Blackstone Mortgage Trust, Inc.

Good day everyone and welcome to the Blackstone Mortgage Trust third quarter 2021 investor call hosted by Weston Tucker, Head of Shareholder Relations. My name is Lesley and I'm the Event Manager. During the presentation your lines will remain on listen only and if you require assistance at any time please key star zero on your telephone and a coordinator will be happy to assist you. If you wish to ask a question during the Q&A session please press star then one on your telephone. And now I'd like to hand you over to your host for today, Weston. Please go ahead.

Great. Thanks, Leslie. And good morning and welcome to Blackstone Mortgage Trust's third quarter conference call. I'm joined today by Mike Nash, Executive Chairman, Katie Keenan, Chief Executive Officer, Jonathan Pollack, Global Head of Real Estate Debt Strategies, Tony Marone, Chief Financial Officer, and Doug Armour, Executive Vice President, Capital Markets. This morning we filed our 10-Q and issued a press release for the 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 factor 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, We should refer to the press release and our 10Q. This audio cast is copyrighted material of Blackstone Mortgage Trust and may not be duplicated without our consent. For the third quarter, we reported gap net income per share of 56 cents, while distributable earnings were 63 cents per share. A few weeks ago, we paid a dividend of 62 cents per share with respect to the third quarter. If you have any questions following today's call, please let me know. And with that, I'll now turn things over to Katie.

Thanks, Weston. In the first quarter of this year, we highlighted emerging portfolio growth as a leading indicator for earnings growth, and we saw the momentum building in the pace of our origination. Today, it's clear that we've delivered. This quarter, we originated a record $4.7 billion of new loans, bringing us to $8.6 billion year to date, solidly on pace with our long-term upward trajectory. Our strong investment activity drove $3.8 billion of net portfolio growth for the year thus far, taking our portfolio to a record $22 billion. And as our deployment has increased, the earnings power of our business is accelerating. We generated distributable earnings of 63 cents per share in the third quarter, more than covering our longstanding dividends. Our performance this year is reflective of the core advantages that continue to differentiate BXMT. Deep, established relationships with the largest sponsors in the market mean that as they become more active, we have more opportunities to find our target investments. Low leverage versus mortgage loans on institutional assets. It's a virtuous cycle. The more we participate in the market, the more sponsors experience the advantages of borrowing from BXMT, the more activity we see going forward, further growing our pipeline. We're lending in 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, and knowledgeable approach that BXMT is known for all over the world. This quarter, we closed three loans with Brookfield on assets in New York, Spain, and across Europe, three with Morgan Stanley across multiple U.S. markets, and new transactions with Tishman Spire, Shorenstein, Rockpoint, and Northwood. all repeat borrowers many times over. And for first-time borrowers, their experience with us, both at the origination stage and over the life of the loan, often turns them into core repeat relationships. This quarter, we closed nine loans with borrowers that were new to us earlier this year, who are now making us their lender of choice as they ramp up activity. And our pipeline of compelling lending opportunities continues to build. Today, we have over $4 billion of additional loans closed or in closing post-quarter end, supporting continued portfolio growth as we look ahead. Given our productivity this year, post-COVID originations represented 31% of the portfolio at quarter end, overlaying a significant component of newer vintage originations atop our stable pre-COVID base. We continue to find strong credit opportunities in our tried-and-true sectors and markets, And within these areas, we've further accelerated activity in segments where we see the strongest growth in today's economy. Multifamily represented 54% of our third quarter origination. Market fundamentals in that sector continue to shine. Strong rental demand led to nationwide occupancy of 97% and year-over-year rent growth of over 10% in the third quarter. Sunbelt markets, where in-migration is driving rents and absorption across sectors, were nearly 40% of our originations this quarter. As a result of this robust activity, our multifamily investments have nearly doubled from 10% of the portfolio at the end of 2020 to 20% today. And our Sunbelt presence has increased from 19% to 25% over the same period. As always, we're sticking to our core credit principles, including never reaching for yield. Our originations this year have averaged 66% LTV, in line with our overall portfolio and our long-term strategy. Our new loans this quarter exemplify our disciplined credit criteria targeting low leverage loans to top quality assets and sponsors in strong markets. In July, we closed a $500 million 58% LTV loan to a premier global sponsor on a new construction apartment project in Brooklyn, part of the Affordable Housing New York program. Our unique access to information drove our investment thesis here and allowed us to act with confidence while others remained uncertain. We began underwriting the loan in February. when New York City was just emerging from the depths of COVID's second wave. Inventory was elevated and concessions were widespread. But with a portfolio of over 10,000 units in the city across our platform, we saw leading indicators of leasing activity reemerging, concessions beginning to inflect, and demand building. Ultimately, New York had its strongest summer of leasing in over a decade. Performance we saw reflected across our portfolio of city multifamily assets and which proved out our thesis on this high-quality lending opportunity. Multifamily has been a consistent area of expansion for us this year, as we continue to see strengthening fundamentals across the country. We closed 24 multifamily loans this quarter, $2.6 billion, including $600 million in Texas, $200 million in South Florida, and another $500 million elsewhere in the Sun Belt. And we continue to see a steady stream of compelling opportunities to lend on stable cash flowing assets with upside in today's rent growth environment. We've established a differentiated process for multifamily flow business where we provide certainty and ease of execution to active top quality borrowers and see them come back to us again and again. In a sector where transaction volumes are up 50% over 2019 levels, this efficiency matters. Our sponsors can focus on closing and executing their business plans knowing they'll have reliable, consistent performance on the financing side. Elsewhere in the portfolio, we continue to be focused on newer vintage, high-quality office, well-amenitized buildings that foster culture, talent retention, and ingenuity. These buildings are particularly appealing to tenants who are growing, like creative tech-based companies, content generators, life science firms, and they are outperforming in today's leasing markets. This quarter, we closed a $312 million loan on a portfolio of recently completed lead silver 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 themes. Our collateral assets are 84% leased on a long-term basis to an institutional rent role, including Google, ICF, and New Star, data-driven knowledge economy tenants who need a workplace environment that supports connectivity and innovation. Our asset selection over time continues to be validated by the performance of our portfolio. This quarter, we saw additional positive credit migration, building on the year-long trends. Occupancies of our collateral continue to rise across asset classes. For example, our New York City multifamily collateral assets are currently 88% occupied, up 30 points from one year ago. We counted over 1 million square feet of leasing in our office assets this quarter. and our hotel portfolio continues to improve, with the majority of our assets now covering debt service and several exceeding 2019 REVPAR levels. While we are mindful of broader economic impacts of inflation, for our portfolio, it translates to rent and NOI growth, further supporting the low basis and insulated credit position we have in our loans. The scale and growth of our portfolio allows us to continue the innovation and sophisticated execution that is the hallmark of our balance sheet strategy. We have consistently achieved best-in-class terms across both our corporate and asset-level financing, reflective of the quality of our track record, investments, and Blackstone management. Last month, we issued our first secured bond, a $400 million transaction that adds favorably priced and structured corporate capital to our already well-diversified balance sheet. Along with the debt capital raised this quarter, we also funded our growth with an equity issuance that was meaningfully accretive to book value per share. Over the last year, we have tapped the full array of corporate and asset-backed capital markets for our business. Term loan, bond, CLO, credit facility, and premium equity. And our ready access across these diverse sources ensures that we can be opportunistic with achieving the best structure and cost of capital for our company. Our performance this quarter and throughout the year continues to underscore the stability and strength of our business model. We are growing. capitalizing on the ever-expanding reach of the Blackstone real estate platform and generating strong lending opportunities in our highest conviction asset classes. Our portfolio is performing with excellent credit metrics and continued business plan progress. We're innovating with new sources of accretive capital. We are driving earnings growth, supporting the attractive cash dividend we have held consistent through the COVID period. And we see great prospects for continued momentum to come. And with that, I'll turn the call over to Tony.