Blackstone Mortgage Trust, Inc.

Welcome everyone to the Blackstone Mortgage Trust first quarter 2022 investor call. At this point, all participant lines are in listen-only mode. If you'd like to ask a question later, please press star one on your telephone. And with that, I would like to turn the call over now to Weston Tucker, head of shareholder relations. Please go ahead.

Great, thank you and good morning and welcome to Blackstone Mortgage Trust's first quarter conference call. I'm joined today by Katie Keenan, Chief Executive Officer, Austin Pena, Executive Vice President, Investments, Tony Marone, Chief Financial Officer, and Doug Armour, Executive Vice President, Capital Markets. I'd also like to introduce Tim Hayes, who recently joined the BXMT leadership team and will be working across a number of initiatives, including shareholder relations. This morning, we filed our 10-Q initiative 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 factor 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. For reconciliations, you should refer to the press release and our 10-Q. This audio cast is copyrighted material of Blackstone Mortgage Trust and may not be duplicated without our consent. For the first quarter, we reported gap net income per share at 59 cents, while distributable earnings were 62 cents per share. A few weeks ago, we paid a dividend of 62 cents per share with respect to the first 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. We had another strong quarter of investment activity, portfolio growth, credit, and earnings, further demonstrating the strength and resilience of our business model in a dynamic market environment. Perhaps more importantly, as we look ahead, BXMT is particularly well positioned to continue delivering for our investors. Today, we see four key advantages powering our company forward. First, we have a floating rate business. Put simply, higher interest rates mean we earn more on our loans. The magnitude of rate hikes widely expected this year creates a powerful tailwind for our earnings profile. Second, the credit of our portfolio is secure. With a portfolio of 65% LTV loans on institutional quality assets to many of the best sponsors in the business, our capital is well protected even if we experience a period of greater market headwinds. Third, our ability to generate investments is unparalleled. We believe we are entering a more opportunistic investing environment for lenders, and BXMT's deep global originations platform allows us to source attractive relative value investments around the world. And fourth, we have broad access to capital. Our fully scaled diversified balance sheet comprises a wide variety of asset level and corporate debt as well as premium equity. This gives us the consistent ability to efficiently tap the capital markets, enhance our balance sheet and deploy capital accretively. Starting with our floating rate model and portfolio. The investment environment over the last 12 months has been highly productive for our growing origination team. We closed $3.4 billion of new loans in the quarter, $16.2 billion over the last 12 months, driving 37% portfolio growth year over year to a record $25.6 billion. Through our strategic portfolio management, we have reoriented both the earnings profile and the collateral mix of our book. While LIBOR floors provided us with earning stability while rates were falling, they can dampen income growth in a rising rate environment. But with the majority of our portfolio originated in recent quarters when rates were lower than they are today, we have now reached our crossover point where any upward movement in short-term rates will positively impact our earnings and flow directly to the bottom line. As a result, earnings in our portfolio today would materially benefit from the rate hikes expected in the coming months. Moving to credit quality, we see positive fundamentals on the ground for high-quality real estate as far as occupancy, rents, and supply demands. But a rising rate environment naturally creates considerations for real estate valuations, especially for assets that are more fixed income in nature. As a low leverage lender, 65% LTV on average, our investments start from a position well insulated by substantial equity value. Moreover, our originations this quarter and indeed over the past 18 months reflect a strong bias toward markets and assets experiencing outsized growth and the ability to drive NOI increases that can outpace rising rates. Today, nearly half of our loans are collateralized by multifamily, hotels, parking, and self-storage, assets that are able to reprice their rents frequently and are therefore naturally well-hedged for inflation. And as a transitional lender, the majority of our remaining collateral is positioned to capture rent growth stemming from value-add strategies. For example, newly built office buildings, which are attracting an outsized portion of tenant demand and seeing increasing rent levels as a result. And the persistent impact of supply chain disruption and materials cost inflation has driven replacement costs up 10 to 30% or more in core real estate sectors, making new supply more challenging to build and supporting the value of our existing collateral. The credit performance of our portfolio this quarter reflects these positive real estate fundamentals, as well as the strength of our borrowers and our investment process. We continue to see 100% interest collections across the portfolio and positive credit migration. And we had 1.3 billion of repayments, 91% of which were in office and hotel, indicative of the progression of business plans and liquidity for our collateral in all property sectors. Third, on investment activity. The first quarter demonstrated our ongoing ability to source and execute on our brand of compelling low leverage lending opportunities in targeted sectors and markets. We closed 3.4 billion of new loans at a weighted average LTV of 65% in line with our broader portfolio, while achieving an average all in yield of 395 over, wider than recent levels, all while continuing to shift the focus of our origination activity toward our highest conviction themes. In line with recent quarters, Nearly half of our 1Q loans were in the Sun Belt, including $1 billion of multifamily in South Florida, Nevada, and Dallas, and $500 million of gross market office. We have also seen accelerating activity in the UK, with $850 million of loans closed this quarter. Because of our long-standing presence in the less efficient Western Europe and Australian markets, we are well-positioned to capture highly attractive relative value lending opportunities. For example, our UK loans this quarter averaged five points lower leverage and more than 50 basis points wider spread than our overall portfolio. And given the ongoing flight to quality across all asset classes, we made over $500 million of new construction loans on assets that will be best in class in their respective markets upon delivery. Looking forward, While broader capital markets volatility may moderate overall transaction volume, we see an attractive backdrop for our business, which was built for resilience and performance in all market conditions. Our position within Blackstone results in a constant information flow from over $500 billion of owned and financed real estate, allowing us to make well-informed, targeted investment decisions in a dynamic and fast-changing environment. And we have an expansive global sourcing platform, and more importantly, deep relationships with major borrowers around the world, which makes us a trusted partner, especially in periods of uncertainty. We see today the makings of a particularly attractive market dynamic for our brand of lending. There is significant accumulation of real estate fund capital in search of ways to earn a real return against rising inflation, $300 billion and growing. At the same time, CMBS and CLL market volatility have driven many smaller-scale lenders to the sidelines, rendered securitized executions less reliable, and created more demand for transitional debt capital. The overall result is a favorable competitive backdrop for scaled, well-capitalized platforms such as ours. This affords us the continued ability to be discerning on credit while capitalizing on the market trend pushing spreads wider. And we presently have $2.9 billion of loans closed or in closing post-quarter ends, a further indication of the attractive opportunity set for our business. Turning to our access to capital. The diversified nature of our fully scaled balance sheet is a critical ingredient to our success. We are an active issuer with well-established relationships across a wide range of capital markets executions. Bank facilities, syndications, CLOs, term loans, high yields, convertible notes, and equity. This allows us to be nimble and opportunistic with our balance sheet, tapping various sources of capital when we see strategic execution. Our balance sheet is match-funded and well-hedged against foreign currencies, and as a result, we are well-insulated against basis risk and changes in the yield curve. This high-integrity capital structure underpins the stability in our business, despite potential movements in rates, spreads, and transaction volumes. With an opportunistic lending environment before us, we expect to continue to strategically access our various funding sources to support the growth of our portfolio into the compelling lending opportunities we see ahead. In closing, the coming quarter should represent an exciting period for our business. We expect the robust earnings power of our $25 billion performing loan portfolio to accelerate as central banks around the world raise their benchmark rates. Our portfolio has a credit profile that is well insulated from volatility and well positioned to capitalize on growth. And our platform reach and dynamic balance sheet will continue to allow us to execute on attractive investment opportunities wherever they arise. Thank you, and I will now turn the call over to Tony.