Good day ladies and gentlemen and welcome to the Blackstone Mortgage Trust’s Fourth Quarter and Full Year 2016 Investor Call. My name is Tracy and I will be your operator for today. At this time, all participants are in a listen-only mode and later, we will conduct a Q&A session. [Operator Instructions] I would now like to turn the conference over to your host for today Mr. Weston Tucker, Head of Investor Relations. Please proceed.

Great, thanks Tracy. Good morning and welcome to Blackstone Mortgage Trust’s fourth quarter conference call. I am joined today by Steve Plavin, President and CEO; Jonathan Pollack, Global Head of the Blackstone Real Estate Debt Strategies, Tony Marone, Chief Financial Officer; and Doug Armer, Head of Capital Markets. Last night we filed our Form 10-K and issued a press release with a presentation of our results, which are available on our website. I’d like to remind everyone that today’s call may include forward-looking statements, which 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 results, please see the Risk Factors sections of our 10-K. We do not undertake any duty to update forward-looking statements. We will refer to certain non-GAAP measures on this call and for reconciliations, you should refer to the press release and our 10-K, which are 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 our consent. So just a quick recap of our results before I turn things over to Steve. We reported GAAP net income per share of $0.57 for the fourth quarter and $2.53 for the full year. Core earnings per share were $0.62 for the fourth quarter and $2.65 for the full year, up 12% from the prior year and equating to 107% coverage of our $2.48 dividend. And based on today’s stock price the dividend reflects an attractive 8% yield. If you have any questions following today’s call, please let me know. With that, I’ll turn things over to Steve.

Thanks, Weston. And good morning, everyone. The competitive advantages we have being part of Blackstone real estate were evidenced throughout 2016. We retained $3.5 billion of senior and floating rate loans at a steady pace throughout the year despite the turbulent macro economic backdrop. Huge market volatility in Q1 and the unexpected results in the Brexit referendum in U.S. Presidential election. We do have terrific results to shareholders generating $250 million of core earnings and strong dividend coverage, while maintaining a 100% credit performance on $10 billion senior loan portfolio. A big part of our 2016 story was the repayments in the GE portfolio and the redeployment of those repayments and to new directly originated floating rate loans. We have migrated from a loan portfolio in which the GE acquired loans were 44% immediately post the acquisition to one where they are now just 17%. Of the $5 billion of GE loans we acquired $3 billion have now been repaid and another $900 million upsized or modified and thus effectively becoming the BXMT originated loans. The concentrated GE repayments to be collected in 2016 especially of fixed rate loans generated quarter-to-quarter volatility that should subside as our portfolio transitions through a greater percentage of BXMT originated floating rate loans. At year-end 89% of our loan portfolio was floating rate and originated or amended by Blackstone with a 61% overall origination LTV. In 2017, with the GE repayments largely behind us, we are in excellent position to grow the portfolio and then benefit from increasing LIBOR. During 2016, we also raised $2 billion of financing capacity to replace the GE term debt repaid and to finance our new origination. Much of the added capacities is efficiently [ph] priced through revolving credit facilities that we expect to maintain long-term and will help…

Thank you, Steve, and good morning everyone. Before turning to the fourth quarter specifically, I would like to review your 2016 results, the first full year since we acquired the GE loan portfolio in 2Q of 2015. All of our operating metrics, increasing -- during 2016 with GAAP net income of $2.53 per share up 5% from 2015, core earnings of $2.65 up 12% and dividends declared of $2.48 up 9%. We originated a consistent flow of senior floating rate mortgage loans during 2016 with total originations of $3.5 billion bringing our total loan portfolio to $9.8 billion. To support our continued lending activity we developed $2 billion of additional financing capacity during 2016, bringing our total capacity to $9.9 billion. Looking at 4Q results, we reported GAAP net income of $0.57 per share, and generated quarter earnings of $0.62 supporting our continued quarterly dividend of $0.62. As we have discussed previously, we have expected our business would migrate to the $0.62 core earnings level following the runoff of the earnings spike generated by the GE portfolio acquisition in 2015. The trend toward $0.62 has been somewhat lumpy; however, as our loan portfolio has evolved during the past several quarters. In particular, with the large volume of prepayment fees we regenerated in 3Q driving earnings temporarily higher. As we discussed on our last call, we typically collect some amount of these fees in a given quarter. However, in 3Q we received $7 million of fees related to repayments of fixed rate loans in the GE portfolio that could be considered outside of our typical results. These prepayment fees effectively shifted earnings into the third quarter that would have otherwise been generated by the repaid loans in 4Q in subsequent quarters by converting future coupon payments into fees collected and recognized…

[Operator Instructions] Your first question comes from the line of Steve Delaney with JMP Securities. Please proceed.

Good morning, thanks for taking the question. So it was certainly nice to see the principal balance of the portfolio grow in the fourth quarter to just under $10 billion. I was just curious if you guys have a target for the optimal size of the portfolio, I mean you certainly have some incremental financing capacity. I wonder if it’s realistic for us to assume that with your existing capital base the actual principal balance of the portfolio could increase over the next year? Thanks.

Thanks, Steve. I do -- we don’t have a target specifically for the for asset, we definitely feel like we can grow a little bit within our existing capitalization. And then for opportunities beyond our capitalization we will evaluate the equity markets at the time. So for us, it’s really been a period of sort of rebuilding the portfolio in light of the GE repayments, but we are – position to grow the portfolio, we are well positioned to grow from here.

Right. And the – about $1 billion of remaining GE loans that you haven’t touched that are out there, do you have a sense for what the average term to maturity on that remaining billion would be?

I don’t have it specifically but I would think that we would expect that most of those loans would roll off over the next one to three years. A few of them are medium term duration fixed rate loans and others are floaters. So I think we’ll begin to have similar maturity characteristics to the direct origination portfolio.

Okay, all right that’s fine. And one final thing Steve, you guys obviously have consistently had a nice pipeline and been able to put up somewhere around $700 million to $1 billion it seems each quarter. If you look at the pipeline today, I’m just curious if it looks the same as it has over the last couple of years and in terms of borrower type and the nature of the transaction that you financing, I was just wondering if it’s is it still primarily private equity, are you seeing maturing CMBS loans, that needs to be refinanced, just if you could comment sort of who your borrowers are, and sort of some sort of order of magnitude? Thanks.

I would say Steve that we are generally seeing the majority of our flow still from opportunistic and value add funds sponsors to institutionally backed who are the major requirers of the transitional assets that work best in our business model. We are seeing a an opportunity to do a little bit of construction lending, sort of a function of the dislocation of the banks and their inability to provide that product in similar terms to what they have been able to do in the past. So we are seeing some emerging opportunities there which I think are new, we’ve made a few construction loans in the past, but the volume of those opportunities have increased as the banks have become less and less able to perform in that sector. But, I think other than construction loans, more of the same, major market assets top sponsors focus on the coastal market.

And the sponsors, do you see the sponsors continuing to raise new funds for commercial real estate investment?

Yes, our sponsors have a lot of un deployed equity in their funds. They generally have an ability to raise new capital; most of them are mature business that have raised multiple funds in the opportunistic sector. So we feel very good, there is a lot of undeployed capital within those structures, and ultimately the deployment of that capital creates majority of our origination activity, so I think we are well positioned. And they have remained active. Even in the sort of uncertain macro economic backdrop, is seeing good transaction flow.

Thank you for the comments, Steve.

Thank you Steve.

Your next question comes from the line of Don Fandetti with Citigroup. Please proceed.

Yes, Steve. If you look at your business model I mean things still continue to look from a competitive standpoint, and it’s sort of hard to you know kind of see where the near-term risk or the one area would be credit, whether it’s you know a company specific type issue that you could have or you know some type of pressure from higher rates, can you just talk a little bit about how you see credit in your portfolio over the next 12 months and would use be surprised to see an type of issue, licenses you would but just wanted to sort of check in on that [Indiscernible]?

Yes, I feel our business model, all senior mortgage business model really endures a difficult credit environment well, we are not experiencing one now, which is which is fortunate. But we don’t see a lot of potential issues on our portfolio. You know as things evolve, I think in general the transitional assets that collateralize our loans are improving in quality and we have a big equity component in all the real estate loans that we finance. So we feel great about the credit. Right though, I think over cycles credit obviously is what you need to watch for, but I don’t think it’s going to be an easy in 2017.

Okay. Thank you.

Your next question comes from the line of Jade Rahmani with KBW. Please proceed.

Yes, thanks very much. Just in terms of the cadence of originations, are you seeing any slowdown, property sales volumes did moderate in the fourth quarter, and some commented that deal timelines have extended are you seeing that impact the business?

You know we haven’t Jade but as they move into the cycle, what we are seeing is a more refinancing opportunities. You know some of the assets, that they have been acquired in immediately post crisis, you know 11, 12, 13 or even the early generation loans that we made. So 13, 14 are ready to be refinanced. This is been realized, our performance has improved, sponsors looking for more term. So I think any slowdown in acquisition activity should be at least be offset by opportunities in the refinancing market which we didn’t see much of in, so 13, 14 we’ll see a lot more of them.

And are those refinancing opportunities less transitional if the business plans have been executed?

I would say in general, in general, yes. They need to be, they need to be transitional enough for us to be the lender as opposed to a bank or an insurance company. So generally, what will happen is maybe they are two thirds away through their plan, but it isn’t time to sell yet or originally the leverage was sort of 60%, now become 45% or 50% they want to top back up to a 65% loan. So those are the opportunities that work, that work well for us.

On repayments what drove the lower fourth quarter number and do you expect a similar quarterly pace going forward with a lot of the GE portfolio having been repaid?

I still think that you’ll see quarter-to-quarter volatility in repayments. It’s just you know that’s been our experience in BXMT so over the last year or so I think we’ll see a little bit more of that as we roll into 2017. I do think it will ultimately moderate, but you know as repayments move from quarter to quarter, it can really, it can skew results. You saw we had $1.7 in repayments in the third quarter and a much lighter quarter in Q4, and you’d expect that because I think given the heavy quarter, as you typically followed by lighter quarter, but overtime I think you will see the trend in repayments moderate in 2017 relative to 2016. And then as the portfolio becomes virtually all BXMT originated product you will see a little bit more of a steady pace, but still it will still be some volatility quarter to quarter just again given the vague reason to any one repayment.

In terms of the loan pricing environment you mentioned it’s competitive. What are you seeing in terms of incremental loan yields and are you yet experiencing any benefit from LIBOR increases?

Well we are – Tony talked about the sensitivity to LIBOR increases and we do have, we do have a net positive exposure to U.S. dollar LIBOR. So any increase in LIBOR we feel there tends to be to lag, you know LIBOR is set either monthly or quarterly in the case of some of our loans. So when LIBOR increases, you know we wait for the next reset date and then you’ll see it in the portfolio results in the subsequent quarters.

And just finally in terms of your approach to capital instruments, I mean it seems that at this size of range the business is self sufficient, self funding and you’ve done a good job calibrating originations and repayments. Is it your expectation that – would be for some kind of outsized opportunity outside of the regular, quarterly pace of originations whether it be an acquisition opportunity or something else?

Well I think in general, we think about raising equity relevant to our ability to deploy. So as we see more attractive deployment opportunities that extend beyond our existing capital base we would think about whether it’s a good time to raise equity then, you know provide that the strong demand for our stock and we are trading in appropriate premium. I do think there is room for growth in our existing business, so I don’t think we’ve sort of reached the end of the business plan. I think we have the ability to originate more and grow the capital base of the company, but we are going to do it prudently and with the goal of increasing shareholder value overtime.

Thanks for taking my questions.

Thanks Jade.

Your next question comes from the line of Jessica Ribner with FBR. Please proceed.

Good morning guys, thanks so much for taking my questions. Piggybacking off of Jade's capital question, would you -- do you guys have a different maybe stance towards the leverage today than you did about a year ago and what can we think about as your target leverage levels?

Hey Jessica, it’s Doug. I think the short answer is that we know we don’t have a different stance towards leverage than we did a year ago. I think the target leverage level for our business is around three times between three and 3.5 times as we sort of reach optimal deployment. And so we are sort of halfway back to that target, if you look at where we move from the third quarter through the fourth quarter. So we are looking at that more or less the same way.

And that includes the asset specific financing right?

Yes.

Okay. And then in terms of just the high rate environment overall, do you have a sense from your borrowers what their appetite would be under a much higher rate environment especially given Yellen’s [ph] comment yesterday.

I think Jess in general, our borrowers are just floating rate borrowers, so that I do think they need to use leverage to realize their returns on their business strategies. They don’t in general think of fixed rate that is an alternative to the floating rate that it just doesn’t work well enough for dynamic business plans on these larger assets. I do think if the – when yield curve is a little bit steeper, we do see on the margin, people moving from fixed rate, the floating rate. But in general, I think you know that we’ll see plenty of opportunities in floating-rate. There’s a lot of room for rates to go higher and for deals to still be economic. As you hear from us over and over again we win with higher LIBOR and I think the market can sustain meaningfully higher LIBOR than where it is today without there being credit issues or resistance on the part of buyers to make acquisitions.

Okay, thanks so much.

Your next question comes from the line of Rick Shane with JPMorgan. Please proceed.

Hey guys, thanks for taking my questions. It really feels like this is the inflection point that you guys have anticipated in terms of dividend policy following the GE acquisition. And you know two quarters ago you were getting questions about why not to raise the dividend and now the core earnings just sort of converge with the dividend. I am curious in the short term if you think the dividend will be covered or be a quarter away in terms of growth from that?

Hey Rick, it’s Doug again. You know I mean we don’t give guidance obviously you know for the go forward, but we did as you as you mentioned, you know we did set the dividend that at $0.62 with an eye towards what was supportable in the sort of long term floating rates senior mortgage business ex the GE portfolio and the sort of upside volatility that we experience as we work through that portfolio. So, I think that’s probably the right way to look at the dividend going forward and core earnings going forward.

Got it, okay. Second question, curious if you saw anything in the market towards the end of the year post November for a slowdown in deal flow is sponsors or owners weighted potentially for better tax structure in 2017?

Yes, I think it's a great question. And I think it gets back to Jade's question as well. And we are still seeing good opportunity to make loans consistent with our strategy and the sponsors, our group of sponsors are active. I do think that there is a shift, a little bit more towards refinancing as opposed to acquisitions which we would have expected absence the presidential election and the tax reform uncertainty. But I think that helps both through the business. We still are seeing acquisition activity and the opportunity to make acquisition loans, so we are seeing both avenues to grow our portfolio and to continue to originate. We’ll have to wait and see as the tax reform dialogue increases, whether that begins to put the chill on the market or not. So far, we are still seeing pretty good regular activity.

Got it. And then last question, this is probably little bit of a dumb one, but I’ve seen the LIBOR charts for some time and I always look at them and wonder, is it one or three month LIBOR that’s really the benchmark for you guys?

Hey Rick, it’s Doug again. It’s really one month LIBOR the vast majority of our loans are priced over one month U.S. dollar LIBOR.

Okay, terrific. Thank you guys.

Thanks Rick.

Our final question comes from the line of Charles Nabhan with Wells Fargo. Please proceed.

Hi, guys. If we look at the G&A line, it came down by about $9 million this year. And I believe you said that part of that had to do with the runoff of the GE loans. Just curious, as that portfolio continues to run off, could we see further reductions on the G&A line going forward, or are we sort of at a steady state from fourth quarter 2016 levels?

Hey Charles, this is Tony. I think what we are seeing at a G&A runoff level right now is about the steady state. The two things that drove the 2015, 2016 one was the GE portfolio wind down or transaction expenses running off and the other is activity in the CT legacy portfolio, which has a considerable amount of expenses that go through G&A just do that accounting regime. So with both of those things behind us I think if you looked at that 4Q 2016 that’s a pretty stable level at this point.

Okay. And you alluded to the possibility of some construction loans over the next year or so. And I know pricing varies from deal to deal, but just generally speaking how would we think about the yields, the spreads, and/or the leverage that you could apply, if any, on those loans that you would be putting on the books?

Yes, I think the construction level pricing that we are seeing is higher than the pricing that we see for the completed assets. And loan to cost is I would say equal or lower. Historically the banks mispriced the construction lending low and there was an opportunity for us. You know banks would lend on buildings that weren’t built or leased at a lower rate than ones that were completed and leased already. And they own this space. You know there wasn’t room for insurance companies of CMBS or even speciality lenders, it was a bank market. And with [Indiscernible] and the other regulation it’s really difficult for the banks to make construction loans and there still is demand for them by developers. And pricing is really wiped out and so we see a unique opportunity and – it’s the one, the one thing I’m seeing in the market that could be impacted by the deregulation of the banks and maybe they will figure out a way to get back into that business. But they are not really in it and an effective way today and there is an opportunity for us to fill the void. I think the leverage returns that we’ll earn on that business will be consistent with our regular business overall, so we may attract a little bit of less leverage on those loans, but those higher rates can get us to a very attractive ROI. I think the risk profiles of those assets are very attractive as or more attractive than we are doing in a regular way portfolio.

Got it. And if I could sneak one more in, there was a $21 million loan that was downgraded to a 4 risk rating. And I know in the K, it said that, that loan is performing. But could you just give us a little color around that loan. Just some background information?

Sure. It’s a hotel loan in a market where there has been some new supply. And so, performance is down a little bit from where it had historically been, meaningfully down. Still covers debt service by a significant margin. The property needs capital and so the real discussion with the borrower is getting him to putting the capital to renovate the property. It’s a GE loan you know obviously we are not making $20 million loans on hotels today. So it’s a loan that we acquired, it’s one that we are in active negotiations with the sponsor and are working on a resolution.

Great, thanks guys.

Charles thanks.

I would now like to turn the conference over to Weston for closing remarks.

Great. Thanks for joining us this morning and look forward to following up with everybody after the call.

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