Good day ladies and gentlemen and welcome to the Blackstone Mortgage Trust Third Quarter 2017 Investor Call. My name is Lisa, I’ll be the operator for today. At this time, all participants are in listen-only mode later we will conduct a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to your host for today Weston Tucker, Head of Investor Relations. Please proceed.

Great, thanks Lisa and good morning and welcome to Blackstone Mortgage Trust’s third quarter conference call. I am joined today by Mike Nash, Executive Chairman; Steve Plavin, President and CEO; Tony Marone, Chief Financial Officer; and Doug Armer, Head of Capital Markets. Last night we filed our 10-Q 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 most recent 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-Q, both of 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, a quick recap of our results before I turn things over to Steve. We reported GAAP net income per share of $0.61 in the quarter and core earnings per share of $0.69 which was up sharply from the second quarter. Earlier this month we paid a dividend of $0.62 with respect to the third quarter and based on today's stock price, that reflects an attractive dividend yield of nearly 8%. If you have any questions following today's call, please let me know. And with that, I'll turn things over to Steve.

Thanks, Weston and good morning, everyone. BXMT had an excellent third quarter highlighted by core EPS of $0.69. We’ve now earned a $1.90 year-to-date demonstrating the earnings power of our business, strong originations $1.1 billion for the quarter and $3.6 billion year-to-date led to the portfolio growth that help generate the increased quarterly earnings. We have added another $768 million of loans that have closed or now in the closing process since quarter end. The highly competitive lending market our 2017 originations were up 33% over last year. Our clients primarily institutional sponsors of opportunistic and value add real estate funds are active, well served by the Blackstone real estate platform they’ve had great experience working with our team. We continue to focus our direct origination efforts on coastal markets with dynamic demand in high barriers to entry, where the entire Blackstone real estate platform has had great success. The major markets are also we believe asset and sponsor quality of the highest and property value is most enduring. As part of that focus earlier in the year we expanded our California regional office to better address West Coast lending opportunities. That strategy has paid off, 64% of our Q3 loans are secured by assets in California, a testament to our high quality team in LA and its origination success in top West Coast markets. Construction loans in our target markets remain a very attractive opportunity for BXMT as the banks continue to struggle with regulatory challenges and capital constraints. Two of our third quarter originations totaling $284 million for construction loans in Northern California with an average LTV of 54% and an interest rate of LIBOR plus 5.15% one office building and one multi-family asset. Both projects are well conceived with excellent sponsorship. In addition to the contribution from…

Thank you, Steve and good morning, everyone. This quarter we produced outsized operating results underpinned by robust originations, a strong senior loan portfolio and our marketing leading financing structure. Starting with operating results, we reported GAAP net income of $0.61 per share and generated core earnings of $0.69, both up 15% or $0.08 and $0.09 respectively from the second quarter. This increase was in part due to $0.03 of additional prepayment income as well as higher intra-quarter deployment. We declared a dividend of $0.62 per share for the third quarter, which is covered 102% by our core earnings on a trailing 12 months basis. We remain comfortable with this dividend level as reflecting our medium term earnings power notwithstanding any quarterly peak in values. Our book value of $26.52 is up $0.14 per share for the quarter and $0.19 year-to-date, driven by the net appreciation in our pound-sterling and euro denominated portfolios and our outsized earnings this quarter. As we have mentioned on previous calls, our book value is not generally subject to significant fluctuation overtime, as our loan portfolios held for long-term investment and we do not own any mark-to-market securities or long dated fixed rate assets. As Steve mentioned, our 3Q originations totaled $1.1 billion bringing year-to-date originations to $3.6 billion, up 33% year-over-year. These loans are all floating rate senior loans with an average origination LTV of 63%. Loan fundings during the quarter, totaled $860 million including $172 million funded under previously originated loans adding the equivalent of one additional new loans portfolio. Notably we also closed our first seven loans in the Walker & Dunlop joint venture, totaling $146 million of new loans and providing an additional avenue for portfolio growth in our business. We collected repayments of $871 million during the quarter, roughly equivalent to…

Lisa I think we can open now for questions, now please.

[Operator Instructions]. The first question comes from the line of Doug Harter, Credit Suisse. Please proceed.

Where the liquidity position was at the end of the quarter and your ability to grow on existing capital base?

Doug, we got cut off just on the start of your question there, could you just repeat that please?

Sure, just where the liquidity position was at the end of the quarter and the ability to grow the balance sheet on the existing equity base.

Thanks, Doug. $702 million is a good liquidity number for us, we continue to have a steady flow of repayment. So I think we’re comfortable with the existing capitalization in liquidity as we look forward. We will always sort of look to make sure that we have adequate capital to meet what we anticipate our future origination and deployment needs will be. And that’s a dynamic process depending upon what we see in terms of market opportunity. But we have been operating at a very nice level now for several quarters.

And then just thinking about the capital structure as you mentioned added additional converts this quarter, I guess how do you think about your mix of capital now between converts, common equity and whether there is any other structure that you’re considering?

Hi Doug, its Doug Harmer here. We continue to think about that mix very carefully, obviously what we want to do is optimize our cost of capital the convertible notes were a very efficient issuance for us and Tony mentioned the 4.375% coupon that’s highly accretive. If you think about those notes in combination with the other notes that are on the balance sheet as our unsecured corporate debt, representing essentially one turn of leverage on the balance sheet as fully deployed. And so I think that’s probably about where we want to be in terms of the mix of common equity to corporate debt on the balance. And we remain committed to the roughly 4 times leverage at the asset level strategy for our secure debt. I think what you’ll probably see is more creativity in terms forms of that secure debt. So we have added a bunch of new lenders over the course of the last year and we have taken the total number of lenders up from 6% or 7% to 10% now if you include Barclays with the swing line we’ve added that corporate revolver. The CLO market is for commercial real estate loans is a very healthy market. And there are other structured alternatives that we think could come into the mix to complement our credit facilities.

Thank you.

The next question comes from the line of Jade Rahmani, KBW. Please proceed.

Thanks very much. Were there any -- was there any acceleration of deferred financing fees in addition to the $0.03 of prepayment income?

Yes, Jade the $0.03 so that reference is net. So we do -- that’s the net of acceleration of income on the assets and deferred financing fees on liabilities. So that's net to net income or core earnings.

And there is typically some level of prepayment income on regular repayment. So I guess excluding that $0.03 do you see the $0.66 of core earnings as a sustainable level or is that also outsized due to the timing of repayments you mentioned?

Jade hey its Doug here. I think with regard to the look forward what we point to is it's a dividend level. There’re going to be ups and downs quarter-over-quarter relative to our average deployment not just our point-to-point deployment quarter-over-quarter and given the size of our portfolio and the leverage on our balance sheet we feel comfortable with the $0.62 dividend and with the prospect for growth going forward particularly as rates increase and as we grow the portfolio. So, those are the numbers that we would point to as appose to the $0.66.

Okay. Just switching to the investment environment, can you comment on where you’re finding attractive opportunities and perhaps what you’re avoiding? You noted California as an outsized share of originations, I’m wondering if you could comment on the investment environment?

The investment environment is very active we're seeing a lot of opportunities. The market is competitive so we're working very hard for what we originate. But we're very focused on larger deals and larger markets and I would say the multifamily asset class more broadly with Walker & Dunlop. And so if you look at originations office and multi primarily those are the asset classes that we are seeing the most of, we're more cautious on hotel. We've done very little retail and we're very cautious on retail as an asset class. But we're opportunistic and as a lender with an equity investment. We always have the opportunity to finance things that might be a little bit -- that might be contrary to the common view in terms of the attractiveness of an asset class to our market. But we're definitely close to market book as we like California we continue to like New York I think you’ll see a lot of our future activity in those markets.

And turning to competition can you discus trends in loans spreads, which seemed quite stable in your actual originations, but are you seeing banks getting more aggressive is the pressure points on competition coming from other debt funds or providers of bridge capital. And are you seeing any compromise in deal structure or covenants and underwriting standards?

Let me take the last part of your question first. I think the quality of underwriting and loan structure has held up very well. And so we’ve been pleased that as pricing has got more competitive loan structure has held up and we still have a lot of clients who don't want extra leverage. So the leverage request that we're seeing now are still much lower than what we saw pre-crisis. So we take a lot of comfort now, we don't see a lot of the warning signs that we saw in ‘06 and ‘07 and in the current market. The competition we feel is mostly around rates some is from other debt funds and other mortgage REITs some is from the banks. We have our niche in terms of transactional loans and construction loans that we serve very well simply better than the banks we’re better suited to these kinds of lending situations than the banks are. And if there is one aspect of our world where we're seeing I think even improved conditions is really been in construction lending where the banks continue to have the regulatory challenges and the construction loan opportunity I talked about the two loans we did this quarter continues to be a very strong one. But I think across a broader ray of markets and activities construction loans, refinancings and acquisition activity there is a healthy degree of lending to be done and we’re competing very effectively for it.

And are you planning to lever the construction loans?

Jade hey, it's Doug. We are planning to lever the construction loans, we’ve got portfolio roughly half a dozen of construction loans, which are levered. So we tend to lever those in through senior syndications or more sort of non-recourse or one-off transactions as oppose to through our credit facilities for the transitional loans. But we do lever those to basically the same sort of low double-digit ROIs that we lever our transitional lending business to.

I wanted to ask, aside some growth in LIBOR, which I think expectation seems to be moderating somewhat. How do you look at prospects to grow earnings over the next year and are there any new business lines that look interesting? I don’t know if you are interested at all on CMBS conduits, special servicing or any other parts of the CRE finance market, but also CLOs I wanted to see if you could comment on whether that’s an attractive source of capital?

Sure Jade, its Doug, I’ll take those in order. I think we do see a good prospect for growth in earnings that will come with the growth in our balance sheet. So having had issued the corporate debt over the last couple of quarters, I think we have got some deployment to do to grow the balance sheet $2 billion and we have credit capacity to do that in place now. So I think that that’s in addition to rising LIBOR where you are going to see the potential for growth in earnings, I think we are also interested in complementary business models. We’ve looked at over the years at those, we always judge whether they’re accretive relative to our existing business and there is certainly the potential for some of those given current market conditions to be entered into in the medium term. With regard to CLOs our goal particularly in the spread compressing environment that we’re seeing on the loan side, is to optimize our cost of capital. And we have had a lot of success doing that with our credit facilities expanding capacity there. But in 2017 in particular the CLO market has become very competitive. So it’s an interesting alternative for us it’s certainly something that you -- that we have the potential to tap we have got a large scale portfolio and we have very well performing loans and people are obviously interested in buying Blackstone affiliated or issued securities. So I think CLO issuance is certainly a very real possibility for our financing strategy.

Thanks for taking the questions.

And the next question comes from the line of Jessica Ribner, FBR Capital Markets.

Good morning guys. Thanks so much for taking my questions. I just have one left here, but could you size the potential with Walker & Dunlop JV, what the pipeline looks like and with that opportunity set looks like for you guys on a go forward?

Thanks for the question Jessica. This is the first quarter that we closed loans with Walker & Dunlop and we spend a lot of time with their team creating a joint process of looking at opportunities and getting them closed and funded. I think we’ve had great success, we have great mutual respect with the Walker team in terms of getting that process established. We closed two new credit facilities on attractive terms that enabled us to create. ROI is consistent with the loans that we’re doing on a direct basis. You saw the volume that we reported this quarter was seven loans $147 million. So going forward I think we hope to originate something in that general band of activity that this quarter’s activity included a few loans that were originated prior to the formation of the JV, the JV acquired at its closing. We are seeing a very nice pipeline of opportunities via the joint venture, I think it will be a meaningful contributor to loans as we go forward. I think the vast majority of our production will continue to be our direct larger loan major market strategy, but I think the two combined will create a very nice picture for us going forward.

And can you give us an idea of the yield on those loans and also maybe talk a little bit about the multifamily backdrop right now? I know that you made comments that you’re positively predisposed to office and multifamily and maybe talk a little bit about the trends in the market.

I think generally multifamily sort of broadly there is generally has a shortage post crisis that has really benefitted the multifamily asset class. We’re seeing strength in multifamily asset class particularly in Class B assets, which is really where more of the Walker JV is focused. Walker is helping us access markets and opportunities that we might -- that we wouldn’t ordinarily see in our direct origination activities, which are focused on larger loans. And so, multi is unique as you go down in assets size you don’t necessarily comprise an asset quality that a lot of strong multifamily markets that are not -- that are major markets in the U.S. how we like the value proposition that comes with those loans and some of the smaller markets we don’t feel the same way about the asset classes where you have tendency to have quality go down with loans size. I think on office we are more focused on those markets with dynamic demand where tech tenants have tended to locate where younger workers want to live and work and that’s markets like the California market and New York and Boston and Washington have had very good upticks from semi-tenants. And so that’s where we are trying to focus our lending activity there and trying to stay away from suburban markets and markets that have flat and no real growth and long-term demand. So our lending tends to mirror where we want to be as investors and shape by the magnitude and the breadth of our equity investing activity in these assets. So we really have a unique perspective given the overall scale of Blackstone’s real estate platform and that really comes across and where you see the loans that we’re originating and what they look like where they are located.

Okay, thank you so much.

And the next question comes from the line of Steve Delaney, JMP. Please proceed.

Good morning everyone and congratulations on a strong quarter. So most of my topics have been covered by now so I’ll try to be brief, just curious on the construction line of product are you comfortable (inaudible) whether the way to model that out including the leverage that you have available for the senior syndications. With that product do you see incremental, an incremental return on equity opportunity as compared to your traditional transitional loan business?

Steve, hey it's Doug. With that product what we see is higher ROA and a little bit less leverage and in line ROI or ROE as compared to our traditional lending business. So what’s interesting about that product is and Steve mentioned in his remarks is that after we originate the loans we layer in the benefits of the funding in terms of growing our balance sheet and the earnings powers. And so are, we think of those sort of forward earnings that are levered and financed and sort of complement our quarter-by-quarter originations of the transitional loans business. So it’s accretive because of the additional deployment and growth in our total assets, but it’s basically in line in terms of the ROI with a slightly different mix of financing.

That’s a great point about the forward funding and could you roughly estimate on these like office and multifamily projects. I assume you are looking at something maybe spending a year with that funding generally be over an 18 months to two years period of time on this type of a project?

Yes I think that’s a good estimate Steve. We sort of view that on average the loans will be about half outstanding over the first two year or so. On bigger projects it’s a longer period of time and on smaller projects the shorter period of time.

Okay, that’s great helpful. And this kind of ties into my next question, Doug commented on CLOs, obviously being strong and we have seen that but obviously the fixed rate CMBS market spreads are really tight and the supply builds but the spreads don’t seem to widen, and obviously now we have got tax reform, the inflation rate and we have had a spike in the tenure. As you look at the [indiscernible].

Steve, background noise at your end, could you -- yes that’s much better.

Okay. So headset I think it was my mic on my shirt sorry gentlemen. I guess my question is are you sensing with rates moving higher the tenure moving higher, the strong conditions currently in the CMBS market. Are you sensing any type of increased urgency for some of your transitional borrowers to maybe move into their permanent financing more quickly than they may have otherwise?

Steve, we really haven’t, most of our borrowers are committed floating rate borrowers and our loan typically bridges them from the acquisition of a property to the ultimate property sale, their fund sponsors they typically have a three to five year life of any individual investment. What we are try and do as originators and asset managers is be the lender through that entire period of time.

Got it. And so specifically your private equity fund borrowers are more opportunistic value added and the CMBS market with the 10 year financing, I think I am hearing you saying Steve that that loan product is more of more interest to the core real estate investor that maybe buys the property from your borrower, is that what you’re suggesting?

Yes, I am, it’s product for generational holders and longer term holders, but yes that’s correct.

Thank you for the comments.

Thanks, Steve.

The next question comes from the line of Rick Shane, JP Morgan. Please proceed.

Thanks guys for taking my questions. Steve Delaney addressed most of them, but I just want to make sure that we understand what’s going on here, which is that there has been over the last three quarters a pretty substantial gap between originations and fundings and that’s clearly being driven by the focus on construction loans or the greater emphasis on construction loans. Is it fair to say that it’s probably a 12 to 18 months lag where if originations were to start to stay flat and you would have that same sort of mix that originations and fundings would begin to converge?

Hey Rick its Doug. That’s exactly right. So I think this quarter you begin to see that those lines come close to intersecting. So we had $172 million of fundings of previously originated commitments and $230 million of construction loans. So those lines are beginning to intersect and something like 18 months to two years into the life of that origination cycle given flat originations you’d see them you cross over.

Got it. And then…

Quick correction, Rick it’s $284 million of construction loans. So we’re two-thirds of the way there.

Got it. And just a quick refinement I had been thinking about as this becomes more significant within the model, are there commitment fees associated with those loans that are driving income on a quarterly basis that isn’t tied to an asset on the balance sheet that we would normally be thinking about.

There are commitment fees, but we account for them in the same way that we account for origination fees on our transitional loans. So they are amortized in overtime to create a level yield on the asset. So we have a relatively smooth ROI in line with funding as oppose to in line just with the tenure of the loan.

Okay. I think I want to clarify that a little bit, so that would suggest that if you originate a loan, but don’t fund it for six months during that first six month period there would be no commitment fees accreted into income?

That’s right.

Okay, fair enough. Thank you.

The next question comes from the line Kenneth Bruce, BofA. Please proceed.

Thanks good morning guys. Just a few follow-up questions, I'm sorry if you’ve kind of mentioned this before been a busy morning. But earlier in the year we saw some spread compression and I am interested if you’ve seen anything incrementally that’s occurred here over the course of the last quarter? Kind of what general spread is relative across obviously there’s some mix shift here that we’ve been talking about, but just if you look at on a like-for-like basis if there has been any further spread compression?

Hey Ken, I think the spread compression we saw in the first year, which was really significant has definitely slowed as we sort of hit the summer and rolling into the fall. We’re still seeing it so the market’s competitive and there is price competition for the loans. And so spreads are I think on the margin still tightening, but not in a really significant way anymore. So I do think the worst of the tightening is over that’s certainly our hope. And we’ve been able to maintain the ROIs necessary to make our business model work well. So I feel it’s also made it more difficult for some of our competitors who have a higher cost capital than us to compete. So in some regard we’ve been a winner from the tightening environment although in general it’s always nice to see spreads higher than lower.

Right. And are you finding yourself going into deeper transitional loans as you kind of move through this point in the cycle. I mean, obviously doing to construction itself for having more of that is kind of suggest that you are, but maybe give us a sense as to kind of within the transitional loan space if you’re finding yourself going into deeper markets?

I think Ken that the business has really been relatively steady over an extended period of time, it varies from quarter-to-quarter and if you look at our loans so there is three general categories of acquisition loans, refinancing, and construction loans. The mix varies but the opportunities have been consistent through the year. This quarter we saw more acquisition financing as our clients level of activity picked up and they were more actively getting more activating their funds invested by properties so create some great opportunities for us. With spreads tightening and some of these properties getting a little further along in their business plans we’ll continue to see good refinancing opportunities as well. And those will be less transitional a little bit more stable from a property standpoint than the acquisitions that we look at. But the profile hasn’t really changed. And we continue to address the market opportunity as well.

Okay. And my last question is just regarding scale from your point of origination there were just ability to generate investments on the current platform is there significant upside from here? We’ve spoken over the years, I mean, there’s we’re always trying to gauge how much you can grow with the capital formation needs to be in order to support that and obviously there is a lot of moving pieces in that, but I am always kind of interested in whether you think you’re kind of at the right level of origination activities whether you look at it on a kind of spot basis or in the context of construction loans that obviously funding the future whether you’re kind of at scale or if you’ve got a lot more upside from there -- from here?

Ken its Doug, maybe I’ll take the first part of that. One thing I’d point to you is the originations growth that we experienced year-over-year. So we’re up 33% 2017 over 2016 at $3.6 billion versus $2.7 billion. So I think you’re seeing that growth manifest in a growing portfolio. We’ve been working through the GE repayments during 2016 in particular, so the top-line didn’t change a whole lot, but you’ll begin to see and I think you saw last quarter the top-line in terms of total assets begin to change. We continued moving in that direction this quarter. If you look at our capital base including the convertible notes there is room to support portfolio that’s up to 20% round numbers larger than it is currently on a fully deployed basis. And so I think in terms of growth in earnings and growth in the portfolio we’ve got the capital in place to support that. And we’re seeing it in terms of our origination activity particularly when you zoom out and look over year-over-year period as oppose to any individual quarter, which can be little bit lumpy.

And may be just to refine that little bit, I guess from here though is do you feel like you’ve got a significant amount of excess capacity that you can continue to effectively leg in to a larger portfolio?

We do have $700 million of liquidity on the balance sheet now not all of that is offensive and deployable, but round numbers $500 million of it is in...

I am not really referring to the capital side, I am really more referring to the just the capacity that the operation can produce from dollar amounts of investments to your people that you have in place can you scale that part of the business up?

Absolutely and that’s part of being part of the Blackstone real estate platform, our focus on larger loans is key in that regard and we have seen that number our average loan size go up year-over-year as well. And we have also continued to build out the team here. Steve referred to the increased presence in California. So tracking for originations as you’ve seen in 2017 over a billion dollars a quarter as oppose to just under a billion dollar a quarter is totally supportable from our platform.

Yes, we really do can upgrade investment capacity here, I mean, Blackstone as an organization we're built to invest. I talked about the new people in LA, but we’ve added people in London as well and expect to see more origination in Europe going forward than what we have seen in the past year or so. And so, we so we have the people in place and we definitely have the ability and we are seeing the opportunities and we continue to also track, what we hope to very large opportunities as well. We benefit from an ability to do larger deals to have a large balance sheet so we you can absorb them. So we are going to continue to focus on larger opportunities that can significantly move the capital base it’s hard to predict a deal like a GE or something else is going to come down the park [ph] again, but I tell you that we are better positioned than anyone for that sort of business should it arise and we are looking for it all the time.

Thank you for your comments and congratulations on another good quarter.

The next question comes from the line of George Bahamondes from Deutsche Bank. Please proceed.

Hey guys, good morning. Most my questions have been answered it’s more of a house keeping items, did you guys disclose the amount of loans you have closed or in the process of closing in the fourth quarter?

We did, I will get you that number it was $768 million, that’s a combination of loans we have already closed and ones where we have signed term sheets they in the closing process.

Great, that’s it from me. Thank you.

The final question comes from the line of [indiscernible]. Please proceed.

Good morning guys. For the loan exposure that you have in the kind of refi cash out variety, have you guys ever disclosed that and are you willing to talk about kind of what’s in the books in terms of the third quarter how much of it was refi cash out?

Well we don’t -- we talk about our loans we really look at LTV and all the good qualities of the loans and the risk associated with them. And so, we are certainly mindful of situations where cash is coming out versus equity going in. But as it relates to the quarter other than the construction loans every loan won was new acquisition. So it was primarily this quarter was exclusively acquisition financing. Again that varies quarter-to-quarter and when we look at refinancing we are certainly mindful of the sponsors equity, cash equity and implied equity in the deal and we believe we can underwrite real estate on a refinancing just as well as we can in acquisition. So they are both important parts of our business, but in the most recent quarter it was almost no acquisitions and the two construction loans.

One small question on the financing page of the balance sheet page in the prior quarter you had shown kind of the credit facility with the all-in cost and now you show just the coupon were there some hedges taken off or what was the reason for the switch? You know what I'm talking about?

No, hey it's Doug here. Where the all-in cost versus the coupon have really just the amortization of season expenses setting up the facility. So the current incremental cost we think is better represented by the coupon, but the detail is in the 10-Q and we can point you to that specifically.

Thank you.

Thank you.

I’d like to turn the call back over to Weston Tucker.

Great. Thanks everybody for joining us today and if you have any follow-up questions please let me know.