Blackstone Mortgage Trust, Inc.

Good day, everyone, and welcome to the Blackstone Mortgage Trust Fourth Quarter 2021 Conference 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. There will be a Q&A session at the end, and if you could limit your questions to one question plus a follow-up, And then if you have any further questions, please rejoin the queue. I'd like to advise all parties that the conference is being recorded for replay purposes. And now I'd like to hand you over to your host for today, Weston. Please go ahead.

Terrific. Thanks, Leslie. And good morning, everyone, and welcome to Blackstone Mortgage Trust's fourth quarter conference call. I'm joined today by Mike Nash, Executive Chairman, Katie Keenan, Chief Executive Officer, Austin Pena, Executive Vice President, Investments, Tony Marone, Chief Financial Officer, and Doug Armour, Executive Vice President, Capital Markets. This morning, we filed our 10-K 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 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 and will also refer to certain non-GAAP measures on the call. And for reconciliations, you should refer to the press release and our 10-K. This audio cast is copyrighted material of Blackstone Mortgage Trust and may not be duplicated without our consent. For the fourth quarter, we reported GAAP net income per share of 76 cents, while distributable earnings were 78 cents per share. A few weeks ago, we paid a dividend of 62 cents per share with respect to the fourth quarter.

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 fourth quarter's outstanding results capped off a banner year for bxmt with record originations and portfolio growth translating into one of our best quarters of earnings ever we originated six billion dollars of new investments in the fourth quarter alone equivalent to a full year of production throughout much of our history for 2021 in total Originations reached a remarkable $14.6 billion, all while staying true to our rigorous credit standards and return requirements, and at the same time, positioning our portfolio to take advantage of our highest conviction investment themes. How did we do it? It's all about our platform. With $279 billion of real estate AUM, Blackstone is the largest real estate investor in the world, and our access to market information, relationships, and investment opportunities is truly unparalleled. We saw the clear benefits of these advantages in 2021, as regular way lending activity resumed following 2020's uncertainty. We drew upon our market insights to provide tailored lending solutions to many of the most active borrowers in the market. with whom we've built deep, long-standing relationships through over $100 billion of loans originated in the nearly 15-year history of the Blackstone real estate debt platform. The strongest endorsement of our approach is our repeat borrower business, which drove $11.5 billion of this year's originations. The strength of our platform enabled us to see recovery trends in real time, move with confidence early, and access unique opportunities in scale, while many others remained on the sidelines. The result was a meaningful expansion of our prime portfolio of low-leverage, well-structured loans to top sponsors, the hallmark of our business. The quality of our loans is a powerful driver of our track record and our long-term performance. But we also built this business to succeed in any rate environment, including the one we believe is coming. We make floating-rate loans. Over time, as rates move higher, we benefit. And with our disciplined focus on low leverage lending on real assets where cash flows can grow, the credit of our portfolio is at the same time highly resilient to the impact of rate increases and the inflation driving them. Moreover, in an inflationary environment, rising replacement costs heightens the barriers to entry for competitive new supply, making the collateral we lend against more valuable. Our $6 billion of investments this quarter echo the themes we've long focused on. High-quality assets with dynamic sources of demand, which have the pricing power to drive rent growth. Life Sciences, with a $362 million new-build asset in Berkeley, California. Multifamily, around the world, where we close $2.5 billion in loans for both new-build and stable cash-flowing assets in the U.S., Europe, and Australia. Modern, well-amenitized office, where we lent on new assets in Miami and Fort Lauderdale. And irreplaceable real estate, where we completed a $770 million refinancing of Industry City in Brooklyn, a one-of-a-kind mixed-use asset that leads the entire city in tenant demand, with 1.6 million square feet of leasing since COVID. Our ability to innovate and draw on our unique real estate and structured finance experience continues to drive differentiated opportunities. This quarter, we acquired a $400 million portfolio of loan participations from a commercial bank with whom we have a long-standing relationship. The bank has substantial experience in real estate lending and a conservative credit philosophy focused on high-quality sponsors that aligns well with our approach. But bank regulations are making commercial real estate loans comparatively less capital efficient, creating an incentive for many banks to reduce their exposure. We have deep experience structuring customized transactions with banks all over the world, and we worked cooperatively in this case to develop an innovative solution that was a win-win, adding a portfolio of bank-originated, well-performing loans to our balance sheet. We've also identified compelling investments in sometimes overlooked sectors, where we can make low-leverage loans on crossed, diversified pools of cash-flowing real estate at attractive relative returns. Asset classes like select service hotels, essential neighborhood retail, and transient travel-oriented parking are appealing to a growing universe of buyers searching for yields because of their stable cash flows, high margins, and ability to benefit from inflationary growth. This quarter, we found good relative value here at a well-protected basis, 57% LTV on average. And given the scale of these transactions and complexity of analysis required, we are well-positioned to capture them. In addition to our origination activity this quarter, we also saw a continuation of the year's healthy pace of repayments as our sponsors complete their business plans and find attractive executions for their assets. This quarter, we had $3.5 billion of repayments, including $2.3 billion of office loans. The overall US market saw $139 billion of office transactions this year, in line with the 2018-2019 average. demonstrating strong capital markets demand for the types of high-quality office assets we lend against. While the lingering effects of the pandemic exacerbate longer-term challenges for older vintage commodity office, we have long been focused on the segment of the office market most desired by tenants even pre-pandemic, newer, well-amenitized assets in dynamic locations that cater to growing knowledge economy businesses. These assets continue to be highly desired by users, who know that in-person interaction is a key ingredient in their innovation, as well as investors who recognize the long-term value of assets where demand is concentrating. A prime example of this dynamic in the fourth quarter was the repayment of our loan collateralized by Hudson Commons, a recently built trophy asset with excellent sponsorship in Manhattan's Hudson Yards. The West Side Submarket has led the city in absorption and rents both pre- and post-COVID. We made the loan in 2019, to finance the construction loan payoff and lease up of the building. Following take-up from users in tech, life sciences, and financial services, the asset was sold in December for over $1 billion, 43% above our loan basis, to a long-term pension fund investor. It's a similar story with another large repayment in Boston. Blackstone has been a dominant player in life sciences real estate for years, starting with the acquisition of BioMed in 2016 which grew into our more than $14 billion BPP life sciences business today. We have deep market knowledge that allows us to act with conviction on investments that address the burgeoning tenant demand we see for the right type of asset. And that's what happened in January of 2021, when a top sponsor identified the opportunity to buy an office building in a prime location in East Cambridge and convert it to life sciences use. Our team knew the building and the location, and we acted swiftly to provide our client certainty for their acquisition. With their deep local relationships and skillful execution, our sponsor was able to accomplish their business plan adeptly and well ahead of schedule, and sold the asset to a REIT for over $800 million in December, more than double our $325 million loan basis. With our significant origination activity and the continued flow of healthy repayments, The BXMT portfolio has turned over materially in the last year, and today reflects a younger vintage asset base, 46% originated this year, that is even more focused on our favored sectors and markets. Our multifamily exposure has more than doubled, with $6.1 billion of new loans in this sector in 2021, 42% of our total loans for the year. We continue to see attractive credit opportunities in Sunbelt markets, now our largest geographic exposure, and in newer, well-amenitized office, logistics, and resort hotels. We've been just as busy on the capital side of our business this year, where we continue to innovate and diversify our funding sources. We raised $5.9 billion of new debt this year across the corporate and asset-level markets, all well-priced and attractively structured. We completed a $1 billion CLO, added or repriced $623 million in several term loan transactions, and entered the high-yield bond market with a $400 million issuance in October that priced at 3.75% fixed for a five-year term, all attractive capital for a growing investment pipeline. We accessed the equity market as well, creating book value and allowing us to accretively fund our growth. And we continue to see strong interest in BXMT products of every type from banks and other financing sources as they look to expand their relationships with our franchise. The scale of our business and strength of our platform uniquely positions us to tap new sources of capital, break market barriers, and innovate products. The result is a best-in-class capital structure with superior scale, efficiency, and integrity. And with $1.3 billion of liquidity at year-end, we put ourselves on strong footing to capture the continued momentum of investment opportunities we see ahead, including $3.6 billion of new loans closed and in closing year-to-date. The growth in our portfolio drove strong earnings momentum over the course of the year. Our results this quarter contributed to annual distributable earnings of $2.62 per share, notching another year of strong dividend coverage, our seventh in a row. Our performing first mortgage portfolio continues to generate a highly attractive current income yield, which is positively correlated with rising rates. There is today over $300 billion of industry dry powder searching for real estate investments, creating a favorable backdrop for continued robust lending activity. And BXMT is the lender of choice to many of the largest real estate investors in the world. As we move into 2022, we remain exceptionally well positioned to deliver for our shareholders. I'll now turn the call over to Tony Marone, our CFO. Tony?