaker dollar could result in some change in we've seen some negative trends in terms of international inbound travel in recent days, but you could also see the dollar having some impact of that over time. So I think it's a little too soon to tell, but I agree that hospitality is one of the sectors that we're watching. I think on the multifamily side, the performance there has been very resilient. And the big story there was obviously the wave of supply that came in over the last year. That supply is really rolling over.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

And the first quarter across the Sunbelt where a lot of the focus has been, we saw positive net absorption. Obviously, new starts are way down, but deliveries are coming down. And so, I think multifamily is kind of moving in the right direction from that perspective. And we have a lot of conviction in investing in that asset class, obviously, as you can see from our pipeline. And then I think on the industrial side, we continue to see that as relatively resilient.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

I mean, I think there's going to be some markets that are very oriented towards international trade, maybe on the West Coast. We have basically no exposure there that see a bit of an impact, but there's also a balance in that. There's gonna be probably more reshoring, more inventory building up. And I think generally, again, the long term tailwinds in terms of e commerce and goods sort of sitting in warehouses versus sitting in stores, that really continues. So, I think that you can see from how we're investing, how we're thinking about what sectors we're interested in and where we see the risks and opportunities going forward.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

And it really comes down to, I think, what Austin said, like multifamily and we like diversification, we like resilience asset classes, Net Lease certainly falls in that category. And that's sort of where our perspective sits today.

[Jade Rahmani, Managing Director at Keefe, Bruyette & Woods (KBW)]

Thank you very much.

[Operator]

We'll take our next question from Harshamnani with Green Street.

[Harsh Hemnani, Equity Research Analyst at Green Street Advisors, LLC]

Thank you. One of the things we've sort of seen post these tariff announcements is that construction costs, know, value add business plan costs are increasing for real estate owners. And so have you seen a shift at all post one q in the types of borrowers that are coming to you for new loans and the type of business plans that they're trying to look at? Are they, I guess, heavy transitional than 1Q?

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

Yeah, absolutely. I'll let Austin take that one.

[Austin Peña, EVP, Investments & Managing Director at Blackstone Mortgage Trust]

Yeah, I think harsh, really, we started to see that even before the last few weeks. When we look at the profile of the investments we're making today, certainly much more light value add business plans, less sort of transition or heavy transition. I think it really is reflective of the challenges of already seeing those cost pressures. I think that could potentially increase. And I think as Katie said, we could expect to see supply come down even more.

[Austin Peña, EVP, Investments & Managing Director at Blackstone Mortgage Trust]

And so, it's really a continuation of that trend more than anything else.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

Yeah, and I think I would also add, as we think about how we wanna invest, we're taking shorter duration business plan risk, less business plan risk. The way the market has moved, we're able to invest at our target returns fundamentally in less transitional assets. I think part of that is our view, and I think part of it is the fact that construction is really hard to pencil today. To your point, value add business plans with a lot of construction oriented aspect to it also hard to pencil. That's been the case for a long time.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

And certainly, the tariffs are going to make that more so. But the broader impact, as often mentioned, and as I talked about in the call, is really just going to be even less new supply, which fundamentally makes the value of existing assets that we lend on better.

[Harsh Hemnani, Equity Research Analyst at Green Street Advisors, LLC]

Great. Maybe one more for me. It sounds like loan volumes and also repayment volumes haven't really been slowing down post tariff announcement. Maybe how have the spreads on new loans changed for you? And is it perhaps fair to say that you're looking at your financing cost at this time given the reinvestment option in the CLOs that that stay constant, but the spread on your new loans have been widening a little bit post one q?

[Austin Peña, EVP, Investments & Managing Director at Blackstone Mortgage Trust]

Yeah, I would I would say, during the first quarter spreads, we did start to see at the beginning of the quarter pre volatility tightening in both the asset side lending spreads as well as where we are cost of financing and where we borrow. I think that's obviously changed over the last few weeks. Spreads are probably out on the asset side, 10 to 20 basis points. But similarly on the financing side. And so they tend to be more pretty correlated.

[Austin Peña, EVP, Investments & Managing Director at Blackstone Mortgage Trust]

I think the advantage of our platform, as Katie mentioned, having 14 different credit facility providers, having the advantage of having the reinvesting CLO, we have a lot of options on the financing side. And so that really gives us an opportunity to we think capture some opportunities in this environment. I think being a stable and certain provider of capital to our borrowers is a really powerful tool in an environment like this. And having diversified sources of capital and strong liquidity. I think that creates a lot of opportunities for us.

[Harsh Hemnani, Equity Research Analyst at Green Street Advisors, LLC]

Got it. Thank you.

[Operator]

We'll take our next question from Don Fendetti with Wells Fargo.

[Don Fandetti, Analyst at Wells Fargo]

Yes. Your international exposure, I think, is around 41%. Are you sort of capped or not capped, but is that likely to just sort of hang out in that level, maybe come down? And then how are you feeling about credit internationally versus The U. S, just given all the tariff movements?

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

Yeah. So I think that our ability to harness investment opportunities globally is one of our biggest strengths. And I think that it's something that we've seen create great opportunities for relative value over time. It's certainly something that others in the space are trying to do. We have the advantage of having been deeply present in Europe for over a decade.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

We have a fantastic team there, great borrower relationships. And I think we've seen that, again, in periods of volatility and in periods of stability, the ability to look around and find the most compelling investment opportunities anywhere in the world allows us to create a better portfolio from a risk adjusted return perspective. We feel very good about our European exposure. It's primarily crossed industrial portfolios. Some crossed hotel portfolios that I mentioned are doing well, some multifamily.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

The lending market in Europe tends to be quite stable, relatively low leverage. We are able to benefit from a cost of capital advantage in Europe that allows us to create, I would say, better risk adjusted returns. And the overall competitive dynamic in Europe is different than The U. S. The CMBS market is much less active.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

There are many fewer platforms like ours that can achieve the types of investments that we can. And therefore, we're able to create some excess return. So we feel good about that portfolio. We also think it provides a nice balance in a period of uncertainty. And we've seen over the history of the business that it's always been around 35 to 40%.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

We have no particular cap, but I think the relative size of the markets and the activity have sort of proved out over time that that's generally it sits. I doubt it's going to change materially in either direction.

[Operator]

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

[Chris Muller, Director - Equity Research at Citizen JMP]

Hey, guys. Thanks for taking the questions. So it's nice to see the CLO market coming back to life in the first quarter, but Katie touched on this a little bit. But I guess, how has the recent market volatility impacted new CLO issuance? And I guess the meat of my question is, could we see another CLO from you guys at some point this year if the market does accommodate?

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

Yeah, I think it's a great question. So, in first weeks of the market volatility, there were some CLOs that had sort of been out there that got put on the shelf, as was the case across CMBS market. But what we've seen in the recent weeks is really a settling down. There's capital in the market. I would say, if anything, there's as many buyers as sellers at wider spreads in this market, perhaps more buyers.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

So I wouldn't be surprised if we saw CLOs coming back into the market. I think there are a couple that were privately placed earlier this week maybe. So I think the CLO market will settle out just as we're seeing the CMBS market settle out. There were a couple of conduit deals that came last week that priced quite well. And so, I think, again, there's plenty of capital in that market.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

It needs to adjust to slightly wider spreads as the overall lending market has. But those markets are outperforming relative to corporates and other parts of the credit market. I think it's a testament to the desire for capital to come in. And yes, the CLO market settles out and it looks like a good option for us. The origination volumes that we're creating are obviously very conducive to potentially coming back to the CLO market later in the year.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

We like that as a potential capital source, and we'll certainly be monitoring it.

[Chris Muller, Director - Equity Research at Citizen JMP]

Got it. That's very helpful. And then, I guess, on the remaining impaired loans, is it fair to assume that you continue resolving those at a similar pace? And I know they can be chunky, so maybe asked a little bit differently. Do you think you guys will resolve the bulk of that bucket at some point through 2025?

[Chris Muller, Director - Equity Research at Citizen JMP]

Or could some of that slip to 2026?

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

Well, that's certainly our goal. And they are chunky, they all have their own story. We've certainly resolved a lot of them. And naturally, as the universe shrinks, each individual one, the timing has more impact. But as I mentioned on the call, we already have resolved another asset this week.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

We have one under hard contract for closing. We have a clear path for a couple of others. So, we certainly see the continued trajectory as positive in terms of resolving the existing impaired assets. And that's a huge focus of our asset management team. So, we're optimistic.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

We're cracking through that as one of our highest priorities. And there will be some idiosyncrasies and timing one quarter versus another. But I think we should continue to see the benefit of the resolution processes that we have in flight coming through.

[Chris Muller, Director - Equity Research at Citizen JMP]

Got it. Very helpful. Thanks for taking the questions.

[Operator]

Thank you. We'll take our final question from Doug Harter with UBS.

[Doug Harter, Equity Research Analyst at UBS Group]

Thanks. I'm hoping you

[Doug Harter, Equity Research Analyst at UBS Group]

could put a little context about around the general reserve increase in the first quarter. Does that reflect the conditions as of threethirty one? Or does that are you able to incorporate any of the kind of early April volatility into that?

[Anthony Marone, CFO & Managing Director of Finance at Blackstone Mortgage Trust]

Yes, I would say we come up with these reserves in April, right, as we're closing the books. It is as of threethirty one. But the way we come up with our reserve, for one, it's not meant to capture short term volatility. It's not a mark to market standard where you would expect any change in capital markets would necessarily come through. So we're looking at the long term credit risk profile.

[Anthony Marone, CFO & Managing Director of Finance at Blackstone Mortgage Trust]

And we think that the way we've ratcheted the risk profile in our general reserve as of threethirty one basically reflects the market. We'll see how things play through for the rest of the second quarter. And that needs a slight notch up or if things move in a different direction, a slight notch down. But I wouldn't expect any dramatic change in the second quarter as a result of some of the things we've seen in April.

[Doug Harter, Equity Research Analyst at UBS Group]

Great. Appreciate that. And then is there can you give us any context around the size of the two loan the loan that you resolved this week and the one you have under hard contract? And then I guess just further on loan resolutions, how are you thinking about the pace of resolving and sort of moving on from REOs and kind of moving back into loans? Or could those be longer term holds?

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

Sure. So as far as the resolutions we have in closing, it's around $200,000,000 in total, the two that I mentioned. In terms of the REO, the assets we took REO, we generally made that decision because we see the opportunity to implement a business plan and improve value over time. And that's not necessarily an overnight thing. So, it's 3% of the portfolio or 3% of our overall business, not a huge number.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

They're not necessarily assets that are going to require a lot of CapEx. In a lot of cases, it's more pursuing a business plan, change of use, something like that. And we're going focus on driving return over time as opposed to sort of a quick thing. That being said, they're all different. I mean, think we have a couple that we might be able to exit pretty soon.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

I think we have others that we may have for longer. But I think the overarching theme is it's a small part of the portfolio. There are actually a number of assets there that have pretty good cash flow and potential cash flow trajectory. We recognize that cash flow as it comes through in earnings. And I think we're just focused on maximizing value over time for those assets, however long that may take.

[Katie Keenan, CEO & Senior Managing Director at Blackstone Mortgage Trust]

And if we see an opportunity to exit at a good level, obviously, we'll take it.

[Doug Harter, Equity Research Analyst at UBS Group]

Great. Appreciate that. Thank you.

[Operator]

Thank you. With no additional questions in queue, I will turn the call back over to Mr. Hayes for any additional or closing remarks.

[Tim Hayes, VP, Shareholder Relations at Blackstone Mortgage Trust]

Thank you, Katie. And to everyone joining today's call, please reach out with any questions.

[Operator]

That will conclude today's call. We appreciate your participation.

Participants

Executives

• Tim Hayes, VP, Shareholder Relations
• Katie Keenan, CEO & Senior Managing Director
• Anthony Marone, CFO & Managing Director of Finance
• Austin Peña, EVP, Investments & Managing Director

Analysts

• Rick Shane, Vice President-Commercial Banker at JP Morgan
• Tom Catherwood, Managing Director at BTIG
• Jade Rahmani, Managing Director at Keefe, Bruyette & Woods (KBW)
• Harsh Hemnani, Equity Research Analyst at Green Street Advisors, LLC
• Don Fandetti, Analyst at Wells Fargo
• Chris Muller, Director - Equity Research at Citizen JMP
• Doug Harter, Equity Research Analyst at UBS Group