Good day and welcome to Blackstone Mortgage Trust First Quarter 2025 Investor Call. Today's conference is being recorded. At this time, all participants are in a listen-only mode. [Operator Instructions] At this time, I'd like to turn the conference over to Tim Hayes, Vice President, Shareholder Relations. Please go ahead.

Good morning and welcome everyone to Blackstone Mortgage Trust's First Quarter 2025 Earnings Conference Call. I am joined today by Tim Johnson, Global Head of BREDS; Katie Keenan, Chief Executive Officer; Tony Marone, Chief Financial Officer and Austin Peña, Executive Vice President of Investments. This morning, we filed our 10-Q and issued a press release with a presentation of our results, which are available on our website and have been filed with the SEC. I'd like to remind everyone that today's call may include forward-looking statements, which are subject to risks, uncertainties, and other factors outside of the company's control. Actual results may differ materially. For discussion of some of the risks that could affect results, please see the risk factors section of our most recent 10-K. We do not undertake any duty to update forward-looking statements. We will also refer to certain non-GAAP measures on this call. And for reconciliations, you should refer to the press release and 10-Q. This audiocast is copyrighted material Blackstone Mortgage Trust and may not be duplicated without our consent. For the first quarter, we reported a GAAP net loss of effectively $0.00 and distributable earnings of $0.17 per share. Distributable earnings prior to charge-offs were $0.42 per share. A few weeks ago, paid a dividend of $0.47 per share with respect to the first quarter. Please let me know if you have any questions following today's call. And with that, I'll now turn things over to Katie.

Thanks, Tim. Amidst a dynamic backdrop, the BXMT’s first quarter results demonstrate continued progress across every aspect of our business, building on the momentum from last quarter. As Outlined then, the BXMT’s forward trajectory is propelled by three key drivers. One, portfolio turnover through repayments and redeployment into high-quality new credit opportunities. Two, resolution of impaired loans. And three, optimization of our balance sheet. All play a critical role in unlocking future earnings potential and further positioning BXMT for performance. And we took a proactive approach on each this quarter, putting the company on very strong footing in the current environment. Starting on the macro, while tariff policy has created greater uncertainty and a slowdown could weigh on the broader market over time, we believe that real estate is well-positioned to outperform. In contrast to other sectors, real estate already went through its cycle, with values resetting lower and many challenged deals addressed. We're still in the recovery phase, far from the pitfalls of over-leverage or over-building that preceded prior real estate downturns. Though tariffs may pressure goods prices, other key components of inflation are coming down. And critically, real estate cash flows over time should benefit from diminished supply, which is already at historically low levels and likely to fall even further. Real estate capital markets have functioned well through this period. Capital is broadly available. And while spreads have widened marginally, overall cost of capital is still around 40% lower than peak. Many banks, insurance companies and investors are under allocated to real estate underpinning continued lending demand. The public markets which react most quickly have already started to digest with spreads settling down and several CMBS and RMBS deals pricing into healthy demand in the last week. And on the private side, new financings continue to attract…

Excuse me. Thank you, Katie. And good morning, everyone. In the first quarter, BXMT reported a GAAP net loss of effectively zero and distributable earnings for DE of $0.17 per share. DE prior to charge-offs, which excludes a realized loss from an impaired loan resolution, was $0.42 per share. As Katie outlined, BXMT continues to make significant progress on the key initiatives that we expect will drive the long-term earnings potential of our platform, as we move past near-term headwinds. I will highlight two of these headwinds in the context of this quarter's results. The first is the timing mismatch between when repayments are received and capital is subsequently redeployed into new investments. In the first quarter, we collected $1.8 billion of repayments, which on average closed two weeks into the quarter, while $1.7 billion of loan fundings were closed an average of eight weeks into the quarter. As a result, our average portfolio size was nearly $1 billion lower than our [3/31] (ph) balance, which had a notable impact on DE for the quarter. With $2 billion of loans closed during closing so far in the second quarter, we are firmly playing offense and expect the timing headwinds we face this quarter will shift to tailwinds and 2Q all else equal. The second earnings headwind is the drag from the remaining capital invested in our non-earning assets. We continue to demonstrate significant momentum with impaired loan resolutions, completing $1.5 billion over the past two quarters at a premium to our aggregate carrying values. Q1 resolutions of $406 million included one new cash flowing REO asset and two loan restructurings, where we received nearly $50 million of incremental cash equity from our borrowers and had significantly reset the basis of our A notes at well-protected levels. As we execute our…

Excuse me. Thank you, Katie. And good morning, everyone. In the first quarter, BXMT reported a GAAP net loss of effectively zero and distributable earnings for DE of $0.17 per share. DE prior to charge-offs, which excludes a realized loss from an impaired loan resolution, was $0.42 per share. As Katie outlined, BXMT continues to make significant progress on the key initiatives that we expect will drive the long-term earnings potential of our platform, as we move past near-term headwinds. I will highlight two of these headwinds in the context of this quarter's results. The first is the timing mismatch between when repayments are received and capital is subsequently redeployed into new investments. In the first quarter, we collected $1.8 billion of repayments, which on average closed two weeks into the quarter, while $1.7 billion of loan fundings were closed an average of eight weeks into the quarter. As a result, our average portfolio size was nearly $1 billion lower than our [3/31] (ph) balance, which had a notable impact on DE for the quarter. With $2 billion of loans closed during closing so far in the second quarter, we are firmly playing offense and expect the timing headwinds we face this quarter will shift to tailwinds and 2Q all else equal. The second earnings headwind is the drag from the remaining capital invested in our non-earning assets. We continue to demonstrate significant momentum with impaired loan resolutions, completing $1.5 billion over the past two quarters at a premium to our aggregate carrying values. Q1 resolutions of $406 million included one new cash flowing REO asset and two loan restructurings, where we received nearly $50 million of incremental cash equity from our borrowers and had significantly reset the basis of our A notes at well-protected levels. As we execute our…

Thank you. [Operator Instructions] We'll take our first question from Rick Shane with JPMorgan.

Hey guys, thanks for taking my questions this morning. Look, I think, you know, you talked about the migration of, I believe it was 3, 4 rated loans back to 3 this quarter. When we think about the 4 book, how many loans are currently in that category? What's the value? And when you think about the path on fours is -- what's sort of the historical transition from 4 to 5 versus 4 to 3 because I think 4 sort of the in-between zone and they ultimately wind up in one bucket or the other.

Sure, so, you know, I think as we look at our 4 book, our main focus, as we've said in the past, is really on the non-modified, 4-rated office. The rest of it, we've either modified loans with very significant capital in the door, or to your question, a lot of fours have really just persisted as fours for a long time. I would say, in general, we're pretty conservative with our risk ratings. And as a result, we have fours that we move to that category in COVID over time. And they've sort of continued performing, continued taking along. We don't see material upticks in performance, and so we keep them as fours. But we also don't see material down ticks in performance. I'd say on the non-modified four-rated office, that's around 500 million. It's down significantly from a year ago, it was 1 billion. It was higher than that before. And that's really where we focus our attention. It's where we're focused on mods. We have mods ongoing and conversations on a couple of those deals that should move them into the sort of post-modification category. There's others that, you know, we'll see which way they go. But it's really a very diminishing universe of assets that I think are truly in that sort of cusp zone.

Got it. Okay. Thank you. And again, I'm assuming that with the sort of a non-sequitur, but given the 30-month reinvestment period on the new CLO and favorable terms, that's going to allow you to really be forward leaning in terms of originations from here.

Yeah, I mean, look, I think we have many, many options for accretive financing of our new originations. We have great relationships with our lenders. They're very active in wanting to lend to us. We also now have the reinvesting CLO. So I think what it really gives us is optionality, which as you know, we love diversification. We love optionality in terms of how we finance our new originations. And I think that having 1 more tool, one more avenue of optionality is always a good thing. But I think say generally, you know, we see very good liquidity, very good sort of capital markets access for various ways to finance the new originations that we're pursuing.

Got it. And at the risk of annoying my peers who are listening, I'm assuming given the timing of that transaction, it probably couldn't be recreated as easily today in this volatile environment as it was at the end of March.

Yeah, I mean, we're obviously really pleased to have gotten it done. I think it's a testament to how quickly we moved, seeing the market was open, the sort of capacity and strength of our team, getting that deal up and down very quickly, as early as we could in the first quarter. You know, the market's settling down, so I won't be surprised to see the CLO market sort of return over the coming months if the trajectory continues. But, you know, certainly looking at it today, we're very happy to have executed that transaction and I think it'll be a good one for our CLO investors as well.

Great. Thank you for taking all my questions.

We'll take our next question from Tom Catherwood with BTIG.

Thank you and good morning everybody. It was great to see originations ramping. Obviously repayments in 1Q were boosted by the spiral refinancing. When you look out over the next three quarters of 2025 and assuming repayments moderate, how much do you think you can grow your loan book from here?

Yeah, so I mean, I think that it's interesting. The pace of repayments clearly impacted by overall capital markets liquidity. But I would tell you again, as we sit today, the pace of repayments is continuing. We've had $200 million so far this quarter, nothing that we anticipated repaying has fallen out. We continue to have repayments tracking. So I think in terms of the premise, if we think about whether things have changed materially, it doesn't feel that way today. That being said, I think that we're under invested today, as Tony mentioned, we have $2 billion in closing. You know, we'll continue to look for great new investment opportunities. And I think that in terms of growth, we're looking to grow the portfolio from here up towards that $20 billion number we talked about last quarter. And, you know, we'll obviously be very mindful around credit, as we mentioned on the script. That's our primary focus, obviously, but we're seeing a lot of opportunities.

Appreciate that. Maybe Beyond the $2 billion that's in closing that you mentioned, Katie, how has your origination pipeline shifted since tariff announcements, either in terms of volume or sector or geography? Austin Peña: Yeah, I can take that, Tom, so Austin. I think really it hasn't shifted per se. I think our strategy has been consistent, as alluded to or as mentioned earlier, 90% of our activity is in profiles that we think are quite resilient, multifamily, cross portfolios of industrial and storage. These are the types of investments that we wanted to do, going back several months. And I think that still remains the case today. And if you look at our pipeline, that's also very, very similar in profile. So, I think our strategy remains consistent. I think in a more uncertain world, that strategy feels even better. But I don't think, you know, it's really changed very much over the last few weeks.

Got it. Appreciate the answers. Thanks, everyone.

We'll take our next question from Jade Rahmani with KBW.

Thank you very much. The first question would be on the repo market. A huge strength for BXMT has been its relationship with credit facility providers. Could you talk to what trends you're seeing with respect to BXMT's own counterparties and its relationships, but then perhaps the broader market. I suspect that BXMT's wherewithal has continued to demonstrate itself, but there could be some turbulence with other smaller, less well-capitalized lenders. So if you could comment on any trends you're seeing, that would be helpful. Thank you.

Sure, thanks, Jade. And appreciate the comments. I definitely, we're really pleased by our relationships with our lenders and how we've seen that through this period especially and really, throughout the last couple of years I would tell you that the dynamic that we've heard from banks around, desire to generally grow their credit facility exposure because of how well it works from their capital charge perspective, because of how well it works in their overall business model. We have not seen any change in that either in word or in deed. They're saying the same things and they're doing the same things in terms of quoting deals. You know, we're out to the market constantly with our pipeline. We're constantly getting multiple quotes at competitive levels from different banks. We have new facilities sort of in closing where banks are looking to, grow relationships with us. And I think it is all driven by certainly our performance in our track record, but also the broader trend towards this being a very high quality product for the bank. And I can't speak too much to other people's experiences, but I think that the large banks like this business, they're looking to expand it. The sort of more medium-sized banks are curious about it and looking to get into it. And I think that's going to benefit the space, but I agree with you that sort of how that plays through will be across the spectrum, depending on the strength of the platform, the strength of the performance in the various platforms.

Thank you very much. Secondly, you mentioned real estate has already gone through its cycle. But really what we went through was an interest rate shock and then stress in the office sector that had been building for years, especially post-COVID. Hospitality multifamily and industrial, however were pretty strong despite the interest rate hikes. We saw operating performance hold up well. So could you comment on those three sectors and what you're seeing there is performance holding up and maybe start with hospitality since that's the most interest rates, I mean, sorry, economically sensitive.

Sure, so I think for sure, as we look across the sectors today and think about areas of potential impact with the macro, I think hospitality is probably the area we are most focused on. It obviously resets most quickly, most correlated with overall economic activity. I think the good news for us is that our hospitality exposure has come down quite a lot. Our US hospitality is only 6.5% of the portfolio as a whole. We've got a couple of big cross portfolios in Europe that are doing very well. But I think that it is something that we're watching. The various, you have transient, you have leisure versus business, you obviously have currency impacts. The weaker dollar could result in some change in, we've seen some negative trends in terms of international inbound travel in recent days, but you could also see the dollar having some impact of that over time. So I think it's a little too soon to tell, but I agree that hospitality is one of the sectors that we're watching. I think on the multifamily side, the performance there has been very resilient. And the big story there was obviously the wave of supply that came in over the last year. That supply is really rolling over. And the first quarter, across the Sunbelt where a lot of the focus has been, we saw positive net absorption, obviously new starts are way down, but deliveries are coming down. And so I think multifamily is kind of moving in the right direction from that perspective. And we have a lot of conviction in investing in that asset class, obviously, as you can see from our pipeline. And then I think on the industrial side, we continue to see that as relatively resilient. I mean, I think there's going to be some markets that are very oriented towards international trade, maybe on the West Coast. We have basically no exposure there that see a bit of an impact, but there's also a balance in that there's going to be probably more reshoring, more inventory building up. And I think generally, again the long-term tailwinds in terms of e-commerce and goods sort of sitting in warehouses versus sitting in stores, that really continues. So, I think that you can see from how we're investing, how we're thinking about what sectors we're interested in and where we see the risks and opportunities going forward. And it really comes down to, I think what Austin said, like multifamily and we like diversification, we like resilience asset classes. Net lease certainly falls in that category. And that's sort of where our perspective sits today.

Thank you very much.

We'll take our next question from Harsh Hemnani with Green Street.

Thank you. One of the things we've sort of seen post the status announcements is that construction costs, value-added business plan costs are increasing for real estate owners. And so have you seen a shift at all post 1Q in the types of borrowers that are coming to you for new loans and the type of business plans that they're trying to look at, are they -- I guess, less heavy transitional than 1Q?

Yeah, absolutely. I'll let Austin take that one. Austin Peña: Yeah, I think Harsh, really we started to see that even before the last few weeks when we look at the profile of the investment we're making today, certainly much more light value at business plans, less sort of transition or heavy transition. I think it really is reflective of the challenges of already seeing those cost pressures. I think that could potentially increase. And I think, as Katie said, we could expect to see supply come down even more and so it's really a continuation of that trend more than anything else.

Yeah, and I think I would also add you know as we think about how we want to invest you know, we're taking shorter duration business plan risk, less business plan risk, the way the market has moved, we're able to invest at our target returns fundamentally in less transitional assets. I think part of that is our view. And I think part of it is the fact that you know construction is really hard to pencil today, to your point value-add business plans with a lot of construction oriented aspect to it also hard to pencil that's been the case for a long time and certainly the tariffs are going to make that more so but the broader impact as often mentioned, and as I talked about in the call, is really just going to be even less new supply, which fundamentally makes the value of existing assets that we lend on better.

Great. Maybe one more from me. Have you, it sounds like loan volume and also repayment volumes haven't really been slowing down post tariff announcement. Maybe how have the spreads on new loans changed for you? And is it perhaps fair to say that you're looking at your financing cost at this time given the reinvestment option in the CLOs that stay constant but the spread on your new loans have been widening a little bit post 1Q? Austin Peña: Yeah, I would say during the first quarter spread, we did start to see at the beginning of the quarter pre-volatility tightening in both the asset side lending spreads as well as where we are cost of financing and where we borrow. You know, I think that's obviously change over the last few weeks. Spreads are probably out on the asset side, 10 basis points to 20 basis points. But similarly on the on the financing side, and so they tend to be more, you know, pretty correlated. I think the advantage of our platform, as Katie mentioned, having 14 different credit facility providers, having the advantage of having the reinvesting CLO, we have a lot of options on the financing side. And so, you know, that really gives us an opportunity, do we think capture some opportunities in this environment. I think being a stable and certain provider of capital to our borrowers is a really powerful tool in an environment like this. And having diversified sources of capital and strong liquidity, I think that creates a lot of opportunities for us.

Got it. Thank you.

We'll take our next question from Don Fandetti with Wells Fargo.

Yes. Your international exposure, it gives around 41%. Are you sort of capped or not capped? Is that likely to just sort of hang out in that level, maybe come down? And then how are you feeling about credit internationally versus the US, just given all the tariff movements?

Yeah, so, you know, I think that our ability to harness investment opportunities globally is one of our biggest strengths. And you know, I think that -- it's something that we've seen create great opportunities for relative value over time. It's certainly something that others in the space are trying to do. We have the advantage of having been deeply present in Europe for over a decade. We have a fantastic team there, great borrow relationships. And I think we've seen that again, in periods of volatility and in periods of stability, the ability to look around and find the most compelling investment opportunities anywhere in the world allows us to create a better portfolio from a risk-adjusted return perspective. We feel very good about our European exposure. It's primarily crossed industrial portfolios, some crossed hotel portfolios that I mentioned are doing well, some multifamily, the lending market in Europe tends to be quite stable, relatively low leverage. We are able to benefit from a cost of capital advantage in Europe that allows us to create, I would say, better risk adjusted returns. And the overall competitive dynamic in Europe is different than the US. The CMBS market is much less active. There are many fewer platforms like ours that can achieve the types of investments that we can, and therefore, we are able to create some excess return. So we feel good about that portfolio. We also think it provides a nice balance and a period of uncertainty. And we've seen over the history of the business that it's always been around 35% to 40%. We have no particular cap, but I think the relative size of the markets and the activity have sort of proved out over time that that's generally where it sits. I doubt it's going to change materially in either direction.

Thank you. We'll take our next question from Chris Muller with Citizens Capital Markets.

Hey guys, thanks for taking the questions. So it's nice to see the CLO market coming back to life in the first quarter, but Katie touched on this a little bit. But I guess how has the recent market volatility impacted new CLO issuance? And I guess the meat of my question is, could we see another CLO from you guys at some point this year if the market does accommodate?

Yeah, I think it's a great question. So, you know, in the first weeks of the market volatility, you know, There were some CLOs that had sort of been out there that got put on the shelf, as was the case across CMBS market. But what we've seen in the recent weeks is really a settling down. There is capital in the market, I would say, if anything, there's as many buyers as sellers that wider spreads in this market, perhaps more buyers. So I wouldn't be surprised if we saw CLOs coming back into the market. I think there are a couple that were privately placed earlier this week maybe. So we will, I think the CLL market will settle out just as we're seeing the CMBS market settle out. There were a couple of conduit deals that came last week that priced quite well. And so I think, again, there's plenty of capital in that market. It needs to adjust to slightly wider spreads as the overall lending market has. But those markets are outperforming relative to corporates and other parts of the credit market. And I think it's a testament to the desire for capital come in. And yeah, the CLO market settles out in it, and it looks like a good option for us. You know, the origination volumes that we're creating are obviously, very conducive to potentially coming back to the CLO market later in the year. We like that as a potential capital source and we'll certainly be monitoring it.

Got it. That's very helpful. And then I guess on the remaining impaired loans, is it fair to assume that you continue resolving those at a similar pace? And I know they can be chunky, so maybe asked a little bit differently. Do you think you guys will resolve the bulk of that bucket at some point through 2025, or could some of that slip to 2026?

Well, it's certainly our goal and they are chunky and they all have their own story. I mean, we've certainly resolved a lot of them and sort of naturally as the universe shrinks, you know, each individual one, the timing has more impact. But as I mentioned on the call, we already have resolved another asset this week. We have one under hard contract for closing. We have a clear path for a couple of others. So we certainly see the continued trajectory as positive in terms of resolving the existing impaired assets. And that's a huge focus of our asset management team. So we're optimistic. We're cracking through that as one of our highest priorities. And there will be some idiosyncrasies in timing one quarter versus another. But I think we should continue to see the benefit of the resolution processes that we have in flight coming through.

Got it. Very helpful Thanks for taking the questions.

Thank you. We'll take our final question from Doug Harter with UBS.

Thanks. I'm hoping you could put a little context about around the general reserve increase in the first quarter. Does that reflect the conditions as of 3/31 or does that, are you able to incorporate any of the kind of early April volatility into that?

I would say we come up with these reserves in April, right, as we're closing the books. It is as of 3/31, but the way we come up with our reserve, for one, it's not meant to capture short-term volatility. It's not a mark-to-market standard where you would expect any change in capital markets would necessarily come through. So we are looking at the long-term credit risk profile. And we think that the way we've ratcheted the risk profile in our general reserve as of 3/31 basically reflects the market. We'll see how things play through for the rest of the second quarter and if that needed a slight notch up or if things move in a different direction a slight notch down but I wouldn't expect any dramatic change in the second quarter, as a result of some of the things we've seen in April.

All right. Great. Appreciate that. And then, is there -- can you give us any context around the size of the two loans – the loan that you've resolved this week and the one you have under hard contract? And then, I guess just further on loan resolutions, how are you thinking about the pace of resolving and sort of moving on from the REOs and kind of moving back into loans? Or could those be longer term holds?

Sure. So, you know, as far as the resolutions we have in closing, it's around $200 million in total, the two that I mentioned. In terms of the REO, you know, the assets we took REO, we generally made that decision because we see the opportunity to implement a business plan and improve value over time. And that's not necessarily an overnight thing. So, you know, we are, it's 3% of the portfolio or 3% of our overall business, not a huge number. They're not necessarily assets that are going to require a lot of CapEx. In a lot of cases, it's more pursuing a business plan, change of use, something like that. And we're going to focus on driving return over time as opposed to sort of a quick thing. That being said, they're all different. I mean, I think we have a couple that we might be able to exit pretty soon. I think we have others that we may have for longer. But I think the overarching theme is – it’s a small part of the portfolio. There are actually a number of assets there that have pretty good cash flow and potential cash flow trajectory. We recognize that cash flow as it comes through in earnings. And I think we're just focused on maximizing value over time for those assets, however long that may take. And if we see an opportunity to exit at a good level, obviously we'll take it.

Great. Appreciate that. Thank you.

Thank you. With no additional questions in queue, I will turn the call back over to Mr. Hayes for any additional or closing remarks.

Thank you, Katie and to everyone joining today's call, please reach out with any questions.

That will conclude today's call. We appreciate your participation.