What changed in this filing

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Item 1. Business

2024-02-14 compared with 2023-02-08 · 55 added, 53 removed, 136 unchanged (44% of the section changed)

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Our portfolio is composed primarily of loans secured by high-quality, institutional assets in major markets, sponsored by experienced, well-capitalized real estate investment owners and operators.

These senior loans are capitalized by accessing a variety of financing options, including borrowing under our credit facilities, issuing CLOs or single-asset securitizations, and syndicating senior loan participations, depending on our view of the most prudent financing option available for each of our investments.

These senior loans are capitalized by accessing a variety of financing options, including borrowing under our credit facilities, issuing CLOs or single-asset securitizations, and corporate financing, depending on our view of the most prudent financing option available for each of our investments.

We are not in the business of buying or trading securities, and the only securities we own are the retained interests from our securitization financing transactions, which we have not financed.

We are externally managed by BXMT Advisors L.L.C., or our Manager, a subsidiary of Blackstone Inc., or Blackstone, and are a REIT, traded on the New York Stock Exchange, or NYSE, under the symbol “BXMT.” Our principal executive offices are located at 345 Park Avenue, 24th Floor, New York, New York 10154.

We were incorporated in Maryland in 1998, when we reorganized from a California common law business trust into a Maryland corporation.

We are externally managed by BXMT Advisors L.L.C., or our Manager, a subsidiary of Blackstone Inc., or Blackstone, and are a real estate investment trust, or REIT, traded on the New York Stock Exchange, or NYSE, under the symbol “BXMT.” Our principal executive offices are located at 345 Park Avenue, 24th Floor, New York, New York 10154.

We conduct our operations as a REIT for U.S.

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We operate our business as one segment, which originates and acquires commercial mortgage loans and related investments.

We are externally managed and advised by our Manager, which is responsible for administering our business activities, day-to-day operations, and providing us the services of our executive management team, investment team, and appropriate support personnel.

Our Manager is a part of Blackstone’s alternative asset management business, which is the world's largest alternative asset manager.

We are externally managed and advised by our Manager, which is responsible for administering our business activities, our day-to-day operations, and providing us the services of our executive management team, investment team, and other personnel.

Our Manager is a part of Blackstone, which is the world's largest alternative asset manager.

Blackstone's assets under management include investment vehicles focused on private equity, real estate, public debt and equity, infrastructure, life sciences, growth equity, opportunistic, non-investment grade credit, real assets and secondary funds, all on a global basis.

Through its different businesses, Blackstone had total assets under management of $974.7 billion as of December 31, 2022.

In connection with the performance of its duties, our Manager benefits from the resources, relationships, and expertise of the 787 professionals in Blackstone’s global real estate group.

Through its different businesses, Blackstone had total assets under management of over $1.0 trillion as of December 31, 2023.

Our Manager benefits from the resources, relationships, and expertise of the 782 professionals in Blackstone’s global real estate group.

Blackstone has built the world's preeminent global real estate business with $336.9 billion of investor capital under management as of December 31, 2023.

Kenneth Caplan and Kathleen McCarthy, who are the global co-heads of Blackstone’s real estate group, are members of our Manager’s investment committee.

Kathleen McCarthy and Nadeem Meghji, who are the global co-heads of Blackstone’s real estate group, are members of our Manager’s investment committee.

Kenneth Caplan, who is Blackstone’s co-chief investment officer overseeing business areas including real estate, is also a member of our Manager’s investment committee.

Blackstone Real Estate Debt Strategies, or BREDS, was launched in 2008 within Blackstone’s global real estate group to pursue opportunities relating to real estate debt investments globally, with a focus primarily on North America and Europe.

Michael Nash, the global chairman of BREDS, serves as the executive chairman of our board of directors and is a member of our Manager’s investment committee.

In addition, Jonathan Pollack, the global head of Structured Finance, which includes BREDS, and Tim Johnson, global head of BREDS, each serve as members of our Manager’s investment committee and Mr.

Pollack also serves as one of our directors.

Jonathan Pollack, the global head of Blackstone Real Estate Credit, which includes BREDS, is a member of our Manager’s investment committee and is a member of our board of directors.

Tim Johnson, the global head of BREDS, serves as the chairperson of our board of directors and is a member of our Manager’s investment committee.

Katharine Keenan, the global chief operating officer of Blackstone Real Estate Credit and a member of our Manager’s investment committee, serves as our chief executive officer and is a member of our board of directors.

In addition, Michael Nash, who served as chair of BREDS until his retirement from Blackstone and also served as the executive chairman of our board of directors until recently, remains a member of our board of directors.

As of December 31, 2023, 133 dedicated BREDS professionals, including 28 investment professionals based in London and Australia, managed $84.2 billion of investor capital.

Our chief executive officer, chief financial officer, and other officers are senior Blackstone real estate professionals.

None of our Manager, our executive officers, or other personnel supplied to us by our Manager is obligated to dedicate any specific amount of time to our business.

Our Manager is subject to the supervision and oversight of our board of directors

and has only such functions and authority as our board of directors delegates to it.

None of our Manager, our executive officers, or other personnel supplied to us by our Manager are obligated to dedicate any specific amount of time to our business.

Our Manager is subject to the supervision and oversight of our board of directors and has only such functions and authority as our board of directors delegates to it.

Pursuant to a management agreement between our Manager and us, or our Management Agreement, our Manager is entitled to receive a base management fee, an incentive fee, and expense reimbursements.

See Notes 14 and 19 to our consolidated financial statements and the information disclosed pursuant to Item 13 “Certain Relationships and Related Transactions, and Director Independence” in our definitive proxy statement with respect to our 2023 annual meeting of shareholders, which is incorporated by reference into this Annual Report on Form 10-K, for more detail on the terms of the Management Agreement.

See Notes 14 and 19 to our consolidated financial statements and the information required to be disclosed pursuant to Item 13 “Certain Relationships and Related Transactions, and Director Independence” in our definitive proxy statement with respect to our 2024 annual meeting of shareholders, which is incorporated by reference into this Annual Report on Form 10-K, for more detail on the terms of the Management Agreement.

Our Investment Strategy

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These investments may be in the form of whole loans, pari passu participations within mortgage loans, or other similar structures.

Although originating senior, floating rate mortgage loans is our primary area of focus, we may also originate and acquire fixed rate loans and subordinate loans, including subordinate mortgage interests and mezzanine loans.

Although originating senior, floating rate mortgage loans is our primary area of focus, we may also originate or acquire fixed rate loans and subordinate loans, including subordinate mortgage interests and mezzanine loans.

This focused lending strategy is designed to generate attractive current income while protecting investors’ capital.

During the year ended December 31, 2022, we originated or acquired $7.1 billion of loans.

Loan fundings during the year totaled $7.2 billion, with repayments of $3.7 billion, for net fundings of $3.4 billion.

The following table details overall statistics for our investment portfolio as of December 31, 2022 ($ in thousands):

During the year ended December 31, 2023, loan fundings totaled $1.6 billion, with loan repayments and sales of $3.8 billion, for net repayments of $2.2 billion.

The following table details overall statistics for our loan portfolio as of December 31, 2023 ($ in thousands):

Balance Sheet

Portfolio Loan

Number of investments 203 203

Number of loans 178 178

Principal balance $ 23,923,719 $ 24,971,028

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Origination loan to value (LTV) (5)

(1) In certain instances, we finance our loans through the non-recourse sale of a senior loan interest that is not included in our consolidated financial statements.

Total loan exposure encompasses the entire loan we originated and financed, including $1.6 billion of such non-consolidated senior interests that are not included in our balance sheet portfolio.

63.6 % 63.6 %

(1) Total loan exposure reflects our aggregate exposure to each loan investment.

As of December 31, 2023, total loan exposure, includes (i) loans with an outstanding principal balance of $23.9 billion that are included in our consolidated financial statements, (ii) $1.1 billion of non-consolidated senior interests in loans we have sold, which are not included in our consolidated financial statements, and excludes (iii) $100.9 million of junior loan interests that we have sold, but that remain included in our consolidated financial statements.

We have retained an aggregate $289.4 million of subordinate mezzanine loans, as of December 31, 2023, related to non-consolidated senior interests that are included in our balance sheet portfolio.

(2) Unfunded commitments will primarily be funded to finance our borrowers’ construction or development of real estate-related assets, capital improvements of existing assets, or lease-related expenditures.

These commitments will generally be funded over the term of each loan, subject in certain cases to an expiration date.

(3) The weighted-average cash coupon and all-in yield are expressed as a spread over the relevant floating benchmark rates, which include USD LIBOR, SOFR, SONIA, EURIBOR, and other indices as applicable to each investment.

As of December 31, 2022, substantially all of our loans by total loan exposure earned a floating rate of interest, primarily indexed to USD LIBOR and SOFR.

Excludes $381.2 million of unfunded loan commitments related to our non-consolidated senior interests, as these commitments will not require cash outlays from us.

(3) The weighted-average cash coupon and all-in yield are expressed as a spread over the relevant floating benchmark rates, which include SOFR, SONIA, EURIBOR, and other indices as applicable to each investment.

As of December 31, 2023, 99% of our loans by total loan exposure earned a floating rate of interest, primarily indexed to SOFR, and the remaining 1% of our loans earn a fixed rate of interest.

Floating rate exposure includes an interest rate swap we entered into with a notional amount of $229.9 million that effectively converts certain of our fixed rate loan exposure to floating rate exposure.

In addition to cash coupon, all-in yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees.

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As of December 31, 2023, 16% of our loans by total loan exposure were subject to yield maintenance or other prepayment restrictions and 84% were open to repayment by the borrower without penalty.

(5) Based on LTV as of the dates loans were originated or acquired by us.

(5) Based on LTV as of the dates loans were originated or acquired by us, excluding any junior participations sold.

The charts below detail the geographic distribution and types of properties securing our investment portfolio, as of December 31, 2023:

(1) States comprising less than 1% of total loan portfolio are excluded.

Geographic Diversification

(Net Loan Exposure) (1)(2)

Collateral Diversification

(Net Loan Exposure) (1)(3)

(1) Net loan exposure reflects the amount of each loan that is subject to risk of credit loss to us as of December 31, 2023, which is our total loan exposure net of (i) $1.1 billion of non-consolidated senior interests, (ii) $1.0 billion of asset-specific debt, (iii) $236.8 million of senior loan participations sold, (iv) $53.0 million of cost-recovery proceeds, and (v) our total loans receivable current expected credit loss, or CECL, reserve of $576.9 million.

Our non-consolidated senior interests, asset-specific debt, and loan participations sold are structurally non-recourse and term-matched to the corresponding collateral loans.

(2) States comprising less than 1% of net loan exposure are excluded.

(3) Assets with multiple components are proportioned into the relevant collateral types based on the allocated value of each collateral type.

For additional information regarding our loan portfolio as of December 31, 2023, see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – II.

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Financing Strategy

To maintain an adequate amount of available liquidity and execute our business plan, we look to a variety of sources.

To maintain an adequate amount of available liquidity and execute our business plan, we look to a variety of capital sources.

In addition to raising capital through public offerings of our equity and debt securities, our financing strategy includes secured debt, securitizations, and asset-specific financings, as well as corporate term loans, senior secured notes, and convertible notes.

In addition to our current mix of financing sources, we also may access additional forms of financings including resecuritizations and public and private, secured and unsecured debt issuances by us or our subsidiaries.

During the year ended December 31, 2022, we (i) borrowed an additional $825.0 million under our term loan facilities with an interest rate of SOFR plus 3.50% and maturity in 2029, (ii) issued $300.0 million aggregate principal amount of 5.50% convertible senior notes due 2027, and (iii) issued 2.3 million shares of our class A common stock, providing aggregate net proceeds of $70.7 million.

Additionally, during the year ended December 31, 2022, we (i) entered into two new secured credit facilities providing an aggregate $2.2 billion of credit capacity and (ii) increased the size of six existing secured credit facilities providing an aggregate $1.4 billion of additional credit capacity.

As of December 31, 2023, we had total liquidity of $1.7 billion with no corporate debt maturities until 2026.

During the year ended December 31, 2023, we (i) repaid the aggregate $220.0 million principal amount of our 4.75% convertible senior notes due 2023, (ii) repurchased an aggregate principal amount of $33.9 million of our 3.750% senior secured notes due 2027, or Senior Secured Notes, at a weighted-average price of 85%, resulting in a gain on

extinguishment of debt of $4.6 million, and (iii) repaid a net $1.2 billion under our portfolio financings, resulting in an aggregate $1.4 billion reduction in our portfolio and corporate financings during the year.

We also maintained the cost of our portfolio financings throughout the year, with a weighted-average spread of +1.89% on our $12.7 billion of secured debt, as of December 31, 2023, relative to +1.85% as of December 31, 2022.

The following table details our outstanding portfolio financing arrangements as of December 31, 2023 ($ in thousands):

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Securitizations 2,507,514

Asset-specific financings (1)

Asset-specific debt 1,004,097

Total portfolio financing $ 16,208,669

(1) Includes our asset-specific debt of $950.3 million, our loan participations sold of $224.7 million, and our non-consolidated senior interests of $1.6 billion, each as of December 31, 2022.

The loan participations sold and non-consolidated senior interests are non-debt financings that provide structural leverage for our whole loan investments.

The amount of leverage we employ for particular assets will depend upon our assessment of the credit, liquidity, price volatility, and other risks of those assets and the related financing structure, the availability of particular types of financing at the time, and the financial covenants under our credit facilities.

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Generally, our business model is such that rising interest rates will increase our net income, while declining interest rates will decrease net income.

As of December 31, 2022, 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.

As of December 31, 2023, 99% of our loans 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.

Refer to “Part I.

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These investment guidelines may be amended, restated, modified, supplemented or waived upon the approval of a majority of our board of directors, which must include a majority of the independent directors, without the approval of our stockholders.

We are engaged in a competitive business.

In our lending and investing activities, we compete for opportunities with a variety of institutional lenders and investors, including other REITs, specialty finance companies, public and private funds (including other funds managed by Blackstone and its affiliates), commercial and investment banks, commercial finance and insurance companies and other financial institutions.

Several other REITs and other investment vehicles have raised, or are expected to raise, significant amounts of capital, and may have investment objectives that overlap with ours, which may create additional competition for lending and investment opportunities.

Some competitors may have a lower cost of funds and access to funding sources, such as the U.S.

Government, that are not available to us.

Many of our competitors are not subject to the operating constraints associated with REIT compliance or maintenance of an exclusion from regulation under the Investment Company Act.

We could face increased competition from banks due to future legislative developments, such as amendments to key provisions of the Dodd-Frank Act, including provisions setting forth capital and risk retention requirements.

In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of loans and investments and offer more attractive pricing or other terms and establish more relationships than us.

Furthermore, competition for originations of and investments in assets we target may lead to decreasing yields, which may further limit our ability to generate targeted returns.

We operate in a competitive market for lending and investment opportunities, which may intensify.

In originating or acquiring our investments, we compete for opportunities with a variety of institutional lenders and investors, including other REITs, specialty finance companies, public and private funds, commercial and investment banks, commercial finance and insurance companies and other financial institutions (including investment vehicles managed by affiliates of Blackstone).

Some of our competitors have raised, and may in the future raise, significant amounts of capital, and may have investment objectives that overlap with ours, which may create additional competition for lending and investment opportunities.

Some competitors may have a lower cost of capital and access to funding sources that are not available to us, such as the U.S.

Many of our competitors are not subject to the operating constraints associated with REIT tax compliance or maintenance of an exclusion from regulation under the Investment Company Act.

In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of loans and investments, offer more attractive pricing or other terms, and establish more relationships than us.

Furthermore, competition for investments may lead to decreasing yields, which may further limit our ability to generate desired returns.

In the face of this competition, we have access to Blackstone’s professionals and their industry expertise and relationships, which we believe provide us with a competitive advantage and help us assess risks and determine appropriate pricing for potential investments.

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For additional information concerning these competitive risks, see Item 1A—“Risk Factors—Risks Related to Our Lending and Investment Activities.”

Environmental, Social and Governance

Environmental, Social and Governance (“ESG”)

We are committed to responsibly managing risk and preserving value for our shareholders.

We make capital allocation decisions with the environmental, social and governance (“ESG”) factors of our potential collateral and borrowers in mind, and incorporate diligence practices as part of our investment process to identify material ESG matters related to a given asset.

We strive to consider ESG factors relevant to our potential collateral and borrowers when making capital allocation decisions and incorporate ESG diligence practices as part of our investment process where applicable.

Our day-to-day operations are externally managed by our Manager, a subsidiary of Blackstone.

As such, many of the ESG initiatives undertaken by Blackstone impact or apply to us.

Key ESG initiatives we share with Blackstone include the consideration of ESG in the investment process, dedicated resources to ESG governance and oversight, industry engagement on ESG matters, corporate sustainability and environmental performance improvements at our office locations, and certain employee and community engagement and diversity, equity and inclusion (“DEI”) programs.

Human Capital

Key ESG initiatives we share with Blackstone include the consideration of ESG in the investment process where applicable, dedicated resources to ESG governance and oversight, industry engagement on ESG matters, corporate sustainability and environmental performance improvements at our office locations, and certain employee and community engagement and diversity, equity and inclusion programs.

Human Capital Management

We do not have any employees.

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The information on our website is not a part of, nor is it incorporated by reference into this report.

Through our website, we make available, free of charge, our annual proxy statement, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish them to, the Securities and Exchange Commission, or the SEC.

The SEC maintains a website that contains these reports at www.sec.gov .

Website Disclosure

We use our website (www.blackstonemortgagetrust.com) as a channel of distribution of company information.

The information we post through this channel may be deemed material.

Accordingly, investors should monitor this channel, in addition to following our press releases, SEC filings and public conference calls, and webcasts.

In addition, you may automatically receive email alerts and other information about Blackstone Mortgage Trust when you enroll your email address by visiting the “Contact Us & E-mail Alerts” section of our website at http://ir.blackstonemortgagetrust.com.

The contents of our website and any alerts are not, however, a part of this report.

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.

What changed 10-K

Item 1. Business