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spk_0: the day everyone and welcome to the blackstone mortgage twist third quarter twenty twenty one invested in best a co hosted by western took her head of share older relations my name is lesley and on the event manager during the presentation your lines will remain on listen only and if you require assistance at any time please keystone zero road new telephone and a coordinator will be happy to assist you if you wish to ask questions you in the queue and a session please press start that one on your telephone and i would like to hand you over to your house today western please go ahead
spk_1: read there for free and good morning and welcome to block the mortgage drugs third quarter conference call i'm joined today by mike nash invective german katie keenan chief executive officer jonathan pollard global had a real estate that strategies twenty marone chief financial officer and dog armor indicator vice president capital markets this morning we brought our trend q and issued a press release of the presentation of our results which are available on our website and have been filed with the ip pc i'd like to remind everyone that is coming forward looking statements which are uncertain and outside of the companies control actual results may differ materially for discussion of some of the risk that could affect results easy to risk factor section of her most recent mk would you not undertake any duty to update or looking statements will also reported certain on get measures on this call and for wreckage we're patients we should refer to the press release and are thank you it's audiocast is copyrighted material blackstone mortgage trust or may not be duplicated without our consent for the third quarter we reported gaap net income per share of fifty six cents or distributable earnings or sixty three cents per share a few weeks ago we pay a dividend of sixty two cents per share with respect with respect to preserve that to the third quarter of you have any question following today golf please let me know and with that on outrun things over again
spk_2: thanks for them
spk_3: in the first quarter of this year we highlighted emerging portfolio route as a leading indicator for earnings growth and we saw the momentum building and the pace origination today it's clear that we have delivered this quarter we originated a record four point seven billion dollars of new loans bringing us to eight point six billion year to date solidly on pay
spk_1: it's with our long term upward trajectory
spk_3: are strong and that's an activity drove three point eight billion of nap portfolio growth for the year that far taking our portfolio to a record twenty two billion dollars and as our deployment has increased be earning power of our business is accelerating regenerated disreputable earnings of sixty three cents per share in the third quarter more than covering our longstanding dividends performance this year is reflective of the core advantages that continue to differentiate the accept you eat establish relationships with the largest sponsors in the market mean that as they become more active we have more opportunity to find our target investments low average first mortgage loans on institutional out that it's a virtuous cycle the more we participate in the market the more sponsors experience the advantages of borrowing from be accept yeah the more as we see going forward further growing our pipeline we're learning and more markets across the us europe and australia and continually build upon our deep local knowledge and sponsor relationships within each region and our scale and expertise allow us to be a single source solution for top tier global sponsors bringing the same creative innovative a knowledgeable approach that the smp have known for all over the world this quarter we close three months with brookfield on assets in new york spain and across europe three with morgan stanley across multiple us market and new transactions with tishman fire shorenstein rock point in northwest all repeat borrowers many times over and for first timers their experience with are both that the origination stage and over the life of the loan often turns them into poor repeat relationship this quarter we close nine loans with bar that were new to us earlier this year to are now making us their lender of choice as the ramp up activity and our pipeline of compelling lending opportunity of continues to belt today we have over four billion dollars of additional learns closed or in closing post quarter and deporting continued portfolio grad that we look ahead given our productivity this your postcode originations represented thirty one percent of the portfolio at quarter and overlaying a significant component of newer vintage origination a top are stable peak of advance we continue to find strong credit opportunity of in our tried and true sectors and market and within these areas we further accelerated activity and fragments where we see the strongest growth in today's economy multifamily represented fifty four percent of our third quarter origination market fundamental the not sector continue to shine strong rental demand lead to nationwide occupancy of ninety seven percent and year over year rent growth of over ten percent in the third quarter sunbelt markets were in migration is driving rents and absorption across sectors were nearly forty percent of our rich nations that's quarter as a result of this robust activity or multifamily investments have nearly doubled from ten percent of the portfolio at the end of twenty twenty to twenty percent today and arsenal presence has increased from nineteen percent to twenty five percent over the same period as always we're sticking to our core credit principal including never reaching for yelled originations that year have averaged sixty six percent ltv in line with our overall portfolio and our long term strategy or new loans this quarter exemplify or discipline credit criteria targeting low leverage phone to top quality assets and sponsors and strong market and july we close a five hundred million dollar fifty eight percent ltd loan to a premier global sponsor on a new construction apartment project in brooklyn part of the affordable housing new york program are you need access to information drove our investment the that's your and allowed us to act with confidence while others remained uncertain we began underwriting alone in february when new york city was just emerging from the depths of covert second wave inventory was elevated and concessions were widespread but with a portfolio of over ten thousand units in the city across our platform we saw leading indicators of leaping activity reemerging concessions beginning to end flags and demands building ultimately new york had a strongest summer of leasing and over a decade performance we saw reflected across our portfolio of city multifamily off that and which proved out our thesis on this high quality lending opportunity multiplayer we have been a consistent area of expansion for us this year as we continue to see strengthening fundamentals across the country we close twenty four multifamily this quarter two point six billion dollars including six hundred million in taxes two hundred million in south florida and another five hundred million elsewhere in the sun belt and we continue to see a steady stream of compelling opportunity to land unstable transporting assets with upside and today it's red roof environment we've established a differentiated process for multifamily flow best that's where we provide certainty and is of execution to active top quality it and see them come back to us again and again in a sector where transaction volume or up fifty percent over two thousand and nineteen levels this efficiency matters our sponsors can focus on closing and executing their business plan knowing or have reliable consistent performance on the financing side elsewhere in the portfolio we continue to be focused on newer advantage high quality office well i'm of high buildings that foster culture charlotte retention and ingenuity it's buildings are particularly appealing to tenants were growing like creative fact based company and content generators by science from and they are outperforming and today if we think market this quarter we close to three hundred and twelve million dollar loan on a portfolio of recently completed leave sober office adjacent to the new metro line in northern virginia it's a market driven by technology information and digital infrastructure one of our highest conviction investment them or collateral assets or eighty four percent we're on a long term basis to an institutional rent role including google i see us and new star data driven knowledge economy tenants who need a workplace environment that supports connectivity and innovation or as assets selection overtime continues to be validated by the performance of our portfolio is quarter we saw additional positive credit migration building on me your long trends occupancy it's of our collateral continue to rise across asset classes for example or new york city multifamily collateral that are currently eighty eight percent occupied at thirty points for one year ago we counted over one million square feet of leasing and are often thought that this quarter and our hotel portfolio continues to improve with the majority of our assets now covering that service and several exceeding two thousand and nineteen rub or level while we are mindful of broader economic impacts of inflation for our portfolio it translates to rent and an ally grow further supporting the low basis an insulated credit position we have in our lives the scale and growth of our portfolio allows us to continue the innovation and sophisticated execution that is a hallmark of our balance sheet strategy we have consistently achieved best and class term across both our corporate an asset level financing reflective of the quality of our track record investments and blackstone management last month we issued our first secured bombs or four hundred million dollar transaction that as favorably price and structured corporate capital to are already well diversified out shit along with that capital races quarter we also funded our growth with an equity issuance that was meaningfully agreed up to book value for share over the last year we have had a full array of corporate an asset backed capital markets for our business term loan been the aloe credit facility and premium equity and are ready access across these diverse sources ensures that we can be opportunistic with achieving the best structure and cost of capital for a company our performance this quarter and throughout the year continues to underscore the stability and strength of our business model we're growing capitalizing on the ever expanding reach of the blackstone real estate platform and generating strong lending opportunity it's in our highest conviction asset classes our portfolio is performing with excellent credit metrics and continued business plan progress we are innovating with new sources of a creative capital we are driving earnings growth supporting the attractive cash dividend we have held consistent through the covert period and we see great prospects for continued momentum to come and without altering the crawl over to chinese
spk_1: you eg and good morning everyone his quarters results illustrate the positive dynamics of our business and twenty twenty one of be from she deployed capital and new loans driving increase or nice of portfolio bros distributable earnings increased to sixty three cents per share from sixty one sense that quarter feeding our quarterly sixty two cent dividends had earlier this month rogan earnings his quarter is a direct result of the strong origination a katie highlight earlier and does not reflect any material prepayment income or not or tried it the one from loans close and the latter part of the third quarter or further support or near term on a trajectory the third quarter we originated four point seven billion dollars of loans cross thirty eight transactions driving our total portfolio to a record twenty two billion dollars an increase of fifteen percent the quarter his portfolio growth is net of eight hundred and eighty six million dollars repayments reflecting a return to more typical market conditions as a bars to plead the repositioning plan and either sell or refinance apa these dynamics bring the proportion of our portfolio originated in st you twenty twenty the first quarter following the of the pandemic to thirty one percent writing greater potential to earn prepayment income on these newer vintage alone computer quarters similar to our experience the twenty nine years prior art from are active origination pace the third quarter reflected another period of stable credit metrics and our portfolio we are greeted the risk rating on ten loans and only one downgrade and no changes to our for rated watch was one overall are weighted average risk rating of two point eight declined from two point nine last square reflecting the continued fundamental strength our portfolio he's reading up rates among other factors contributed to a for basis point reduction in our general use a reserved twenty seven basis points he got a forty two cents per share book i am we continue to receive one hundred percent of interest do with virtually no interest of rural and no changes to our not cool enough formula a weighted average origination ltv of sixty five percent has remained consistent over the last year and reflects the significant equity capital our bar was haven't tested ordinance warlock we had an active quarter on the right hand side of the balance sheet and continue to benefit from attracted executions or at that level nancy this quarter over two thirds of are two point eight billion dollars about that financing priced at the el pas one twenty five to one fifty range reflecting the premium credit profile of our lands the strength of our balance sheet and are deep relationships with credit writers in addition we priced or debut four hundred million dollars senior bond offering ember which was shortly after quarter of the transaction price it affects three point seven five percent for five years no id every track the level a lot get ahead of what will likely be a period of rising interest rates
spk_4: lastly we issue ten million new shares a premium equity this quarter raising three hundred and twelve million dollars and attic twenty five cents to the guy
spk_1: because the quarter with liquidity a one point one million dollars including the bond proceeds receive in early october and a death equity ratio of only three point one time we look forward clothing or four billion dollar alone pipeline which will continue to increase our earnings power as we focus as always and discreet credit selection maintaining the strength of our balance sheet and delivering consistent compelling returns to or cycles thank you for your support and with that allows the to open the called question
spk_0: thank you thank you have you want your question and answer session will now begin if you wish to ask a question if you start than one on your telephone if you want to withdraw that question it's dark to am if you could just an ask a question plus a follow up questions if you have any further questions if you could just doll backing and kids
spk_5: and the first question comes and t tim he's from bp i g your live in the caught him please go ahead
spk_1: take one guys i can rather than a quarter
spk_4: first question here i'm just about you know the all in yields on the portfolio eating your at a very strong quarter from the origination standpoint but only saw a my degradation the all and yield walls are focusing on kind of more defenses asset multifamily sunbelt where out
spk_1: expect competition is a little bit more intense than than other parts of the market jokes d touch on you know and i think you did touch on in a little bit in terms of he the the power of the broader blackstone platform and been able to be a consistent a fish and capital provider but maybe it is anymore anything more that like how your
spk_3: are able to sustain these all in yield are you focusing on heavier transitional assets now and ebb and we seem construction pick up a little better is that what you're getting a little bit spread any comments are now be helpful there are think some guy i think your point is exactly right in that we've been real consistency in the year and our portfolio and you know including as we kind of expand into multifamily found out and i think it really does get to exactly as you pointed out you know that the differentiation in terms of our origination effort del mar you're alone ah deep relationships with our town our party have the ability to provide speed and certain can move quickly leveraging all the information we have within our platform you know that really allows us to continue finding what we see as compelling lending opportunity is guy wouldn't read too much into any individual quarter but i think if you look over time including that are you know the you have really been
spk_5: very consistent as of our lt view and i think that just speak to our ability to find you know the compelling lending opportunities that are a good fit for our portfolio
spk_1: okay got it doesn't sound like any real change in strategy or at least
spk_3: you know more concentrated focus on different have types of my get your little bit more spread their
spk_1: no i mean if your point of anything get people are present originations nations the corner where multi family and found you know it it really is very consistent game yeah got it in and then just my follow up there on yeah i know you mentioned some comments but the forward pipeline sound like you know obviously have a lot of activity going on still in the fourth quarter in i know repayments are are lumpy or not always easy to predict but the i was a broadly across the sector we're we're seeing repayments pick up his passport or was
spk_3: i'm in a certainly a setback more on the second quarter but just curious why your outlook is for repayments in the nearest like intermediate term if you think that you might see some and you know some elevated activity there and if that might be a source of kind of prepayment income for you guys over the next couple quarters thanks yeah i do think we'll see you don't return to a normalized level of prepayment summer repayments because it is all correlated with the activity in the capital markets so i think that's certainly a possibility if the other thing to think about though as you know that that case of prepayments is really more correlated with where a portfolio was two three years ago versus the size of the portfolio today so i think if you think about the relative you know origination first that repayments it's important to think about that but certainly the prospects for early payments you know acceleration of income you know our portfolio gets new where i'm at the capital markets or reopening we think that a return to in a more normal i love
spk_6: out there make them
spk_0: gotta think getty
spk_7: thank you your next question comes from the line aws stephen lot from raymond james you live in the cool stephen please go ahead i think you good morning i'm katie the to follow up against sob on the pipeline you know looks like a couple years running of were flip around a hundred and twenty five loans were up over one fifty now none of the new origination seem to have made the top fifteen table
spk_3: any talk about that pipeline is it is it more loans and smaller lonesome what with historically same and of that movie really out of the top five them as they can you talk about whether the pipeline continue to have larger stopper better job of focus to be awesome dot obviously and and smoke more loans and and smaller in size yeah it's a great question you know i think the way i think about that activity in our pipeline it's we're still targeting at the same type of problems with always target and but we've also overlaid increased activity in multi family and and some of the smaller growth market so i think you're still be a pursuing his great large scale opportunity as with very strong bouncers you know a lot of cash equity and we can differentiate and terms a scale you know that's always been a great area activity for us and and we really like that opportunity for also overlaying in a more activity particularly and multifamily you know where the field tend to be potentially a little bit more think our average multifamily thought that quarter was around one hundred million so we're not talking about substantial difference in terms of our long term average
spk_7: but we are overlaying more activity in that multifamily fan
spk_1: right and then you know only origination side know appreciate the chart and the in the supplement ah that really shows canada
spk_8: the trail and twelve month and will origination number if you look back out coburn seems like you know eight to nine billion a year it is sort of the normalized one raiders is that how we should think about growth from here at the is that number going to get get bigger as you expand this focus can you talk about what we should think about as far as an annual average patient
spk_3: expectation yeah yeah i think we've seen it over and over thirty years at griffin our business and across the black general a platform creates a virtuous cycle on and you know we're growing over our business where i've seen know it's increasingly sophisticated data a larger market present and we've grown origination team as well to you address the pipes and that we're generating from that larger scale and by over forty percent in the last two years so i think it's certainly possible and that will continue to see you know the long term trajectory and and he opened we've we've really grown the portfolio every year
spk_1: in the history of the company so yeah i think that long term trajectory of clear and you know you'd expect to see it continue
spk_0: buy photo time soon
spk_9: thank you and your next question comes from ricocheted from jpm please go ahead with you live in a cool thanks everybody could take my question this morning i'm i'm curious is we look forward how to think about the arm floors and one of the things that stands out is dead
spk_3: palm disproportionately your non us dollar denominated are loans have a much higher percentage of
spk_1: zero floors or no moore's law on them i'm curious if dad is a tiny an issue is a function of wind up portfolio was created is it a function of sort of local arm practice or is there something imbedded in your car i see hedges to i'm basically are structurally provide affectively a floor that will just not seen in terms of way things are disclosed and he ragged is dugout take that one and yeah i'm i think the answer is is both actually in short so zero board in the european portfolio are really a function of you were raised the been in in your boring and and although in the uk and you know over the preceding several years when the loans were originated your rates never increased it on the continent in particular the way they did in the us but but you're onto something you know in referencing that the hedging strategy you know what that the rowing board contract strategy that we do we essentially swap your of or or or sterling i work for us dollar live or and for that provides a very substantial heads on your to that the floor income in our us dollar portfolio because it essentially represents a non
spk_4: on for component of our capital structure that is exposed to us dollar live or
spk_9: got it okay i said try to that that actually makes a great deal as it's really helpful just because it is
spk_0: in the context of things are the distribution seemed a little bit odd just trying to understand how to think about that guy port thank you
spk_9: thank you for next question consumed on sunday key from wells fargo your lives in the caught on please go ahead
spk_3: a hi good morning on politically talk a little bit about new york office and what you know viewers and then also provide an update on how rapport porn occupancy are trending your hotel for falling jack so you know i think our view on new york office remains very consistent with what we've been saying over the last year which is that the other outperformance family thing activity perspective from a capital markets fact that we're seeing in the high quality a newer a good chance while i'm at it has office building that we've always been focused on about really continue as i think that's been a couple of great example that that over the last couple quarter of obviously to both acquisition of the st john's terminal being them most it as highly as published one ah but it will really thing it across the market whether it hudson yards or and your grand central the newer quality building continue to attract really great and it's to me and and you know we're seeing that in the numbers and had an activity in the market activity all about been back and got really concentrated in that high quality building and you know we we continue to see the bifurcation that we've identified i think i'm a occupancy and wrap far side again you know continued progress there in i mentioned
spk_0: these are in the call was being really good coverage across our portfolio resorts continued as significantly outperform select service has been very stable either urban hotel side it's gonna take a little bit longer but i do think the reopening of international travel in november will be a pass for that part of the market
spk_10: like you thank you for your next question comes from jade romani from kbw your live in the cool jade please go ahead
spk_3: thank you very much on kitty i was wondering what the strong growth across the portfolio could do to explain the portfolio management process you know how frequent our ass at level reviews and what information gets you know past upstream to yourself as well as other members of the managed with it absolutely in i think are integrated really sophisticated asset management processors on have that kind of areas of secret thought the bar business we've got a great asset management team they all fit with appear on the same floor the same building we've worked with them a really long time and we go through every load in the portfolio every porter you know really looking at individual performance in i'll be thing occupancy i'm you know what's happening in the short term and a long term know with the entire be accessed the management team and and role that up to the overall average management team south a very detailed sophisticated process and it's also quite pro active you know we we use those with you
spk_10: to look at you know which great loans are doing well that we can try and keep around longer you know looking at call protection and thinking about how to maintain the high quality portfolio and in a also really using that to extend our the touch points we have with our borrowers tell you know we've got as strong relationships with our far as barzani asset management
spk_7: i'd if we have a me origination side and it really keeps that positive dynamic flowing in terms of seeing new lending opportunity opportunities
spk_3: thank you and a follow up would be in today's environment how do you make sure you're not lending into an overly frothy market based on current low interest rates above his dark a valuation and risks to the outlook based on what we're the supply chain which i assume will eventually impact commercial real estate construction as well as inflation and assistance why is it really comes down to information in a we owed a four hundred billion dollar real estate portfolio across the blackstone flop where we have fifty portfolio companies and they're always you know every day feeding information into every aspect of the investment process you're at blackstone and i think you know having that access to information flow really keep that up to the minute and terms of what we're seeing an individual asset classes an individual market so i think it really gives us a big advantage in terms of making sure we're making the right investments overlaying that obviously with a low ltv loans were making strong bouncers asset classes that we've seen in a state
spk_10: able performance over time you know all of those areas i think help us really mitigate risk even as the market as changing i think i'm a supply chain in construction side you know as a lender on existing assets or of you know in the market construction where we have you know gmp than completion guarantee is that really just me and last new supply over time
spk_0: increasing replacement cost to translate through to increasing value for existing assets so i think it's a lender on hard assets in in a potentially inflationary environment that's really just gonna translate some more value protection arm and credit support for our alone
spk_11: okay thank you very much thank you for your next question cause i'm steven delaney from j m p securities please go ahead stephen your live in the cool the why everyone congrats on your strong results i'm katie is sparse tom
spk_3: this the lost city in the commercial real estate markets or this this level of activity on how does that impact in your mind be expected average life of your new loans i'm assuming that you when you talk about your sponsors it sounded like a lot of these loans or new acquisitions to the business play lands for your sponsors are you still seeing sort of the historical three to four your average outlook just trying to get a sense for the life of these new originations thank you very much yeah that's a great question you know i think that the life of our alone tends to be driven by the business plans of our sponsors more so than what's going on in the capital market so you know it's really you know most of our sponsors are employing you know a by a fix that salad strategy much like in a we have across the doesn't appear
spk_12: and so you know that the life of the lungs really are driven by the fix that part of the business plan and i don't think that's really changed substantially we've always had in iowa of an array of different types of business plans in our portfolio whether it's you know as straight least that strategy unit renovation you know rebranding i'm an asset in a way
spk_3: never sort of type of transition them and we've always had sort of a mix of light transition chair you know a little bit more transitional the pair be an
spk_11: you know that that trend are not has changed substantially so you know we we did see obviously and a longish and in the duration of the portfolio in kobe as the capital markets where quieter i think there were assets that we're ready to be sold in a just before kobe the obviously hung around a bit longer because of the capital markets but i think that as the market returns to more normalized level what will see as a returns you are more normalized duration similar to what we're seeing and eighteen and nineteen got it okay thanks and it obviously these heavy originations in three q and and are coming up and forty will likely the first loans likely sort of extend the weighted average you know expected maturity of i would assume i'm in then you just close my follow up quickly as the you made positive comment
spk_3: i'm with respect to read for revpar in the hospitality holdings i would you say that applause similarly to your loan fourteen and in new york city yeah you know i think we're seeing positive trends and hotel across the board and what really differs is the pace or the slope of the recovery so you don't you look at new york generally in i think the market occupancy was you know it could have been single digits at one point in a few years ago and today it's more like ninety seven deeper
spk_11: fan so it's it's really moved a lot there's still a lot more to go in a city like new york because you know the underlying international demand the corporate the man
spk_0: that's going to take time to recover but i think that the direction we're seeing across the hotel spaces is all upward it's just a question of the flow
spk_13: great thank you for the comments
spk_10: thank you and your final question comes in the line of jade with money from kbw please go ahead jade your live in the pool
spk_4: and thank you very much
spk_3: in terms of the repayment outlook what do you think drove the mannis level repayments in the third quarter despite the surge in volumes were seeing across the sector and you expect that to increase going forward i believe you earlier indicated that is the case yeah i think it really goes back to what when the loans were originated and you know when you think about the pace of the repayment you know of the repayments happen when won't get through their business plans you think about the scale of the repayments we've had over the last three quarter and obviously quarters are lumpy it's which i look at ever a little bit a longer period and compare that to the size of the a at three or four years ago it's actually not really add add on it's a pretty reasonable number you think about the weighted average
spk_5: duration of loan so i think you know the differential you're seeing a new originations vs repayments it's really a factor of the growth of the portfolio over time
spk_10: and in i think that that's that that's the primary drivers i think we're we're getting to a pretty normalized case this year in and you know you'll see it continue to track the growth of the portfolio two or three years ago which is really sort of the corollary data points okay
spk_4: thanks and lastly question i get a lot from investors and i know everyone asks you guys this all the time
spk_3: which is about adding business lines but from the perspective of liability management you think that it's an interesting prospect to add a different business line
spk_14: in order to allow be of them t to eventually be able to issue unsecured debt
spk_15: australians i can add you i mean i think we're always gonna be driven first by what we think the best investment opportunity is for our business so you know we're not going to be driven by went with the on the liability side we really start with how do we make the best relative value in batman and then we think about you know the best way to capitalize
spk_10: it says and batman
spk_0: and i i wouldn't add anything to that it is it's all about the bathroom and then we better capitalised the in a given that and strategy
spk_1: thank you very much
spk_0: and say thank you i know it like to hunt you back to west and the closing remarks
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