Blackstone LP : BXMT Transcript 3Q 2018

Final Transcript

Blackstone Mortgage Trust, Inc.: 3Q 2018 Earnings Call

October 24, 2018/10:00 a.m. ET

SPEAKERS

Stephen D. Plavin-Chief Executive Officer

Douglas N. Armer-Head of Capital Markets

Anthony F. Marone-Chief Financial Officer

Weston Tucker-Head of Investor Relations

ANALYSTS

Steve Delaney-JMP Securities

Stephen Laws-Raymond James

Benjamin Zucker-BTIG

Rick Shane-JP Morgan

Jade Rahmani-KBW

Don Fandetti-Wells Fargo

George Bahamondes-Deutsche Bank

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Blackstone Mortgage Trust, Inc.: 3Q 2018 Earnings Call October 24, 2018/10:00 a.m. ET

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CoordinatorW. Tucker

Good day, and welcome everyone to the Blackstone Mortgage

Trust Third Quarter 2018 Investor Call. My name is Derina, and

I'm your event manager. [Operator Instructions] And with that, I would like to hand over to Weston Tucker, Head of Investor

Relations. Please proceed.

Great. Thanks, Derina, and good morning to everyone, and welcome to Blackstone Mortgage Trust's Third Quarter conference call. I'm joined today by 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 and have been filed with the SEC. 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 section of our most recent 10-K.

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Blackstone Mortgage Trust, Inc.: 3Q 2018 Earnings Call October 24, 2018/10:00 a.m. ET

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We do not undertake any duty to update forward-looking statements. We will also refer to certain non-GAAP measures on the call, and for reconciliations, you should refer to the press release and our 10-Q. This audiocast is copyrighted material of

Blackstone Mortgage Trust and may not be duplicated without our consent.

So a quick recap of our results: We reported GAAP net income per share of $0.67 for the third quarter, while Core Earnings were $0.75 per share, up from the prior year comparable period. Last week, we paid a dividend of $0.62 with respect to the third quarterand based on yesterday's closing price, the dividend reflects an attractive yield of 7.6%. If you have any questions following today's call, please let me know.And with that, I'll now turn things over to

Steve.

S. Plavin

Thanks Weston. Continuing the momentum from the first half,

BXMT reported strong third quarter results with Core Earnings of $0.75 per share. Our originations team maintained its high productivity, closing $1.4 billion of loans in the quarter, and continuing to build our pipeline. We now have another $2.0 billion of originations in the closing process, or closed since quarter end.

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Blackstone Mortgage Trust, Inc.: 3Q 2018 Earnings Call October 24, 2018/10:00 a.m. ET

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We have grown our portfolio more than 20% year-to-date to $13.8

billion with a combination of new originations and fundings on

existing loans, far exceeding repayments.

Our quarterly originations include office, multifamily and hotel

loans in California, Hawaii and Australia. We also had our single

best quarter of Walker & Dunlop originations since we formed the

JV, with almost $200 million of closings, a nice addition to our

productivity. Prepayment penalties again boosted our baseline

earnings this quarter, contributing to our outperformance.

The largest contributions came from two construction loans that

were repaid soon after build and completion, one from the sale and

another from the recapitalization of high quality underlying real

estate, while call protection was still in effect. These prepayment

penalties totaled $9.2 million. While prepayment fees tend to be

unpredictable in timing and magnitude, over time, they provide a

consistent source of supplemental earnings.

BXMT continues to benefit from the power of the Blackstone

global real estate franchise. BXMT originations ramped up this

year in Spain, the UK and Australia, where the Blackstone equity

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Blackstone Mortgage Trust, Inc.: 3Q 2018 Earnings Call October 24, 2018/10:00 a.m. ET

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business is driving with strong teams of investment and asset

management professionals on the ground. We also have loan

originators in the BX offices in London and Sydney, which have

been able to export our low cost debt capital to regions that have

not seen the same magnitude of spread compression as in the US.

So, origination ROIs in these markets are higher. Deal flow is still

episodic outside the U.S., where our ability to source and lend

internationally and take advantage of global market inefficiencies

adds to the scale, dynamism and quality of BXMT overall. In the

U.S., our year-to-date originations were up 50% over the same

period last year. Our real estate private equity fund sponsored

clients have been active and the CRE equity fund universe still has

more than $175 billion of dry powder, so we expect to see

continued strong demand as that equity is invested in new

acquisitions that will require financing. We are still seeing

refinance opportunities as well.

The market remains competitive with spreads trending tighter.

Fundamentals and demand generally are stable, especially in the

major markets that we target. We achieve our best economic

results when we can leverage our scale and target in real estate