Blackstone Mortgage Trust, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. The company is an externally managed REIT that originates senior commercial real estate loans in North America, Europe, and Australia. Financial statements are unaudited.
Key financial results and position
| Metric | Q1 2021 / March 31, 2021 | Comparison |
|---|---|---|
| Interest and related income | $187.5 million | $204.9 million in Q1 2020 |
| Interest and related expenses | $78.4 million | $104.2 million in Q1 2020 |
| Net income from loans and investments | $109.2 million | $100.6 million in Q1 2020 |
| Net income attributable to the company | $79.9 million; $0.54 per share | Q1 2020 net loss of $53.4 million; loss of $0.39 per share |
| Distributable Earnings (non-GAAP) | $87.0 million; $0.59 per share | $87.9 million; $0.60 per share in Q4 2020 |
| Dividend declared | $0.62 per share | Unchanged from Q1 2020 and Q4 2020; exceeded Q1 Distributable Earnings per share |
| Cash and cash equivalents | $280.1 million | $290.0 million at December 31, 2020 |
| Loans receivable, net | $16.9 billion | $16.4 billion at December 31, 2020 |
| Total assets / total liabilities | $17.4 billion / $13.5 billion | $17.0 billion / $13.1 billion at December 31, 2020 |
| Debt-to-equity / total leverage | 2.6x / 3.8x | 2.5x / 3.6x at December 31, 2020 |
| Book value per share | $26.35, net of $1.25 per-share cumulative CECL reserve | $26.42 at December 31, 2020 |
Operating cash flow was $83.0 million, investing cash flow was negative $523.6 million, and financing cash flow was positive $431.7 million. Cash decreased by $8.9 million during the quarter. Loan originations were $1.7 billion; fundings exceeded repayments and sales by $692.8 million. The filing does not provide a clear standalone operating-margin measure.
Material changes and portfolio
- Compared with Q1 2020, the company swung from a net loss to net income. The prior-year quarter included a $122.7 million increase in the CECL reserve; Q1 2021 recorded a $1.3 million decrease. Net income from loans and investments rose $8.5 million year over year, as lower interest expense and portfolio growth more than offset lower interest income.
- Compared with Q4 2020, net income attributable to the company declined from $83.6 million to $79.9 million, while Distributable Earnings per share declined from $0.60 to $0.59. The $0.62 dividend per share was unchanged.
- The portfolio comprised 121 loans with $17.1 billion principal balance and $18.0 billion of total loan exposure. Office loans represented 57% of portfolio exposure; 67% was in the United States and 33% international. Weighted-average origination LTV was 64.5%, and weighted-average risk rating was 3.0, unchanged from year-end.
- Approximately 98% of investments by total exposure earned floating rates. Weighted-average cash coupon was benchmark plus 3.27%, and all-in yield was benchmark plus 3.60%.
Debt, liquidity, risks, and management commentary
- Portfolio financing totaled $13.0 billion, including $8.1 billion of secured debt agreements, $3.5 billion of securitizations, and $1.3 billion of asset-specific financings. Corporate debt was $1.9 billion. Secured term-loan borrowings increased by $200 million during the quarter; $198.5 million of net proceeds were reported.
- Reported available liquidity was $1.12 billion: $280.1 million cash, $836.9 million available under secured debt facilities, and $2.6 million net loan payments held by servicers. The company reported compliance with its debt covenants.
- Unfunded loan commitments were $3.5 billion across 79 loans, with identified financing for $2.4 billion. Funding timing and amounts depend on collateral performance and project progress.
- Total CECL reserves were $184.0 million, including $172.1 million on loans, $0.9 million on held-to-maturity debt securities, and $11.0 million on unfunded commitments. Two risk-rating-5 loans had $338.7 million aggregate principal and $69.7 million of reserves; income accrual on them had been suspended since July 2020. These include modified New York multifamily and hospitality loans.
- Management said it collected 100% of contractual interest payments due in Q1, with virtually no interest deferrals. It cited borrower support and the portfolio’s 64.5% origination LTV, while cautioning that COVID-19’s economic effects and recovery remain uncertain and uneven, particularly for hospitality and other affected properties.
- Management described net income as generally positively correlated with rising rates because many assets have interest-rate floors, while warning that borrower debt-service burdens could rise. LIBOR and other benchmark transitions, currency movements, credit performance, financing access, and counterparty performance are additional risks. Foreign-currency exposure was substantially hedged.
- No earnings or dividend guidance was provided. The board approved higher independent-director compensation effective July 1, 2021. The company reported no material legal proceedings, no material changes to previously disclosed risk factors, and effective disclosure controls.
Important facts for investors to verify
- Whether the two non-accrual, risk-rating-5 loans and their collateral values support the recorded $69.7 million reserve, and whether other loans require modification or additional reserves.
- Whether the $0.62 quarterly dividend is sustainable relative to Distributable Earnings, taxable income, funding needs, and future credit performance.
- Availability and terms of secured financing, covenant headroom, debt maturities, and liquidity to meet $3.5 billion of unfunded commitments.
- Office and hospitality exposure, geographic concentrations, borrower equity support, and changes in portfolio risk ratings or repayment activity.
- Assumptions underlying CECL estimates and the effects of COVID-19 recovery, benchmark-rate transition, and interest-rate changes on earnings and collateral performance.
- Related-party transactions and management fees, including the disclosed loan involving a Blackstone-advised investment vehicle and the manager-affiliated book-runner role in the term-loan increase.