What changed in this filing

/stocks — the workspaceLOADING

Item 3. Quantitative and Qualitative Disclosures About Market Risk

2025-04-30 compared with 2024-10-23 · 102 added, 58 removed, 24 unchanged (87% of the section changed)

1 unchanged sentence

Interest Rate Risk

For information on financial reference rate reforms, refer to “Part I.

Risk Factors—Risks Related to Our Lending and Investment Activities—The transition away from reference rates and the 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 14, 2024.

Investment Portfolio Net Interest Income

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 September 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.

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 September 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 September 30, 2024 ($ in thousands):

Assets (Liabilities) Sensitive to Changes in Interest Rates (1)

Interest Rate Sensitivity as of September 30, 2024 (2)(3)

Increase in Rates Decrease in Rates

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 March 31, 2025 , substantially all of our loans by principal balance 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 changing interest rates, subject to the impact of interest rate floors on certain of our floating rate

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, 2025 , 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, 2025 ($ in thousands):

Assets (Liabilities)

Interest Rates (1)

Interest Rate Sensitivity as of March 31, 2025 (2)(3)

Increase in Rates

Decrease in Rates

50 Basis Points

100 Basis Points

50 Basis Points 100 Basis Points

50 Basis Points

100 Basis Points

Floating rate assets (4)(5)(6)

$ 18,389,554 $ 73,558 $ 147,116 $ (73,558) $ (146,922)

Floating rate liabilities (5)(7)

(16,578,711) (66,515) (133,030) 66,515 133,030

Net exposure $ 1,810,843 $ 7,043 $ 14,086 $ (7,043) $ (13,892)

(1) Reflects the USD equivalent value of floating rate assets and liabilities denominated in foreign currencies.

(2) Increases (decreases) in interest income and expense are presented net of incentive fees.

Refer to Note 15 to our consolidated financial statements for additional details of our incentive fee calculation.

(2) Increases (decreases) in interest income and expense are presented net of theoretical impact of incentive fees.

to Note 16 to our consolidated financial statements for additional details of our incentive fee calculation.

(3) Excludes income from loans accounted for under the cost-recovery method.

(4) 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.

(4) Excludes $1.5 billion of floating rate impaired loans.

(6) Excludes $770.2 million of non-consolidated senior interests and $103.5 million of loan participations sold, as of September 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.

(7) Our loan agreements generally require our borrowers to purchase interest rate caps, which mitigates our borrowers’ exposure to an increase in interest rates.

(8) Includes amounts outstanding under secured debt, securitizations, asset-specific debt, and Term Loans.

(5) Excludes $845.8 million of non-consolidated senior interests and $101.7 million of loan participations sold, as of

March 31, 2025 .

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.

(6) Our loan agreements generally require our borrowers to purchase interest rate caps, which mitigates our borrowers’

exposure to an increase in interest rates .

(7) Includes amounts outstanding under secured debt, securitizations, asset-specific debt, Term Loans, and the senior

secured notes due 2029, for which we entered into an interest rate swap with a notional amount of $450.0 million

that effectively converts our fixed rate exposure to floating rate exposure for such notes.

Investment Portfolio Value

As of September 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.

As of March 31, 2025 , substantially all of our loans by principal balance 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.

Risk of Non-Performance

In addition to the risks related to fluctuations in cash flows and asset values associated with movements in interest rates, there is also the risk of non-performance on floating rate assets.

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.

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.

As of September 30, 2024, 96% of our performing loans have interest rate caps,

with a weighted-average strike price of 3.5%, or interest guarantees.

During the nine months ended September 30, 2024, interest rate caps on $10.8 billion of performing loans, with a 3.4% weighted-average strike price, expired and 95% were replaced with new interest rate caps, with a weighted-average strike price of 3.4%, or interest guarantees.

In addition to the risks related to fluctuations in cash flows and asset values associated with movements in interest rates,

there is also the risk of non-performance on floating rate assets.

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.

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.

As of March 31, 2025 , 86% of our performing loans had interest rate caps, with a

weighted-average strike price of 3.5% , or interest guarantees.

During the three months ended March 31, 2025 , interest rate

caps on $2.6 billion of performing loans, with a 3.7% weighted-average strike price, expired and 100% were replaced with

new interest rate caps, with a weighted-average strike price of 3.8% , or interest guarantees.

Our loans are subject to credit risk, including the risk of default.

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.

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.

We maintain a robust asset management relationship with our borrowers and utilize these relationships to maximize the performance of our portfolio, including during periods of volatility.

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.

Our loan portfolio’s low weighted-average origination LTV was 62.8%, excluding any loans that are impaired and any junior participations sold, as of September 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.

As of September 30, 2024, we had an aggregate $883.6 million asset-specific CECL reserve related to 20 of our loans receivable, with an aggregate amortized cost basis of $3.2 billion, net of cost-recovery proceeds.

This CECL reserve was recorded based on our estimation of the fair value of each of the loan’s underlying collateral as of September 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.

Blackstone has built the world's preeminent global real estate business, with a proven track record of successfully navigating market cycles and emerging stronger through periods of volatility.

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.

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

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.

manage these risks through our underwriting and asset management processes.

We maintain a robust asset management relationship with our borrowers and utilize these relationships to maximize the

performance of our portfolio, including during periods of volatility.

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.

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.

As of March 31, 2025 , we had an aggregate $555.4 million asset-specific CECL reserve related to 13 of our

loans receivable, with an aggregate amortized cost basis of $1.5 billion , net of cost-recovery proceeds.

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, 2025 .

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.

Blackstone has built the world's

preeminent global real estate business, with a proven track record of successfully navigating market cycles and emerging

stronger through periods of volatility.

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.

Capital Market Risks

We are exposed to risks related to the equity capital markets, and our related ability to raise capital through the issuance of our class A common stock or other equity instruments.

We are also exposed to risks related to the debt capital markets, and our related ability to finance our business through borrowings under credit facilities or other debt instruments.

As a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore requires us to utilize debt or equity capital to finance our business.

We seek to mitigate these risks by monitoring the debt and equity capital markets to inform our decisions on the amount, timing, and terms of capital we raise.

Margin call provisions under our credit facilities do not permit valuation adjustments based on capital markets events, and are limited to collateral-specific credit marks generally determined on a commercially reasonable basis.

We are exposed to risks related to the equity capital markets, and our related ability to raise capital through the issuance of

our class A common stock or other equity instruments.

We are also exposed to risks related to the debt capital markets, and

our related ability to finance our business through borrowings under credit facilities or other debt instruments.

we are required to distribute a significant portion of our taxable income annually, which constrains our ability to

accumulate operating cash flow and therefore requires us to utilize debt or equity capital to finance our business.

to mitigate these risks by monitoring the debt and equity capital markets to inform our decisions on the amount, timing, and

terms of capital we raise.

Margin call provisions under our credit facilities do not permit valuation adjustments based on capital markets events, and

are limited to collateral-specific credit marks generally determined on a commercially reasonable basis.

Counterparty Risk

The nature of our business requires us to hold our cash and cash equivalents and obtain financing from various financial institutions.

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.

The nature of our loans also exposes us to the risk that our counterparties do not make required interest and principal payments on scheduled due dates.

We seek to manage this risk through a comprehensive credit analysis prior to making a loan and active monitoring of the asset portfolios that serve as our collateral, as further discussed above.

The nature of our business requires us to hold our cash and cash equivalents and obtain financing from various financial

institutions.

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.

The nature of our loans also exposes us to the risk that our counterparties do not make required interest and principal

payments on scheduled due dates.

We seek to manage this risk through a comprehensive credit analysis prior to making a

loan and active monitoring of the asset portfolios that serve as our collateral, as further discussed above.

Currency Risk

Our loans that are denominated in a foreign currency are also subject to risks related to fluctuations in currency rates.

We generally mitigate this exposure by matching the currency of our assets to the currency of the financing for our assets.

As a result, we substantially reduce our exposure to changes in portfolio value related to changes in foreign currency rates.

In addition, substantially all of our net asset exposure to foreign currencies has been hedged with foreign currency forward contracts as of September 30, 2024.

The following table outlines our assets and liabilities that are denominated in a foreign currency (amounts in thousands):

September 30, 2024

GBP EUR All Other (1)

generally mitigate this exposure by matching the currency of our assets to the currency of the financing for our assets.

result, we substantially reduce our exposure to changes in portfolio value related to changes in foreign currency rates.

addition, substantially all of our net asset exposure to foreign currencies has been hedged with foreign currency forward

contracts as of March 31, 2025 .

The following tables outline our assets and liabilities that are denominated in a foreign currency (amounts in thousands):

March 31, 2025

All Other (1)

Foreign currency assets

3 unchanged sentences

Net exposure to exchange rate fluctuations in USD (2)

$ 9,815 $ 9,488 $ 6,239

(1) Includes Swedish Krona, Australian Dollar, Canadian Dollar, Swiss Franc, and Danish Krone currencies.

(2) Represents the U.S.

Dollar equivalent as of September 30, 2024.

Dollar equivalent as of March 31, 2025 .

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-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk