BXMT - Earnings call transcript Q4 2018 | Blackstone Mortgage Trust, Inc.

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Operator

Good day, and welcome everyone to the Blackstone Mortgage Trust Fourth Quarter and Full Year 2018 Investor Call, hosted by Weston Tucker, Head of Investor Relations. My name is Matthew, I'm your operator today.

During the presentation your lines will remain on listen only. [Operator Instructions] This conference is being recorded for replay purposes. I would now like hand over to Weston, please go ahead.

Weston Tucker

Great. morning conference welcome call. good Trust's Blackstone and quarter fourth Matthew, everyone, to and Mortgage Thanks, Estate Marone, I'm Strategies. Estate and Managing Katie Global Real Keenan, CEO; today Director Jonathan strategies, joined by Capital of Pollack, Head Steve and Head Managing of Markets, Doug Director Financial Debt Officer; Chief Plavin, of President Debt Armer, Tony and Blackstone Real Blackstone on press results, we night, filed available website Last which with our presentation of and been a our have a release issued SEC. are filed our and the XX-K with remind include to outside are like of everyone statements, and I'd that today's may uncertain forward-looking call the control. company's which materially. Actual differ results may

call, For to refer please measures We Trust and recent discussion without could This to and press XX-K. non-GAAP release also on some certain our Risk update material to Blackstone that for we copyrighted not will this refer should be our reconciliations, duplicated risks the may not affect see any undertake is these most a of do XX-K. results, statements you our duty of consent. Factors and of audiocast the and the section Mortgage of

in annualized price. on year. $X.XX the few A closing prior weeks the quick for were yield share XXX yesterday's based We paid an the income to with results. respect So, of share of for and per of stock the $X.XX $X.XX quarter, up reported net a the we of $X.XX and GAAP recap a full for our year, from dividend earnings for fourth the $X.XX quarter year, ago reflecting per core quarter X.X% the attractive

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

Steve Plavin

maintaining nature year excellent produced $X.X Thanks, an of core the focus tying while $X.X loan transitional financed needed The Weston solely purchase sold hotels which existing a billion example the for greatly competition which pure advantage. and of acquisition investments for ever during our of competitive that growth Pebble senior book estate have also XX.X investment our and the York the borrowers strong as the acquisition the York The joint Brook lenders XX.X a of loans most LaSalle highlight helped and the scale We of to of of execute, the in been XXXX, that value borrowers the we clients. underwritten. DC, New is able New the dividend portfolio in Francisco, platform. acquired million and XX%. reduce BXMT. originations acquisitions And $XXX morning during as dividend, with lending construction coverage The the extraordinary our confidence power XXX% to experience large closing we one the quarter the and Midtown by portfolio great stores and active a terminal The billion we earnings in originated Lauderdale. limited a for redevelopment of of The strong origination vehicles our Because were the relationship indefinitive San was the our asset to as GE other Chicago, year share, York contributed ability size XX in million grew from billion business. relationship In deal. In quarter loans XX% of well City so San the Atlanta, equity closed billion LTV quarterly biggest play, REIT in to is generated for of Also Central that year. Francisco relationships And real our earnings during and loan coverage. quarter our M&A the exclusive critical hotels per Fort closing. count The for ever. the venture separately recently in BX up the Also acquisition loan historic the two loan needed was fourth quality and quarter of QX, we're fourth drive $X.XX along of With quarter the Park excess its Central hotel financed a Washington component loan necessary an everyone. London capped Park $XXX the reflects of totaling XXXX. several by bridge loan increase our portfolio for were to highest the pursued New proceeds at we quick competition. two during by loans, which our retain of Blackstone's LaSalle also and Sydney cost that acquisition borrower good the

most, in loans, and to market matter loans real best led special in significant and America As Blackstone transaction we and speed slowdown estate especially situations equity results where real quarter our our loans is core volatility certainty North and debt economic a activity. where achieve exemplified Late expertise estate outside holdings. markets we construction can estate the scale larger the has in where extensive in real leverage

QX Our advanced pipeline already QX slowed. origination transactions the were well but

$XXX in deployment performance being should our Also continue repayments. our with group to capital and loans originations we progresses. Keeping recovering process. are now we year that capital book is estate growth, of saw billion of year of capital stability. markets average strong funds drive closed billion million To extraordinary the matched of raised. capacity. raised our XX.X year $XXX financing transaction X.XX quarter in that as currency also We also sheet reported completed an propel even pace term during and most we XXXX markets segment XXX the The have the of component for of pickup active The XXXX quickly index dry fund financing helping comprise senior our real nonrecourse billion providers have Fourth over senior investment and facility of Spiral. help our their now times XX business. equity We to base loan and of we opportunity the have of the closing end during originations. options that in a successfully offsetting BXMT $X had our expect loan the array team credit the slowing more powder multiple million balance with to great of returns capacity debt client commitments fantastic equity The To syndicated of date portfolio vehicles volume in

while future for BXMT. Hudson going in loan very Speyer construction enabling significantly funding us positive economics for preserving substantial billion obligations $X.X Yards, to forward Tishman mitigate So the

strategy. We pleased which plan originated are the business are our with when we and very results our consistent loan overall the financing with

growth our XX% attractive and and to greatest way XXXX positioning have have business the market shareholders our endorsement very company. of We investors never stability in senior on return the to a X.X%. continuing and stock and the sponsored with recognition and originations repeat been stronger. client Blackstone remain of Since The are mortgage borrowers for With delivered very focused quality competitive loans yields BXMT's we we introduce majority the a our significant differentiated of do our approach. still centric dividend inception BXMT

the Keenan took of and day-to-day Tony great over President I Armer me respectively. the Markets turn yearend. to work and wanted the and Katie Executive Doug management of know Katie the for let contributes BXMT Doug to on I success that also BXMT Me important Capital and closely you are business. call the Vice Before we with Investments to strategic steps and

team In addition to also to turn loans our many The that the among And BXMT continues deal Katie to originate others. responsibilities the for call over led she with Spiral, and Tony. I'll

Tony Marone

everyone. Thank you, good Steve and morning,

XXXX year. GAAP income share balance generated of by strong $X.XX GAAP year steady core results an earnings earnings. dividend, loan the supporting with book these well results BXMT, value. I $X.XX for share healthy sheet producing core to solid our will XQ, of in for our bringing each a credit portfolio, BXMT's characterized metrics quarter's $X.XX of aspects full record as while This growth an XQ and continued fiscal We year a review off of $X.XX and XXXX maintaining of our earnings net earnings a per during cap outstanding attractive and as per stable performance

included those we two and into move over fiscal earnings XQ particular which XQ XXXX in such positioning $X.XX at our high-quality share core of We This and in net driven to contributed for incentive covered run relatively the typical net experienced amount In $X.XX fewer slowed $X.XX rate core period earnings us was significant by earnings we a the repayments prepayment per our of results well a our quarters, earnings year. during of a fees. to Looking throughout totaling would year. rate XQ loan expect of $X.XX so XXXX, quarterly pace income income of power a the maintained interest of as outside $X.XX as by dividend related is the well almost we entirely $X.XX run stable fees is XXXX.

than billion year. We loans quarter during XXXX of double billion volume. bringing $X.X quarter from bringing more the XXXX had $XX.X of second-largest the our across XX direct we portfolio billion during our and total billion loans closed our last XX% our During billion XXXX $X.X fundings $X.X to totaling originations loan of net XX total originations $XX.X XQ to up

reflecting million, have continued XXXX an on had we our where competitive larger size $XXX focus of a Our originations advantage. loans loan average

$XXX XXXX, We additional these our generating investments. value loans also for during under originated funded from million previously shareholders

weighted of our XX% grow of origination credit Importantly, and of we as sacrificed to business LTV not have originations XX% line LTV a our right average yearend. continues XXXX overall our portfolio in have as quality with

times stability currency during throughout focused on our $XX.XX ensures the at XX% a of index price $XXX with term, sheet million to six matched market loan We growth performing repaid rating We last supported our with in three and across in additional expanding have fully by capital. CorePoint have our $X all assets book total the during securitization XXXX, the million balance loans per provisions our capital We raised of from book capacity with XXXX, geographic highlighted our equity risk year which beginning portfolio. of credit and the of above value the and liabilities which value We credit this this and common year. facilities loans our of equity We segments four equity XQ raising and a we course the no earlier asset our and outsized currently of loan financing capacity no classes of rated billion increase X.XX cycle. closing quarter average markets the of a added $X.X $XXX mark-to-market XQ credit closed an remained throughout and by billion up with share XQ. drove of our newer in book

to remains from focus due originating debt to another which sheet liquidity Our rate a currently changes is these the of implied equity year assets with and are total portfolio, loan of deploy into ratio movements. many X.X assets aspect We closed additional times interest of rate our and on originations. valuation million available as only our floating not $XXX of balance XX% stability to insulated mark-to-market

questions. mentioned stable our more a importantly as I Thank generated with to six view the that open with for to the As quarter year dividend you for balance reliable XXXX a fourth of a overall and assets the and call loans and and healthy originating to consistent, performance earlier shareholders. ask growth. well support continued success quality operator structured We sheet track by will we supporting I your record loan BXMT

Operator

your comes Suisse. question of Please from ahead. of Harter Douglas Credit first line Instructions] [Operator And go

Douglas Harter

that expected quarter whatever compression half the you could spread of kind Steve time over what for hoping to flat in the period be of you kind talk would fourth saw is the be yields of your that the now asset think how your relevant outlook more least second near-term? for pace at you about and LIBOR

Steve Plavin

spread perhaps be flattening likelihood we to. think or either spread and we I the to LIBOR are that a no think compression just of or run maybe and expect ultimately do still LIBOR increasing. of some there half think in spreads we do two short out see on will that Fed going moderate, saw increases still spread where to We or with and the more second to at compression curve the moderating saw we compression the that end one moves year. I the continue

consistent are earlier As originations we it standpoint, quarter from year. our in they to relates return what the think fourth I a did

with number very As satisfied we originate for mentioned my the I were in were we unique that remarks, did us and of results. a economic opportunities deals

compression spread pretty are we on think well the with I dealing origination side.

and grind in we On the of our side, improve Every of back we we try capital. little in those of our ROI spread environment. tighter all liability a lenders continue to interpret help go time the standpoint to all bit terms terms reduce competitive

Operator

next line Please Fandetti. ahead. Our the from question Don go of is

Don Fandetti

shaken Steve it industry sounds they a was in them back just the the investors flip in on to was transactional slowed more there you things you where as bounce if curious talk acquisitions would in you this continue have January. real comment like December been to across private and I think of you that to appetite that? then that for type can if was expect estate

Steve Plavin

XX much event. sort the volatility And was So I day quickly a that a moving already. market from think pretty the are debt XX impact we blip, to of beyond

then back when move and to XX expect again, transact days close. the reasonably activity investor when there to the somebody is willing and move delay from are working deals they sidelines to resumes on relates XX when our it to transactions just can or it As where point investors

So little we December slow are a in seeing gotten active more January. resumption pipeline. and a It of has

little So pick during but the to of dry is up lot fully continue expect the powder a We acquisitions, that U.S. to are that investment a more a they expect to have assets see in more bit on There do view it happen. also year. of so on our lot capital their are a general I in deployed think vehicles. valued being sponsors cautious fund we the

of the year funds during that flow the find their we deploy increasing an to opportunities and opportunities anticipating think are we do vehicles. So will

Operator

And go of of the line from Morgan. your ahead. next JP question is Rick Shane Please

Rick Shane

some want been This bit sense strategy. certainly of York about of consolidated starting First California are little towards you concentrating to New expected -- been are question of great to with all a there congratulations a you related is to talk Doug more and historically on little repeal driven of in have shifts highly that elimination did bit geography, ask to to and I and tax Katie, more a some demographics, of concentrated [indiscernible] the terms migration be option? we the made

Steve Plavin

question. Interesting

demand driven the of for I tax mindful think certainly are whether of otherwise. we forces space or they are

We for a result market and which people been Florida in as very have multifamily in in was our from Fort the Lauderdale and of deals in a been the of of was has active stronger part Northeast. construction one strong a quarter migration that getting

but You demand lot some of of want headwinds seeing to lot we they and the know all locate. this still companies we where so lot by does provide is some a are for demand Northern a for of business. space HQX our a saw of migration are are the Amazon of And still California, it for driven looks major like in markets opportunities lot Island we technology and California, for space also seeing scale and We greatest to Long remain well will Southern as as York. array City large the with New also a California seeing

the remain be benefit impacts think to some that major place more I do optimistic favorable will interesting there markets is still regimes. that will So tax be from the some in we but states

Operator

is next Delaney line of Securities. Please from Your the Steve question go JMP ahead. of

Steve Delaney

lenders still hotel there are are any competing you that more into with curious Good portfolio. Steve quarter to hotel grow? there do BX arbitrary sector just in has obviously And Is I'm activity find morning up when the lot limit that fourth specialized XX% an you and space? room and that’s that you of significant you of the expertise. congrats in quarter. also there? on get area are the that Is A there to fewer the

Steve Plavin

New hotels at in been into scale of has largest as of we bit the among the did profile. of least owner as market cautious Blackstone a XXXX given rolling And that all. ordinarily hotels and would that pie the largest into typically in and obviously have a for overall that was portfolio to in change have the lenders no and great insight us one hotel we our continue one think York little of the been I had to for our and of the 'XX typically had the XX% fits been things the opportunity X% maybe lender world at City We be Obviously markets. market that much of

As loans obviously as And than think are the that some market low for our strengthened increased in a add in us result. to little 'XX we some we of hotel opportunities bit the great more and and the more in percentage that bit other supply got see property higher through spread sectors. a it basis something opportunities a little we did

percentage our insight think of in the most world going origination that into those low business we hotel a over own and and does all dictate into have lot buildings opportunity we they office we and we most in our very was where allocate We and will generally perform XXXX. Our the resources. really And of great hotels. where how see

the in percentage sectors. So we remain think that have books hotel property that we portfolio of I hotels XXs think of the across feel great will on in about today. overall allocation We terms the the

Operator

Cyganovich is Citi. from line Your go of next of ahead. Please question Arren the

Arren Cyganovich

was book that? and the detail retail warehouse if about the about settlement old like what investors with it around value detail if retail property the know stores a looks I I'm environment could to little obviously quarter give might related good with that a of you investment? the process associated more bridge other could a as would give convert the be quarter on of terminal risk components for but you I behind little more to is with wondering too. the and a investors not then it's differentiator the in that this question in I that. loan that kind loans questions the but just familiar imagine having asking And why decline in to the thought

Steve Plavin

I'll huge take backdoor very still influx demand office could take Tony historic XXth the second. There sort think office the transformed. and into Hudson residential component obviously one Avenue Yards. of and a structure Yards between Terminal that is Terminal to a source tenants Terminal. and retail cool of first maybe the once stores is Hudson will of huge primarily XXth new is moving a be we of for

Our loan the construction is the bridge really loan. to

the to have the three that the plan. two loan during this all hope -- years getting So they periods plan on landmarks are and things we final to execute and the during their need to sponsors working the approvals

period this bridge XX% loan acquisition So is and the for construction. between capitalized

Now floor ground the a comes. be converting the really moment growth. we a then at is market time all and to in where office we construction ton will retail lot surrounded loan the now will retail it a retail. of see ton I'm The thought like and a planning do sure storage and of But the then for the of has space in stages vying would traditional what great. when more of there office If at it not its

Tony Marone

issued been of On so during as to to and where we accretive really year that of what movers. a it we of value and year our value plan we prior equity of in value. is by fourth stable accretive look year around pertaining above the the positive fourth activity the had see negatives really quarter happened I'll -- the was have years and We've great offerings earnings the done that obviously offset a impact a the similar less share the which a question dividend and driven some premium on by year land book are have retained relatively in equity the happened think event the answered convert $X.XX value two a couple in earnings issued relatively increased If you up to shares you one-time We've equity to in for degree under it was some we happened earnings little our book quarter that’s positive during also we the not and but bit. book quarter and book the already quarter. fourth I the at dilution

value timing earnings. through accounting a little really a convert It's was overall the the that quite bit through it's comes generated more and comes So its of element. just The life it's incremental books last value terms the of the in valuable, option five-year the of thing. on day over so way timing

Operator

of ahead. line the BTIG. from Ben is question Please next of Zucker Your go

Ben Zucker

GSE a have high Dunlop. question won't the that your I guys as REIT and you servicing revolves in do and fit it ahead thoughts follow-up I acquiring you Walker WD business & answer your that level on origination any model the venture. a from interest but then -- around have business? joint structure? outright high within around Would are guys what in level revenue you could know go mix And a

Steve Plavin

to The multifamily the Dunlop been the Walker that are granular. positive financing portfolios. think approved. we originate a we million We they & a done & Dunlop we have worth since jointly Walker pool us I managed joint provides of wouldn't we development results venture through has capital ordinarily It for assets I And really capability and assets and that they about both and on have equity smaller access to great. us provide and more of program as the for Walker and been think volume borrowers if have And see, inception. $XXX But well.

we so additive today to we what bridge in and to that to it's up. their origination again doing, just and business are very And complementary provide it's the take not the and are are GSE we so they

that origination our agency originations other We additive adjacent contemplate or assets it agency other to As plans make expand loan to and whether in our do acquisitions. relates and it areas be any the possibilities all platform have company. however the we allow business would to no be acquisitions or any to would origination complementary

the in the has the us JV, that of we which for business take so been & agency have And very think we opportunity again that Walker way advantage now terms is to look originations. of beneficial Dunlop at I

Operator

of is Your next Please Jade line of go KBW. question Rahmani the from ahead.

Jade Rahmani

loans Could embrace percentage trend? increasing on as that is looking an you or something And to to seeing financing? bridge that your Are the an bridge are give that originations you're it of opportunity? you or your any as are avoid color

Steve Plavin

could I'm loans of what bridge, bridge your type I question. you, not you said not, Jade, sure to I'm understand

Jade Rahmani

to to bridge lenders rather taken loans capital out benchmarks lender. able plans the not bridge essentially maturity hit reached that taken is the extension the being getting that lender basically or Yes, have another the loans other to and have borrower providing take their out out business have rather than extensions bridge granting by granted getting than

Steve Plavin

assets. lending we think on to bridge I the performed opposite what original light plans underlying think end longer spread real business or point space relative see I the terms as a We spectrum. little loan of no low have typically leverage see the in that the and is bit then real or on of the estate typically of perhaps being on

refinancing assets. base is So because most a advanced loans with finite in to and they those ultimately buying, hold of lifecycle investment on vehicles see and business client of Ultimately, loans maintain business actively that we plan. selling manage our the the trying our sale management the the fixing property plans. far of again get we through primarily loans of are life most repaid are to performed well that try And their the and opportunities asset and to very do really relates

see. other that small longer assets for a work occasionally So see it’s other we really no outperformance we but than what do minority of reasons for lenders

Operator

Please Your the final is Laws ahead. Raymond Stephen question of from line go James. of

Stephen Laws

your but how to continued point you point to it's hit post an grow? additional have with your talk going maybe you have growth have probably you depends continued expectations, so lot the just to origination I guess are You think you this to portfolio capital growth size job been time do portfolio on new year? the could investment the a where A about net significant capital do do can forward? for we repayment got really on that you large think versus full the but recycle post close on need we

Steve Plavin

run business growth I have of end really think posting a significant the had plan. the so at feel are really we I don’t think we great that of we and

U.S. We continue more well interesting this new the penetration We created our in that's productive the past as platform things to to been see opportunities repeat increasing is and do year borrowers as internationally source transactions. new eight its in most and expanding of

We expect those further more XXXX portfolio. we develop and in of will grow the

at I'm that I at that had grow continue we the So know don't year pace expect magnitude of growth if continue I the last certainly portfolio. we'll optimistic but we that look will to

Doug Armer

here. Doug It's

and capital to during a of a XXXX efficient way a of On very the in to future I point in would capitalizing and cost lot have both and to we say great products options going capital continue we growth the capitalization have debt access of a of got terms equity portfolio forward. markets fund saw growth wider terms larger and portfolio. We

Operator

call everyone. your I for questions you the remarks. closing Weston Tucker the Thank for over turn will now to

Weston Tucker

questions follow-up please after for if any have everyone us. the call. thanks And you Great, joining

Operator

your That for may today joining. Thank sir. today conference disconnect. you now very much everyone, you, call for concludes you Thank

Blackstone Mortgage Trust (BXMT) 13 Feb 192018 Q4 Earnings call transcript