BXMT - Earnings call transcript Q4 2017 | Blackstone Mortgage Trust, Inc.

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Operator

Great day, ladies and gentlemen and thank you for joining Blackstone Mortgage Trust Fourth Quarter and Full Year 2017 Investor Call. My name is Latia. I’ll be your moderator for today. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. reminder, is a replay recorded As purposes. Instructions] this being conference for [Operator great host introducing Tucker, is honor It with our Investor Head Relations. for of Weston today, Please proceed.

Weston Tucker

fourth presentation like welcome Latia. of Head which our call by today a materially. of results, everyone issued Doug night which filed the Marone, Executive on President Last a with forward-looking are Blackstone press morning today’s Chief available thanks our website Plavin, Nash, call. of we and Capital differ outside with Steve XX-Q company’s CEO; are Great, Mortgage release am Markets. statements, Good that and Mike and Trust’s include may the to filed control. have uncertain Armer, may and quarter Chairman; and Actual SEC. joined Financial conference I I’d and to our remind Tony results Officer;

that the XX-K. For not statements. the of results, to update risks of our of affect sections forward-looking see a some We any Factors duty could please undertake discussion do Risk

may will your be advice in audio investment constitute and non-GAAP Any this in to regarding reconciliations, reform and for duplicated Blackstone cast of own our and do BXMT. without consent. is call to consult not you the measures should should with Trust Mortgage This release references refer certain refer advisors We call you XX-Q. our tax the tax on tax press to not consequences this also of copyrighted and material

year. an the per the quarter based and paid Last share and reported respect attractive year. Core net yield the of X%. quarter over reflects per fourth price, month on and the $X.XX fourth our of for dividend We that with results. a quick for $X.XX quarter the share dividend stock for earnings of $X.XX we were $X.XX of today's to GAAP recap So for $X.XX income

that, with call, things to please I'll following Steve. over And let If me know. any today's questions now you have turn

Steve Plavin

by Blackstone, and more balance support our real evident the originations investment That investment Thanks senior grew in everyone. funding XXXX by $X.X sourced manager and sheet. the $X.X leading to priced drove billion. earnings XXXX. In from over $XX during our BXMT than portfolio management sides activity XX% billion were dividends our $X.X growth, these originated we up new core We Weston paid. XXXX, covered of estate of $X.XX, full billion of To world which morning, loans good and future billion to year capital on both benefits of efficiently and the

During the major quarter, contributed investment Dunlop themes JV we coastal accounting in or with our million about billion multifamily of volume class of asset estate. the $XXX Walker were our focus the of million loan. Southern coastal value. property and originations, the see of property with the consistent sponsors and the we highest in of Atlanta secured assets where in in enduring the Boston, rest our buildings with originated in the for Multifamily two of office total. hotel a originations the matching Loans that and of California California, quarterly in $XXX real XX% by and Northern most $X.X markets, quarterly loan comprised markets originations favorite quality Blackstone The concentrated & industrial

And the raised a worked equity since extraordinary the of pipeline in for strong. as driving funding first In million it of times We X.X loans year and XX% CLO $X.X source of value, a innovative securitization business. origination. of origination the debt participations financing we the left December, and primarily of Earlier end, year, million had convertible new at XXXX, issued we loan have we side expected in and we right our at balance facilitated close sheet XX large assets. in $XXX hard with truly billion of balance share. million value time per book our a and $XXX the sponsor that as opportunities to remain had quarter sheet $X this increase additional X.XX% to a and credit the loans issued We months coming $XXX an of billion year for our book our coupon

We continued also our to credit added fund facility portfolio. in $X.X million capacity of additional growth loan

reform deduction rates. growth demand healthy and capacity, interest strong XX% which income, aggressively top-quality additional leverage floating REIT bodes In added enabling rate with activity lending competition borrowing addition increasing also for higher reduced Increased short-term and on more transitional still corporate range spread us opportunities loan treasuries. is to look remain property spreads. increases that to origination high of inflations. to in to from portfolio, our is with owners benefit. well impact With the the more up, to dividend within prices private driving revenues tax performance effectively their XX% spreads lowering interest year a Individual and XX.X%. economic property require for opportunities historic rate There for our to including led an our we've Tax offset tighter, on and convert costs And our properties. for but U.S. values less rates federal provides terms. shareholders improve we've rates lower compete also picking in cap each tax loan refinance the expense rates Corporate to asset has maximum relief benefits interest as from own, pressure get seen XX%

market our our repeat have and client of positioning and recognition endorsement differentiated bracket in stronger. majority equivalent lender never of yield is with the greatest yield. we an individual produces estate a in becoming share the tax basis the BXMT At its Our real top dividend provide most X.X% competitive XX points approximate of pretax business the senior borrowers, the another and in will are the leading level, do centric that of way been The our current pretax in loans price. approach. shareholders deduction

is attractive thank for yield, this I'll that interest remains like over With the XXX% XX% the has to I'd we for an Our turn and and call value your loan you management LTV Tony. With believe with BXMT in of portfolio to shareholders. investing overall performing. origination support proposition highly of and Blackstone compelling

Tony Marone

Steve results. and everyone. already morning, you, full-year good XXXX Thank our Steve covered

prepayment million fourth the stock A part dilutive We XQ right So, the net reported $X.XX, into generated quarter income This as $X.XX GAAP offering both per quarter. common core I'll due well of of highlights. generated from as earnings jump of Class was impact our $XXX December. in and decrease down $X.XX slightly share of to the additional income in third in

our equity balance our revolve the per new immediately to down impact we and manage proceeds of to equity credit these facilities, offerings, stock any share. with As sheet reduce earnings curve used on J

unavoidable is are loan proceeds into However, until some these originations. fully decline new in deployed earnings

$X.XX all XQ context, had core approximately would've we been December a our this else share issued XX, result instead of earnings For these of dilution. for equal, as on shares October per XX

As Steve mentioned, and half earnings we of have of the anticipate to investments pipeline XXXX. over a taper first new therefore dilution robust the

per Importantly, $X.XX times and we X.X driving of price are our book proud in favorable quarter. executing this a for during the share value a price-to-book, increase offer stock capturing

some the securities loan subject seen nature generally as mentioned rate long-term and we've for market is not this long do our price have to dated we although general, we REITs in assets. our portfolios investment broader capital not volatility on in on anticipate pressure our calls, our significant the to business. has following balance sheet of rate share or fixed market's given not previous As over we fluctuation any do held to value book our mark-to-market time own translate Accordingly, floating

As with Steve under originations benefiting an from senior estate mentioned, loans originated $X.X average million LTV totaled XQ totaled $XX.X portfolio from billion billion all These markets. floating real are record up secured origination XX% Loan funded loans the fundings to bringing our of our total in repayments a rate million during loans. XX% by $XXX of million $XXX institutional $X.X outpacing major previously XXXX. quarter and

XX% average $XX one-to-five performing a remains an one portfolio. is with with four risk average an largely of unchanged of rating origination scale in XXX% million our loan LTV on only of and portfolio rated X.X Our at

the of only allows us $XXX a CLO by $X which had for with On term financing plus is these debt-to-equity loans X.X significantly coupled match replenishment amount balance activity. of cost as our end, of X.XX% available credit cash X.X of inaugural rate an issuance active side $XXX This providing future to XX% notes facilities revolving times LIBOR for million our nonrecourse financing billion liquidity weighted loans. at on we us our to of comprised right-hand repay coupon X/XX. reduced majority of sheet, the Available our of in raise of from CLO sold. of down million issuance, million times December, quarter which feature, under borrowings the maintain tenant XX only advance effective equity with ratio quarter to includes a loans $XXX average the initial structure investment reducing This innovative the led our our

impact of after-tax mentioned, our laws, in basis recently enacted income our excited the dividend by full Thank operator to not is such are the XX.X% our questions. XXXX your REIT to to the non-resources. bonds deduction and with new with continued else are results reform dividends Steve REIT generating We're of look we Under and in business forward see value sector to and tax the open as REIT entitled future. on the Lastly all federal we an the general. structure. year support XX% our the from you benefiting individuals XX% will in tax fixed call fourth for Accordingly, for that equivalent the from income top rate the from to $X.XX equal, stock, reducing ask I effectively to products owning income on a pleased $X.XX shareholders other this quarter to for marginal and the the on to

Operator

from with proceed. Instructions] Your Don comes first question Wells Please Fargo. [Operator Vandine

Steve Plavin

Good Don. morning, Hi.

Operator

time, feature Please at check mute Sir. this your

Your open. line is

Don Vandine

markets? on what have of happen? terms first seen Steve. you question and ground that's a velocity worry are the my impact transactions Quick So the How The doing. question you real that Hi to you about expect the XX-year be is would things would guess obviously of the yields my I part the two, and be Yes. slowdown up of rates. of question. the moved estate in property would one you in on

Steve Plavin

we've transaction think Don. don't in I I solid upon And activity a a rate haven't is activity. back depends I the standpoint, but seeing seen is to in we're want go -- you from slowdown far the economic It what pickup market. how seen still now think yet the

benefit terms has already in the think of tax of I being felt corporate activities. I reform think

rates higher pick operating be positive that actually activity that the to coinciding overall impact growth, to and want to estate. expect to see net income This leasing with up. scenario to for economic and more real economic We in velocity the higher -- be income is economic for operating with you

Don Vandine

Okay. let's on should cost the all-in And about that how relative to the we CLO, your say your then bank is what financing? of think issuance, --

Doug Armer

Don, CLO financing. and be the Doug. of to Hey The this maximize That's question. in as great structural got that'll Tony its cost really a the the some enable efficiency a features function will of transaction we've us the ultimately tenor all-in mentioned, of

the XXX to expect all-in over. we think I below be cost

another of in that basis of noncash amortized So, to top XX on coupon. XX overtime points the will cash cost

Don Vandine

you. Thank Okay.

Operator

Credit Your Douglas with next Please question Suisse. comes proceed. Harter from

Doug Harter

that last on at tenor XX% question. is starts we long to about the before Thanks. down? up of it think should following how Doug that what leverage how you long -- just stay pay How

Doug Armer

question. function are pool. of collateral That's the speed in Obviously, that a of loans the a prepayment the great it's

And a walk. be it'll random of bit so, a little

and maintain that loans to the replenishment that tenor. some maximize is I understand of think built features modifications to flexibility ability we also extensions the underlying some and thing in in important of terms to structural

three-year our So, life able the least so long. for loan is be we'll expectation period the BXMT probably typical that a in that at out average to is push weighted and range

Doug Harter

for factor -- them? kind that CLO all-in to how that cost pays your of that does question, expectations Great. in And this Don's the your referenced

Doug Armer

foresee. market be regard to points, would time deleveraging, but we'd do as then the But the No. of refinance to think in CLO be creep that think of out, to of we we'll or the have on CLO to that expect Again, I several that's with it in terms basis to to cost I pass. likely decision the rate the beyond comes based so maintain the rate call to creep optimizing three the years at we the It make option horizon then XX term all-in to terms potential de-lever portfolio for have the financing. course five-year or significantly the as in years the the out conditions, going have more additional XX does

Doug Harter

you. Thank helpful. Very

Operator

Levi-Ribner with comes Your next Riley from FBR. Please question Jessica B proceed.

Jessica Ribner

taking morning. so question. for Good much Thanks my

Steve Plavin

Good morning, Jessica.

Jessica Ribner

environment market? know for that strong in high seeing, In comments terms portfolio the can still rate more terms quality still credit demand anything is of made kind I so broader you with but is little you're increase know I and seeing on a What there just talk are to that there if quarter properties. of that's you the Steve that? concerning that this performing, XXX% your you of than you credit last about is

Steve Plavin

would Sure. seen we've really. not I say a don't Jess, I change.

and in in portfolio seeing what we're remains I quality think credit our general strong.

at healthy in operations I think the overall at in are the leverage a cycle. point Property market levels. and we're still good

to if rates from treasury in or three's. in, in I then three low in the the expected don't the any haven't foresee think they're I stay So, impact range any I and impact be yet seen

I is think the still very fundamental strong. backdrop

Jessica Ribner

seen out of the you market Have because tightening? higher spread maybe competitors of rates the the of some any and

Steve Plavin

I capital seen think competitors leaving about competitors feeling private because The it. loan and fall out good unfortunately. market away so to competitive market and I ability the not haven't haven't is market. No, wish to competitive cost compete, we our standpoint the very fall of of and we seen we but very would our anybody the remains are from a some

Jessica Ribner

transitional 'XX, landing, construction one -- comments you how as then thinking there? about one Has but attractive? participating you are last terms just still around you And in last in construction anything lending some of changed made in lending

Steve Plavin

No.

still construction we think We past I as any see quarter. construction attractive. close lending in didn't loans this

or it maybe of talked minus do. I about So, what plus XX% being we

loans continue don't the seem loan opportunities of We look changed. fit that the reluctance well bank's to construction profile to The for hasn't priced unique that banks. construction fund

see So, go forward do in I we'll think as commit we to new XXXX. to opportunities construction loans

Jessica Ribner

it That's for Thank Okay. you. me.

Steve Plavin

Thanks Jess.

Operator

Delaney Your proceed. next Steve from Please question JMP Securities. with comes

Steve Delaney

everyone. Thanks. morning, Good

strong You provided When X of of that execution the of us your with carving Page a about of the the on off on XX% great chart [FLX]. look at deck and you AX another and CLO? you XX% AX loans loan reason take structural the participation, a is into look why do an Thanks. another couldn't of and there create to an then whole

Doug Armer

do of a there's great do were question, it's to a reason maybe bit one expected leading no we why the question, point we CLO structural with The keep Doug. the and hey is upfront but cost. a little couldn't of that. amortization in Steve, of That's life no regard that the mind we thing making previously the the

I an not would pool expected of life keep is be. One the it's about static at that in loans decision. mind that XX looking or would make thing what other those So, evaluation an nothing we all think to of

that new the pool. carve half and could a CLO and of new the we loans with collateralize pool of notes them So, couple of kind off combine with some AX a of

financings think the this very technology I future company. see efficiently used in for you'll So,

Steve Delaney

thanks? helpful. in relative much mix in increase the understand an start investors, making Steve, some to that way is and that That's I investors the other increase I'm the you just very of of [MF] driving attractive you just multifamily And those financing, property general. is to curious asset that's -- because CLO talking -- view to multifamily, attractive the in that more versus important your class types when Understood.

Steve Plavin

class perform and our actually that added as we our look and these really that we have this it's we in the the success. how to pursued multifamily to nice an will see also of country it. I what's just of in so the well that's driving I like belief really at structures. securitized efforts our loans reason does for real is fundamental the sector perform. it benefit the fundamental not estate The some for in Multifamily housing increase think you'll have asset because in reason

Steve Delaney

spread Thanks. for at XXX-cash basis past tightening spread heard if looking average mortgage LIBOR coupon where average commercial as on can XX XX anywhere spreads about looks it all to commented XX. that me puts XXX how Page points Okay. how thanks? we like REITs over your current to your I just loan some give about final me And and year-end, And the one ranges Steve that from at of to was the were spreads, points. compares was quarter the portfolio LIBOR was based on to at curious thing one-month pricing basis where us whether year XXX, it fourth insight you the originations now, loans or in loans the you're

Steve Plavin

are would XX would of leverage. to had to much spreads throw say improved basis number benefit say I tightening we've case, bit that a I that little and had our XX funding our I in corporate of saw costs in we last we've points the to In a there, a months. X and if general tightening with seen the offset

despite So, competitive maintain the compressing spreads. we've able to ability been our

Steve Delaney

for Thanks Okay. the color.

Operator

Rahmani from Your question next Jade comes KBW. Please with procced.

Jade Rahmani

much. year-to-date? very I is side, rate there tightening. question there's Have origination seen you follow-up on been on What a on spread believe there? about spread to potential fixed any continued widening spreads where Thanks and the pressure Steve's

Steve Plavin

that spread the has a saw begun of first We to recently trend into the slow. spread lot from quarter. I tightening think coming

So, I do to the moderate. tightening level begun of spread think has

lending, have at be loans better add really our they’ll I we it to portfolio, lending we could model for look us shareholder in over rate rate a we'll we then loans, constantly Floating ourselves, rate there we is fixed how As fixed if add create beneficial. some work find better our are period way loans time how longer fixed-rate to mix. with to and if a relates to then loans expand the we think opportunity value, fixed rate envelope and of our matched into to an finance but can

Jade Rahmani

you on well you close loans? of can $X.X issuance your believe as billion time of capacity capacity, CLO any, appetite adequate there's In comment loans financing pipeline those current terms if as the if in the is to one for additional of financing

Doug Armer

capacity in billion do -- of also some to collateral Hey facilities, current ability do of We do off over revolving $X that question, we the and the on there billion it's have we can accommodate credit pipeline of Great $X.X you financing our to transaction which December interest Doug. facilities in took do the that would $XXX Jade, obviously our open credit plus we that CLO again. capacity. another CLO million we those and room generated up do have

is we $X.X The currently other process. note have and that thing upsizes billion new of facilities I'd almost in

the the continuing very So, in credit balance confident billion. even CLO facility continuing generate capacity We're ability sheet $X work billion and and about angle tune to our the debt we're to to fund $X we're to of within growth space. the

Jade Rahmani

was little so that of moderate? outsized the of on higher. million we due that cost Was CLO, issuance and bit those think the size or $XX the I the perhaps issuance subsequent CLO CLO inaugural costs The estimated a to would around or it costs financing

Doug Armer

outsized a describe wouldn't number disclosed. is that we've isn't and it I number that

developing that be cost efficient but sure way that legal I right to So, in more I'm will particular that the are regard comes not where relate you to technology. with from, future CLO's think the

cost cash coupons lesser and will market given think going forward. the both dynamics will that we also down think upfront be the come So, we

Jade Rahmani

other or out rate are lines or space? Thanks. view number to the business at expect disclosure interesting find the primarily just transitional floating looking lastly, you there complementary to as models to want you statement we flow the current And calculated any and to was cash the if stick just

Doug Armer

and is that great grew butter have think bread of saw a use still to our by In see have continue really it best Jade good last XXXX. into we We provides that in the shareholders. business. our for and really XX% returns year, the from that capital growth what we going We really standpoint. momentum we topline great opportunity do We portfolio

our So, business. core love we

think increase great and the for think that growth That anything shareholder business on continue value liking we add continue core time won't our that on shareholders. would to really evaluate we're and to cylinders. it's all could we but really being, for and hitting liquidity We change, it the

Jade Rahmani

Thanks very much.

Steve Plavin

welcome. You're

Operator

final comes -- Your Please Rick proceed. next question from Shane JPMorgan. with question

Rick Shane

originations morning. funding exceeded is Hey like fundings see the talk have would Most pretty the to been in my quarters. this how but function that Thanks starting a I'm actually the seen where forward? I about bit, is or been answered, guys. that that portfolio, come like -- for to construction through a assuming and this asked lending a taking we going is several the a significant last in questions little to we've relationship of There's gap. should but think first this quarter while

Steve Plavin

our for measured a but each primarily in originated prior have of on meaningful the bit calls, that funding loans seen quarters, we We've loans. the It's what little construction recent quarters. prior

originated was loans million loans in were this over quarter made $XXX periods. it of we that that prior of So, that -- in advances

the without if loans originate to or time the real of adding them in impact two actually quarter. So, in having one

So, it nice. for We've is it a about while. talked

to come didn't see nice any QX. construction new loans originate pass. We So in to it

the funding unfunded very funding the which balance didn't strong. in beneficial is commitments fundings part a exceeding old originate saw the and with being new unfunded we But commitments, that really you the explains -- originations. lot had our So, quarter positive funding the loans of pipeline in the

balance positive expect fundings. in see meaningful We some to

Rick Shane

make That originations with space. sense terms it. no in the of the construction in relationship Got actually new

number, but just about do those be annual much the As how number, not or mentioned related think you to million draw -- lines. facilities? we construction a you on remaining What's move let's is quarterly could $XXX about on draws to worry an number reasonable think let's into think about of to about drawn fundings XXXX,

Steve Plavin

have we do Doug, a number?

Doug Armer

billion. unfunded over $X of is total The commitments

toward million. a pointed as think as little the I $XXX the out was during fourth at XXXX, was you the number whole. a for skewed quarter It bit million year $XXX

are the So, full in swing. construction loans with fundings

expect see a that you'd similar think to XXXX. in number I to

Steve Plavin

is provide funding previously add property it's to the of future one that, loans not just construction loans the for Rick, that originated.

unfunded One make space. that commitments of they up. of a It's the have meaningful we lending lease when the renovation for also component close transitional transitional and loans

a more having it a little really fundings is it's of it. really, bit feature. of those mature combination is So those a portfolio and rolling two nice The

Rick Shane

Got it. We them. where are the though for to construction assume basically that the likely to capacity closer maximum the loans loans draw much that's versus transitional cushion more

Doug Armer

loans the commissions. The transition that may funding construction in the The and of future funding loans, progress is do of based on renovation a as construction we meaningful portion that of drawn the be expect upon loans, tenant some of is leasing it ultimately well. a construction improvements at to and really buildings least and relates leasing the be initially the to amount leasing and

fundings think I and definitely it's the on be a be future commitments look at. significant something previous will So, should taking you

Rick Shane

guys. Thanks

Steve Plavin

you, Thank Rick.

Operator

closing for the Weston Tucker to will call hand now over remarks. I

Weston Tucker

morning. everyone for this joining us Thanks Okay.

you If questions, any please follow-up have Thank out. reach you.

Operator

participation. you thank for today's conference. This gentlemen, concludes and Ladies your

You may your of now rest all disconnect. day. Enjoy the

Blackstone Mortgage Trust (BXMT) 14 Feb 182017 Q4 Earnings call transcript