5 unchanged sentences
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, 2024, substantially all 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.
−Removed: The following table projects the earnings impact on our interest income and expense, presented net of implied changes in incentive fees, for the twelve-month period following March 31, 2024 , 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 March 31, 2024 ($ in thousands):
+Added: As of June 30, 2024, all 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.
+Added: The following table projects the earnings impact on our interest income and expense, presented net of implied changes in incentive fees, for the twelve-month period following June 30, 2024 , 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, 2024 ($ in thousands):
Assets (Liabilities) Sensitive to Changes in Interest Rates (1)
−Removed: Interest Rate Sensitivity as of March 31, 2024 (2)(3)
+Added: Interest Rate Sensitivity as of June 30, 2024 (2)(3)
Increase in Rates Decrease in Rates
13 unchanged sentences
(5) Excludes $3.0 billion of floating rate impaired loans.
−Removed: (6) Excludes $742.6 million of non-consolidated senior interests and $335.3 million of loan participations sold, as of March 31, 2024.
+Added: (6) Excludes $725.4 million of non-consolidated senior interests and $100.6 million of loan participations sold, as of June 30, 2024.
Our non-consolidated senior interests and loan participations sold are structurally non-recourse and term-matched to the corresponding loans, and have no impact on our net floating rate exposure.
2 unchanged sentences
Investment Portfolio Value
−Removed: As of March 31, 2024, substantially all of our portfolio earned a floating rate of interest, so the value of such investments is generally not impacted by changes in market interest rates.
+Added: As of June 30, 2024, all of our portfolio earned a floating rate of interest, so the value of such 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.
2 unchanged sentences
In the case of a significant increase in interest rates, the cash flows of the collateral real estate assets may not be sufficient to pay debt service due under our loans, which may contribute to non-performance or, in severe cases, default.
−Removed: This risk is partially mitigated by our consideration of rising rate stress-testing during our underwriting process, which generally includes a requirement for our borrower to purchase an interest rate cap contract with an unaffiliated third party, provide an interest reserve deposit, and/or provide interest
−Removed: guarantees or other structural protections.
−Removed: As of March 31, 2024, 95% of our performing loans have interest rate caps, with a weighted-average strike price of 3.4%, or interest guarantees.
−Removed: During the three months ended March 31, 2024, interest rate caps on $4.2 billion of loans, with a 3.3% weighted-average strike price, expired and 95% were replaced with new interest rate caps, with a weighted-average strike price of 4.2%, or interest guarantees.
−Removed: Our loans are also subject to credit risk, including the risk of default.
−Removed: 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.
+Added: This risk is partially mitigated by our consideration of rising rate stress-testing during our underwriting process, which generally includes a requirement for our borrower to purchase an interest rate cap contract with an unaffiliated third party, provide an interest reserve deposit, and/or provide interest guarantees or other structural protections.
+Added: As of June 30, 2024, 95% of our performing loans have interest rate caps, with a
+Added: weighted-average strike price of 3.3%, or interest guarantees.
+Added: During the six months ended June 30, 2024, interest rate caps on $8.1 billion of performing loans, with a 3.4% weighted-average strike price, expired and 94% were replaced with new interest rate caps, with a weighted-average strike price of 3.5%, or interest guarantees.
+Added: Our loans are subject to credit risk, including the risk of default.
+Added: The performance and value of our loans depend upon the borrowers’ 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.
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.
3 unchanged sentences
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 weighted-average origination LTV was 63.4%, excluding any loans that are impaired and any junior participations sold, as of March 31, 2024.
+Added: Our loan portfolio’s low weighted-average origination LTV was 62.9%, excluding any loans that are impaired and any junior participations sold, as of June 30, 2024.
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.
−Removed: As of March 31, 2024, we had an aggregate $602.6 million asset-specific CECL reserve related to 17 of our loans receivable, with an aggregate amortized cost basis of $2.4 billion, net of cost-recovery proceeds.
−Removed: This CECL reserve was recorded based on our estimation of the fair value of each of the loan’s underlying collateral as of March 31, 2024.
+Added: As of June 30, 2024, we had an aggregate $759.4 million asset-specific CECL reserve related to 19 of our loans receivable, with an aggregate amortized cost basis of $2.9 billion, net of cost-recovery proceeds.
+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, 2024.
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.
1 unchanged sentence
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, 2024 have shown a mix of positive and challenging developments leading to continued volatility in global markets.
−Removed: Investor concerns over inflation, interest rates, slowing economic growth, political and regulatory uncertainty and geopolitical conditions have persisted.
−Removed: If inflation and other economic indicators do not meet central banks’ relevant expectations, interest rates could remain higher for longer than expected by market participants and observers, which could create further uncertainty for the economy and our borrowers.
Capital Market Risks
6 unchanged sentences
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
−Removed: various contractual arrangements.
+Added: This exposes us to the risk that these financial institutions may not fulfill their obligations to us under these 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, 2024.
+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, 2024.
The following table outlines our assets and liabilities that are denominated in a foreign currency (amounts in thousands):
−Removed: March 31, 2024
+Added: June 30, 2024
GBP EUR All Other (1)
5 unchanged sentences
$ 11,765 $ 9,450 $ 7,025
−Removed: (1) Represents the U.S.
−Removed: Dollar equivalent as of March 31, 2024.
(1) Includes Swedish Krona, Australian Dollar, Canadian Dollar, Swiss Franc, and Danish Krone currencies.
+Added: (2) Represents the U.S.
+Added: Dollar equivalent as of June 30, 2024.
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.