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Edited Transcript of BXMT earnings conference call or presentation 24-Jul-19 2:00pm GMT

Q2 2019 Blackstone Mortgage Trust Inc Earnings Call

NEW YORK Aug 7, 2019 (Thomson StreetEvents) -- Edited Transcript of Blackstone Mortgage Trust Inc earnings conference call or presentation Wednesday, July 24, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Anthony F. Marone

Blackstone Mortgage Trust, Inc. - CFO, Principal Accounting Officer & Assistant Secretary

* Douglas N. Armer

Blackstone Mortgage Trust, Inc. - Executive VP of Capital Markets & Treasurer

* Katharine Keenan

Blackstone Mortgage Trust, Inc. - Executive VP of Investments & MD

* Stephen D. Plavin

Blackstone Mortgage Trust, Inc. - CEO, President & Director

* Weston M. Tucker

Blackstone Mortgage Trust, Inc. - Head of IR & Senior MD

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Conference Call Participants

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* Donald James Fandetti

Wells Fargo Securities, LLC, Research Division - Senior Analyst

* Douglas Michael Harter

Crédit Suisse AG, Research Division - Director

* George Bahamondes

Deutsche Bank AG, Research Division - Senior Research Analyst

* Jade Joseph Rahmani

Keefe, Bruyette, & Woods, Inc., Research Division - Director

* Richard Barry Shane

JP Morgan Chase & Co, Research Division - Senior Equity Analyst

* Stephen Albert Laws

Raymond James & Associates, Inc., Research Division - Research Analyst

* Steven Cole Delaney

JMP Securities LLC, Research Division - MD, Director of Specialty Finance Research and Senior Research Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the Blackstone Mortgage First -- Second Quarter 2019 Investor Call. (Operator Instructions) I would like to advise all parties that this call is being recorded for replay purposes. I'd now like to -- and your host for today, Weston Tucker, Head of Investor Relations. Please go ahead.

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Weston M. Tucker, Blackstone Mortgage Trust, Inc. - Head of IR & Senior MD [2]

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Great. Thanks, Sunny, and good morning, everyone, and welcome to Blackstone Mortgage Trust Second Quarter Conference Call.

I'm joined today by Steve Plavin, President and CEO; Tony Marone, Chief Financial Officer; Doug Armer, Executive Vice President, Capital Markets; and Katie Keenan, Executive Vice President, Investments.

Last night, we filed our 10-Q and issued a press release with 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 uncertain and 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 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 our 10-Q.

This audiocast is copyrighted material of Blackstone Mortgage Trust and may not be duplicated without our consent.

So a quick recap of our results. We reported GAAP net income per share of $0.59 for the second quarter, while core earnings were $0.68 per share.

Last week we paid a dividend of $0.62 with respect to the second quarter. If you have any questions following today's call, please let me know. And with that, I'll now turn things over to Steve.

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Stephen D. Plavin, Blackstone Mortgage Trust, Inc. - CEO, President & Director [3]

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Thanks, Weston, and good morning, everyone. Our second quarter results again reflect the earnings power of the high-quality senior loan portfolio that we have built. Our core earnings of $0.68 generate 110% coverage of our dividend that yields an attractive 7% of the current share price.

On the call in April, we announced the Q2 pipeline of $875 million. As the quarter progressed, the hangover from the Q4 volatility that flowed originations at the start of the year abated.

Our originations accelerated, and we ended up closing $1.3 billion of loans in the quarter. We continue to see an uptick in large loan opportunities, and our forward for pipeline has grown.

We now have another $3 billion of loans that closed post quarter end or are in the closing process, so we are well positioned for strong second half.

Our originations in Q2 exemplify our global capability. Our largest loan this quarter was EUR 192 million acquisition financing for an office portfolio in a very tight Berlin sub-market.

In the U.S., we made a $210 million construction loan for a pre-leased asset in West LA, another very strong market.

We also closed loan secured by apartments in Arizona, a Hotel in California and office buildings of Florida and the U.K.

In addition, we closed 6 more loans totaling $165 million in our partnership with Walker & Dunlop.

The growth in our pipelines comprised of a broad international mix of larger loans capitalizing the power of the Blackstone Global Real Estate franchise and the strong relationships we've established. Blackstone generally owns real estate everywhere BXMT lends and maintains geographic and sector-focused teams of investment and asset management professionals that are hugely beneficial in the sourcing, underwriting and asset management of our loans.

As we saw our pipeline expand and to further optimize our capital structure, we issued a $500 million corporate term loan that we mentioned in the last call. We also raised $300 million of equity.

Doug and our capital markets team did a great job on the execution and market timing for all of this new capital.

The equity raised and our earnings in excess of the dividend also contributed to a nice pop in book value. Tony will take you through those details.

We keep pace with our portfolio on pipeline growth. We continue to expand our credit facility capacity in multiple currencies. Post quarter end, we closed facilities with 2 new lenders to the company, and now have more than $13 billion of capacity from 12 lenders with more in process.

The scale and quality of our capital markets initiative is well matched to our origination capability. And it also benefits from the Global Blackstone Real Estate platform and its great track record as a borrower and banking client.

Improving credit profile continued to be a theme across our portfolio. We upgraded the risk ratings on 18 loans in the first half, 9 in each quarter, generally driven by improved leasing and cash flow as the collateral properties advance in their business plans and transition to more stabilized operating performance.

In the second quarter, we put 3 loans secured by New York City apartments on our watch list, the only risk rating downgrades of the year.

These properties will be impacted by newly enacted legislation related to rent-regulated units that will ultimately result in less revenue growth over time than what we originally underwrote. We believe our credit position in these assets is still protected even under the new regulations, but we still decided to watch-list the loans due to the projected change in cash flow profile.

The collateral properties are owned by strong, well-capitalized sponsors, and the 3 loans together represent only 1% of our portfolio.

The lending market overall remains competitive with spreads stable in part because of anticipated declines in base rates in the U.S.

Fundamentals are solid with real tenant demand in the major markets that we target. We continue to achieve our best results with repeat clients, larger loans, special situations where speed and certainty matter most, construction loans and loans in European markets.

We've built a market-leading, global senior mortgage lending business with a $16 billion portfolio, almost $5 billion of equity market cap and a highly efficient match-funded liability structure.

Our focus remains on dividend quality and stability. And with that, I'll turn the call over to Tony.

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Anthony F. Marone, Blackstone Mortgage Trust, Inc. - CFO, Principal Accounting Officer & Assistant Secretary [4]

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Thank you, Steve, and good morning, everyone. This quarter, BXMT again delivered compelling results for our stockholders with strong earnings, a well-covered dividend and increased book value following an active capital-raising quarter.

We generated GAAP net income of $0.59 per share and core earnings of $0.68, providing 110% coverage of our stable $0.62 dividend for the quarter.

Our book value increased to $27.85, up $0.53 during the quarter and $0.65 year-to-date driven by our issuance of 8.6 million shares of common stock during the quarter, raising $311 million of fresh capital at 1.3x our prior book value.

In addition to our common equity raise, we also closed our inaugural $500 million term loan B in April, which priced at a market-leading LIBOR plus 2.5% with only 25 basis points of issue discount.

Our term loan has limited amortization, a 7-year term with flexibility to prepay after 6 months, further expanding the aperture of financing options for our business.

The term loan and premium equity raise in 2Q will be used to fund the continued growth of our business in the second half of the year and allow us to continue managing our cost of capital and competing for the best investment opportunities for our stockholders.

We also remain steadfast in our focus on balance sheet stability in terms of our asset level credit facilities, which had an average cost of only LIBOR plus 1.89% as of quarter end, and remain insulated from any capital markets-based mark-to-market prudence.

Closed the quarter with a debt-to-equity ratio of only 2.5x, down from 2.8x as of March 31 and liquidity of $962 million available to fund our active investment pipelines Steve mentioned earlier.

Looking at 2Q originations, we closed $1.3 billion of new or upsized loans during the quarter, highlighted by our international and Southern California loan originations, and funded $1.1 billion under these and existing commitments.

Our fundings were roughly in line with repayments of $1.4 billion, maintaining our total portfolio supplies of nearly $16 billion as of quarter end.

Asset yields on our total investment portfolio migrated modestly lower during the quarter with spreads tightening about 7 basis points, as a handful of legacy assets with higher spreads happen to repay this quarter.

As we've highlighted on previous calls, we look to manage the impact of spread tightening with offsetting reductions in our cost of capital through accretive equity issuance, negotiating asset level pricing with our credit facility providers and employing other sources of financing like the term loan we closed this quarter.

Our portfolio credit quality remains stable with an unchanged weighted average risk rating of 2.7 on our scale of 1 to 5, as 9 upgrades totaling $703 million offset the 3 minor downgrades Steve mentioned, totaling $167 million.

It is important to note that these loans are fully performing, and we continue to have no nonaccrual or impaired loans in our portfolio.

We felt filing the risk rating of these loans was a prudent disclosure to our stockholders given the change in the New York City rent control regulations, but we have no expectations of loss on these loans.

As a reminder, we have had 2 loans with a risk rating of 4 in the past, both of which have fully repaid with 0 losses as we successfully resolved these loans with our borrowers.

In closing, we previously highlighted the floating rate focus of BXMT's portfolio, which was 97% floating rate as of quarter end and how this positions us to capture incremental earnings as rates rise.

In addition to that important benefit, we would also like to highlight that while higher rates will directly increase our earnings, we are partially protected from declining revenues should rates decrease with LIBOR floors baked into the structure of many of our loans, which we believe is another example of the stability of the BXMT business model.

Thank you for your support. And with that, I will ask the operator to open the call to questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Doug Harter from Crédit Suisse.

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Douglas Michael Harter, Crédit Suisse AG, Research Division - Director [2]

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Can you just update us on kind of where you would expect leverage to get to kind of as the pipeline comes through and how the term loan factors into that leverage calculation?

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Douglas N. Armer, Blackstone Mortgage Trust, Inc. - Executive VP of Capital Markets & Treasurer [3]

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Hey, Doug. It's Doug here. It's a great question. We do have a very strong pipeline. We expect net growth in our balance sheet, which will probably show up in increased leverage. We're down quarter-over-quarter from 2.8x to 2.5x at the end of the second quarter, and we'd expect that to increase inside of the range that's anchored right around 3x in terms of debt to equity.

So I think our expectations for the level of leverage remain consistent with where they've been for the last several quarters in a range right around 3.0x in terms of debt to equity.

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Operator [4]

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Your next question comes from the line of Don Fandetti from Wells Fargo.

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Donald James Fandetti, Wells Fargo Securities, LLC, Research Division - Senior Analyst [5]

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Steve, can you talk a little bit about the New York multifamily property lease in terms of the risk rating change? What are the scenarios? How do you see that sort of playing out, no bull-and-bear case scenario?

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Katharine Keenan, Blackstone Mortgage Trust, Inc. - Executive VP of Investments & MD [6]

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Sure. Don, this is Katie. It's 1% of our portfolio, so our risk is relatively limited. And I think in the various scenarios, we expect that our loans are going to be well protected. These loans were 67% LTV on average when we originated them, so we had significant equity cushion. And while the rent regulations will affect the impact of cash flow growth going forward, we don't think that ultimately, it's going to result in an impairment as we have that equity cushion.

So we've underwritten the loans today based on what the regulations are today. We're obviously closely monitoring any potential developments on the regulations, but we're basing the way that we're looking at the loans on the current regulations. And we thought it was prudent to risk rate them forward. But again, they're performing, and we don't expect impairments.

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Stephen D. Plavin, Blackstone Mortgage Trust, Inc. - CEO, President & Director [7]

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Yes. And Don, I think we feel good about the fact that although we didn't fully anticipate this kind of regulatory change that -- we have strong sponsors and 65% loans that any kind of reasonable fluctuations in the business plans at the risk of the equity and not the debt. I think this is another case of that.

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Operator [8]

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Your next question comes from the line of Rick Shane from JPMorgan.

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Richard Barry Shane, JP Morgan Chase & Co, Research Division - Senior Equity Analyst [9]

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Really on the same topic. There's at least one other New York multifamily property in the portfolio that continues to be on -- up 3 ratings. I do note that the LTV is a little bit lower, 62% as opposed to mid-60s. Is that the distinction there? Or is there something more nuanced we should all be thinking about in terms of how we think about New York multi?

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Katharine Keenan, Blackstone Mortgage Trust, Inc. - Executive VP of Investments & MD [10]

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Yes. So I think it's important to note that New York rent regulations affect different properties in different ways. There's a lot of multifamily in New York that's fair market and not impacted at all by rent regulation.

And then other assets maybe have a few rent-regulated units and are less impacted. So we've taken the approach that we've looked at every loan in our portfolio and assessed the impact. And the ones that we have done greater than the ones we think are impacted in a way that would necessitate a downgrade, but the others we just don't think are materially impacting.

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Weston M. Tucker, Blackstone Mortgage Trust, Inc. - Head of IR & Senior MD [11]

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And just -- I know, Sunny -- for the operator, I just want to make sure that follow-up questions are coming through there. We can go ahead with the next question.

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Operator [12]

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Your next question comes from the line of Steve Delaney from JMP Securities.

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Steven Cole Delaney, JMP Securities LLC, Research Division - MD, Director of Specialty Finance Research and Senior Research Analyst [13]

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Steve, you mentioned that $3 billion pipeline, I'm just curious if we could parse that a little bit, are all those loans under term sheets at this time? Or is that sort of just a visible number about what you're looking at? Can you just kind of clarify that for us?

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Stephen D. Plavin, Blackstone Mortgage Trust, Inc. - CEO, President & Director [14]

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Yes. Sure, Steve, thanks. It's a stat that we note on all of our earnings calls, and its deals that have signed up, where we have signed term sheets, agreed terms that we're proceeding to closing. The expectations to close.

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Steven Cole Delaney, JMP Securities LLC, Research Division - MD, Director of Specialty Finance Research and Senior Research Analyst [15]

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So some in 3Q and then some in and 4Q as well, correct? I mean that's a big number for 1 quarter, but or -- are you thinking that all these might actually close before September?

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Stephen D. Plavin, Blackstone Mortgage Trust, Inc. - CEO, President & Director [16]

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No, I think you're right, some in 3Q, some in 4Q. But we'll also continue to originate more loans, Steve. So -- which will close it, likely close in 4Q. But the origination process is ongoing. That's what we have signed up at the moment.

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Steven Cole Delaney, JMP Securities LLC, Research Division - MD, Director of Specialty Finance Research and Senior Research Analyst [17]

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And a quick follow-up, if I may, for Doug. Doug, there was an article on CMA Page 1 last week about sort of an evolved warehouse credit product that could provide a lower cost alternatives to CLO financing. They mentioned specifically Morgan Stanley and KREF.

I read the article and the features that they were discussing about no mark-to-market, et cetera, it didn't sound like anything to me, it sounded like a lot of features that Blackstone already has. I just wondered if you were familiar with that article and if you could comment on that briefly.

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Douglas N. Armer, Blackstone Mortgage Trust, Inc. - Executive VP of Capital Markets & Treasurer [18]

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We are familiar with that article, and I think we share your view that the structure of that -- of those transactions and particularly, in terms of those features is very consistent with stuff that we've been doing for years.

So we're happy to see the activity in the marketplace, and we think it'll ultimately accrue to our benefit in terms of validating our business model and the market's acceptance of the loan-on-loan financing strategy that we have.

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Operator [19]

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Your next question comes from the line of Stephen Laws from Raymond James.

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Stephen Albert Laws, Raymond James & Associates, Inc., Research Division - Research Analyst [20]

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A couple of questions around CECL. One, I guess what do you think is the best historical data set that you look at as far as historical performance versus the portfolio that you guys own? And the specific follow-up to that is a situation like the Tishman need a large -- a loan you guys did, $1.8 billion last April. You had mentioned it won't start funding until 2020, but my understanding is you'll have to take the entire full CECL reserve even if the funding is at 0. So given that accounting treatment, does that change your willingness to do large loans that have a significant delay in funding going forward?

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Anthony F. Marone, Blackstone Mortgage Trust, Inc. - CFO, Principal Accounting Officer & Assistant Secretary [21]

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Thanks for the question. This is Tony. I could jump on the CECL point. So I'll take all the things. One is we are still going through our adoption of CECL, I think, as is everyone in the mortgage REIT space, and frankly, a lot of the folks in the banking and specialty finance space overall.

So I can't get into too much specifics on exactly where we expect it to land. We think that the important reference data is a mix of looking at our loans, which have a great track record as well as seeing what data is available in the market that we can leverage. So I can't really speak to definitively what our record set is going to be that we'll use at this time. But we'll have more detail on that as we finalize our process and put those disclosures out more formally.

I would say that we're being very thoughtful about ensuring that the reference data that we do use is as analogous to our loans as possible and not picking up data that may have lower credit quality loans that are not comparable to the high-quality loans that we make here.

As for the Tishman loan example, kudos to your reading of the FASB rules, you're right. The CECL does require picking up a reserve on funded, not just in a deal like Tishman that's fully unfunded, but even if the loan is 90% funded, the 10% unfunded has to be taken into account. Without getting into a ton of nuanced math, the way CECL looks at that, it does take into account the size of the loan over time, so there is a timing element to those fundings in terms of how you look at how impactful that will be. We think that overall the credit quality of the loans that we make is very high. And so whatever the loan structure, our CECL reserve will be appropriately low, and we'll take that into account.

So I don't expect that's going to influence our decision-making in terms of our investments. We make good loans to quality real estate with quality sponsors, and that will continue. But you are right, there could be a one-off loan here or there that may we have a little bit larger CECL reserve. But we don't think that's going to move the reserve way out of a reasonable range.

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Operator [22]

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Your next question comes from the line of George Bahamondes from Deutsche Bank.

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George Bahamondes, Deutsche Bank AG, Research Division - Senior Research Analyst [23]

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I'm sorry if I may have missed this point. But do you guys have any thoughts on what potential impacts on the, maybe, incremental attractiveness of borrowing as LIBOR declines, assuming that we do see some Fed rate cuts in the back half of '19 and into '20?

Just wanted to get a general sense of -- if you think that becomes incrementally more attractive to borrowers and maybe that impacts origination volumes or just any sort of thoughts generally on what the landscape could look like? Should we see some Fed rate cuts?

And I think the second question is tied to that similarly -- is that do we see spreads maybe widen out a bit just given that LIBOR would decline to ensure that the returns on these loans are similar to what they've been more recently? Just wanted to get your general thoughts on that, if possible.

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Stephen D. Plavin, Blackstone Mortgage Trust, Inc. - CEO, President & Director [24]

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Thanks for your questions. I think as it relates to the impact on loan demand of lower LIBOR, I mean it's certainly beneficial. Most of our borrowers are just floating rate borrowers, not because of their guessing interest rates, but because they want to maintain flexibility in their real estate ownership. They don't want to lose the sale window.

They have ongoing capital needs, they need loans that accommodate future advances and floating rate loans do that much better than fixed rate loans.

So I think on the margin, it's beneficial having lower floating rates as it relates to loan demand, but our loan demand has been very strong throughout, when LIBOR was at a lower range and also when LIBOR is in current range.

On this -- after asking the spreads question, Doug, if you have anything you want to contribute. But I think we would expect spreads -- we've seen spreads begin to moderate in the market already.

I think it's in part because of -- people just have minimum returns in business models. They can't withstand continually compressing spreads. But also I do think there's -- with the expectation of lower base rates that spreads have moderated. And I think there certainly is a possibility that spreads could increase as base rates go down because again, a lot of the business models, a lot of the investors are looking at their total return even on floating rate loans.

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Douglas N. Armer, Blackstone Mortgage Trust, Inc. - Executive VP of Capital Markets & Treasurer [25]

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I think it's a great point. It's just another illustration of how the LIBOR analysis is an all else equal analysis. And by definition, all else will not be equal as we move forward into a different rate environment.

There may be headwinds coming from spread compression or a decrease in LIBOR, but there are a lot of tailwinds coming from other directions, albeit increased deployment or demand for our loans, potential moderation in spreads, and also all of the capital market initiatives that Tony referred to, but reductions in our funding cost, optimizing corporate level leverage, raising premium equity. So I think with regard to the capacity to offset those headwinds and maintain our earnings power, we feel very good about our asset-sensitive floating rate business model.

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Operator [26]

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Your next question comes from the line of Jade Rahmani from KBW.

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Jade Joseph Rahmani, Keefe, Bruyette, & Woods, Inc., Research Division - Director [27]

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What drove surge in repayments in the second quarter? Was anything surprising there? And what do you expect for the balance of the year?

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Stephen D. Plavin, Blackstone Mortgage Trust, Inc. - CEO, President & Director [28]

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No. I think, Jade, we -- it's hard to look at repayments in any one quarter. So I think those were repayments that maybe we thought would come last year and just ended up coming in the first quarter.

So we think we're sort of in a stabilized repayment mode. The repayments tend to be correlated over longer periods with our originations, some of the market's more liquid. We would expect to see more repayments.

But as we go forward, we feel very good about achieving portfolio growth, again, like we have in the most of the past quarters.

So it was a $3 billion pipeline. We do expect to see portfolio growth in the second half.

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Jade Joseph Rahmani, Keefe, Bruyette, & Woods, Inc., Research Division - Director [29]

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Just turning to the New York multifamily issue. Can you give any sense, any insights into the borrower mindsets on these loans? Are they taking a wait-and-see mode and sort of hunkering down, focusing on maximizing cash flows, reducing expenses? Have there been any comps, any transactions in the market? I don't believe there have, so there hasn't been much price discovery as yet. And over what kind of time period do you expect this to play out? Is it over the next 6 months? Or are you thinking much longer than that?

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Stephen D. Plavin, Blackstone Mortgage Trust, Inc. - CEO, President & Director [30]

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Great questions, Jade. I think the answer on a lot of them -- it's too early to say.

Our sponsors are very committed to their assets, to their New York City multifamily strategy. And so we -- and again, we've spent a lot of time betting sponsors and feel great about the sponsorship on the loans that we've been talking about.

I do expect to see relatively few transactions in the near term. Typically in periods of volatility, transaction volume slows. And I would assume that's what will happen here as well. And then over time, as things stabilize, we'll see transaction activity resume in the market.

It's going to take a long time for the impact of this to play through. That really relates to future rents. And so it's not an adjustment of our in-place cash flow, it's really just an impact on what the future cash flow might be.

And typically, these deals have gradual increases in cash flow over time depending upon how capital was spent and how units turnover. And so that's what's been impacted here. And we think that, again, the underlying assets are still strong. We have a lot of confidence in our borrowers, and we'll just have to wait and see in terms of how the market adjusts and what the long-term prognosis this year.

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Operator [31]

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Your next question comes from the line of Rick Shane from JPMorgan.

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Richard Barry Shane, JP Morgan Chase & Co, Research Division - Senior Equity Analyst [32]

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I got cut off as I was trying to ask my follow-up. It's largely been explored. But just want to ask related to the 3 New York multifamily properties. Is there any commonality among the sponsors? Or are they different sponsors?

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Katharine Keenan, Blackstone Mortgage Trust, Inc. - Executive VP of Investments & MD [33]

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There's -- we have different sponsors on various assets. So we generally expect all of the -- I mean they all are very well capitalized. So the commonality in the assets is really the business plans, which was investment of capital over time for gradual increases of rents. As we have said, we expect that, that will moderate going forward.

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Richard Barry Shane, JP Morgan Chase & Co, Research Division - Senior Equity Analyst [34]

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Got it. And my question wasn't clear. I -- Is it 3 discrete sponsors for those properties?

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Stephen D. Plavin, Blackstone Mortgage Trust, Inc. - CEO, President & Director [35]

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It's 2 discrete. 2 sponsors, 3 loans.

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Operator [36]

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Your final question comes from the line of Doug Harter from Crédit Suisse.

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Douglas Michael Harter, Crédit Suisse AG, Research Division - Director [37]

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Just following up on the term loan. Just -- what are your thoughts -- I mean do you view since that's a 7-year term, do you view that as leverageable capital in any way? And does that presence kind of give you some ability to, kind of, be north of 3x?

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Douglas N. Armer, Blackstone Mortgage Trust, Inc. - Executive VP of Capital Markets & Treasurer [38]

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Yes. Doug, thanks for the follow-up. I realize I probably didn't address that as clearly as you had asked it. I think the post term loan -- I think the range that we'll be able to achieve in terms of our debt-to-equity ratio is higher. And I think the long-term outlook for being above 3x as opposed to below 3x, where we have historically been, is significantly greater.

Again, it'll relate quarter-to-quarter to the amount of deployment that we're able to achieve in a given quarter. But yes, I think with the term loan being as well structured as it is -- floating rate. And as you point out, a 7-year maturity, that's capital that we're very comfortable leveraging. And it results in a capital structure that we're very confident operating on a slightly higher leverage basis than we have been historically.

I think that will be in a range around 3x and more likely above 3x as opposed to below 3x compared to prior to the term loan issuance.

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Douglas Michael Harter, Crédit Suisse AG, Research Division - Director [39]

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And then as you think about kind of constructing the capital structure, kind of over the long term, how much term loan could we expect kind of in the capital structure? Or more broadly, how much kind of noncommon equity could you expect to kind of makeup that leverageable capital base?

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Douglas N. Armer, Blackstone Mortgage Trust, Inc. - Executive VP of Capital Markets & Treasurer [40]

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I think the ratio that we have now and we think about the convertible debt together with the term loan in sort of connection with this question is close to our target range. The amount of common equity is also in flux, and we continue to grow the balance sheet, and we'll continue to fund that through a mix of debt and equity.

I think that you'd expect to see that mix stay roughly where it is today in terms of proportions. But again, I think with the term loan in the picture, that proportion is higher than it was previous to the term loan.

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Operator [41]

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Thank you. There are no current questions. And I'll turn the call back to Weston for closing remarks. Thank you.

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Weston M. Tucker, Blackstone Mortgage Trust, Inc. - Head of IR & Senior MD [42]

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Great. Thanks everyone for joining us this morning. And please let me know if you have any follow-up questions.

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Operator [43]

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Thank you to all speakers. That concludes your conference call for today. You may now disconnect. Thank you for joining, and enjoy the rest of your day.