Blackstone Mortgage Trust, Inc. (NYSE: BXMT) — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Unaudited consolidated results; dollar amounts below are U.S. dollars unless noted.
Business context
BXMT is an externally managed REIT that originates senior commercial real estate loans in North America, Europe and Australia. Its portfolio is primarily floating-rate loans backed by commercial property.
Key financial metrics
| Metric | Q2 2021 / June 30, 2021 | Comparison |
|---|---|---|
| Interest and related income | $196.3 million | $192.0 million in Q2 2020 |
| Interest and related expense | $82.4 million | $84.9 million in Q2 2020 |
| Net income from loans and other investments | $114.0 million | $107.1 million in Q2 2020 |
| Net income attributable to BXMT | $131.6 million; $0.89 per share | $17.5 million; $0.13 per share in Q2 2020 |
| Distributable Earnings (non-GAAP) | $89.9 million; $0.61 per share | $86.9 million; $0.59 per share in Q1 2021 |
| Dividend declared | $0.62 per share | Unchanged from Q2 2020 and Q1 2021 |
| Total assets / total equity | $17.90 billion / $3.96 billion | At December 31, 2020: $16.96 billion / $3.90 billion |
| Debt and leverage | $13.79 billion carrying value of listed debt obligations; 2.7x debt-to-equity and 3.8x total leverage | Leverage was 2.5x and 3.6x, respectively, at December 31, 2020 |
| Liquidity | $289.6 million cash, $1.07 billion available under secured facilities, and $27.6 million net loan payments held by servicers | $1.39 billion combined stated sources of liquidity |
| Cash flow, six months ended June 30 | $165.4 million operating; $925.0 million used in investing; $806.1 million provided by financing | Operating cash flow was $175.7 million in 2020 |
The debt carrying-value total comprises secured debt, securitized debt, asset-specific debt, term loans and convertible notes. The filing separately reports $13.4 billion of asset-level financing and $2.0 billion of corporate debt on a principal-balance basis; these presentations are not directly interchangeable.
Portfolio and changes versus comparable periods
- Net loans receivable were $17.31 billion, up from $16.40 billion at year-end 2020. The portfolio had 124 loans and $18.53 billion total loan exposure, including non-consolidated senior interests.
- Office represented 53% of loan exposure; hospitality and multifamily each represented 14%. Exposure was 67% U.S. and 33% international. Weighted-average origination LTV was 64.8%.
- The weighted-average risk rating improved to 2.9 from 3.0 at year-end 2020. Management attributed upgrades to improving collateral performance and economic recovery.
- Q2 net income increased from $17.5 million a year earlier. For the first six months, BXMT reported $211.5 million attributable net income versus a $35.8 million loss in 2020. The comparison was substantially affected by credit-reserve movements: in 2021 the reserve release increased earnings, while 2020 included a large provision.
- Six-month net interest income rose to $223.1 million from $207.8 million, despite lower interest income, as interest expense fell more. Management cited lower benchmark rates, floors on some loans, and growth in average loan balances, partly offset by increased financing balances.
- Loan originations were $2.16 billion in Q2 and $3.90 billion for the first half. First-half loan fundings were $3.64 billion and repayments and sales were $2.68 billion.
Outlook, commentary and risks
- No quantified earnings or portfolio guidance is provided. Management said the recovery from COVID-19 was underway but could remain uneven, with risks from renewed infection, variants, and sector or regional weakness.
- BXMT said it collected 100% of contractual interest payments due in Q2, with virtually no deferrals. It cited borrower support and collateral equity as mitigants, while acknowledging that loan principal may not be fully recovered in some cases.
- The loan CECL reserve fell $44.6 million during the first half to $128.9 million. Including reserves on debt securities and unfunded commitments, the total was $133.1 million. The release reflects management’s recovery assumptions and is not a forecast of reserves absent COVID-19 impacts.
- Two troubled New York loans, one multifamily and one hospitality, had $338.7 million aggregate principal outstanding and $69.7 million of reserves; income accruals were suspended beginning July 1, 2020.
- Unfunded loan commitments were $3.35 billion across 86 loans, with a weighted-average expected future funding period of 3.1 years. Identified financing covered $2.4 billion; timing and amounts depend on collateral and project performance.
- Benchmark-rate transition remains a risk: USD LIBOR publication was expected to end for remaining tenors after June 30, 2023, with certain other LIBOR settings ending after December 31, 2021. BXMT reported some financing already indexed to SOFR and SONIA and said market effects of the transition remained uncertain.
- Q2 financing actions included a new $1.8 billion European secured facility and a $500 million increase to an existing facility. The B-2 term loan was refinanced at LIBOR plus 2.75%, down from 4.75%, and increased by $100 million. BXMT reported compliance with applicable debt covenants.
- No material legal proceedings or material changes to previously disclosed risk factors were reported. Management stated disclosure controls were effective and there were no material changes to internal control over financial reporting.
Important facts for investors to verify
- How much of reported GAAP earnings depended on CECL reserve releases, and whether portfolio performance supports those estimates.
- Credit quality, recovery prospects and income status of the two impaired loans, plus any changes in risk ratings or non-accruals.
- Funding needs and lender availability for the $3.35 billion of unfunded commitments, especially where lender funding is discretionary.
- Debt maturities, refinancing capacity, covenant headroom and the effects of rising rates, rate floors and the LIBOR-to-SOFR/SONIA transition.
- Whether recurring Distributable Earnings support the $0.62 quarterly dividend; Distributable Earnings is non-GAAP and is not equivalent to operating cash flow or cash available for distribution.
- Related-party exposures and management fees, given the external management structure and disclosed loans involving Blackstone-advised investment vehicles.