Good day, ladies and gentlemen and welcome to the Blackstone Mortgage Trust Third Quarter 2014 Investor Call. My name is Derick and I’ll be your operator for today. (Operator Instructions). As a reminder this conference is being recorded for replay purposes. I would now like to turn the conference over to Mr. Weston Tucker, Head of Investor Relations. Please proceed.

Great. Thanks, Derick. Good morning and welcome to Blackstone Mortgage Trust’s third quarter 2014 conference call. I’m joined today by Steve Plavin, President and CEO; Mike Nash, Executive Chairman; Paul Quinlan, CFO; Doug Armer, Treasurer and Head of Capital Markets; and Tony Marone, Principal Accounting Officer. Last night we filed our 10-Q report and issued a press release with a presentation of our results, which hopefully you’ve all had some time to review. I’d like to remind everyone that today’s call may include forward-looking statements which by their nature are uncertain and outside of the company’s control. Actual results may differ materially. For a discussion of some of the risks that could affect the company’s results, please see the risk factors section of our Form 10-K. We do not undertake any duty to update forward-looking statements. We will refer to certain non-GAAP measures on this call. For reconciliations to GAAP measures, you should refer to the press release and to our Form 10-Q filing each of which have been posted on our website and have been filed with the SEC. This audio cast is copyrighted material of Blackstone Mortgage Trust and may not be duplicated without consent. So a quick recap of our results, before I turn things over to Steve. We reported core earnings per share of $0.50 for the third quarter, which was up 16% versus the second quarter with a greater net interest income from continued strong growth in our loan origination portfolio. A few weeks ago, we paid a dividend also $0.50 per share with respect to the third quarter. If you have any additional questions following today’s call, you can reach out to me or Doug directly. And with that, I’ll now turn the call over to Steve.

Thanks, Weston and good morning everyone. For the third quarter we achieved an important milestone, there is a continued ramp up with BXMT. As Weston indicated core earnings per share increased to $0.50 which fully covered our third quarter dividend. The drivers to this significant performance benchmark in the evolution of BXMT are strong loan origination activity, discipline capital raising and efficient credit were all evident in the third quarter. During the quarter, we closed eight loans representing total commitments of $656 million and subsequent to quarter end we have an additional $1 billion of loan related activity, $145 million of loans have closed and other $865 million are in the closing process. Our biggest forward closing pipelines was at the restart of our business last year. Putting our loans on closings, we’ve now exceeded $6 billion of growth origination with BXMT and we’re still seeing high levels of borrower demand for our senior mortgage loan. Our increased capital base and extended footprint facilitate the origination of larger loans in the U.S. and Europe. The bigger loans are secured by larger individual properties and portfolios incorporating better institutional quality sponsorship and real estate that is more synergistic with properties that Blackstone acquires in it equity real estate business. The $1 billion of loans closed during closing post quarter-end comprise of $168 million average side versus $86 million average of our existing portfolio. There is less competition for the larger loans that we target as many of the competing platforms don’t have the reclusive scale or the financing capacity that we have developed. Where we have significantly grown our loan portfolio, we’ve remain true to our portfolio strategy of maintaining floating-rate senior mortgage equivalent risk. Our average LTV as it ended the quarter with 64% in line with prior quarters. The…

Thank you Steve and good morning everyone. BXMT’s third quarter financial results reflected the continued profitably scaling of our loan origination business. Core earnings were $25 million or $0.50 per share up 21% overall and 16% on a per share basis versus the second quarter driven by net interest income of $30 million. Since day one we’ve remained laser focused on delivering compelling risk adjusted returns to shareholders and generating strong core earnings to support an attractive growing dividend is among our highest priorities. Steve commented already on the growing power of our origination platform. To provide context in the first nine months of the year we have nearly doubled our loan portfolio climbing to $3.9 billion which drove a commence rate rise in net interest income. During the quarter the loan portfolio grew 12% as $557 million of loan funding including $68 million from previously originated commitments outpaced a $109 million of repayments. Moving to the right-hand side of the balance sheet. Most of the quarterly activity relates to the revolving repurchase facilities as we use as the main stay of our financing structure and operating liquidity. Relative to the growth in our loan portfolio, borrowings under these facilities increased by only $146 million as we used the proceeds from our later September equity offering to revolve down debt. This resulted in a temporal debt-to-equity ratio 1.7 times on September 30, down slightly from 1.9 times on June 30. Absent the impact of our offering leverage would have been approximately half a turn higher. Importantly, these undrawn credit facilities give us significant potential loan origination capacity moving into an active fourth quarter. $1.9 billion of dry powder at quarter end. Despite our rapid growth and an evolving market landscape we have maintained net ROIs that drive net interest income.…

[Operator Instructions]. Your first question will be from line of Rick Shane, JPMorgan.

Thanks guys and good morning. You provided good color into your pipeline for the fourth quarter as the portfolio starts to mature little bit in terms of originations of the normal vehicle, one of the things we will expect is repayments to start to pick up, can you provide a little bit of outlook what you are anticipating in the fourth quarter and sort of when we should start to see some of the originations that you guys started with last year really start to run through. I assume that’s a two to three year process?

Hey, Rick. This is Steve. Our portfolio, the first loans we originated are still only about 18 months old and typically we get call protection to our loans for one to two years out. So, we’ll begin to see increasing repayments as to roll into 2015. In the start we’ll have some in the fourth quarter, we have about a $100 million in the third quarter. They will become an increasing component of our quarterly results and will be a source for funding our new loan portfolio. We don’t get a lot of forward color in terms of those repayments, we’re anticipating what we think we’ll receive based upon our portfolio management dialogue with our sponsors. But typically the notice provisions and those are only about 30 days out, so it’s very hard to accurately predict them in a specific timeframe. But I think we still see a sort of a favorable picture for repayments for the next couple of quarters until our initial loans are all that more seasoned.

Steve, one to follow on to that. Historically, there is a lot of seasonality pick up in business end of the fourth quarter. We’re certainly seeing that in terms of the pipeline you guys are describing right now. Could we see a little bit surge of repayments into the fourth quarter this year?

Is possible, it's certainly possible it is a time where people tend to refinance and lenders are most aggressive. We do expect -- again we expect an increasing pace of repayments, but I don’t think it’s something that we’re overly concerned about yet, at this stage. We do -- the origination businesses, these loan in the fourth quarter typically is a big quarter for us. As we’ve increased our loan size, the closing timeframe of any one loan has the greater influence that did, when the average loan size was much smaller in 2013. So, our originations will get lumpier as we go forward depending upon the timing of any one or two closings. But we’re seeing very good pace to origination, especially in the larger loans that we’re targeting.

Got it, great. Thank you very much.

Your next question will be from the line of Steve DeLaney, JMP Securities.

Good morning, everyone. Thanks for taking my question. Steve you commented on the shift to the larger loan size, we noted that while it was a good quarter certainly earnings wise the originations was $650 million, that was this smallest amount that you -- quarterly amount that you booked in closings since you recap and I was just curious as, does that reflect in part this transition to focus on maybe a different segment of the market these larger loans or should we just view that as a combination of seasonality and maybe the lumpiness coming from the larger loans? Thanks.

I think Steve is really more a combination of the larger loans and the lumpiness. We think about an average loan size of a $168 million which is the reflective of our closing pipeline now. The movement of one or two loans from quarter-to-quarter has very large -- very large impact on our closings in a given quarter. So, the third quarter typically is a slower quarter for originations. We were very active during the quarter, we just had a couple of deals we thought would close in Q3 rolling to Q4 and the larger loans do sometimes take longer to close. So sometimes they have a longer lead time to the smaller deals.

Okay, that’s great. It's just a question I guess Steve some people may have noticed and I did, sometimes you can be a victim of your own prior success, right. But we totally get that it's going to be lumpy quarter-to-quarter, we’ll try not to focus too much on the quarter-to-quarter shifts like this. I guess more importantly and strategically and Paul again reiterated this -- the sensitivity of your earnings to -- the positive sensitivity to rising LIBOR rates. I am just curious as, because this year as you scaled up, not as a function of rising LIBOR but just more operating efficiency, funding efficiency. You steadily kind of increased core EPS and following that you stair-step your dividend, I think you’ve had two increases this year. So, as we look out the next year or so we may get some rising LIBOR and you probably have a little more scale. So it is reasonable for us to expect that as core EPS plateaus maybe at a higher level that we could expect another stair-step or one or two or so in the dividend or I guess the foot side of that is, at some point here are you going to shift the focus from sort of a near 100% pay-up is there any consideration of thinking about lowering the dividend payout regardless the direction of core EPS? Thanks.

I think stability is sort of the watch word for us in terms of the dividend from here forward for the near-term. You are right, the vectors have growth are primarily in terms of increased scale and efficiency on the balance sheet plus potential increases in LIBOR and on top of that the origination profile, how we are able develop ROIs is another potential factor for growth in the dividend. But obviously the initial 18 months period of the company represented the steepest portion of the ramp and from here on out I think we are going to be focused on maintaining stability and disciplined growth in terms of core earnings, the dividend and the equity capital days going forward.

Okay, that was Dough, right?

Yeah.

Thanks for the color appreciate the time guys.

Your next question is from the line of Aaron Sagonovich, Evercore.

Looking at the loan pricing on some of the new loans that you’ve added recently, obviously it seems to be coming down which makes sense from when you placed your original loans 18 months ago. But what are you seeing in terms of the pricing environment and are there any other ways to help offset that yield pressure that you are experiencing on these new senior loans you are adding?

This is Steve. I think what you should really focused on this is net ROIs in our loans. The rate of anyone loan is reflective of its risk, its LTV, the competitive environment and if we are pursuing loans that are lower in LTV are more secure, obviously are going to go lower in rate. But we are able to finance those loans much more efficiently than the ones that are higher in LTV or higher in risk. So we are able to achieve a relatively consistent ROI across the entire landscape of loans we originate from the lowest risk, lowest LTV loans that we close on to the higher risk and higher LTV loan. Again we haven’t seen a lot of movement lot of downward pressure on ROI. There is a lot of competitive pressure in the loan origination business but we are still able to effectively compete. And our rates again in any one quarter are really reflective of the profile of the loans we closed in that quarter. This stuff is really low LTV we will have a lower rates but again we will always be looking to achieve that’s same target ROI across the whole portfolio.

Thanks, that’s helpful. And then in terms of the pipeline and activity, transaction activity has been very strong throughout the past couple of years. Is there anything you could talk about in terms of those, the drivers of the sustainability of underlying transaction activity in the transitional space and capital formation et cetera that’s helping to sustain the strong origination requirement for you?

I think we are really in the sweet spot of the cycle. I think asset values are stable yet it’s still increasing, capital markets are improving liquidities are improving. So I think the prognoses for transaction activity is, it remains very favorable. And again we are product of transaction activity because that’s really what drives the borrower demand for a loan. So as we look forward we see a very favorable landscape to the business. We don’t see anything out there that will cause that the change although we are obviously always looking forward to see what we can do to best position the company.

Your next question will be from line of Jade Rahmani, KBW.

Regarding the current environment have you seen any spread widening on the loans that you are targeting?

We haven’t really seen spread widening although we would love to. Whenever we see any sort of market volatility or changes in the marketplace we always test our loans a little bit wider to see if we can get a little bit more gross return. We haven’t seen that many opportunities to achieve that in the current market, they’re just hasn’t been enough instability even in the choppy markets to create a lot of excess spread or opportunity achieve excess spread in our loan. It does help in terms of -- especially the CMBS bit, because the CMBS vendors just tend to quickly retreat if there is any market volatility. So again for the more stable properties that we pursue where we are competing with that execution that’s where we see this is the gain in market volatility. The banks and the other private equity platforms and mortgage REITs like us don’t react as quickly and as directly to the volatility of the CMBS vendors do.

Okay, thanks. The competitive set on the large loans that you are targeting, can you give us some sense for how many other credible players there are on the given transaction at best?

It really varies depending upon where it is and the nature of the transaction and how large it is. Only the largest mortgage REITs and maybe some of the banks have the ability to do the very large loan. The banks as a group tend to not be comfortable holding large positions in those loans, so a lot of times their executions predicated upon a syndication strategy which I think impacts their ability to definitively compete with us. So that’s why we move to this larger loan size where we have the confidence in our ability to underwrite and quickly execute on those kinds of transactions it’s a real distinguishing quality that we have that others don’t. I wish we have the space entirely to ourselves we don’t but the competitive dynamics on the larger loan are very favorable for us right now and I think that’s why you’ve seen our average loan size increase over the quarter relevant to where it was in the prior quarters.

Okay. Thanks. I was wondering if you could also comment on whether you view B-notes or even mezzanine as increasingly attractive, looking to introduce higher yielding loans portfolio. And also I think there is a large subordinate mortgage maturing in the April, how you might offset that?

As it relates to B-notes and mezzanine loans -- we’ll incorporate B-notes and mezzanine loans into our portfolio as long as we believe that the risk associated with the loan within what we view as senior mortgage equivalent risk, we have no problem with the mezzanine or B-notes structure, it’s really just the risk of the portion of the loan that we’ll be maintaining on our balance sheet. It we feel is equity like or very high in LPV we will not -- we won’t pursue it. So, we remain very vigilant in terms of trying to preserve the credit quality of our portfolio. So, we typically haven’t been reaching for yield as it involves really changing the risk profile of our business, I don’t think that will change. But we will have the willingness to see mezzanine loans and B-notes, but again just as a structured means of achieving equity deployment with the same risk profile there at senior mortgage loans have.

And Jade its Doug, with regard to the B-note that’s maturing on -- in Q1, that position is levered about one-to-one times and it generates an ROI that’s right in line with our 12% to 13% ROI on our entire portfolio. So, while that loan rolling off -- it’s sort of an outlier in terms of the asset yields, in terms of the equity that we have deployed into the loan origination business, its right in line. So, we’ll replace that position with another 12% to 13% position we may very well get there by levering that a little harder so there could be a higher top-line number maybe it gets replaced with $300 million of assets or some number along those lines. But it doesn’t represent outlier in terms of the driver of our return on equity in our quarter news.

Great. And one last one just on securitization looks like the scale of market continues to develop and I’m no capital trust strong issuer, Steven wondering if you have any thoughts on whether you guys might be pursuing the securitization in 2015?

I think it will depend upon the term that available to us of the securitization market relative to alternative options as it relates to the financing of our balance sheet assets. We do have a lot of experience in the CLO market. We actively monitor, we taking to bankers all the time and looking at deals and talking to investors. And we do believe that at some point we’ll execute a CLO as in mean the financing of balance sheet assets. But for the time being it -- the options that we have, we presently employ which is primarily a bank financing is superior to what’s available in the CLO market and one of the reasons why we have been so successful originating is because we do maintain a cost to capital advantage relative to our competitors, including competitors who utilize the CLO market to their financing.

Great. Thank you for answering the questions.

Your next question is from the line of Donald Fandetti, Citigroup.

Yes. Steve, I was wondering if you could provide a little perspective on what will happen to your deal flow, let's say when the Feds are raising rates so how do the transitional property buyer think going into that and after Federate hikes to you, do they see a lot less floating rate debt therefore your deal flow slows, can you talk about how that will play out?

Well, I think Don it will depend upon the economic environment associated with the Fed action. Our belief is that will come with increase in improving economic activity which will be again -- which should be a favorable environment for our business. Our loans in this market are built to sustain a much higher LIBOR that was currently in place. And we welcome higher LIBOR obviously because it will increase the yields for our higher loans and our dividend yield. But I think that lot of the borrowers that we -- that it represent are strongest sponsors. We utilize floating rate debt just a matter of their business practice, they are transitional holders of real estate, they buy assets that maybe aren’t fully leased or fully renovated and they complete the leasing in the renovation and they sell them. And during that transitional period our financing represents the best available options to them and they don’t really have an opportunity to finance their asset in the fixed rate market or in another market that is more efficient or represents a better alternative than what we’re able to provide. So, I think we’re pretty well protected in that scenario.

So, you don’t really think that there would be a slowdown in floating rate origination volumes in around higher rates just to clarify there?

No, I don’t.

Okay.

Your next question will be from the line of Dan Altscher, FBR Capital Market.

Appreciate the ability to ask question. Steve, I thought your comments in the press release from last night regarding the $0.50 dividend being earned with core earnings was really important, I know you don’t really like to give tons of guidance, but is it may be fair way to think about that we have kind of hit the dividend now and there is like no looking back that we are going to be keep $0.50 plus or $0.50 even like hitting the dividend on a go forward basis, even with some maybe timing issues around equity raises and closings of loans?

Our goal has been and our strategy has been to have a positive slope to our core earnings and our dividends. As it relates to the activities of any one quarters it’s difficult to look ahead and try and exactly describe what the shape of that line will be. But we have been disciplined in terms of how much capital we’ve raise and how we’ve deploy it and clearly it is our goal to maintain a stable dividend that we hope to increase overtime.

Okay. And I was wondering a little bit on a balance sheet level and the leverage level, you are certainly doing a good job of managing that leverage number pretty, pretty low. But when think about maybe the run rate to maybe 3 times to 4 times, it seems like we are still little bit away from there. Is there any expectation to start really leveraging that balance sheet more now as opposed to maybe keeping a kind around that same two’ish time’s level with the help of permanent equity capital?

Hey Dan its Doug. I think there is and you know couple of numbers might be helpful here. At quarter-end, debt-to-equity was 1.75 times or so, excluding the effect of the equity issuance it would have been 2.3 times. So that implies as you suggested it, an average for the quarter of about 2.2 times. So right in 2 times to 3 times range. If you add the $1 billion subsequent to quarter-end origination pipeline into the picture that ratio goes to 2.4 times and that leaves $900 million or so of origination capacity in the tank giving effect to that would imply a ratio of 3 times. So there’s your sort of bookend at the 3 times level. I think the key to increasing leverage on the balance really is increased scale, because the larger the invested capital base is the smaller the proportion of un-deployed working capital is and therefore the less deleveraging effect is. So I think you will see that range tighten up as we get larger. I think we saw that a little bit in Q3 although we did see a short term point to point in terms of leverage, in the medium term on the period basis we have seen increase in the leverage riding to that 2 times to 3 times range. And that’s of course reflected in the third quarter core earnings number of $0.50. And we take great comfort in that we’ve generated the core earnings of the dividends that we have to date, without significantly leveraging the balance sheet. That to give everybody comfort that in terms of quality of the earnings for the dividends that produce to date. I would also add that on an increased scale, a bigger stronger balance sheet, also does give us increased options in terms of corporate level leverage including for example convertible debt potentially high yield unsecured corporate revolvers and those sorts of things. So going forward being a bigger company with the stronger balance sheet we will also incline us towards higher leverage level than in our very earlier stage.

Okay, that’s really helpful commentary. Just a thought on the loan that was made in Spain. I guess Spain is always been thought or recently been thought is little more of a, opportunistic country. What gives you the confidence that Spain is maybe the place to be or is this just kind of a one-off where its like, we looked at the asset level metrics, we looked at the cash flows like it was just really good loan regardless of the broader macro?

We are very active across most of Europe in our equity business and with Blackstone and so we definitely have been actively looking at loan opportunities in Spain and other countries in Europe. And the opportunities that the Spanish loan providers to us, these are two shopping centers that are 97% leased, has a debt yield of 11%. So highly stable asset larger asset is – was in Suburban Madrid very strong. So by going to Spain with its less liquidity we were able to attract very high quality asset, a strong U.S. financial sponsor. And a loan that on a standalone basis was an extremely high quality loan for us.

Okay, and then I have a quick one, it’s kind of little bit of timely question. There was an article in Walls Street Journal -- last night or this morning just regarding Peter joining Richard Mack, I know he left Blackstone a couple of months ago, but I am just wondering has there been any -- have you seen any impact from that on the origination side or is there been a deep benched fell his absence?

We have a great origination team and origination pace that we have had in the last two quarters or three quarters has been as strong as that we have had since the company as was formed. So we have a great team and we have originators not only in New York but in LA and in London. And we feel like we see all the opportunities are available in the market. And we feel great about the origination team and origination prospects going forward.

Okay, thanks for the commentary Steve. Appreciate it.

Your final question is from the line of Charles Nabhan, Wells Fargo.

Good morning. Most of my questions have been asked but as a follow-up to Dan’s I wanted to get some color on the competitive environment in Europe and how you weigh that allocation towards your core U.S. business?

Well, I guess first I am going to take the back end of your question, there is no allocation. We’re originating as many loans as we can in the U.S. and in Europe. In the mix it's just the function of how the total originations in those regions compare. We’re still seeing great opportunities in Europe. In Europe the competition is primarily banks and platforms like ours. There is almost no insurance company or CMBS competition, so the landscape of competitors is more favourable. Our equity business there is so significant that we see virtually every transaction in the market, if not as the lender then as an owner and we have great access to that sourcing platform to give us the head start and looking at loan anyway we’re active in Europe which accounts from everywhere, we want to be a lender. So, Europe has been great thus far, I mean we’re close to their first only a year ago, it’s already 15% percent of our total portfolio, lifeline there is great, theme is fully engaged and we think it will be a huge part of business going forward. But we certainly hope to have a lot of growth in the U.S. as well.

Okay, great. And as a quick follow-up and I apologize if you touched on this. As the portfolio migrates towards larger dollar loans despite the room in your capital structure on the leverage side is it fair to expect greater participation activity, increased activity in sales going forward as that large-debt average-loan size gets larger?

Yeah, I think that the average loan size gets larger that we’ll continue to employ all of the options that we have to achieve the highest ROI in the portions of the loans that we retain and we do that now even on the smaller loans. But we have more options on the larger loans as it relates to selling A-notes or other kinds -- or other syndication strategies that might increase our yield in our retain portion. So, I think that’s a reasonable expectation. But because we have very strong relationships in the bank market as well as great financing capacity, the larger loan really work well for us and provides us with meaningful competitive advantage over a lot of the other platforms that don’t have the capabilities that we have.

Okay, great. I appreciate the colour guys. Thank you.

And at this time I would like to turn the call back over to Mr. Weston Tucker for any closing remarks.

Great. Thanks everybody for their timing this morning.

Ladies and gentlemen that conclude today’s conference. We thank you for your participation. You may now disconnect. Have a great day.