Q4 2021 Blackstone Mortgage Trust Inc Earnings Call

Speaker 1: Good day, everyone, and welcome to the Blackstone Mortgage Trust fourth quarter 2021 conference call, hosted by Weston Tucker, head of shareholder relations. My name is Lesley, and I'm the event manager. During the presentation, your lines will remain on listen only. And if you require assistance at any time, please keep star 0 on your telephone, and a coordinator will be happy to assist you.

Good day, everyone and welcome to the Blackstone mortgage trusts fourth quarter 2021 conference call hosted by Weston Tucker head of shareholder Relations. My name is Leslie and on the event manager during the presentation. Your lines will remain on listen only and if you require assistance at any time, please Keystone zero on your telephone.

And a coordinator will be happy to assist you.

Speaker 1: There will be a Q&A session at the end. And if you could limit your questions to one question plus a follow up. And then if you have any further questions, please rejoin the queue.

There will be a Q&A session at the end.

And if you could limit your questions to one question plus a follow up and then if you have any further questions. Please rejoin the queue I'd like to advise all parties at the conference is being recorded for replay purposes. I know, it's like how do you all go to your host for today Weston. Please go ahead.

Speaker 1: I'd like to advise all parties that the conference is being recorded for replay purposes and I'd like to hand you over to your host for today Weston, please go ahead.

Perfect. Thanks, Leslie and good morning, everyone and welcome to Blackstone mortgage Trust's fourth quarter Conference call I'm joined today by Mike Nash Executive Chairman, Katie Keenan, Chief Executive Officer, Austin, Pena Executive Vice President investments, Tony Marone, Chief Financial Officer, and Doug Armer Executive Vice President capital markets.

Speaker 2: Good morning everyone and welcome to Blackstone Mortgage Trust's fourth quarter conference call. I'm joined today by Mike Nash, Executive Chairman, Katie Keenan, Chief Executive Officer, Austin Pena, Executive Vice President, Investments, Tony Marone, Chief Financial Officer, and Doug Armour, Executive Vice President, Capital Markets. This morning we filed our 10-K and issued a press release for the presentation of our results which are available on our website and have been filed with the FCC.

This morning, we filed our 10-K and issued a press release with a presentation of our results which are available on our website and have been filed with the SEC.

Speaker 2: 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 factors section of our most recent 10K. We do not undertake any duty to update forward-looking statements and will also refer to certain non-GAAP measures on the call. And for reconciliations, you should refer to the press release and our 10K. This audio cast is copyrighted material of Blackstone Mortgage Trust and may not be duplicated without our consent.

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 a discussion of some of the risks that could affect results. Please see the risk factors section of our most recent 10-K.

We do not undertake any duty to update forward looking statements and we'll also refer to certain non-GAAP measures on the call and for reconciliations you should refer to the press release and our 10-K.

This audiocast is copyrighted material of Blackstone mortgage trust and may not be duplicated without our consent.

Speaker 2: For the fourth quarter, we reported gap net income per share of 76 cents, while distributable earnings were 78 cents per share. A few weeks ago, we paid a dividend of 62 cents per share with respect to the fourth 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. Fourth quarter's outstanding results capped off a banner year for BXMT, with record originations and portfolio growth translating into one of our best quarters of earnings ever.

For the fourth quarter, we reported GAAP net income per share of <unk> 76 cents.

While distributable earnings were <unk> 78 per share.

A few weeks ago, we paid a dividend of <unk> 62 per share with respect to the fourth quarter.

Have any questions. Following today's call. Please let me know and with that I'll now turn things over to Kate.

Thanks Weston.

Fourth quarter's outstanding results capped off a banner year for <unk> with record originations in portfolio growth translating into one of our best quarters of earnings ever.

Speaker 2: We originated $6 billion of new investments in the fourth quarter alone, equivalent to a full year of production throughout much of our history.

We originated $6 billion of new investments in the fourth quarter alone.

Equivalent to a full year of production throughout much of our history for.

Speaker 2: For 2021 in total, Originations reached a remarkable $14.6 billion, all while staying true to our rigorous credit standards and return requirements. And at the same time, positioning our portfolio to take advantage of our highest conviction investment theme.

For 2021 in total originations reached a remarkable $14 $6 billion, all while staying true to our rigorous credit standards and return requirements and at the same time positioning our portfolio to take advantage of our highest conviction investment theme.

How did we do it it's all about our platform with.

Speaker 2: How did we do it? It's all about our platform. With $279 billion of real estate AUM, Blackstone is the largest real estate investor in the world. And our access to market information, relationships, and investment opportunities is truly unparalleled.

With $279 billion of real estate AUM Blackstone as the largest real estate investor in the world and our access to market information relationships and investment opportunities is truly unparalleled.

Speaker 2: We saw the clear benefits of these advantages in 2021, as regular way lending activity resumed following 2020 is uncertain.

We saw the clear benefits of these advantages in 2020 , one as regular way lending activity resumed following 2020 as uncertainty.

Speaker 2: We drew upon our market insights to provide tailored lending solutions to many of the most active borrowers in the market, with whom we built deep, long standing relationships through over $100 billion of loans originated in the nearly 15 year history of the Blackstone real estate debt platform.

We drew upon our market insights to provide tailored lending solutions to many of the most active borrowers in the market.

With whom we felt deep long standing relationships through over $100 billion of loans originated in the nearly 15 year history of the Blackstone real estate debt platform.

Speaker 2: The strongest endorsement of our approach is our repeat far more business, which drove $11.5 billion of this year's origination.

The strongest endorsement of our approach is our repeat borrower business, which drove 11 $5 billion of this year's originations.

Speaker 2: The strengths of our platform enabled us to see recovery trends in real time, move with confidence early, and access unique opportunities and scale, while many others remained on the sidelines.

The strength of our platform enabled us to see recovery trends in real time move with confidence early and access to unique opportunities and scale, while many others remained on the sidelines.

Speaker 2: The result was a meaningful expansion of our prime portfolio of low leverage, well structured loans to top sponsors, the hallmark of our business.

The result was a meaningful expansion of our prime portfolio of low leverage well structured loans to top sponsors the hallmark of our business.

Speaker 2: The quality of our loans is a powerful driver of our track record and our long-term performance.

The quality of our loans is a powerful driver of our track record and our long term performance.

Speaker 2: But we also built this business to succeed in any rate environment, including the one we believe is coming.

But we also built this business to succeed in any rate environment, including the one we believe is coming.

Speaker 2: We make floating rate loans over time as rates move higher, we benefit. And with our discipline focus on low leverage lending, on real assets where cashless can grow, the credit of our portfolio is at the same time highly resilient to the impact of rate increases and the inflation driving.

We make floating rate loans over time as rates move higher we benefit and with our disciplined focus on low leverage lending on real assets were cashless can grow the credit of our portfolio is at the same time highly resilient to the impact of rate increases and the inflation driving them.

Speaker 2: Moreover, in an inflationary environment, rising replacement costs heightens the barriers to entry for competitive new supply, making the collateral we lend against more valuable.

Moreover, in an inflationary environment rising replacement costs heightens, the barriers to entry for competitive new supply, making the collateral we lend against more valuable.

Speaker 2: Our $6 billion of investments this quarter echoes the themes we've long focused on.

Our $6 billion of investments this quarter Echo the themes, we've long focused on.

Speaker 2: High quality assets with dynamic sources of demand, which have the pricing power to drive rent growth.

High quality assets with dynamic sources of demand, which have the pricing power to drive rent growth.

Speaker 2: Life Sciences, with a $362 million new build asset in Berkeley, California. Multi-family around the world, where we close $2.5 billion in loans for both new build and stable cash flowing assets in the US, Europe , and Australia.

Life Sciences, with a $362 million Newbuild asset in Berkeley, California.

Multifamily around the world, where we closed $2 5 billion in loans for both new build and stable cash flowing assets in the U S Europe and Australia.

Speaker 2: Modern, well-eminentized office where we lent on new assets in Miami and Fort Lauderdale.

Modern well, a monetized office, where we lent on new assets in Miami and Fort Lauderdale.

Speaker 2: And irreplaceable real estate, where we completed a $770 million refinancing of industry city in Brooklyn, a one of a kind mixed use asset that leads the entire city in tenant demand with 1.6 million square feet of leasing since COVID.

And irreplaceable real estate, where we completed a $770 million refinancing of industry City and Brooklyn, a one of a kind mixed use asset that leads the entire city and tenant demand with one 6 million square feet of leasing since COVID-19 .

Speaker 2: Our ability to innovate and draw on our unique real estate and structure finance experience continues to drive differentiated opportunities.

Our ability to innovate and draw on our unique real estate and structured finance experience continues to drive differentiated opportunities.

Speaker 2: This quarter, we acquired a $400 million portfolio of loan participation from a commercial bank with whom we have a long standing relations.

This quarter, we acquired a $400 million portfolio of loan participations from a commercial bank with whom we have a long standing relationship.

Speaker 2: The bank has substantial experience in real estate lending and a conservative credit philosophy focused on high-quality sponsors that aligns well with our approach.

The bank has substantial experience in real estate lending and a conservative credit philosophy focused on high quality sponsors that aligns well with our approach.

Speaker 2: But bank regulations are making commercial real estate loans comparatively less capital efficient, creating an incentive for many banks to reduce their exposure.

But bank regulations are making commercial real estate loans comparatively less capital efficient, creating an incentive for many banks to reduce their exposure.

Speaker 2: We have deep experience structuring customized transactions with banks all over the world. And we worked cooperatively in this case to develop an innovative solution that was a win-win, adding a portfolio of bank-originated, well-performing loans to our balance sheet.

We have deep experience structuring customized transactions with banks all over the world and we worked cooperatively in this case to develop an innovative solution that was a win win adding a portfolio of bank originated well performing loans to our balance sheet.

We've also identified compelling investments and sometimes overlooked sectors, where we can make low leverage loans on cross diversified pools of cash flowing real estate at attractive relative returns.

Speaker 2: We've also identified compelling investments in sometimes overlooked sectors, where we can make low-leverage loans on crossed, diversified pools of cash flowing real estate at attractive relative returns.

Speaker 2: Asset classes like Select Servet Hotels, Essential Neighborhood Retail, and Transant Travel Oriented Parking are appealing to a growing universe of buyers searching for yields because of their stable cash flows, high margins, and ability to benefit from inflationary growth.

Asset classes like select service hotels essential neighborhood retail and transient travel oriented parking are appealing to a growing universe of buyers searching for yield because of their stable cash flows high margins and ability to benefit from inflationary growth.

Speaker 2: This quarter, we found good relative value here at a well-protected basis, 57% LTV on average. And given the scale of these transactions and complexity of analysis required, we are well positioned to capture them.

This quarter, we found good relative value here at a well protected basis, 57% LTV on average and given the scale of these transactions and complexity of analysis required we are well positioned to capture them.

Speaker 2: In addition to our origination activity this quarter, we also saw a continuation of the year's healthy pace of repayments as our sponsors complete their business plans and find attractive executions for their us.

In addition to our origination activity. This quarter. We also saw a continuation of the year's healthy pace of repayments as our sponsors complete their business plans and find attractive executions for their assets.

Speaker 2: This quarter, we had $3.5 billion of repayments, including $2.3 billion of office loans.

This quarter, we had $3 $5 billion of repayments, including $2 $3 billion of office loan.

Speaker 2: The overall US market saw $139 billion of office transactions this year, in line with the 2018-2019 average, demonstrating strong capital markets demand for the types of high-quality office assets we lend again.

Overall U S market saw $139 billion of office transactions. This year in line with the 2018 2019 average demonstrating strong capital markets demand for the types of high quality office assets, we lend against.

Speaker 2: While the lingering effects of the pandemic exacerbate longer-term challenges for older vintage commodity office, we have long been focused on the segment of the office market most desired by tenants even pre-pandemic. Newer, well-emetitized assets in dynamic locations that cater to growing knowledge economy business.

While the lingering effects of the pandemic exacerbate longer term challenges for older vintage commodity office.

We have long been focused on the segment of the office market most desired by tenants even pre pandemic.

Well, a monetized assets in dynamic locations that cater to growing knowledge economy businesses.

Speaker 2: These assets continue to be highly desired by users who know that in-person interaction is a key ingredient in their innovation, as well as investors who recognize the long-term value of assets where demand is concentrated.

These assets continue to be highly desired by users who know that in person interaction is a key ingredient in their innovation as well as investors, who recognize the long term value of assets where demand is concentrated.

A prime example of this dynamic in the fourth quarter was the repayment of our loan collateralized by Hudson Commons, a recently built trophy asset with excellent sponsorship in Manhattan Hudson yards.

Speaker 2: A prime example of this dynamic in the fourth quarter was the repayment of our loan collateralized by Hudson Commons, a recently built trophy asset with excellent sponsorship in Manhattan's Hudson Yards.

Speaker 2: The Westside Submarket has led the city and absorption and rents both pre and post COVID. We made the loan in 2019 to finance the construction loan payoff and lease up of the building.

The West Submarket has led the city and absorption and rents both pre and post Covid we.

We made the loan in 2019 to finance the construction loan payoff and lease up of the building.

Speaker 2: Following take up from users in tech, life sciences and financial services, the asset was sold in December for over $1 billion, 43% above our loan basis, to a long-term pension fund investor. It's a similar story with another-

Following takeout from users in Tech life Sciences, and financial services. The asset was sold in December for over 1 billion, 43% above our loan basis to a long term pension fund investor.

It's a similar story with another large repayment in Boston.

Speaker 2: Blackstone has been a dominant player in life sciences real estate for years, starting with the acquisition of Biomed in 2016, which grew into our more than $14 billion BPP life sciences business today.

Blackstone has been a dominant player in life Sciences real estate for years, starting with the acquisition of Biomed in 2016, which grew into our more than $14 billion of <unk> life Sciences business today.

Speaker 3: We have deep market knowledge that allows us to act with conviction on investments that address the burgeoning tenant demand we see for the right type of that.

We have deep market knowledge that allows us to act with conviction on investments that address the burgeoning tenant demand we see for the right type of assets.

Speaker 3: And that's what happened in January of 2021. When a top sponsor identified the opportunity to buy an office building in a prime location in East Cambridge and convert it to life sciences use.

That's what happened in January of 2021, when a top sponsor identified the opportunity to buy an office building in a prime location in east, Cambridge and convert it to life Sciences youth.

Speaker 3: Our team knew the building and the location, and we acted swiftly to provide our client certainty for their acquisition.

Our team knew the building and the location and we acted swiftly to provide our clients certainty for their acquisition with.

Speaker 3: With their deep local relationships and skillful execution, our sponsor was able to accomplish their business plan adaptably and well ahead of schedule and sold the asset to a rate for over $800 million in December . More than double our $325 million loan base.

With their deep local relationships and skillful execution, our sponsor was able to accomplish their business plan adapt flea and well ahead of schedule and sold the asset to a REIT for over $800 million in December more than double our $325 million loan basis.

Speaker 3: With our significant origination activity and the continued flow of healthy repayments, the BXMT portfolio has turned over materially in the last year and today reflects a younger vintage asset base, 46% originated this year. That is even more focused on our favored sectors and markets.

With our significant origination activity and the continued flow of healthy repayments. The <unk> portfolio has turned over materially in the last year and today reflects a younger vintage asset base, 46% originated this year that is even more focused on our favorite sectors and markets are.

Speaker 3: Our multifamily exposure has more than doubled, with $6.1 billion of new loans in this sector in 2021, 42% of our total loans for the year.

Our multifamily exposure has more than doubled with $6 $1 billion of new loans in this sector in 2021, 42% of our total loans for the year.

Speaker 3: We continue to see attractive credit opportunities in Sunbelt markets, now our largest geographic exposure, and a newer, well-emmetitized office, logistics, and resort hotels.

We continue to see attractive credit opportunities in sunbelt markets now our largest geographic exposure and a newer well monetize office logistics and resort hotels.

Speaker 3: We've been just as busy on the Capitol side of our business this year, where we continue to innovate and diversify our funding sources.

We've been just as busy on the capital side of our business. This year, where we continue to innovate and diversify our funding sources.

Speaker 3: We raised $5.9 billion of new debt this year across the corporate and asset level markets, all well priced and attractively structured. Completed a one.

We raised $5 $9 billion of new debt SCR across the corporate and asset level markets.

All well priced and attractively structured.

Completed a $1 billion CLO.

Speaker 3: Added or reprised $623 million in several term loan transactions and entered the high yield bond market with a $400 million issuance in October that priced at 3.75% fixed for a five-year term. All attractive capital for a growing investment pipeline.

Added or repriced $623 million in several term loan transactions and entered the high yield bond market with a $400 million issuance in October that priced at 375% fixed for a five year term.

Our attractive capital for our growing investment pipeline.

Speaker 3: We access the equity market as well, creating book value and allowing us to accretively fund our growth. And we continue to see strong interest in the XMT products of every type from banks and other financing sources, as they love to expand their relationships with our franchise.

We accessed the equity market as well, creating book value and allowing us to Accretively fund our growth.

And we continue to see strong interest in <unk> products of every type from banks and other financing sources as they look to expand our relationships with our franchise.

Speaker 3: The scale of our business and strength of our platform uniquely positions us to tap new sources of capital, break market barriers and innovate products. The result is a best in class capital structure with superior scale efficiency and integrity.

The scale of our business and strength of our platform uniquely positions us to tap new sources of capital break market barriers and innovate products. The result is a best in class capital structure with superior scale efficiency and integrity.

Speaker 3: And with $1.3 billion of liquidity at your end, we put ourselves on strong footing to capture the continued momentum of investment opportunities we see ahead, including $3.6 billion of new loans closed and in closing year to day.

And with $1 3 billion of liquidity at year end, we put ourselves on strong footing to capture the continued momentum of investment opportunities. We see ahead, including $3 $6 billion of new loans closed and in closing year to date.

Speaker 3: The growth in our portfolio drove strong earnings momentum over the course of the year.

The growth in our portfolio drove strong earnings momentum over the course of the year.

Speaker 3: Our results this quarter contributed to annual distributable earnings of $2.62 per share, notching another year of strong dividend coverage, our seventh in a row.

Our results this quarter contributed to annual distributable earnings of $2 62 per share notching another year of strong dividend coverage, our seventh in a row.

Speaker 3: Our performing first mortgage portfolio continues to generate a highly attractive current income yield, which is positively correlated with rising rates.

Our performing first mortgage portfolio continues to generate a highly attractive current income yield which is positively correlated with rising rates.

Speaker 3: There is today over $300 billion of industry drive powder searching for real estate investments, creating a favorable backdrop for continued robust lending activities. And BXMT is the lender of choice to many of the largest real estate investors in the world.

There is today over $300 billion of industry dry powder are searching for real estate investments, creating a favorable backdrop for continued robust lending activity and <unk> as the lender of choice to many of the largest real estate investors in the world.

Speaker 3: As we move into 2022, we remain exceptionally well positioned to deliver for our shareholders. I'll now turn the call over to Tony Morone, RCFO. Tony? Thank you, Kay. And good morning, everyone. This quarter concludes your record year for BXMT.

As we move into 2022, we remain exceptionally well positioned to deliver for our shareholders.

I'll now turn the call over to Tony Marone, our CFO Tony.

Thank you Keith and good morning, everyone.

This quarter concludes a record year for <unk> with strong results across all of our key metrics.

Attributable earnings.

Speaker 4: $1.78 per share for the quarter. Brought full year earnings to $2.62 about six cents from 2020. And dividend coverage to $106.

<unk> 78 per share for the quarter brought full year earnings to $2 62.

Up six from 2020 and dividend coverage to 106%, reflecting the earnings power of our growing loan portfolio.

Our GAAP net income of 76 cents this quarter and $2 70 for the year nearly doubled 2020 levels reflects the impacts of about $40 million decrease in our seasonal reserve this year.

Speaker 4: Our gap net income of 76 cents is quarter and $2.70 for the year, nearly doubled 2020 levels. Reflect the impact of a $49 decrease in our CSO reserve.

Speaker 4: Our book value increased 80 cents this year at the $27.22

Our book value increased <unk> 80 cents this year to $27 22.

Speaker 4: driven by a combination of retainer and pre-stack offerings and the CESA Reserve.

Driven by a combination of retained earnings accretive stock offerings and the seasonal reserve reduction.

Speaker 4: One pack earnings a bit further. The 4Q DE of 78 cents per share reflects two particular items.

Will impact earnings a bit further the <unk> 78 per share reflects two particular items.

Speaker 4: First, we are in significant pre-payment income related to a certain loan repayment this quarter.

First we earned significant prepayment income related to a certain loan repayment this quarter, which effectively represents the accretion of the minimum amount of income we otherwise would've earned over the life of the loan into a single quarter as loan repaid early.

Speaker 4: effectively represents the accretion of the minimum amount of income we otherwise would have earned over the life of the loan and do a single quarter as the loan repeater.

Speaker 4: Repayment income is a normal part of our business, but with this transaction we saw a larger magnitude than it's typical of this quarter.

Prepayment income is a normal part of our business, but with this transaction we saw larger magnitude than is typical this quarter.

Speaker 4: separately, in connection with a 4-q modification of a loan that was impaired in 2020, we recognized the 7-cent reduction at DE, which had no impact on gap knitting.

Separately.

In connection with the <unk> modification of a loan that was impaired in 2020.

Recognize that <unk> reduction.

Which has no impact on GAAP net income due to the prior impairment.

Speaker 4: Including both of these items, our DE for the fourth quarter was 66 cents on a run rate basis.

Excluding both of these items <unk> for the fourth quarter was 66 cents on a run rate basis up from 63 and <unk>.

Speaker 4: Notably, our rapid pace of deployment and net $2 billion of 4Q portfolio growth absorb the $312 million in new capital we raised in September .

Notably our rapid pace of deployment and net $2 billion of <unk> portfolio growth absorbed the $312 million of new capital we raised in September .

Speaker 4: muting the typical earnings J curve and the core following equity

<unk> the typical earnings J curve in the quarter following the equity raise.

Speaker 4: Similarly, the 10 million shares we issued in November had only a slight impact on four Q results as they were only outstanding for a portion of the quarter.

Similarly.

The 10 million shares we issued in November , but only a slight impact on <unk> results as they were only outstanding for a portion of the quarter.

Speaker 4: We expect to see some modest impact on one QPS as this new capital is deployed into the $3.6 billion of new transactions.

We expect to see some modest impact on <unk>, because this new capital was deployed into the $3 6 billion of new transactions.

Yeah.

Speaker 4: We discussed one of the central features of BXMT's business that are focused on floating rate loans and the general positive correlation of our earnings.

You discussed one of the central features of <unk> business with a focus on floating rate loans and the general positive correlation of our earnings to interest rates.

Speaker 4: rates dropped precipitously in 2020. Our earnings did not follow because of the live-work floors embedded in many of our lives.

When rates dropped precipitously in 2020, our earnings did not follow because of the LIBOR floors embedded in many of our loans.

Speaker 4: Now what rates expect to derives, where happy report such for income has become substantially less

Now with rates expected to rise we're happy to report that such foreign income has become substantially less material to our earnings power.

Speaker 4: We enter 2021 with a weighted average floor of 82 basis points across our portfolio.

We enter 2021 with a weighted average floor of 82 basis points across our portfolio.

Speaker 4: But after $7.2 billion of loan repayments this year, and $14.6 billion of originations without the money floors, our weighted average floor is only 42 basis points as of

But after $7 $2 billion of loan repayments, this year and $14 $6 billion of originations without the money floors.

Our weighted average floor, only 42 basis points as of yearend and 73% of our loans carry a floor is at or below 25 basis points.

Speaker 4: 73% of our loans carry floors at or below 20.

Speaker 4: We expect this trend to continue in 2022 with incremental portfolio turnover. We will further position our business to benefit from anticipation rising interest rates.

We expect this trend to continue in 2022 with incremental portfolio turnover, which will further position our business to benefit from anticipated rising interest rates later this year.

Speaker 4: As we've grown originations, we continue to target consistent asset level returns with the yields of 3.7% for 2021 originations in line with

As we have grown originations, we continue to target consistent asset level returns with a yield of three 7% for 2021 originations in line with pre Covid 2019 levels.

Speaker 4: Similarly, our average origination LTV to 0.64% has also remained.

<unk>, our average origination LTV. This year, a 64% has also remained consistent.

Speaker 4: showing that as we have grown the side of our business, we would maintain our discipline focus on both return generation and conservator.

Showing that as we have grown the size of our business, we will maintain our disciplined focus on both return generation and conservative risk management.

Speaker 4: The subject of the credit, performance across our entire portfolio continues to be strong. For the weighted average, risk rating of 2.8 as of 1231, consistent with 3Q and improved slightly from 3.0 in 2020.

The subject of credit performance across our entire portfolio continues to be strong with a weighted average risk rating of two eight as of 12 31, consistent with <unk> and improved slightly from three point out in 2020.

Speaker 4: We saw 11 risk rating upgrades this quarter in 43 for the year with only 3 downgrade and no new watchless loans. The borrowers continued to execute pre-

We saw 11 risk rating upgrades this quarter 43 for the year with only three downgrades and no new watch list loans.

Our borrowers continue to execute pre COVID-19 business plans.

<unk> performance metrics continue to grow.

Speaker 4: Report fully credit performance is also reflected in our CSO reserve I mentioned earlier.

Our portfolio credit performance is also reflected in our <unk> reserve I mentioned earlier.

Speaker 4: Effectively flat quarter over quarter, but decreases year overall.

It will be flat quarter over quarter with decreases year overall.

Speaker 4: First share basis, a CESAR reserve is only 78 cents as of 1231, relative to $1.26 at the start. The first share basis, a CESAR reserve is only 78 cents as of 1231, relative to $1.26 at the start.

Per share basis.

<unk> reserves only 78 cents as of 12 31 relative to $1.26 at the start of the year.

Speaker 4: We can continue to innovate and expand our capital sources to enhance the growth of our business.

Eddie mentioned, we continue to innovate and expand our capital sources to finance the growth of our business.

Speaker 4: This year we added $5.9 billion of new financing capacity, including $3.7 billion of new credit facilities, a $1 billion CLO security.

This year, we added $5 $9 billion of new financing capacity, including $3 $7 billion of new credit facilities, a $1 billion CLO securitization and.

Speaker 4: $1 billion of financing across our corporate level term loans. It's secured.

At $1 billion of financing across our corporate level term loans and secured notes.

Speaker 4: We've also been successful in driving down our cost of capital as we continue to scale, increasing the net interest margin on our asset level financing, and reducing our corporate level financing cost.

We've also been successful in driving down our cost of capital as we continue to scale, increasing the net interest margin on our asset level financings and reducing our corporate level financing costs by 43 basis points.

Speaker 4: Our death to equity level remains conservative at 3.2 times in line with pre-COVID levels. We have $1.3 billion of liquidity at year-end providing ample room for continued growth within our current capital.

Our debt to equity level remains conservative at three two times in line with pre Covid levels, and we have $1 $3 billion of liquidity at year end, providing ample room for continued growth within our current capitalization.

Speaker 4: We're reflecting on this record year for originations, earnings, and portfolio growth. We're proud of the performance we have delivered our stockholders. We are focused on delivering continued, strong, reliable results.

Reflecting on this record year for originations earnings and portfolio growth. We are proud of the performance. We have delivered our stockholders and we are focused on delivering continued strong reliable results in the future.

Speaker 4: Thank you for your support and with that I will ask the operator to open the call.

Thank you for your support and with that I'll ask the operator to open the call to questions.

Speaker 1: Thank you and thank you everyone. Your question and answer session will now begin. If you wish to ask a question, it's just start then one on your telephone. If you can limit your questions to just one question plus a follow up. And then if you wish to ask any further questions, please read you in the queue.

Thank you and thank you everyone. Your question and answer session will now begin if you wish to ask a question. It's just star then one on your telephone if you could limit your questions to just one question plus a follow up and then if you wish to ask any further questions. Please rejoin the queue.

Speaker 1: And your first question comes from Rick Shawner from JP Morgan. You're live in the call Rick, please go ahead.

And your first question comes from Rick Sherlund from J P. Morgan you're live in the call. Rick. Please go ahead.

Speaker 2: Good morning, everybody. Thanks for taking my question. Two things. One is that when we back out the prepayment income, and it sounds like it was about five cents, what should we see as the run rate on interest income exiting the fourth quarter?

Good morning, everybody. Thanks for taking my question.

Two things one is that when we back out the prepayment income and it sounds like it was about five.

What should we see as the run rate on interest income exiting the fourth quarter.

Speaker 4: Sure, well, what we would focus on between mentions the run rate earnings of 60-3 cents overall, if that's 26 cents, which compares the 63 cents last quarter. And that's net of all the two one off items that I mentioned earlier.

Sure.

Well, we would focus on <unk> the run rate earnings of 63 overall.

<unk>, which compares to <unk> 63 last quarter and.

And Thats net of all the two one off items that I mentioned earlier.

Speaker 2: Got it. Okay. And second question, when we compare the interest rate sensitivity chart from the third quarter to the fourth quarter, there's been a very significant impact in your name compression related to a 50 basis point increase. And you guys have done a great job articulating that. I am curious. You basically shaped six cents a year of compression with the portfolio rotation.

Got it okay.

Second question, when we compare the interest rate sensitivity chart.

The third quarter to the fourth quarter.

There has been a very significant impact in your NIM compression related to a 50 basis point increase in you guys have done a great job articulating that.

I am curious.

We've shaved six cents a year of compression with the portfolio rotation.

Speaker 2: The chart goes out 25 and 50 basis points. Say what point does the portfolio become fully asset-tensitive again? Is it a Ryon 75 basis point?

The chart goes out, 25% and 50 basis points at what point.

Does the portfolio become fully asset sensitive again is it around 75 basis points.

Speaker 2: Rick, it's Doug. I'll take that one. Now, that chart to your point is a backward looking chart or point in time for year end. And I think it's important to think about it, you know, in the terms that you are, you know, with respect to the the prospective.

Hey, Rick its Doug I'll take that one.

That chart to your point is a backward looking charter a point in time for year end and I think it's important to think about it in the terms that you are with respect to the prospective.

Speaker 2: And, you know, we feel very good about our positioning on rates today. And that's really for three reasons. The first is the decrease in the proportion of floor income that in our portfolio that Tony referred to and that you've referred to. That's a function of the portfolio growth and turnover. And that trend will continue very significantly in 2022. It has continued very significantly in 2022. And so that's a big, you know, differentiator versus the 1231 number.

We feel very good about our positioning on rates today, and that's really for three reasons. The first is the decrease in the proportion of floor income that.

Our portfolio of that Tony referred to in that you've referred to.

And that's a function of the portfolio growth and turnover.

And that trend will continue very significantly in 2022. It has continued very significantly in 2022, and so that's a big differentiator versus the 12 31 number set.

Speaker 4: The second factor is the indirect life exposure we get from the FX hedging strategy in our non-US portfolio. And we've discussed that a little bit in the past.

The second factor is the indirect exposure, we get from the FX hedging strategy and our non U S portfolio and Rick we've discussed that a little bit in the past.

Speaker 5: And on the liability side, the fixed rate bond that we issued at the beginning of the fourth quarter also factors in.

And on the liability side, the fixed rate bond that we issued at the beginning of the fourth quarter also factors in and.

Speaker 5: And when you added all up, the impact of a prospective 25 basis point increase on earnings is essentially negligible, a fraction of a penny per share.

And when you add it all up the impact of a prospective 25 basis point increase on earnings is essentially negligible a fraction of a penny per <unk>.

For sure.

Sure.

Speaker 5: and a 50 basis point increase is modestly positive.

And a 50 basis point increases modestly positive.

Speaker 5: What's more exciting is looking a little further out on the curve and thinking about meaningfully higher rates to your point, Rick, in the second half of the year, when there would be a meaningfully better contribution to earnings from our floating rate loans. So we're at that crossover point, essentially now that you're referring to. And I think when we see 50 basis 0.75, a 100 basis point increases in LIBOR, we're going to see a much more meaningful, positive contribution to interesting come going forward. You know, stepping back and we're at that...

What's more exciting is looking a little further out on the curve and thinking about meaningfully higher rates to your point Rick in the second half of the year.

When there'll be a meaningfully better contribution to earnings from our floating rate loans. So were at that crossover point essentially now that youre, referring to and I think when when we see 50 basis points 75 basis points 100 basis point increases in LIBOR, we're going to see a much more meaningful positive contribution to interest income going forward.

Stepping back and we're as I said I think.

Speaker 5: Just to finish the thought, the library floor story really highlights how well hedged our business model is. When rates drop, our earning stayed steady. Now with the prospect of rates increasing, we're very well positioned to benefit from that. And I think that translates to a stable, consistent, high quality dividend and income from our shareholders. It's really unique to our business model in this.

Okay.

Just to finish the thought.

LIBOR floors story really highlights how well hedged our business model is when rates dropped our earnings stayed steady now with the prospect of rates, increasing we're very well positioned to benefit from that and I think that translates to a stable consistent high quality dividend and income from our shareholders, that's really unique to our.

Our business model in the space.

Speaker 2: Great, I'll be careful not to stick catch you off again. Thank you very much. I apologize for taking so much time, but hopefully it's a thank you.

Great I'll be careful not to cut you off again, thank you very much I apologize for taking so much time, but hopefully answers. Thank you.

Speaker 1: Thank you. Your next question comes from Don Thundetti from Wells Fargo. You're live in the call Don, please go ahead.

Thank you. Your next question comes from Don <unk> from Wells Fargo, You're live in the call. Don. Please go ahead.

Speaker 2: Great. Good morning, everyone. So Katie, I guess two questions. One, you know, the tenure yield continues to move up. We've had blockbuster performance in terms of asset sales and purchases in the market. Do you think that continues? And then second, there really on the competitive front, are you seeing any new funds, private funds formed or do you feel like as far as you can see, over the next year or so that the competitive window looks pretty good.

Oh, great and good morning, everyone. So just two questions. One the 10 year yield continues to move up we've had blockbuster performance in terms of asset sales and purchases in the market do you think that continues.

And then secondarily on the competitive front are you seeing any new funds private funds formed or do you feel like as far as you can see over the next year or so the competitive window looks pretty good.

Speaker 3: Thanks, Don. On your first question, I think I'll leave the rate prognostication to more macro people, but I think as Doug focused on, when we look at the rate picture for our business,

Thanks, Don on your first question I think I'll leave the rate Prognostication said more macro people, but I think as Doug focused on you know when we look at the rate picture for our business.

Speaker 3: You know, we think it sells a really positive dynamic for our floating rate lending portfolio.

It's a really positive dynamic for our floating rate lending portfolio.

Speaker 3: I think on your second question, you know, in the history of the business, there's certainly always been competitors, you know, new funds coming into the market, other businesses coming out of the market.

On your second question in the history of the business there certainly always been competitors new funds coming into the market at other businesses coming out of the market and what we've really seen year. After year is that the combination of the scale of our platform. So really incredible relationships, we have developed through repeat business with borrowers over the years.

Speaker 3: What we've really seen year after year is that the combination of the scale of our platform, the really incredible relationships we've developed through repeat business with borrowers over the years.

Speaker 3: And all the information that we have coming in here that allows us to stay ahead of the curve in terms of investment decisions, that has really translated through to very significant market share and competitive advantage on the origination side, really throughout sort of market cycles and throughout competitive dynamics in the industry. So we see no reason for that to change, even if new competitors come in, others leave. We think that the advantages we have as far as...

And all the information that we have coming in here that allows us to stay ahead of the curve in terms of investment decisions that has really translated through to a very significant market share and competitive advantage on the origination side really throughout market cycles and throughout competitive dynamics in the industry. So we see no reason.

For that to change, even if new competitors come in others leave we think that the advantages we have as far as the scale of the strength experience of our platform continues.

Speaker 3: The scale, the strength, experience of our platform continues.

Speaker 2: But just to clarify Katie, you know, rates moving higher, do you still feel good that you can generate significant asset growth this year or do you see a slow down because you have this big...

But just to clarify Casey.

You know rates moving higher do you still feel good that you can generate significant asset growth this year or do you see.

Slow down because you had this big pent up demand catch up.

Speaker 3: That's a great question. I think when our borrowers are borrowing from a floating rate lender, it's really as a result of the business plan of the assets that they're looking to execute. So typically our borrowers are executing some sort of value add or bi-fix it sell it strategy, which really is most appropriate for a floating rate product given the prepayment flexibility we offer, and also given all the salary benefits of being able to work with a lender that's thoughtful, that understands their business plan that can sort of reframe the loan over time if things go better than expected.

Yes, that's a great question I think when our borrowers are borrowing from floating rate lender. It's really as a result of the business plan of the assets that they are looking to execute so typically our borrowers are executing some sort of value add or buy it fix it solid strategy, which really is most appropriate.

Bret for a floating rate product given the prepayment flexibility we offer and also given all the ancillary benefits of being able to work with a lender that's thoughtful that understand their business plan that can sort of reframed alone over time, if things go better than expected I think between that and the significant amount of capital that's been raised as I mentioned in the script.

Speaker 3: I think between that and the significant amount of capital that's been raised, as I mentioned in the script, looking for a new real estate investment, I think we'll see continued transaction flow. And I think that should translate into continued demand for our types of loans.

Looking for a new real estate investments I think we'll see continued transaction flow and I think that should translate into continued demand for our types of loans.

Thank you.

Speaker 1: Thank you. Your next question comes from Doug Hartter from Credit Suisse. You're live in the call dog, please go ahead.

Thank you. Your next question comes from Doug Harter from Credit Suisse, You're live in the call. Doug. Please go ahead.

Speaker 6: Thanks. Katie, hoping you could talk about, you know, I guess how you think about sort of a portfolio.

Thanks.

Maybe hoping you could talk about I guess, how you think about sort of the full portfolio.

Speaker 6: The portfolio concentration that you have and whether that introduces any risks or kind of when those loans do season and the capital needs to be redeployed, how you get comfortable kind of with the opportunities that couple of years out in the future.

The portfolio concentration that you have and whether that introduces any risks or kind of when those loans do Susan.

The capital needs to be redeployed.

We're comfortable.

Kind of what's the opportunity set you know couple of years out into the future.

Speaker 3: Sure, I think the best answer to that question is really our track record over the years where we've grown the portfolio every year in the history of the business, 20% takeer over the last five years. And I think you can see from this year, our growth is accelerating, not leveling off. And that really speaks to.

Sure I think the best answer to that question is really our track record over the year, it's where we've grown the portfolio every year in the history of the business, 20% CAGR over the last five years and I think you can see from this year our growth is accelerating not leveling off and that really speaks to the large and I think.

Speaker 3: The large and I think growing addressable market, the growth of our overall platform and our origination team, and that translates to more and more touch points in more markets. Over the years, we have expanded geographies.

Growing addressable market the growth of our overall platform and our origination team and that translates to more and more touch points in more markets over the years. We have expanded geography is we've looked at more asset types. We've obviously built up a very large stable of.

Speaker 3: You know, we've looked at more acetypes. We've obviously built up a very large stable of, you know, repeat, very experienced and skillful borrowers.

Repeat very experienced and skillful borrowers and we continue to see more and more pipeline from that virtuous cycle that we have developed so we see a very large market that we have many touch points, then and I think that will translate to the consistent performance that <unk> seen over the years.

Speaker 3: And we continue to see more and more pipeline from that virtuous cycle that we've developed. So, you know, we see a very large market that, you know, we have many touch points in and I think that will translate to the consistent performance that you've seen over the years.

Speaker 5: I would just add that, you know, on the redeployment point that when there are significant prepayments or repayments, we tend to experience more prepayment income. And the fourth quarter was a great example of that. Our balance sheet is large. Our capitalization is as fairly flexible. And so we're able to manage those ebbs and flows in terms of our debt and equity producing, as Katie mentioned, you know, consistent earnings through those peaks and valleys in terms of deployment.

I would just add to that you know on the on the redeployment point that when there are significant prepayments or repayments, we tend to experience more prepayment income in the fourth quarter was a great example of that.

Our balance sheet is large cap.

<unk> is fairly flexible and so we're able to manage those ebbs and flows in terms of our debt and equity producing as Katie mentioned consistent earnings through those peaks and valleys in terms of deployment.

Speaker 6: Great, and thanks, Doug. To follow up on your point, Katie, are there other geography, or where do you think you are in terms of building out the different geographies and kind of getting up to scale? And those is that potential for, you know, for, you know, another acceleration.

Great. Thanks, Doug to follow up on on your point are there other geography, or where do you think you are in terms of building out the different geographies and kind of getting up to scale in those is that a potential firm for.

Another acceleration of the growth.

Speaker 3: Yeah, I think there continues to be more untapped markets out there for us. I mean, this year we made our first loan in Sweden. We made a large loan in Australia. We've been continued flow coming out of Australia.

Yeah, I think there continues to be more untapped markets out there for us I mean this year, we made our first loan in Sweden, and we made a large one in Australia, we see continued flow coming out of Australia and it's also the case in the U S. We've been much more active in growth markets. We've expanded the scope of the size of loans we are doing.

Speaker 3: And it's also the case in the US. We've been much more active in growth markets. We've expanded the scope of the size of loans we've done, particularly on the multi-family side. We've done a lot of work on making our processes efficient and invested very significantly in our team. So I think we just continue to find more complementary areas that we weren't...

Sit down and particularly on the multifamily side, we've done a lot of work on making our processes assertion and invested very significantly in our team. So I think we just continue to find more complementary areas that we werent, perhaps investing in five years ago that are just driving more growth.

Speaker 3: perhaps investing in five years ago that are just driving more growth.

Great. Thank you.

Speaker 1: Thank you. Your next question comes from Tim Hayes from BTIG. Your live in the call Tim, please go ahead.

Thank you. Your next question comes from Tim Hayes from BT Gee, you're live in the call. Tim. Please go ahead.

Speaker 2: Hey, good morning guys. Congrats on a nice wrap to a solid year. Just a follow up on Doug last question. I mean, at the...

Hey, good morning, guys. Congrats on a nice wrapped a solid year.

Just a follow up on Doug's last question.

Speaker 2: Parents company are the broader Blackstone platform. You know, you guys have made a lot of investments on the equity side.

The parent company or the broader Blackstone platform you guys have made a lot of investments on the equity side.

Speaker 2: and REZI platforms with the Blue Rock acquisition, getting deeper and rent to own, and then also, I'm not even gonna scratch the surface of everything you guys have done, but extended stay, and then industrial portfolio acquisitions and BRE. I guess my question is, these are asset classes that typically have not been the major concentrations at the BXMT loan portfolio level, and I'm curious if they create opportunities for you

Rajiv platforms with the Blue Rock acquisition.

Getting deeper and rent to own and then also I'm not even scratched the surface and everything is done but extended stay in an industrial portfolio acquisition to be re I guess my question is these are asset classes that typically have not been the major concentrations at the <unk> loan portfolio level.

And I'm curious if they create opportunities for you to get.

Speaker 2: lending opportunities in the years ahead as you kind of grow deeper there on the equity side as well.

Lending opportunities in the years ahead, as you kind of grow deeper there on the equity side as well.

Speaker 3: Yes, I think you really put your finger on it. It is exactly the case that as our platform across the real estate, business, and all of those new partnerships, all of those touch points we have in the market, we really see that translate through to new relationships that we can bring our capital to. We've stopped seeing that very significantly in the multifamily side this year.

Yes, I think you really put your finger on it it is exactly the case that as our platform across our real estate business expand all of those new partnerships.

All of those touch points, we have in the market, we really see that translate through to new relationships that we can bring our capital to you we've seen that very significantly in the multifamily side. This year when our equity side of the business. That's always been a very significant player in multifamily, but continues to expand and all the new partners and sellers and buyers that theyre worth.

Speaker 3: when our equity side of the business has always been a very significant player and multi-family, but continues to expand. And all the new partners and sellers and buyers that they're working with, we have the opportunity to talk to them and bring the same level of high integrity, really good way of doing business that we have throughout the Blackstone platform to them on the lending side. And that really creates this very powerful network effect that I think you see across the Blackstone business. We're giving you an intelligence of every division in Blackstone which even says that the crash of war is not only efforts to receive all new land but money ???. But this definitely is an Omological project. We're giving you an intelligence of every division in Blackstone which even says that the crash of war is not only efforts to receive all new land but money ???.

With <unk>, we have the opportunity to talk to them and bring the same level of high integrity.

Really good way of doing business that we have throughout the Blackstone platform to them on the lending side and that really creates a very powerful network effect that I think you'll see across the Blackstone business, but certainly as well in our business and our real estate platform, where we just have such an expansive reach over the players in the real estate market that just.

Speaker 3: But certainly as well in our business and the real estate platform where we just have such an expansive reach.

Speaker 3: over the players in the real estate market that just continues to expand every year with the growth of our overall real estate business.

To expand every year with the growth of our overall real estate business.

Yeah.

Speaker 2: Right, yeah, definitely makes sense. And then just to follow up on the capital structure, just curious how you see that evolving over the course of the year. You seem to have a really solid liquidity position. Leverage seems appropriate for essentially fully senior loan portfolio. So curious, I know you have an upcoming maturity this year. Sounds like you're doing some A-note sales, which is.

Alright, yes definitely makes sense.

And then just a follow up on the capital structure, just curious how you see that evolving over the course of the year you seem to have a really solid liquidity position.

Leverage seems appropriate for.

Essentially fully senior loan portfolio. So curious.

I know you have an upcoming maturity this year.

It sounds like Youre doing some <unk> sales, which is.

Speaker 4: Pretty nothing out of the ordinary for you guys and the CRE CLO market remains really hot. So a lot of options that you're disposal, just curious how you see the capital structure evolving with all that minded and expectations for future growth.

Nothing out of the ordinary for you guys in the CRE CLO market remains really hot so a lot of options at your disposal. Just curious how you see the capital structure evolving with all that in mind and expectations for future growth.

Okay.

Speaker 5: Hey, Tim, it's Doug. I'll take that one. I think again, you sort of put your finger on it. Yeah, I think we expect to continue diversifying our balance sheet accessing opportunistically different sources of capital, both at the asset level and at the corporate finance level.

Hey, Tim it's Doug I'll take that one.

I think again, you sort of put your finger on it.

I think we expect to continue diversifying our balance sheet accessing opportunistically different sources of capital both at the asset level and at the corporate finance level.

Speaker 5: The the the COO market, you know, is an important part of our capital structure. And, you know, we expect to be an issue where they're we in terms of new horizons that, you know, we expect to address the European market in terms of securitized debt.

The CLO market is an important part of our capital structure.

And we expect to be an issue where they are we in terms of new horizons that we expect to address the European market in terms of securitized debt.

Speaker 5: I think that we're also, as you mentioned, increasing the amount of syndication that we do. So across syndication, securitization and our bilateral credit facilities, I think we'll continue to be very active in capitalizing future growth in the portfolio. And we've got a whole bunch of different options on the corporate finance side as well. In the fourth quarter, you saw us enter the high yield market. We've got convertible notes outstanding.

I think that we're also as you mentioned.

Increasing the amount of syndication that we do so across syndication securitization and our bilateral credit facilities I think will continue to be very active in capitalizing future growth in the portfolio.

Got a whole bunch of different options on the corporate finance side as well in the fourth quarter you saw us enter the high yield market.

Obviously, we've got convertible notes outstanding.

Speaker 5: the term loan has been the term loan market has been important to us. And obviously we've been active issuers on the equity side as well. So it really runs again.

<unk> loan has been the term loan market has been important to us and obviously, we've been to act as issuers on the equity side as well so it really runs the gamut.

Speaker 5: and we're going to remain opportunistic and focused on the integrity of the balance sheet and focused on efficiency in terms of cost of capital going forward.

And we're going to remain opportunistic.

<unk> focused on the integrity of their balance sheet and focus on efficiency in terms of cost of capital going forward.

Speaker 2: Yes, thanks Doug, that's helpful. And if I can maybe just kind of part B to that question is just more pointed on leverage. 3.2 times thing that deck to equity, how should we think about leverage going forward? Should we look at it more on kind of a total leverage basis or on a recourse leverage basis if you work to kind of do more syndication and CRI, CLO and how do you balance that relationship?

Yes, Thanks, Doug that's helpful and if I could maybe just kind of part b to that question is just more pointed on leverage.

232 times and net debt to equity how.

How should we think about leverage going forward.

Should we look at it more on kind of a total leverage basis or on a recourse leverage basis. If you were to kind of do more syndication and CRE CLO and how do you balance that relationship.

Speaker 5: I would think about it in terms of debt to equity more than in terms of total leverage. When you look at our existing capital structure and the 3.2 times debt to equity ratio, we can see room for in that existing capitalization and other three to five billion dollars of portfolio growth before we would...

I would think about it in terms of debt to equity more than in terms of total leverage when you look at our existing capital structure and the $3 two times debt to equity ratio.

We can see room for in that existing capitalization, another $3 billion to $5 billion of portfolio.

Portfolio growth before we would.

Speaker 5: be constrained in terms of the amount of debt on the balance sheet and the capacity available to us.

No.

Be constrained in terms of the amount of <unk>.

Debt on the balance sheet and the capacity available to us.

Speaker 5: And so, I think what you saw in 2021 is more of what you'll see in 2022, where we'll fluctuate between three and 3.5 times potentially higher, potentially a little bit lower as we move around the different capital markets executions. But I think you'll see a lot more going forward of what you've seen in the recent past in terms of managing that debt equity ratio.

And so I think what you saw in 2021 is more of what Youll see in 2022, where we will fluctuate between three and three five times potentially higher potentially a little bit lower as we.

Move around the different capital markets executions, but I think you'll see a lot more going forward.

What you've seen in the in the recent past in terms of managing that debt to equity ratio.

Yeah.

Got it well thanks again for taking my questions. This morning.

Speaker 1: Thank you and your next question comes from Jade Romani from KBW. You're live in the core Jade, please go ahead.

Thank you and your next question comes from Jade Rahmani from K B W. You're live in the call Jade. Please go ahead.

Speaker 7: Thank you very much. With the material increase in pace of origination, could you talk to first what you think the main drivers are of the surge? It's not just evidence by BXMT, but others such as Starward have also announced a surge in originations. What we do today is driving that growth.

Thank you very much with the material increase in the pace of origination could you talk to what you think the main drivers are of the search.

Not just evidenced by the S&P, but others such as Starwood have also announced a surge in originations what would you say is driving that growth.

Speaker 3: Thanks, Jade. You know, I think the sort of first order driver is really just the overall growth in transaction activity across the market, you know, 2021 versus 2019.

Thanks, Chad.

I think the sort of first order driver, it's really just the overall growth in transaction activity across the market 2021 versus 2019 total transactions were 35% higher this year and some of the more favorite sectors multifamily, 74% higher than 2019 level. So certainly seeing a very significant uptick.

Overall transactions I think the second order for that it's really just driven by what real estate investors see as the macro picture right. When you combine the potential for growth a little bit of inflation and overall positive macro outlook with the reopening trends in demand coming back into the real estate market I think.

Speaker 3: I think the second order for that is really just driven by what real estate investors see as the macro picture. When you combine the potential for growth, a little bit of inflation, an overall positive macro outlook with the reopening trends and demand coming back into the real estate market, I think the large real estate investors out there are really just seeing this as an opportune time to buy into the market and real estate historically has been a very good a place to be in a potentially inflationary environment from a hedge perspective. So I think the combination of just positive macro fundamentals with the reopening, the rates picture and significant capital flowing into the space searching for yield, I think that's what's really driving those transaction volumes. And I think, you know, as well as many of them in the...

The large real estate investors out there are really just seeing this as an opportune time to buy into the market and real estate historically has been a very good place to be.

In a potentially inflationary environment from a hedge perspective, so I think the combination of just positive macro fundamentals with the reopening the rates picture and significant capital flowing into the space searching for yield I think that's what's really driving those transaction volumes and I think you know.

Speaker 3: the rates picture and significant capital flowing into the space, searching for yield. I think that's what's really driving those transaction volumes. And I think, as well as many of them in the space, have been able to see very good activity, very good maintenance of market share, continued activity from all the borrowers we work with, which has driven a lot of the trends.

As well as many of them in the space have been able to see very good activity very good maintenance of market share continued activity from all of the borrowers we work with which has driven a lot of the trends.

Speaker 7: Thank you very much. Secondly, it would be on credit. You know, wondering what your thoughts are on that. It seems like...

Thank you very much secondly.

Secondly would be on credit.

Wondering what your thoughts are on that it seems like.

Speaker 7: COVID was, you know, the cyclical pattern that folks had been anticipating and we didn't really see much in the way of credit hiccups, probably largely related to the amount of government support and then all the pen-up demand that caused things to come surging back. What would be your outlook now and how would you compare the credit quality on this surge in origination verse perhaps the prior v-

<unk> was the cyclical pattern that folks had been anticipating and we didn't really see much in the way of credit hiccups, probably largely related to the amount of government support and then all the pent up demand that caused things to come surging back what would be your outlook now and how would you compare the credit quality.

<unk>.

Serge and origination.

Versus perhaps the prior vintage.

Speaker 3: Sure, so, you know, I think that the credit performance of our portfolio over COVID really was a very significant validation of our brand of ballot sheet lending. So, you know, certainly the government intervention helped, but I think that when you look at our credit performance and our business.

Sure. So I think that the credit performance of our portfolio over Covid really was a very significant validation of our brand our balance sheet lending. So certainly the government interventions helps but I think that when you look at our credit performance in our business.

Speaker 3: you know, very strong and I think testament to the low leverage lending, the strong well capitalized sponsors with long-term time horizons. And really just the quality of our assets and the equity support that we have in them. And that all translated through to as your point, you know, a very strong credit performance through the period of COVID for our Balochie portfolio.

Strong and I think testament to the low leverage lending the strong well capitalized sponsors with long term time horizon and really just the quality of our assets and the equity support that we have in them and that all translated through to as your point.

A very strong credit performance through the period of Covid for our balance sheet portfolio I think as we look at the credit profile of the loans. We've been doing this year, we see really strong characteristics in that portfolio as Tony mentioned, our LTV of 64% has remained extremely stable really through the <unk>.

Speaker 3: I think as we look at the credit profile of the loans we've been doing this year, you know, we see really strong characteristics in that portfolio. As Tony mentioned, our LTV, 64% has rebained extremely stable, you know, really through the history of the business. And we've been doing a lot more lending into multi-family, into Sunbelt Market, into areas where we're seeing a lot of growth. So...

History of the business and we've been doing a lot more lending into multifamily into sunbelt markets into areas, where we're seeing a lot of growth. So you know I think the credit performance will remain consistent which is to the case that it's been very strong and can't get much stronger than its been but I think that as we look at the growth in originations, we really see continue.

Speaker 3: You know, I think the credit performance will remain consistent, which is to the case that it's been very strong. You can't get much stronger than it's been. But I think that as we look at the growth and originations, you know, we really see continued low leverage lending great borrowers, markets where we're seeing positive, fundamental sectors that we see as winners. And, you know, I think that will translate through to the performance over the years.

<unk> low leverage lending great borrowers markets, where we're seeing positive fundamental factors that we see as winners and I think that will translate through to the performance over the years.

Thanks, very much I'll try to get back in the queue.

Yeah.

Speaker 1: Thank you. Your next question comes from Stephen Laws from Raymond James. You're live in the call free and please go ahead.

Thank you.

Our next question comes from Stephen Laws from Raymond James You alive in the Cold season. Please go ahead.

Speaker 5: Hi, good morning, everyone. First one is...

Hi, good morning, everyone.

First wanted to.

Speaker 5: You know, Katie, you touched a little bit on Australia earlier, but you know, looks like Australia and you take picked up a little bit as far as the portfolio. You know, are those more international focus? Is that something we're going to see more of? Is it coincidental? Maybe talk about the opportunity to see in those markets.

Could you you touched a little bit on on Australia earlier, but it looks like Australia, and UK ticked up a little bit as far as the.

Portfolio.

Are those more.

More international focus is that something we're going to see more of is it coincidental can you maybe talk about the opportunities you're seeing in those markets.

Sure Yeah, we have always.

Speaker 3: We have always observed, I think, a really attractive, relative value opportunity, both in Europe and in Australia. And those markets were a little bit slower to reopen, following COVID, driven by some of the policies in the overall economy, but we're really seeing.

Served I think a really attractive relative value opportunities both in Europe , and in Australia, and those markets were a little bit slower to reopen following COVID-19 driven by some of the policy is in the overall economy, but we're really seeing the.

The impact of the reopening now and.

The recent quarter in those markets and I think that you will see a continued uptick in activity in those markets Europe has always been a big part of our business, 30% over time, it's been growing this year and I think we'll continue to grow and Australia. I think is a really exciting opportunity like our overall business we.

Speaker 3: I think we'll continue to grow. And Australia, I think it's a really exciting opportunity, like our overall business. We own everywhere we lend. We have large real estate presence in Australia that I think is translating to more opportunities. And while it's not a huge market, so I don't think it's ever gonna be a massive part of the balance sheet. I think we will see continued uptick in business there. And it's a very positive environment for lending. Great lender protection, stable economy. And obviously the market reopening, we're just seeing that.

One everywhere, we land we have large real estate presence in Australia that I think is translating to more opportunities and while it's not a huge market. So I don't think its ever going to be a massive part of the balance sheet. I think we will see continued uptick in business there and it's a very positive environment for lending great lender protections stable economy and obviously the.

Speaker 3: And, you know, well, it's not a huge market. So I don't think it's ever going to be a massive part of the balance sheet. You know, I think we will see continued uptick in business there. And it's a very positive environment for lending great, you know, lender protection.

Speaker 3: stable economy and obviously the market reopening, you know, we're just seeing now the impact of that.

Market reopening, we're just seeing now the impact of that.

Speaker 5: Great, and then shifting to the US office, you guys, Nick has come down, but it's still the majority of the, or the highest mix. Can you talk about, you know, what you're seeing here domestically, conversations with borrowers, you know, as to their outlook and kind of feedback you're getting, you know, on the office markets here.

Great and then shifting to the U S office, you got mix has come down, but it's still the majority of the or the highest mix can you talk about what youre seeing here domestically conversations with borrowers.

So their outlook and kind of feedback you're getting.

The office markets here.

Speaker 3: Absolutely. You know, I think as we've talked about in the past, you know, what we're seeing is a continued bifurcation in demand in the office market. And what that means for us is that the newer high quality office, well-eminentized assets that we lend on and really that our, you know, core sponsors are most focused on.

Absolutely I think as we've talked about in the past what we're seeing is a continued bifurcation in demand in the office market and what that means for us is that the newer high quality office well monetized.

<unk> that we lend on and really that our core sponsors are most focused on that area of the market has really seen continued demand from tenants whether it's in core markets like New York, where we've seen significant leasing take up on the west side or in growth markets, where we're obviously seeing some material growth and.

Speaker 3: That area of the market has really seen continued demand from tenants, whether it's in core markets like New York, where we've seen significant leasing take-ups on the west side or in growth markets, where we're obviously seeing some material growth in businesses moving to those markets. So...

Businesses moving to those markets. So I think that looking at the type of office that we focus on.

Speaker 3: You know, I think that looking at the type of office that we focus on, the fundamentals there are very positive, both on the tenant demand side and on the capital market side. And I think you'll just see that continued by vacation over time.

The fundamentals there are very positive both on the tenant demand side and on the capital market side and I think you'll just see that continued bifurcation overtime.

Great. Thanks, guys.

Speaker 1: Thank you. Your next question comes from Stephen Delaney from JMP Security. You're live in the Corp. Stephen, please go ahead.

Yeah.

Thank you. Your next question comes from Steven Delaney from JMP Securities You're live in the call. Stephen. Please go ahead.

Speaker 6: good morning everyone let me have my congratulations on an excellent year focusing on the dividend coverage ratio of a hundred and six percent uh... we've got a backdrop obviously rising live or and you've commented that you expect that to be you know a creative to run rate earnings going forward

Hey, good morning, everyone and let me add my congratulations on an excellent year.

Focusing on the dividend coverage ratio of 106%.

Got a backdrop, obviously of rising LIBOR and you've commented that you expect that to be.

Creatives to run rate earnings going forward.

Speaker 8: As we model, where should we, at what point in dividend coverage, whether it's 110, 115, 120, when, how high does that have to go before you would consider, seriously consider adjusting your, your dividend payout. Thank you.

As we model where should we.

Point and defer dividend coverage, whether it's 110 115 120.

When how high does that have to go before you would.

Sidor seriously consider adjusting your your dividend payout. Thank you.

Speaker 3: Thanks. You know, I think our most significant focus is making sure that we have the most stable reliable dividend that we can for our shareholders. And you know, with that being said, we revisit the dividend every quarter with our board. And I think that, you know, if we saw the possibility of a sustained consistent increase in our earnings, you know, we would certainly be talking about that. But I think that, you know, we need to think about the sustainability of the dividend, you know, for first and foremost.

Thanks, Yes, I think our most significant focus is making sure that we have the most stable reliable dividends that we can for our shareholders and with that being said, we revisit the dividend every quarter with our board and I think that if we saw the possibility of a sustained concern.

An increase in our earnings we would certainly be talking about that.

But I think that we need to we need to think about the sustainability of the dividend.

First and foremost.

Speaker 8: right under a but certainly appreciate that and and not to cut a put you on the point but should we think about it me your sixty two

Right.

We appreciate that and not to try to put you on the point, but should we think about I mean your 62.

Speaker 8: It seems kind of silly to make a penny adjustment. I mean, I'm interpreting your comments.

It seems kind of silly to make a penny adjustment I mean.

I'm interpreting your comments that you would not and the board not want to adjust the dividend unless one you had high confidence and it would it might be a more meaningful adjustment been messing around with a penny or so.

Speaker 8: you would not and the board not want to adjust the dividend unless one you had high confidence in it

Speaker 8: It might be a more meaningful adjustment than messing around with the penny or so.

Speaker 8: Would you say that's a reasonable expectation on my part?

Would you say, that's a reasonable expectation on my part.

Yeah.

Speaker 3: Yeah, I think that's accurate. I mean, I don't think we want to be moving the dividend around a lot, you know, penny to penny. You've seen very significant or very, very stable dividend over the last years in our business. We've held it consistent and covered it.

Yeah, I think thats accurate I don't think we want to be moving the dividend around a lot penny to penny you've seen very significant are very good.

Stable dividends over the last years in our business, we've held that consistent uncovered at.

Speaker 5: So, I think we would really be looking at the sustainability in the long term earnings potential of the business. Yeah, and she's, I would just add to that, that the retained earnings take a little bit of tension off that question. So when we do out earn the dividend, which historically we have, that money accrues to book value and ultimately benefits shareholders. So, and I think to Katie's point, we're much more focused on.

I think we would really be looking at the sustainability in the long term.

Earnings potential of the business.

Steve I would just add to that.

The retained earnings take a little bit of Tien Tsin asked that question. So when we do out earned the dividend, which historically we have that.

That money accrues to book value and ultimately benefit shareholders. So.

To <unk> point, we're much more focused on stability than we are.

Speaker 5: then we are, you know, squeezing out every last.

Squeezing out every last penny.

Speaker 8: Yep, agree 100%. One quick thing just to follow up and this can be a short answer on your part. Do we need to even think about SOFR in 2022 as we're modeling in terms of your loan pricing, your capital market activity? We did notice the CLO printed today or was reported today with a SOFR index. Thanks, and that's it for me.

Yes, I agree 100% one quick thing just a follow up.

And this can be a short answer on your part.

Do we need to even think about so for.

In 2022, as we're modeling in terms of your your loan pricing Youre capital markets activity. We did notice a CLO printed today or was reported today with the Sofa index. Thanks.

It for me.

Speaker 5: Hey Steve, it's Doug. I can take that. I mean, the short answer is no. It's something that we spend a lot of time on, you know, particularly in the middle office. And it is relevant in terms of capital markets, the transition is well underway, complete in some regards. But we don't think it's going to materially affect our earnings or, you know, the profile of our business and anyway from a shareholder perspective.

Hey, Steve It's Doug I can take that I mean, the short answer is no I mean, it's something that we spend a lot of time on particularly in the middle office.

And it is relevant in terms of capital markets that transition is well underway complete in some regards but we don't think its going to materially affect our earnings or the profile of our business in any way from a shareholder perspective.

Thank you.

Speaker 1: Thank you and your final question comes from Jade, Romani from KBW. You're live in the call Jade, please go ahead.

Thank you and you will final question comes from Jade Rahmani from <unk> dumping you you're alive in the KOL Jade. Please go ahead.

Speaker 7: Thank you very much. Couple of quick ones, in terms of competition, has that changed at all? And how would you characterize the competition, would it be the couple of handful of large PE sponsored that funds credit funds, or would it be now primarily the bank?

Thank you very much.

A couple of quick ones in terms of competition has that changed at all and how would you characterize the competition would be a.

Couple of hand, the handful of large PE sponsored.

Funds credit funds or would it be now primarily the banks.

Speaker 3: I think that what we've seen over the course of the business is, you know, for our low leverage lending, the type of institutional quality assets we lend on, and we certainly run into the bank.

So I think that what we've seen over the course of the business is.

For our low leverage lending the type of institutional quality assets, we lend on and we certainly run into the banks.

Speaker 3: probably more than a lot of the sort of deaf and univered.

Probably more than <unk>.

Lot of the of the sort of depth on universe.

Speaker 3: There's certainly some other large strong platforms out there that we also run into from time to time. But I think I would go back to the previous question and just note that while the exact contours of the competition have changed from time to time over the years, our performance has been extremely consistent in terms of being able to access the types of lending opportunities that we like for our portfolio.

Certainly some other large strong platforms out there that we also run into from time to time, but I think I would go back to the previous question and just sort of note that while the exact contours of the competition have changed from time to time over the years. Our performance has been extremely consistent in terms of being a.

To access the types of lending opportunities that we like for our portfolio.

Speaker 7: Thank you very much. In terms of the LTV, you know, two things I think, number one is the origination LTV, and number two, close to 50% of the portfolio was originated post-COVID. We've seen an uptick in inflation that's meaning for all we see increases in real estate prices. So do you think market to market the LTV? It's more like in the mid 50s.

Thank you very much in terms of the LTV.

Two things I think number one it's the origination LTV and number two.

Close to 50% of the portfolio was originated post COVID-19 .

Seen an uptick in inflation, that's meaningful we've seen increases in real estate prices. So do you think marking to market. The LTV, it's more like in the.

Mid fifties.

Speaker 3: Yeah, I think that there's definitely the case that we think the value of our collateral by and large, you know, between the time it was originated and today has improved, especially when you look at the loans that are, you know, older vintage have been around for longer. And I think that is partly driven by inflation, rising replacement costs, as I mentioned, I think replacement costs, that's anywhere from 10 to even 30 percent, you know, depending on asset class and markets. And that definitely translates through to the value of existing real estate stocks.

Yes, I think that there is definitely the case that we think the value of our collateral by and large between the time. It was originated and today has improved especially when you look at the loans that are older.

Older vintage have been around for longer and I think that is partly driven by inflation rising replacement costs as I mentioned I think replacement cost is up anywhere from tens even 30%.

Pending on asset class and markets and that definitely translates through to the value of existing real estate stock and then you really look at the business plans, we're lending into business plans that are value add in nature. So the value of the assets. We lend on should increase just in and of themselves away from market dynamics as the business plan is is <unk>.

Speaker 3: And then you really look at the business plans. You know, we're lending into business plans that our value add in nature. So the value of the assets we lend on.

Speaker 3: It should increase just in and of themselves away from market dynamics as the business plan is implemented over time.

Momentum over time, so I think you can also see that in some of the repayments we saw this quarter.

Speaker 3: So, you know, I think you can also see that in, you know, some of the repayments we saw this quarter, you know, where we saw the ultimate exit value of the assets, you know, very well in excess of what we thought the value was going in as is appropriate for the implementation of a value at this plan.

Where we saw the ultimate exit value of the assets very well in excess of what we thought the value was going in as is appropriate for the implementation of our value add business plan, but I think taking a big step back 64%, 65% LTV, which has always been our bread and butter. That's just a very good leverage point for our lender.

Speaker 3: But I think taking a big step back, you know, 64%, 65% LTV, which has always been our bread and butter, you know, that's just a very good leverage point for a lender in any part of the market, whether it's COVID, whether it's now, and we feel very good about the values support for our loans.

In any part of the market, whether it's <unk>, whether it's now and we feel very good about the value support for our loans.

Speaker 7: Thank you very much. And just last question would be the diversification question comes up all the time. I think Doug was trying to ask it around, you know, new property types, new geographies. But any increased attention being paid to different business lines that would be complementary to the core of first mortgage lending business.

Thank you very much and just last question would be the diversification question comes up all the time I think Doug was trying to ask it around new property types, new geographies, but any increased attention being paid to different business lines.

It would be complementary.

The core first mortgage lending business.

Speaker 3: Sure, I think that we certainly send a lot of time in year in and year out, looking at different complimentary business lines. And I think one of the great things about sitting within the Blackstone platform.

Sure I think that we certainly spend a lot of time in.

In yearend and Youre out looking at different complementary business lines and I think one of the great things about sitting within the Blackstone platform is it affords us the ability to see across many different markets and asset classes. So if there's something out there that we think is interesting we definitely see yes, we definitely have the opportunity to do it and we are constantly.

Speaker 3: is it affords us the ability to see across many different markets and asset classes. So, you know, if there's something out there that we think is interesting, we definitely see it, we definitely have the opportunity to do it. And, you know, we are constantly evaluating complementary businesses that we think would align well with our investment focus and our strategic goals.

Value added and complementary businesses that we think would align well with our investment focus and our strategic goals.

Speaker 3: The bar is very high because the performance of the poor business has been so strong over the years and we think that it's a very stable, very attractive relative value, particularly as we look at a rising rate environment. But it is certainly something that we spend a lot of time on thinking about whether there could be something out there that would be complimentary and if we see something good, you know, we would certainly pursue that.

<unk> is very high because the performance of the <unk> business has been so strong over the years and we think that it's a very stable very attractive relative value, particularly as we look at a rising rate environment, but it is certainly something that we spend a lot of time on thinking about whether there could be something out there that would be complementary and if we see something that we would certainly pursue that.

No.

Thank you.

Speaker 1: Thank you and now I'd like to hand back to Western Tucker for closing me more.

Thank you and now I'd like to hand back to Weston Tucker for closing remarks.

Speaker 2: Great thanks everyone for joining us today and look forward to following up after the call. Good bye.

Great. Thanks, everyone for joining us today and look forward to following up after the call.

Goodbye Weston.

Thank you to all Youll speakers.

Speaker 1: And thank you everyone that concludes your conference call for today. You may now disconnect, thank you for joining and enjoy the rest of your day.

And thank you everyone that concludes your conference call for today you may now disconnect. Thank you for joining and enjoy the rest of your day.

Okay.

Yes.

Yeah.

Yes.