BXMT - Earnings call transcript Q1 2019 | Blackstone Mortgage Trust, Inc.

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Operator

Good day, and welcome to the Blackstone Mortgage Trust First Quarter 2019 Investor Call. My name is Joanne and I'm your event manager.

During the presentation your lines will remain on listen-only. [Operator Instructions] I would like to advise all parties, this conference is being recorded and I would like to hand over to Weston Tucker, President of Investor Relations.

Weston Tucker

Great. morning call. to good first Mortgage and conference quarter Joanne and Blackstone welcome Trusts Thanks today Mike Officer; joined Keenan, CEO; Vice I'm by Capital Executive Tony President Steve President, Marone, and Vice Plavin, President, Chief and Financial Markets Doug Investments. Executive Nash, Armer, Katie Executive Chairman; press been which night, on are Last a our filed filed presentation a website XX-Q our with we have with available SEC. the of issued and and release our results, include forward-looking everyone outside remind that may uncertain control. today's to which like and statements, call of I'd are company's the differ Actual results may materially.

a risks Risk results, certain non-GAAP For will discussion most not could of the of update on section measures duty the some recent the we that forward-looking see any refer We and do of undertake also please to our call. XX-K. affect Factor to statements

you XX-Q. our Mortgage duplicated For release to of This and audiocast refer without may reconciliations, press Blackstone copyrighted not be material consent. Trust the and should our is

quick results. a core of our for per the were first $X.XX first quarter, respect paid dividend with GAAP of share quarter. of share. We $X.XX $X.XX a recap net earnings week, while per to we the So, income Last reported

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

Steve Plavin

good and Watson morning, Thanks everyone.

and our power XXXX sheet earnings heavily strong provided XXXX. loans, earnings drive earnings with provided for very the of portfolio core robust year balance quarter. growth We invested Our momentum our going started the into which $X.XX in helped

and loan of with and QX grew capital in remained But in the The volatility markets that slowed limited carried originations. portfolio positioned our the opportunities to December still throughout market. over base million asset lending we early $XXX well transaction activity Our started quarter.

in pound NEC established. mortgage our market in million senior the by is portfolio the first we've floating Birmingham Our UK Exposition participation Property of strength quarters Blackstone performance lending stability with a model large and resilient quarter cost leading has over business the with mortgage Fund. Equity very with that Center a The base time a largest rate a is and our loan The client NEC The domestic by owned business to further complementary caters Trust. convention of and participation located primarily and XXX proven assets limited XX% competition. secured demonstrates Starwood this other loan close

we apartments hotel London, During reached Canada, City a acquisition LTV for York Antonio. a the also low in transitional and loans office buildings New San quarter in

closed terms quarter We process. in have agreed closing either post another end loans or $XXX the of million

footprint to origination the knowledge upsides a conversion institutional the department they clients in of of management. several strategy, and The I repeat this specifically active because major of of that loan virtues an office. by secured origination. Another cost XX% real West $XXX million market by was loan like creative undergoing Coast The Oakland to ownership would conviction historic advantages the of our in XXXX transitional team Blackstone vacant were exemplify in sponsor Downtown to made store and loan the from Blackstone a estate origination including highlight asset comes a investment management, major BXMT California in advantages is existing

block office lease a that on XXX% and underwriting. of critical our in tenants demand space escalating credit was our would leasing terms of strong tenant for was Francisco was no major buildings the of funds, and analysis with with five asset. our pioneering requirements combined large an that sponsor San the virtually agreed this availability high As thesis space office loan. quality underwriting This with San for the viewpoint successful loan in post And A exceeded months Oakland pursuit closing, owner Francisco our equity tech but we for from validated. generate tech signed

With work to priced efficiently a an loan But protection maintain bank risk the profile insurance us. or and a the the company we in of place, provider and loan. including more rate a amount, its attract extension to upside asset, the rate modification, lease could reached in to credit and lower of property agreement call the an because leased our agreed reduce reduction of loan facility to on the

an So a we Improving and stable the portfolio were able profile in ROI attractive across credit was loan. more QX. to larger our theme maintain

nine improved accrued to by flow are to of the rating we where quarter, upgrades operating cash stabilized risk the as more were downgrades. a risk collateral The three originated most from without leasing of any loans and loans transition performance. During rating driven primarily two properties

have On the curve. execution Along options with of we a closed our to and the financing. little term structured optimize continue loan efficiency. capital significantly our Yesterday very adds markets $XXX priced debt efficiently million facilities to array firepower maximize CMBS to J credit we our debt that in our new powerful corporate with corporate front, indications innovatively we COL,

also quarter structure. mortgage We our continue match play value. X.XX built efficient funded global business with over lending to $XX our $X We market cap a ATM highly the book equity average market at equity a capital during of times billion liability senior of an billion tap pure portfolio raising leading

it's in investors and to over company dividend with And invest Our Tony. and BXMT, this focus turn sponsored X.X% compelling opportunity quality remains to continue to it stability dividend introduce with very that Blackstone to yield. I'll the on

Tony Marone

morning, Steve everyone. you, Thank good and

and $X.XX platform of demonstrated fourth of This of per from GAAP BXMT key positive generated up core $X.XX quarter our results earnings the income earnings quarter. the the We metrics. all in both share power with net of

and full have just rate loan entirely was strong contribution capital, our XXXX run performance sheet program. from by driven with and the Our were from our raising really almost volume into in earnings deployment time efficiently onetime ATM balance minimal coming which our been quarterly origination we via of equity items nearly

in book program of under average our value times share. an at book $XX per During to million $XX.XX increase the the first X.XX quarter, we an driving raised price value,

of of earnings further XX% strength of $X.XX XXX% core Our our platform. the and a our of dividend, is consistent indication stability

loans originated saw of million this million, total and $XXX repayment we and upsized time over $X our only under newer these $XXX up time commitments. the quarter year. which quarter million portfolio brought loan from limited at portfolio loan the this During our $XX nearly activity $XXX We first in existing for funded million million last

rating characteristics consistent scale to performance portfolio five, on strong of with credit origination in our XXX% Our continues risk of X.X and one XX% all exhibit to quarters. LTV prior of with

primarily our program financing to under facilities, addition the our In assets. issuance that earlier, portfolio I sheet and continue credit through us balance for our with equity growth ATM market our provide mentioned which Steven we to financed differentiated

terms We insulated capital capital of base for facilities continue mark an and from to average negotiate cost to markets market of these and of LIBOR manage leading which had market any end plus provisions. remain X.X% only our cost quarter as

at the also existing year. at total the and our LIBOR of quarter closing term end the In committed advances XX.XX% floating line quarter the million. The months significantly quarter syndication flexible rate X.X% source rate our portfolio, interest closing, loan Yards This interest we've only financing year loan to providing Steve from We a of with capture of incremental quarter mentioned unchanged the an facilities. fund floating Hudson During This highlighted liquidity protection this across how liquidity is million our us plus share in loan and development earnings following rate rates Spiral portfolio. unfunded credit their lenders we positions and prior of million of effectively which to $XXX loan loan earlier. for covenant as amortization XX% was nonrecourse commitments our and a has we grew a future X.X of focus business. rise. closed carries with last the par previously that loan of seven price financing capital term limited quarter Post loan closed as of ratio package a in to attractive requirements, of XX% under the of BXMT's our the an of with with our six prepayment additional times of equity highlighted with end of $XXX representing a debt our $XXX senior

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

Operator

the in Doug of Suisse. question you're from Credit first live call ahead. comes line Our Please Instructions] Doug. [Operator Harter go from the

Doug Harter

rate Thank you you. given you're mentioned kind coverage high mostly that about level talk that Can of that earnings? this and earnings Can giving -- rate you were about the quarter. thinking your how run XXX% you of the dividend run

Steve Plavin

the it's Steve for Doug thanks question. Hey

adding of I able focused we really value. book script, earnings retain beneficial that think dividend to fact mentioned to quality the as the and I retained my the the earnings. we're on and been in like really have coverage The we're

the to steady is coverage, continue well how $X.XX we'll obviously get we it's to continue dividend and what to $X.XX. that. do a the Again over but in to and trying the proud strong evaluate evaluate have now our it per progression but quarter of multiple investors by right You've reflect and value We'll the yield time. appreciate quarter the book seen we're now dividend we're covered like share

Doug Harter

that for that just kind as closed, willingness -- on to leverage loan how your then and whole the impact And the capital think that. you're Appreciate guys we thinking the lever I company you on of a about new guess when forward? about going should

Doug Armer

it's Doug here. Doug Hey

worth great flexible maintain we it's BXMT will and very capital continue loans rate it saying outset allow to to the base. priced us capital are balance it's sheet think as at its leverage really the deal our and moderate term floating efficiently grow I for

providing our working I it very business. for capital think priced efficiently as of

increase deploy grow it leverage is balance continue capital and that today. to from As where I'd the expect we sheet, to somewhat

the would capital quarters think our used I X.X very we large to know and as new deployed of will range well it in of equity X.X of in over but increase so that equity. the ratio, sheet ultimately to slight the the a debt last debt amount that are you've of that seen in working with range times capital it X.XX a leverage imply in of to a structure at be the balance terms will We X.X part capital remain capital form in sort to debt in on several

Operator

line the ahead. Please from comes Rick question next of go from JPMC. Our Shane

Rick Shane

of little question none we spreads, as questions. sort taking that really regain go, way for again from guess a my spreads appreciate to expect And I of Thanks is tight is the some might and relatively two things know ask bit inflection and which repayments guys. we point you power given I'm one increased Couple actually going curious Hey little rates of LIBOR. widen impact rates. lower we versus business the but in disclosure as us expect rates we're look in reason the bit I originations things the part to as other slow that could decline. this a pricing to around

Steve Plavin

I Rick. certainly Thanks that's hope question. case. the Hey the for

say that lot historically the spreads move do the decline, having to the spreads rates, spreads a happen they've stabilize potentially will the a possibility but certainly wider. compression a see run think And with saw could I result we rates of low, that if and wide, of tightened to index. Hard as were now was was spread a LIBOR index think -- if in it's increased. I what increases we lot to as happen

Rick Shane

nuance, a huge on it this at you is again in focused and what in And spread, spread I as look it. we even what on conversations the nuance Got all do. when conversation yield? really but you know basis not focused you're is difference between the guys is do We borrowers, on the do engaged really the but well, this with

Steve Plavin

borrowers a that that part our lot and become think think of I conversation economic -- the I elements us the negotiation. and non-economic there's is with of become

but loan I in sometimes all of on floors there's and the economics around fees extension think nature part yield. and the of is rate it fees well. mean origination the I depending the the rate are as other fees is important negotiation primary focus

of other the but and all those it and play all compared we most compression our competitors, able factors not seeing little seen the able all break have a important that factors structure client matches So so our how you've they'll economic into the clients composition that the deliver plan total and a and but non-economic we're ultimately us, those loan business loan of with and to relates I the think as elements how we've around lot to package come loan around to our look result, experience on to just times of a we're and repeat with just as rate. not win seen to bit economics we're

Operator

comes Delaney, Go ahead. Our JMP. from line next of question Steve the

Steve Delaney

Thanks. volume I guess taking over the just how question and the of Steve. release last the originations away significant thing we eye right Good place morning, everyone. was that for couple caught start Thanks saw to have our years. the on your based origination best been the when the

the timing and how year to weigh was last lighter as just the So and year your roughly can -- was just billion originations, the you react may leverage your some much reach last end of your as how you. optimal number in selectivity try sort obviously clients $XXX reflect million $X.X on. mind on of market the chaotic, is Thank compared comment to to portfolio average as much about greater lag to part tends commented

Steve Plavin

highly start period. takes are tend again of Thanks the regular happens terms biggest a sidelines the for XX the buyers first the markets factors with was in transaction are driver the basis those is originations. in of for to of originations The so period to resettle the primary of periods They selective after resume our short relatively factor go the and but periods quarter relatively way early in or volatility play and and volatility come sellers on in for our it question and loans. days new volatility to what was of All XX and another into credit volatility activity in of really to in gestation our really that the buyers and of terms Steve. demand ended to deals sort to and QX closing regulate we

repayments where you So pipeline in look, you good still to it our first I was seeing originations. that in about pace our pickup you see we a origination can are relative quarter if we now the see feel below earlier year and very activity were think can that in the and

we QX able the The terms fact what positive and origination a the positioned that environment really we well end So on bit we quarter of quarter just in the remain fewer little at at portfolio basis. a isn't as in the potent, beginning was the our see of natural hedge very go power grow repayments. when earnings we're of to in like see we forward were of the that

Steve Delaney

balance that you is a for out, look out year that's Thank Okay clarifying helpful. two on today the if $XX.X and years or portfolio billion. sheet we

seen profitability estate I reasonable reasonable liquidity conditions Is for the last some the the I say conditions, us to where in not think of sort give trend just three a that and you lending, year let's over me. care maybe and that'll take expect market or it heard real over of portfolio or term are years. on but And etcetera say loan. XXX some to at two two? next combination Could of color $XXX million portfolio the pace Thanks. stable growth think may

Steve Plavin

that portfolio the over vary of and of was bit deals December, QX might quarter I saw we into a thought of to quarter. time which you that from n we The to little continue lot the it Yeah we'll period just grow roll fact had over extended in that expect QX. can QX what

and of we we QX QX, little than in loans quarter. a spillover the less impact how fourth our otherwise of it that little bit did terms over a was the think because we had in bit many extraordinary were I So closed XX

the and a have seeing to to a originate So base. I still to We're grow portfolio. great client, we think we great we have see product, opportunities client that large -- great continue

that that I But steady XXXX originations. extraordinary forward. that think strong see So Not expectation was going year. an I my you'll with trend match think sure will is a

Steve Delaney

you, Thank Steve. That's very helpful.

Operator

Lewis from question the Our ahead. of line Raymond comes Please James. next Steven from go

live the You're call. in

Steven Lewis

morning. but asset-specific at of back at was maybe up the bit portfolio from you about billion looks looking believe financing guess asset like good on $XXX first that European drove what a from bit. to financing million looking the could a please. loan talk to $X.X side good financing the I looking specific down Hi I it quite declined I'm historically Q a the

Doug Armer

really Hey Doug of was here. acquisition financing as credit and has cross from acquisition it financing. and is as we regular financing, effect piece some big financing categorized That portfolio collateralized Wells evolved Fargo the previously facility, that our those was of in of re-categorized been a that over it's way some the That fully portfolio of asset-specific our our with A and largely we Wells financing. facility result credit what essence turned of in of Fargo. part so GE had situation and recapitalization

We're aren't actual the how the Q. So reduced. outstandings we in -- those categorize we're just redefining

Steven Lewis

Right. And question if next know could That's Doug. Doug your has been comment helpful, performance Cecil credit you on exceptional. you

the this away? you you to that during expect remarks results. months the impact performance. How or about some you the there some comment that's adjusted how on do loan think I Can Cecil mentioned You were book upgrades quarter mentioned number? But value think in about prepared that, number reporting do six

Tony Marone

the This have numbers we One analysis. say yet, here. share a do range, concluded. that through still everyone Cecil be going will couple remains perhaps our is think don't specific portfolio on With that of effectively is required end that is of to we're our be the We can credit reserve, given I'd of some but reserve we Tony to lower quality the book any have to things. Sure. that respect We to. will expect we

option impact its only. sheet the to relates on a As that they wanted balance financials is

earnings. the doesn't as your income statement equity and then come off, go reduces -- changes in in it income go and or on through it It reserve loans your the that So loan portfolio future. through

Our earnings is a adjustment expense. expectation core not that an realized is be because this for there'll

earnings earnings earnings seen. from The consistent see a remain will what we've with from noise. So -- some core GAAP an you'll perspective

about You ask value. book specifically

value. we think make are going I our a book adjust have to we decision if to

how I think see wait that we'll out and have one. to on comes final the analysis

Steven Lewis

for I that Thanks Tony. appreciate the on Great. it. color

Operator

from question from comes Jade the go line next Rahmani Our Please of KBW. ahead.

the live in You're call.

Jade Rahmani

Thanks very much.

wondering NEC the was further pricing can loan of originated any that and in what company? approvals what deal, owns I On as It you if kind color. you necessary since are drove Blackstone the give mentioned you started participated

Katie Keenan

includes asset Hey the over the well visibility. dominant the the then of quite totaling forward for think place opportunity originated is script. in large we Thank cash conference mentioned loan was The has There's The business basis exhibition is been in with loan which in that Steve Starwood good we business to cost We million and loan -- to performance U.K. a feet. pretty by like flow. five center his X build Jane facilities loan protected. square very our you It very in participate of its strong is itself stable Katie. the have the of business a secured XX% as attractive. XX% This question. the

-- then operating by some of independent their of rate real higher Starwood of location the And do and size our part the general the rate was because the overlaid our the and about a deal part again combined get as talk we from part deals of and with nature, the think of bit that But because business. their Brexit a drove and Board origination rate. deal types affiliate as the impacted is the also that large that of we competitiveness to with established then the estate far little directors. these geographic approval sort loan but business in and size, considerations, As owned

Jade Rahmani

cash it much. very strong mentioned element -- there Is business You is Okay. in the transitional place flow. plan? to a Thanks

Katie Keenan

the facilities flow some see from already cash The and this flows that. sponsor we and in this cash a investing But the to intend to -- business stable does is good. expect business, very continue are the again improving improvement is

business continued current So be contracts to of fact but are and that in performance, years our at the levels to of improvement also and it would because the basis three in most great in the even see of length. stability business the the five

far is of as So -- couple years. the there there is visibility as next good

as depending plan. as even our well business if is Our protection on far loan the established

Jade Rahmani

how with Thanks. date? I $XXX million in you over ask should are anticipate a range seen of last million, acceleration? to that quarters trending we liquid similar quarter we've we on to Steve, prepayments few Should the comment if wanted expect could kind $XXX range Separately more a an market or the

Doug Armer

hey Doug actually. it's Jade

than disclose with numbers So particularly we that pipeline were the don't regard to portfolio forward-looking statements other script. the activity in

have we'll that. wait next quarter's to detail disclosures on So for until

Jade Rahmani

office exposure? BXMT to the also share I leasing your share Okay. co-working? and ask does outsized thoughts there seeing re-work this that thoughts co-working of any trend about were And leasing if have guys I statistic to JLL your growth? think of flex What are of an lastly total cited XX% wanted contributed and you can we're on

Katie Keenan

Sure.

factor we for potentially new amenity building. specifically, far incubating not very in increasing in grow the and -- types space buildings portfolio They're quite exposure seeing as the their general. of work an and perspective, as to other in certain little tendency office certainly buildings. in think are in in our coworking terms of generally I that co-working But really we can We source market think an force a active as be can have in It's a as we leasing from tenants work also additive small and that our in of activity. just co-working the our a tenants

Jade Rahmani

a And couple order in that? percent talking of or magnitude, by of less than

Katie Keenan

X.X%. It's approximately

Doug Armer

But credit. and going take ultimately have of certainly We a also on We're tenants in positive. changes look lot force underlying the Jade, something certainly we're recent and mindful prefer exposures for the buildings strong up forward. prefer mindful it's our market demand very at of. and -- of a of that impact it's to

sort approach so in is for And our in credit at for look of positive. think of how us, been it's terms portfolio a we co-working traditional but us I

Jade Rahmani

part seeing they dramatically existing of property lot Is you the buildings any CapEx any because in change that owners your on are of making improving more Are it full causing and CapEx amenities. and assumptions old changes a modern assumptions?

Doug Armer

Well.

in get co-working right You're the a amounts environment to of PI to large the trying as well tend invest as establish particular tenants usually to whatever improve that some and of create own their space in they're their market.

mentioned so it's space. are gets yeah, gives who amenity thinking it as tenant to very their beneficial it can tenants a a just significantly create space And expanding and but coming or on usually to the adds building, tend it in to they building about a place improved heavily different spend and the do the Katie vibe, go

Operator

Fandetti from question Wells Don line the ahead. of comes Fargo. Next from go Please

call. the You're in live

Don Fandetti

was morning, Good estate. talking call I about the CIT Steve. just real being commercial they little careful a were on in more yesterday and

asset hurdles, an If hear obviously guys are to banks. some but say are regulatory grow pricing what general. while real what secondarily pulling in outside key continue they of then that continue We back. that guess CBD to points and pretty I the let's you would your on estate talking have are banks from I'm why thoughts to on your aggressively investor

Steve Plavin

question Well are credit. on Don. thanks really we careful Don for your

company here across our infrastructure manage is ownership credit great a information how share given how have that and We the platform. the footprint we'll

just a that we and a ones an globe investor investor So and the finance. we like assess have much ability better huge real owner feel risk frankly we as the properties across owned to like estate

model we continue to be that on I on exercises ability but does growth feel risk the some cautious analytical do we focused banks in from reflect and a do margin and better highly credit very and our of to the So have whatever and insight better process a caution. great investment standpoint, think we an committee than that's we make assessments

pricing. The about second question part of office building your

are like for so I office think high sources uses. the cities We costs there's innovation we're you're seeing along the tech of still strong. major growth and real demand dynamic biotech pricing with seeing where where up take there's assets, markets strong very end market still the where traditional

I we're a in positive and demand lot the pricing and those of fundamentals think seeing held. So still properties has for markets those

the new markets secondary economy where tend those robust in to less markets less and demand are but challenged, are not is tenant The participate there tenants, more we much those.

Operator

Thank you.

Ben from question line Zucker Next comes from ahead. Please BTIG. go the of

live Ben. in call You're the

Ben Zucker

origination asked questions. did had Good so call your remarks and guys thanks out Most I taking think my of for real in I your morning what missed answered, prepared was and what just right as I pipeline quickly you but now?

Doug Armer

million. $XXX

Ben Zucker

at know now posture flows place? And your at what fact in does thanks. looking percent happen in to Great, offhand would loan have then me, the the in book you Fed and for just one we're more change labor just of given what the

Doug Armer

business Ben positioned and a Hey that in in is bit our a rates. little terms of answer Doug, its let me roundabout very way, well

a floating LIBOR have business precisely upside floors, significant the LIBOR levered. point loans do provide is in model our More lower of same are rate think way bring We downside floors our you in that protection for have book because you levered that's earnings up and and in because loan the our that a environment. our lot which than the more themselves and might

it and you big of percentages from and moves library with borrowers. it's of the of terms significant sort rates strike in impact do sort our rates of very and that is a sensitive prices portfolio well protection fact do obviously range disclose for of strike the floors prices don't of provides big can have given there's we're on precise provides So overall range impact our very the a loans matter benefiting that or capital as particularly positioned release those is a and the floors we structure levered of in disclose see in in ultimately our earnings and upside. floors. protection Most for our What to in the significant that's confidential of business and us. We moves and

Ben Zucker

-- that's me. is That and all that's really helpful for

for my again thanks So questions. taking

Operator

of Thank question comes final in from you. Citi. the live And from Arren call. line go Cyganovich ahead. the our Arren Please you're

Unidentified Conference Call Participant

the This for about dialing if opportunities give seeing and expecting in to you Are update you. U.S.? total could you're on XX% outside of Maybe with risks at still investment an today. what are what of it investing Thank and remain benefits [indiscernible] Arren international is portfolio? the your you

Steve Plavin

markets Thank opportunity you outside for your US. the question. We in see great

of like the advantages real estate. own in everywhere making BXMT the of loans think US I also one and we we're

true in Australia, So environment the platform are true spread XX% so as we a In Europe we we inside that has Europe in hasn't compression are and our true the seeing the we same have -- benefits outside it's and of it's portfolio we in the have about Canada very Europe. much had spread have about U.S. Europe, US. in US attractive

relative flow little U.S. a the it's a episodic bit the demand more a on So US. the way it's relative more basis in more attractive. to But deal rate standpoint from regular is

opportunities pace look We've -- just of further Europe have seen So how a our in we recent our a ability demand good how in good is quarters function pipeline we loan much to and pretty some there'll much be. grow of as forward. in

what a continue U.S. I as very originations Europe not originate BXMT we forward. loan the go outside you meaningful we reflection to So originations our we're tell overall elsewhere. also what be what the but to can't and optimistic. originate of because global the portfolio a expect part of only will percentage I our in be that's we But

Operator

I'd to Weston Tucker call you. to final remarks. Thank the for turn like back

Weston Tucker

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

Operator

conference Thank for concludes call your you. That today.

you disconnect. now Thank good joining may day. a you. have for Thank You and very

Blackstone Mortgage Trust (BXMT) 24 Apr 192019 Q1 Earnings call transcript