1 unchanged sentence
Interest Rate Risk
−Removed: Investment Portfolio Net Interest Income
−Removed: Generally, our business model is such that rising interest rates will increase our net income, while declining interest rates will decrease net income.
−Removed: As of March 31, 2023, substantially all of our investments by total loan exposure earned a floating rate of interest and were financed with liabilities that pay interest at floating rates, which resulted in an amount of net equity that is positively correlated to rising interest rates, subject to the impact of interest rate floors on certain of our floating rate loans.
For information on financial reference rate reforms, refer to “Part I.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Reference Rate Reform” of this report and “Part I.
−Removed: Risk Factors—Risks Related to Our Lending and Investment Activities—The recent and expected discontinuation of currently used financial reference rates and use of alternative replacement reference rates may adversely affect net interest income related to our loans and investments or otherwise adversely affect our results of operations, cash flows and the market value of our investments” of our Annual Report on Form 10-K filed with the SEC on February 8, 2023.
−Removed: The following table projects the earnings impact on our interest income and expense, net of incentive fees, for the twelve-month period following March 31, 2023 , of an increase in the various floating-rate indices referenced by our portfolio, assuming no change in credit spreads, portfolio composition, or asset performance, relative to the average indices during the year ended March 31, 2023 ($ in thousands):
+Added: Risk Factors—Risks Related to Our Lending and Investment Activities—The transition away from reference rates and use of alternative replacement reference rates may adversely affect net interest income related to our loans and investments or otherwise adversely affect our results of operations, cash flows and the market value of our investments” of our Annual Report on Form 10-K filed with the SEC on February 8, 2023.
+Added: Investment Portfolio Net Interest Income
+Added: Generally, our business model is such that rising interest rates will increase our net income, while declining interest rates will decrease net income.
+Added: As of June 30, 2023, substantially all of our investments by total loan exposure earned a floating rate of interest and were financed with liabilities that pay interest at floating rates, which resulted in an amount of net equity that is positively correlated to rising interest rates, subject to the impact of interest rate floors on certain of our floating rate loans.
+Added: In certain cases, we have financed fixed rate assets with floating rate liabilities, and have purchased interest rate swaps to effectively convert our net exposure to floating rate.
+Added: The following table projects the earnings impact on our interest income and expense, net of incentive fees, for the twelve-month period following June 30, 2023 , of an increase in the various floating-rate indices referenced by our portfolio, assuming no change in credit spreads, portfolio composition, or asset performance, relative to the average indices during the three months ended June 30, 2023 ($ in thousands):
Assets (Liabilities) Sensitive to Changes in Interest Rates (1)
−Removed: Interest Rate Sensitivity as of March 31, 2023 (2)
+Added: Interest Rate Sensitivity as of June 30, 2023 (2)
Increase in Rates Decrease in Rates
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Floating rate assets (3)(4)
+Added: $ 24,314,240 $ 93,449 $ 186,898 $ (93,449) $ (186,898)
Floating rate liabilities (4)(5)
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Refer to Note 14 to our consolidated financial statements for additional details of our incentive fee calculation.
−Removed: (3) Includes amounts outstanding under secured debt, securitizations, asset-specific financings, and term loans.
+Added: (3) Includes an interest rate swap with a notional amount of $229.9 million that effectively converts our fixed rate loan exposure to floating rate exposure.
+Added: (4) Net of $1.2 billion of non-consolidated senior interests and $236.3 million of loan participations sold, as of June 30, 2023.
+Added: Our non-consolidated senior interests and loan participations sold are structurally non-recourse and term-matched to the corresponding collateral loans, and have no impact on our net floating rate exposure.
+Added: (5) Includes amounts outstanding under secured debt, securitizations, asset-specific debt, and term loans.
Investment Portfolio Value
−Removed: As of March 31, 2023, substantially all of our portfolio earned a floating rate of interest, and so the value of our investments is generally not impacted by changes in market interest rates.
+Added: As of June 30, 2023, substantially all of our portfolio earned a floating rate of interest, and so the value of our investments is generally not impacted by changes in market interest rates.
Additionally, we generally hold all of our loans to maturity and so do not expect to realize gains or losses resulting from any mark to market valuation adjustments on our loan portfolio.
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The performance and value of our loans depend upon the sponsors’ ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us.
−Removed: To monitor this risk, our asset management team reviews our loan portfolios and, in certain
−Removed: instances, is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary.
−Removed: In addition, we are exposed to the risks generally associated with the commercial real estate market, including variances in occupancy rates, capitalization rates, absorption rates, and other macroeconomic factors beyond our control.
+Added: To monitor this risk, our asset management team reviews our loan portfolios and, in certain instances, is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary.
+Added: In addition, we are exposed to the risks generally associated with the commercial real estate market, including changes in occupancy rates, capitalization rates, absorption rates, and other macroeconomic factors beyond our control.
We seek to manage these risks through our underwriting and asset management processes.
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We believe that we benefit from these relationships and from our long-standing core business model of originating senior loans collateralized by large assets in major markets with experienced, well-capitalized institutional sponsors.
−Removed: Our loan portfolio’s low origination weighted-average LTV of 63.8% as of March 31, 2023 reflects significant equity value that we expect our sponsors will be motivated to protect through periods of cyclical disruption.
+Added: Our loan portfolio’s low origination weighted-average LTV of 63.9% as of June 30, 2023 reflects significant equity value that we expect our sponsors will be motivated to protect through periods of cyclical disruption.
While we believe the principal amounts of our loans are generally adequately protected by underlying collateral value, there is a risk that we will not realize the entire principal value of certain loans.
+Added: As of June 30, 2023, we had an aggregate $214.4 million asset-specific CECL reserve related to seven of our loans receivable, with an aggregate amortized cost basis of $1.1 billion.
+Added: This CECL reserve was recorded based on our estimation of the fair value of each of the loan’s underlying collateral as of June 30, 2023.
Our portfolio monitoring and asset management operations benefit from the deep knowledge, experience, and information advantages derived from our position as part of Blackstone’s real estate platform.
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The market-leading real estate expertise derived from the strength of the Blackstone platform deeply informs our credit and underwriting process, and we believe gives us the tools to expertly asset manage our portfolio and work with our borrowers throughout periods of economic stress and uncertainty.
−Removed: The three months ended March 31, 2023 have been characterized by continued volatility in global markets, driven by investor concerns over inflation, rising interest rates, slowing economic growth, and geopolitical uncertainty.
−Removed: Recent bank failures and consolidations, and other events affecting financial institutions, have also contributed to volatility in global markets and resulted in diminished liquidity and credit availability in the market broadly.
−Removed: The ongoing and potential future impacts of the war between Russia and Ukraine is also contributing to economic and geopolitical uncertainty.
+Added: The six months ended June 30, 2023 have been characterized by continued volatility in global markets, driven by investor concerns over inflation, rising interest rates, slowing economic growth, political and regulatory uncertainty and geopolitical conditions.
+Added: Recent events affecting financial institutions have also contributed to volatility in global markets and diminished liquidity and credit availability in the market broadly.
Continued inflation has prompted central banks to take monetary policy tightening actions, including raising interest rates, which has created further uncertainty for the economy and for our borrowers.
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The nature of our business requires us to hold our cash and cash equivalents and obtain financing from various financial institutions.
−Removed: This exposes us to the risk that these financial institutions may not fulfill their obligations to us under these various contractual arrangements.
+Added: This exposes us to the risk that these financial institutions may not fulfill their obligations to us under these
+Added: various contractual arrangements.
We mitigate this exposure by depositing our cash and cash equivalents and entering into financing agreements with high credit-quality institutions.
5 unchanged sentences
As a result, we substantially reduce our exposure to changes in portfolio value related to changes in foreign currency rates.
−Removed: In addition, substantially all of our net asset exposure to foreign currencies has been hedged with foreign currency forward contracts as of March 31, 2023.
+Added: In addition, substantially all of our net asset exposure to foreign currencies has been hedged with foreign currency forward contracts as of June 30, 2023.
The following table outlines our assets and liabilities that are denominated in a foreign currency (amounts in thousands):
−Removed: March 31, 2023
+Added: June 30, 2023
EUR GBP All Other (2)
6 unchanged sentences
(1) Represents the U.S.
−Removed: Dollar equivalent as of March 31, 2023.
−Removed: (2) Includes Swedish Krona, Australian Dollar, Canadian Dollar, Swiss Franc, and Danish Krone currencies.
+Added: Dollar equivalent as of June 30, 2023.
+Added: (2) Includes Swedish Krona, Australian Dollar, Swiss Franc, and Danish Krone currencies.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.