Blackstone Mortgage Trust's stock falls as it signals more earnings impact from office exposure

By Steve Gelsi

Real-estate finance company backed by Blackstone posts loss and cuts dividend

Blackstone Mortgage Trust Inc.'s stock dropped 9% on Wednesday after the real estate lender backed by Blackstone Inc. cut its dividend and swung to a loss as it manages through lower values in its office real estate portfolio.

Blackstone Mortgage Trust (BXMT) said it expects near-term earnings to "continue to be encumbered" by assets categorized as non-accrual, which are loans that are not expected to be paid back.

It added that the office space market continues to face substantial challenges amid slack demand in many markets as workers stay at home after the COVID-19 pandemic.

The trust also cut its quarterly dividend to 47 cents a share from 62 cents a share.

Blackstone Mortgage Trust reported a second-quarter loss of $61 million or 35 cents a share. In the year-ago period. it earned $102 million, or 59 cents a share.

Distributable earnings of 49 cents a share beat the FactSet consensus estimate of 45 cents a share, but revenue of $126.8 million missed the analyst expectation of $130.3 million.

Blackstone Mortgage Trust's stock fell $1.77 to $17.86. Blackstone Inc.'s stock (BX) moved lower by 2.3%.

Chief Executive Katie Keenan said the firm is seeing signs of green shoots in the office real estate market, as well as increased acquisition and financing activity across the market.

But potential interest-rate cuts by the U.S. Federal won't do much to help office loans, given that assets in that bucket have seen a 50% drop in value.

"Obviously, lower rates are helpful on the margin," Keenan said on the firm's quarterly call with Wall Street analysts. "But I think that what we're seeing in office is really a secular reset that is not really rate related....I don't think that 100 basis point lower rates are going to...significantly change what's generally going on in the office market."

Blackstone Mortgage Trust continues to keep close watch on where office space rents settle out, where the cost of capital settles and whether liquidity comes back in in the form of new capital, she said.

Meanwhile, the firm continues to face a headwind of incremental loans placed on cost recovery, executives said.

U.S. office accounts for about 26% of its roughly $21 billion portfolio, which includes 27% multifamily, 10% U.S. non-office, 18% hospitality and 10% industrial.

BXMT reported $1.5 billion or 7% of its total portfolio are impaired loans with no earnings generation.

BXMT's portfolio focuses on floating senior secured loans, collateralizedby institutional-quality real estate across sectors and markets

The trust typically lends $50 million to $500 million per loan, of all commercial types.

Also read: Blackstone still sees 'substantial pressure' in office sector as real-estate market recovers

-Steve Gelsi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

07-27-24 0728ET

Copyright (c) 2024 Dow Jones & Company, Inc.