Q3 2025 Blackstone Mortgage Trust Inc Earnings Call

October 29, 2025

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Thank you for standing by your on hold for the Blackstone Mortgage Trust third quarter 2020.

Five investor call at this time, we're gathering additional participants and should be underway. Shortly we appreciate your patience and ask that you continue to hold.

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Katie Keenan: Annual loans secured by fully occupied net lease retail assets, with a low weighted average origination LTV of 52% and an in-place debt yield over 12%. We were uniquely positioned to evaluate this portfolio, leveraging our experienced net lease and loan portfolio acquisition teams to underwrite and execute this transaction. Acquiring high-quality, performing loans at discounts from banks remains one of our top investment themes across our platform. These transactions have a high barrier to entry, requiring bespoke sourcing capabilities, the capacity to underwrite granular portfolios quickly and accurately, and the operational wherewithal to onboard and manage hundreds of loans seamlessly. Here at Blackstone, we have invested in building market-leading capabilities to execute, leveraging the scale of our team and our data. The prize is quite compelling: high credit quality loans with convexity and duration, in thematic sectors, and with outsized risk-adjusted returns.

Slide net lease retail assets.

A low weighted average origination LTV of 52%.

In place debt yield over 12%.

We were uniquely positioned to evaluate this portfolio leveraging our experience net lease and loan portfolio acquisition teams to underwrite and execute this transaction.

Acquiring high quality performing loans at discounts from banks remains one of our top investment themes across our platform.

These transactions have a high barrier to entry requiring bespoke sourcing capabilities or capacity to underwrite granular portfolios quickly and accurately and the operational wherewithal to onboard and manage hundreds of loans seamlessly.

Here at Blackstone, we have invested in building market, leading capabilities to execute leveraging the scale of our team and our data.

And the prize is quite compelling high credit quality loans, with convexity and duration and thematic sectors and with outsized risk adjusted returns.

Katie Keenan: With bank M&A accelerating, we see more opportunities like this on the horizon. In total, we expect to close over $7 billion of new investments this year across originations, loan acquisitions, and our net lease strategy, diversifying our portfolio and enhancing credit composition through deliberate rotation into the sectors and markets best positioned in the current environment. Turning to the portfolio, market tailwinds are driving increasing investor demand for assets, large and small, and supporting positive credit outcomes. We collected $1.6 billion of total repayments in the third quarter, including four loans greater than $200 million, two secured by Texas multifamily assets and two abroad, a European hotel portfolio, and a London office building. We had no new impaired loans this quarter. We resolved two previously impaired loans at a premium to aggregate carrying values, and we upgraded eight loans, including six office loans, removing two from our watchlist.

And with bank M&A accelerating we see more opportunities like this on the horizon.

In total we expect to close over $7 billion of new investments this year across originations loan acquisitions in our net lease strategy diversity, diversifying our portfolio and enhancing credit composition through deliberate rotation into the sectors and markets best positioned in the current environment.

Turning to the portfolio market tailwind are driving increasing investor demand for assets large and small and supporting positive credit outcomes.

We collected $1 6 billion of total repayments in the third quarter, including four loans greater than $200 million to secured by Texas multifamily assets and two abroad, a European hotel portfolio and our London Office building.

We had no new impaired loans this quarter, we resolved two previously impaired loans at a premium to aggregate carrying values and we upgraded eight loans, including six office loans, removing two from our watch list.

Katie Keenan: Our loan portfolio is now 96% performing, and our impaired loan balance continues to decline, now at 71% below last year's peak. We expect to complete additional resolutions next quarter, with one impaired office asset sold last week and others in advanced stages. The real estate recovery, while uneven, is extending to some of the most acutely impacted markets and sectors. In San Francisco, fundamentals are improving, driven by the growth of AI. Multifamily rents are up 10%, office demand is growing, and convention hotel bookings are up 60%. Investors are taking note, with acquisition volumes picking up across sectors. Altogether, 25% of our REO portfolio today is in the Bay Area, including our largest asset, a fully renovated hotel held at nearly 60% below the prior owner's basis and more than 70% below replacement cost.

Our loan portfolio is now 96% performing in our impaired loan balance continues to decline now at 71% below last year's peak.

We expect to complete additional resolutions next quarter with one impaired office asset sold last week and others in advanced stages.

The real estate recovery, while uneven is extending to some of the most acutely impacted markets and sectors and San Francisco fundamentals are improving driven by the growth of AI multifamily rents are up 10% office demand is growing and convention hotel bookings are up 60%.

Investors are taking note with acquisition volume is picking up across sectors.

Altogether, 25% of our Oreo portfolio today is in the Bay area, including our largest asset a fully renovated hotel how that nearly 60% below the prior owner's basis and more than 70% below replacement cost.

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Katie Keenan: San Francisco has long been amongst the most cyclical markets in the country, and today we are positioned to capitalize on the upswing. Amid a strong capital markets backdrop, Blackstone Mortgage Trust Inc. has taken advantage, refinancing and extending over $2 billion of corporate debt in the last 12 months. Debt markets have been resilient through recent market volatility, with spreads still sitting within 20 basis points of all-time tights. We continue to see strong demand from our bank lenders, providing opportunities to introduce new facilities, further optimize our financing structures, and reduce our marginal secured funding costs. We borrowed over 15 basis points tighter in the third quarter compared to the prior quarter, improving our cost of capital and advancing our overarching goal to generate an attractive, stable stream of current income for our investors. With that, I will pass it over to Tony to unpack our financial results.

Francisco has long been amongst the most cyclical markets in the country and today, we are positioned to capitalize on the upswing.

Amid a strong capital markets backdrop, <unk> has taken advantage refinancing and extending over $2 billion of corporate debt in the last 12 months.

Debt markets have been resilient through recent market volatility with spreads still sitting within 20 basis points of all time tights.

And we continue to see strong demand from our bank lenders, providing opportunities to introduce new facilities further optimize our financing structures and reduce our marginal secured funding costs.

We borrowed over 15 basis points tighter than the third quarter compared to the prior quarter improving.

Improving our cost of capital and advancing our overarching goal to generate an attractive stable stream of current income for our investors.

And with that I will pass it over to Tony to unpack our financial results.

Tony Marone: Thank you, Austin, and good morning, everyone. In the third quarter, BXMT reported GAAP net income of $0.37 per share and distributable earnings, or DE, of $0.24 per share. DE prior to charge-offs, which excludes realized losses related to two loan resolutions, was $0.48 per share, an increase of $0.03 from the prior quarter and $0.01 above our $0.47 quarterly dividend. DE benefited from BXMT's continued execution on key initiatives, with investment activity, loan resolutions, and accretive capital markets executions all contributing to this quarter's strong results. We also recognized $0.02 of default interest from a multifamily loan that we paid in full. Looking forward, we expect our earnings will continue to benefit from capital redeployment and resolutions of impaired loans, including the two that close on the last day of the quarter, as we unlock the earnings potential of that capital.

You Austin and good morning, everyone.

In the third quarter <unk> reported GAAP net income up 37 cents per share and distributable earnings or <unk> 24 per share.

B E. Prior to charge offs, which excludes realized losses related to loan resolutions was <unk> 48 per share.

An increase of <unk> <unk> from the prior quarter and one of our 47.

With that.

D benefited from <unk> continued execution on key initiatives with investment activity loan resolutions and accretive capital markets executions, all contributing to this quarter's strong results.

We also recognized <unk> of default interest from our multifamily loan that repaid in full.

Looking forward, we expect our earnings will continue to benefit from capital redeployment and resolutions of impaired loans, including the to the close on the last day of the quarter as we unlock the earnings potential of that capital.

Tony Marone: For reference, we collected $0.06 of interest from impaired loans this quarter, which were excluded from earnings under cost recovery accounting. We ended the quarter with a book value of $20.99 per share, which was largely stable quarter over quarter, reflecting strong credit performance, loan resolutions executed above carrying values, and accretive share repurchases. When considering the $0.47 dividend, BXMT provided an 8% annualized economic return to stockholders this quarter. BXMT repurchased $16 million of common stock in Q3 at an average share price of $18.69, a significant discount to book value. In Q4, we have accelerated buybacks through recent market volatility, repurchasing another $61 million of stock at even lower levels. In total, we repurchased nearly $140 million of shares since establishing our program in 2024, and just last week received board approval to replenish our $150 million buyback capacity.

For reference we collected six tenths of interest from impaired loans, this quarter, which were excluded from earnings or cost recovery.

We ended the quarter with book value of $20 99 per share it was largely stable quarter over quarter, reflecting strong credit performance loan resolutions executed above carrying values and accretive share repurchases.

When considering the 47 dividend <unk> provided an 8% annualized economic return to stockholders this quarter.

<unk> repurchased $16 million of common stock in Q3 at an average price of $18 69.

Significant discount to book value.

And so far in Q4, we had accelerated buybacks through recent market volatility.

Purchasing another $61 million of stock at even lower level.

In total we repurchased nearly $140 million of shares since establishing our program in 2024.

And just last week received board approval to replenish our $150 million buyback capacity.

Tony Marone: Our book value at 9/30 includes $712 million, $4.16 per share of CISL reserves, which declined from $755 million, $4.39 per share in the prior quarter, as we crystallized $42 million of specific CISL reserves in connection with two impaired loan resolutions. As Katie mentioned earlier, these resolutions were executed at a premium to aggregate carrying values, contributing to an $11 million net reversal in our specific CISL reserve and offsetting the modest $10 million increase in our general reserve. Turning to our balance sheet, BXMT remains well positioned to address today's attractive investment environment, with debt-to-equity down to 3.5 times, strong liquidity of $1.3 billion, and over $7 billion of available financing capacity as of quarter end. In October, we closed a new $250 million non-mark-to-market credit facility with an international bank.

Our book value at 930, <unk> $712 million 14.

$4 16 per share seasonal reserves, which declined from $755 million $4 39 per share in the prior quarter as.

As we crystallize $42 million of specific seasonal reserves in connection with two impaired loan resolution.

As Katie mentioned earlier these resolutions were executed at a premium to aggregate carrying values contributing to an $11 million net reserves.

Specific seasonal reserve.

And offsetting the modest $10 million increase our towers are.

Turning to our balance sheet <unk> remains well positioned to address today's attractive investment environment, that's equity down to three five times strong liquidity of $1 3 billion.

And over $7 billion of available financing capacity as of quarter end.

And in October we closed a new $250 million non mark to market credit facility with an international Bank recent.

Tony Marone: We recently established their CRE loan warehousing business and targeted Blackstone as one of their first and largest relationships, another example of our strong position in the market and ability to drive differentiated results for stockholders. We continued to take advantage of the supportive capital markets backdrop to further optimize our cost of capital, as we repriced $400 million of corporate term loan during the quarter, reducing spread by 100 basis points and upsizing the deal by $50 million, reflecting strong demand from institutional investors. Just last week, we collapsed BXMT's 2020 FL3 CLO, which we replaced with balance sheet financing at a lower spread. The CLO market remains robust, with new issuance nearly tripling last year's total and tracking its strongest year since 2022.

Our recently established their CRE loan warehousing business targeted Blackstone as one of their first and largest relationships.

Another example of our strong position in the market and ability to drive differentiated results for stockholders.

We continue to take advantage of the supportive capital markets backdrop to further optimize our cost of capital as we repriced $400 million of corporate term loan during the quarter.

Reducing spread by 100 basis points and upsizing the deal by $50 million.

Strong demand from institutional investors.

And just last week, we collapsed <unk> 2000, 20-F, L. III, CLO, which we replaced with balance sheet financing at a lower spread.

CLO market remains robust with new issuance nearly tripling last year's total and tracking its strongest year since 2022.

Tony Marone: We have been a consistent issuer in this market, completing our fifth transaction earlier this year, and we are well positioned to take advantage of the supportive market backdrop. Before opening the call to Q&A, I will turn it over to BXMT's Chairman and incoming CEO, Tim Johnson, for a few closing remarks.

We've been a consistent issuer in this market completing our fifth transaction earlier this year and we are well positioned to take advantage of the supportive market backdrop.

Before opening the call to Q&A I will turn it over to <unk>, chairman and incoming CEO, Tim Johnson for a few closing remarks, thanks, Tony first and foremost I'd like to thank Katy for her dedicated service to <unk> The board and our shareholders 80 leaves <unk> in a tremendous spot with a global portfolio, that's delivering for our investors.

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Tim Hayes: Thanks, Tony. First and foremost, I'd like to thank Katie for her dedicated service to BXMT, the board, and our shareholders. Katie leaves BXMT in a tremendous spot, with a global portfolio that's delivering for our investors and a team that's poised to capture this exciting investment environment. I've had the pleasure of working alongside Katie throughout her Blackstone tenure, and I'm extremely grateful for all of the hard work, strategic insight, and strong execution she's brought with her each and every day. She's been an inspiring partner and leader and will leave a lasting impression on our business. While we'll no doubt miss Katie, we wish her well in her next chapter, and are confident the team will step up in her place.

<unk> and her team that's poised to capture this exciting investment environment.

I've had the pleasure of working alongside cadence router Blackstone tenure and I'm extremely grateful for all the hard work strategic insight and strong execution excuse me every.

Every day, she been an inspiring partner and leader that will leave a lasting impression on our business well.

While we will no doubt Ms. Katy we wish her well in our next chapter and are confident the team will step up into place.

Tim Hayes: Personally, I'm excited to have been appointed CEO of BXMT and to work closely with Austin to continue to build on the momentum our business has today. Austin and I are fortunate to have the strength of the Blackstone franchise behind us, our dedicated team of over 160 real estate credit professionals, and the critically important connectivity with our global real estate team. This has always been the backbone of BXMT's investment process. I'm looking forward to working more with all of you along the way. With that, I'll now ask the operator to open the call to questions.

Personally I am excited to have been appointed CEO of <unk> and to work closely with Austin to continue to build on the momentum our business has today.

And I are fortunate to have the strength of the Blackstone franchise behind us our dedicated team of over 160 real estate credit professionals and the critically important connectivity with our global real estate team.

<unk> has always been the backbone of <unk> investment process.

I'm looking forward to working more with all of you along the way and with that I'll now ask the operator to open the call to questions.

Okay.

Operator: Thank you. As a reminder, please press star one to ask a question. We ask you to limit yourself to one question and one follow-up question to allow as many callers to join the queue as possible. We'll take our first question from Catherine with BTIG.

As a reminder, please press star one to ask a question.

Ask you limit yourself to one question and one follow up question to allow as many callers join the queue as possible.

We'll take our first question from Catharine <unk> with BTG.

Okay.

Thank you and good morning, everybody.

[Analyst 1]: Thank you, and good morning, everybody. Katie, just first off, congratulations and best of luck in your new role. It has been an absolute pleasure having you in this position. Second, just wanted to follow up, Katie, on your prepared remarks where you mentioned a recovery in transaction activity and return of liquidity to the CRE markets. Two items around that. First off, can you provide a little bit more color on exactly where you're seeing that? Is that U.S. and Europe, or is it just pockets that you're seeing that recovery? Second, if that recovery in transactions is more here in the U.S., which is what it seems like to us, could we see a larger portion of your origination activity pivot back to U.S. loans instead of more Europe loans, which you've been doing so far this year?

Katy just first off congratulations and best of luck in your new role.

A pleasure having you in this position.

And then.

Second just wanted to follow up on your prepared remarks, where you mentioned a recovery in transaction activity and return of liquidity to the CRE markets.

Two items around that first off can you provide a little bit more color on exactly where you're seeing that is that U S and Europe or is it just pockets that youre seeing that recovery and then second.

If that recovery in transactions is more here in the U S, which is what it seems like to us could we see a larger portion of your origination activity pivot back to U S loans, instead of more Europe loans, which you've been doing so far this year.

Thanks, Tom This is Tim I'll take that I'd say liquidity certainly has returned to markets I would say both in the U S and in Europe.

Tim Hayes: Thanks, Tom. This is Tim. I'll take that. I'd say liquidity certainly has returned to markets, I would say both in the U.S. and in Europe. As you pointed out, a bit stronger on a relative basis in the U.S. and mainly driven by a more established CMBS market here in the United States, as Katie referenced, tracking toward an all-time high in terms of liquidity. I would say it's a little bit further ahead, as you'd expect, in the U.S. versus Europe, but both places are continuing to see capital markets open up and be pretty strong. In terms of the U.S. versus Europe on an ongoing basis, what we love is being able to have a platform that can look across all of the regions and establish a view on relative value at any moment in time. That does shift over time. I think that the U.S.

As you can pull it out a bit stronger on a relative basis in the U S and mainly driven by a more established the MBS market here in the United States as Katie referenced tracking toward an all time high in terms of liquidity.

So I would say, it's a little bit further ahead as you would expect in the U S versus Europe, but both places are continuing to see capital markets open up and be pretty strong in terms of the U S versus Europe on an ongoing basis, what we love is being able to have a platform that can look across all of the regions and establish a view on relative value at any <unk>.

And in time, so that does shift over time.

And I think that the U S continues to be the biggest market for us just a larger transaction market. Overall, so I think youll continue to see that would be the largest share of our investment activity over a long period of time, but we certainly look at both in play relative value across both.

Tim Hayes: continues to be the biggest market for us, just a larger transaction market overall. I think you'll continue to see this be the largest share of our investment activity over a long period of time. We certainly look at both and play relative value across both.

I appreciate that Tim Thank you.

[Analyst 1]: Appreciate that, Tim. Thank you. The second one for me, maybe Austin, in terms of the REO portfolio, first off, can you remind us of the potential earnings uplift as that capital comes back over time? Do you need to set aside incremental capital for the New York City hotel that you took on balance sheet during the quarter, or is that one in pretty good shape already?

One for me.

Maybe Austin.

Of the Oreo portfolio can first of all can you remind us of the potential earnings uplift as that capital comes back over time and.

Do you need to set aside incremental capital for the New York City Hotel that you took on balance sheet during the quarter or is that one in pretty good shape already.

Yes, thanks for the question.

Tim Hayes: Yeah, thanks for the question. I would say generally, we haven't given specific numbers in terms of the potential earnings uplift, but obviously the REO assets are not generating our target returns, and we certainly see the opportunity to, as we turn over the portfolio, exit these REO assets over time to drive additional earnings power as we do that. Specifically with regards to sort of CapEx and conditions, I would say firstly, we have a tremendous amount of insight into kind of the needs across these assets. We really don't feel that there's a significant component of CapEx needed. To the extent it is needed, we certainly have the capability to do that with over $1.3 billion of liquidity. I'd say the condition of these assets across the board is pretty good, and we feel comfortable with our position today.

I would say generally.

We haven't given specific numbers in terms of the potential earnings uplift, but obviously the Oreo assets are not generating our targeted returns and we certainly see the opportunity to as we turnover of the portfolio exit. These oreo assets over time to drive additional earnings power as we do that.

Specifically with regards to Capex and conditions I would say firstly, we have a tremendous amount of insight into the needs are.

Across across these assets.

And we we really don't feel.

There is a significant component of capex needed to the extent to the extent. It is needed. We certainly have the capability to do that with over $1 $3 billion of.

Liquidity.

But I'd say.

The condition of these assets across the board.

It's pretty good.

We feel comfortable with our positioning.

Got it I appreciate the answers thanks, everyone.

[Analyst 1]: Got it. Appreciate the answers. Thanks, everyone.

Thank you we'll take our next question from Harsha <unk> with Green Street.

Operator: Thank you. We'll take our next question from Harsh Hemnani with Green Street.

Thank you.

[Analyst 2]: Thank you. Maybe one on how you're thinking about originating new loans versus buying back into the capital structure. Is there a particular premium or discount to book at which you're thinking that buybacks are perhaps more accretive than new originations? It sounds like Q4 is stepping up on the origination front, but also on the buyback front. I'm just trying to understand the relative value match there.

Maybe one on how you're thinking about.

<unk>, new loans versus buying back into the cap structure.

A particular premium or discount to book at rich.

Thank you for standing by your on hold for the Blackstone mortgage trusts third quarter 2025 investor call.

What's your thinking that buyback side, perhaps more accretive than you would've generations.

At this time weird rather than additional participants and should be underway. Shortly we appreciate your patience and ask that you continue to hold.

<unk>.

Sounds like <unk>.

It's stepping up on the origination front, but also on the buyback front. So I'm just trying to understand.

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That's done.

Yes, I'd say, we continue to look at both in terms of everyday just like we do across loans in the U S and Europe, we look at opportunities of where to invest capital, including share buybacks, which of course you've been quite.

Tim Hayes: Yeah, I'd say we continue to look at both in terms of every day, just like we do across loans in the U.S. and Europe, we look at opportunities of where to invest capital, including share buybacks, which of course we've been quite active in. I'd say that's a pretty dynamic analysis. We've taken advantage of the opportunity to buy back when the stock is traded at levels that we think are quite attractive and provide a very high return on investment. I think that's how we look at it. We continue to look at it dynamically over time.

Quite active in so that's I'd say, that's a pretty dynamic analysis, but we've captured the we've taken advantage of the opportunity to buyback when the stock is trading at levels that we think are quite attractive.

Provide very high return on investment.

So I think that's how we look at it we continue to look at it dynamically overtime.

Got it.

[Analyst 2]: Got it. Maybe one on the makeup of the investment portfolio this quarter. It feels like roughly two-thirds of originations this quarter were in sort of the traditional floating-rate loan portfolio, and roughly a third is in net lease and bank loan portfolio acquisitions. Should we be thinking about these fixed-rate loans as sort of being a lever for you to be able to reduce your floating-rate exposure ahead of what most are expecting to see lower floating rates in the future?

And then maybe one on the makeup of the investment portfolio this quarter.

It's like roughly two codes.

Originations this quarter.

So they are traditionally floating rate loan portfolio and <unk>.

<unk>.

Net lease in banking on portfolio acquisitions should we be thinking about these fixed rate loans has sort of been the level to be able to.

You will see our floating rate exposure to ahead of what most would expecting too.

They are expecting to see lower floating dates in the future.

Yes I.

Tim Hayes: Yeah, ours is Austin. I can take that. I think you're correct in that we really are looking across different channels to deploy our capital right now. One of the things we like about net lease and these bank portfolios is that they do add some duration and create a natural hedge to our sort of traditional floating-rate business. The bank portfolios in particular, as we noted earlier, we're buying those at a discount to par. That provides some upside convexity to the extent those loans repay more quickly than we underwrite. We like that as well from a risk-adjusted return basis. I think you'll continue to see us look across different types of investments across these channels to really think about the best relative value and really sort of diversify the composition of our earnings.

I can take that I think you come you are correct in that we really are looking across different channels to deploy our capital right now.

One of the things we like about net lease in these bank portfolios is that.

They do add some duration and create a natural hedge to our sort of traditional floating rate business.

Ink portfolios in particular as we noted earlier, we're buying those at a discount to par.

And that provide some upside convexity to the extent those those loans repay more quickly than we underwrite and we like that as well from a from a risk adjusted return basis.

So I think youll continue to see us look across different types of investments across these channels to really think about the best relative value.

And really sort of diversify the composition of our earnings.

Got it thank you.

[Analyst 2]: Got it. Thank you.

Thank you we will take our next question from Jade Rahmani.

Operator: Thank you. We will take our next question from Jade Rahmani with KBW.

With K B W.

Thank you very much each earning season brings its own unique developments and it seems to me that this earnings season. So far has been characterized by a dominance, but also some pockets of weakness in the economy, whether it would be in the consumer and jobs or discrete credit items in the financial space in the <unk>.

[Analyst 2]: Thank you very much. Each earnings season brings its own unique developments, and it seems to me that this earnings season so far has been characterized by AI dominance, but also some pockets of weakness in the economy, whether it be in the consumer and jobs or discrete credit items in the financial space and the C&I lending and also a couple of CRE items. The commercial mortgage REIT sector also seems to have been caught in this downdraft. My main question is whether you've seen any spillover effects into the CRE market as yet, and if you're doing anything differently, perhaps more defensively, to prepare for any weakness that may unfold.

C&I lending and also a couple of Siri items so the.

The commercial mortgage REIT sector also seems to have been caught in this down draft and my main question is whether you've seen any spillover effects into the CRE market as yet and if youre doing anything differently, perhaps more defensively to prepare for any weakness that may unfold.

Thanks Jade.

Tim Hayes: Thanks, Jade. I'd say we're not seeing it in real estate credit. We are in an environment with real estate credit where we've gone through a pretty significant downturn, and now we're quite clearly in recovery mode in terms of coming out of that downturn. I would say the real estate credit market has been somewhat uniquely tested already and has experienced its challenges. Not to say that there might not be other challenges around the corner, but it definitely is more battle-tested, I'd say, overall. That translates through to what we see on the new origination side of things in terms of credit quality. Generically, you're going to have a more tighter lending market coming out of a cycle like we've been through where credit standards are higher. We're not seeing that type of deterioration that's been referenced elsewhere.

We're not seeing it in real estate credit.

We are in an environment with real estate credit, where we've gone through a pretty significant downturn.

And now we are quite clearly in recovery mode.

Coming out of that downturn, so I would say the real estate credit market has been somewhat uniquely tested already and has experienced the challenge is not to say that there might not be other challenges around the corner, but it definitely is more battle tested I'd say overall and so that translates through to what we see on the new origination side of things in terms of credit quality.

Generically youre going to have a more tighter.

Tighter lending market coming out of a cycle like we've been through we're credit standards higher.

And so we're not seeing that type of deterioration that's been referenced elsewhere.

Tim Hayes: We're seeing, much like what you're seeing in the BXMT portfolio itself, improved credit overall.

We're seeing much like what youre seeing in the <unk> portfolio itself improves credit overall.

Thank you and in terms of the pace of <unk> investments and originations.

[Analyst 2]: Thank you. In terms of the pace of Q3 investments and originations, notwithstanding the bank loan JV, which I believe would have higher ROEs than the traditional business, was there anything that drove a more muted pace of originations? Perhaps it was on the liability management side, putting in place the new repo line, the tighter spreads on the term loan, as well as calling the CLO. Was that in preparation of stronger originations and maybe weighed on volume in the quarter?

Notwithstanding the bank loan JV, which I believe would have higher Roe than the traditional business.

Was there anything that drove a more muted pace of originations.

Perhaps it was on the liability management side, putting in place the new repo line.

Tighter spreads on the term loan as well as calling the CLO was that in preparation of stronger originations and maybe weighed on volume in the quarter.

Yes, Jay disaster.

Tim Hayes: Yeah, Jade, this is Austin. We obviously made $1 billion of total investments this quarter, which we think is a good amount. I would say that we have $1.7 billion in closing as well. Our pipeline of opportunities remains really robust. I'd say we're actively investing in the environment. I would say there might have been a modest impact seasonally, with some of the volatility we saw in the spring around some of the tariffs, which may have impacted certain timings of transactions overall. Across our channels, we really see a lot of interesting opportunities, both in Europe and the United States. We feel good about the level of the transaction activity going forward.

We obviously made $1 billion of total investments this quarter, which we think is it got about I.

I would say that we have a $1 $7 billion in closing as well as our pipeline of opportunities remains really robust I'm sorry to say we are actively investing in the environment.

I would say there might've been a modest impact seasonally with some of the volatility we saw sort of in the spring around some of the tariffs, which may have impacted certain timing of transactions overall, but over but really across all our channels, we really see a lot of interesting opportunities both in Europe and the United.

[music].

State. So we feel good about the level of transaction activity going forward.

Thank you.

[Analyst 2]: Thank you.

Thank you we'll take our next question from Doug Harter with UBS.

Operator: Thank you. We'll take our next question from Doug Armer with UBS.

Awesome, Thanks sort of touching on that last point.

[Analyst 2]: Thanks. Touching on that last point, how do you see the pace of kind of net deployment in the portfolio in the coming quarters, and how do you think about what is the right level of leverage that you guys are targeting?

How do you see.

The pace of kind of net.

Net deployment.

In the portfolio.

They are coming quarters, and how do you think about what is the rate.

Good day and welcome to the Blackstone Mortgage Trust third quarter 2025, Investor call. Today's call is being recorded at this time all participants are in a listen only mode. If you require operator assistance at any time. Please press star Zero. If you would like to ask a question. Please signal by pressing star one on your telephone keypad.

Our level of leverage that you guys are targeting.

I'd say I'll take the first in terms of deployment I think it's a pretty good indication of what you saw this past quarter, where were having a healthy amount of repayment activity.

Tim Hayes: I'd say I'll take the first. In terms of deployment, I think it's a pretty good indication of what you saw this past quarter, where we're having a healthy amount of repayment activity and then turning that directly into new investment activity. I think we're at a place where we feel pretty good about being kind of at a run rate in terms of repayments and deployment overall. I think that that would remain consistent.

And then turning that directly into new investment activities. So I think where we're at a place where we feel pretty good about being kind of at a run rate in terms of repayments and deployment.

If you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. At this time I would like to turn the conference over to Tim Hayes, Vice President shareholder Relations. Please go ahead.

Overall, so I think that that would remain.

Consistent.

Good morning, and welcome everyone to Blackstone mortgage trusts third quarter 2025 earnings conference call I'm joined today by Katie Keenan, Chief Executive Officer, Tim Johnson Chair, <unk> Board and global head of bread anymore.

And on the leverage side like how are you thinking about what is the right level of leverage to run this business.

[Analyst 2]: On the leverage side, how are you thinking about what is the right level of leverage to run this business at this part of the cycle?

At this part of the cycle.

Tony Marone, Chief Financial Officer, Austin, Panyard Executive Vice President of investments and Boston at Mercer Neuropathic, Deputy Chief Financial Officer.

Yeah, Doug on leverage obviously, we're at three five times today, which is right in the middle of the range that we target.

Tim Hayes: Yeah, Doug, on leverage, obviously we're at 3.5 times today, which is right in the middle of the range that we target. I think we've always been sort of in that mid-threes over the last period. We certainly have liquidity and capacity to go up a little bit from there. Again, we're seeing good opportunities. We feel very comfortable with the balance sheet today and where we are from that perspective.

And so I think we've always been sort of in that mid threes over the last quite period. So we certainly have liquidity and capacity to sort of go up a little bit from there.

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

I'd like to remind everyone that today's call may include forward looking statements, which are subject to risks uncertainties and other factors outside of the company's control.

And again, we're seeing good opportunity. So we feel very comfortable with the balance sheet today and where we are.

Actual results may differ materially.

From that perspective.

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.

Thank you Karen.

Operator: Thank you. We'll take our next question from Rick Shane with J.P. Morgan.

We will take our next question from Rick Shane with J P. Morgan.

We do not undertake any duty to update forward looking statements.

We will also refer to certain non-GAAP measures on this call and for reconciliations you should refer to the press release and 10-Q.

Hey, guys. Thanks for taking my question and I apologize to like everybody, we're bouncing around between calls surfaces and cover <unk>.

[Analyst 2]: Hey guys, thanks for taking my question. I apologize, like everybody, we're bouncing around between calls. If this has been covered, I apologize. Look, when we look at the implied dividend yield as a function of book, it's about 9%. You guys aren't quite there yet. When you think about the path to covering that dividend, which is obviously not only your goal, but your indication by maintaining that dividend, can you walk us through what the different levers in terms of higher yields, reducing non-approvals, reducing REO, what you think are, sort of rank those opportunities, please, and perhaps give us some sense of what the contribution of each is?

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

Colleges.

Look when we look at the.

For the third quarter reported GAAP net income of 37 per share and distributable earnings up 24 cents per share distributable earnings prior to charge offs were 48 cents per share.

Implied.

Our dividend yield is a function of book, it's about 9%.

You guys are or.

A few weeks ago, we paid a dividend of <unk> 47 per share with respect to the third quarter. Please let me know if you have any questions. Following today's call with that I'll now turn it over to Katie.

When you think about the past covering that dividend, which is obviously not only Brazil, but there are indications.

Thanks, Tim Yeah, sometimes strong third quarter results underscore the continued forward momentum across all aspects of our business.

Painting that dividend.

Can you walk us through sort of what the different levers in terms of higher yields reducing non accruals reducing oreo.

<unk> earnings power credit investment activity and balance sheet optimization.

What you think are sort of rank those opportunities clearly.

We reported distributable earnings prior to charge offs of 48 cents per share covering the 47 cent dividend and continuing this year its positive trajectory.

And perhaps give us some sense of what the contribution of aegis.

Book value was essentially flat, reflecting a stable credit backdrop with no new impaired loans.

Yes, Thanks, Rick I'd say, obviously it was good to cover the dividend this quarter in terms of.

Tim Hayes: Yeah, thanks, Rick. I'd say obviously it was good to cover the dividend this quarter in terms of distributable earnings ex-charge-offs at $0.48 relative to the $0.47 dividend. As Tony noted, a couple of one-time small items in there, but pretty close to the dividend ex those. As you said, and as we've said for a while, we set the dividend with a long-term view in mind. Where we really still have earnings left to unlock is in the REO and the impaired loan portfolio, where we can turn those assets into higher returning investments. We're not particularly focused on quarter-to-quarter results, as there's always a little bit of variability in terms of the ins and outs of fundings and things like that. We continue to have confidence that we've set the dividend level at a long-term sustainable position.

Distributable earnings.

We continued our robust investment activity looking across channel originations portfolio acquisitions, and that list and across geography is to find compelling relative value.

X charge offs at 48 relative to 47 seven dividend as Tony noted a couple of one time small items in there, but pretty close to the dividend.

Ex those and as you said and as we've said for a while we set the dividend.

And we continue to drive a more attractive cost of capital to enhance our competitiveness improving terms on both corporate and asset level financing to reflect the strong positioning and track record of our business through this period.

With a long term view in mind, and where we really still have earnings left to unlock as in the Oreo.

And the impaired loan portfolio, where we can turn.

First on Q3 Q performance also reflects our ability to capitalize on the continuing recovery in market conditions.

Those assets into higher returning investments.

We're not particularly focused on quarter to quarter results and Theres always a little bit of variability in terms of the ins and outs of fundings and and things like that but we continue to have confidence that we have set the dividend level.

Real estate fundamentals remain strong with demand stable or improving and new supply constraints liquidity and transaction activity are increasing with SaaS B C. M b as on track for a record issuance here.

Long term sustainable.

Physician.

This dynamic continues to generate robust repayment levels in our pre rate hike portfolio $1 6 billion this quarter and affords us a strong investment pipeline with $1 7 billion of total originations closed during closing post quarter end building on the $1 billion of investment activity in <unk>.

Okay.

Got it okay and.

[Analyst 2]: Got it. Okay. When you think about, for example, funding loss rate outlook, obviously you're modestly asset-sensitive, but there's so much opportunity in terms of recycling capital. I'm assuming that you guys are even in a sharply lower short-term rate environment confident that you can continue to achieve those hurdle rates, given the scale.

Yes.

Is there.

When you think about for example, hunting loss rate outlook.

Obviously, you're modestly asset sensitive, but theres, so much opportunity in terms of recycling capital.

While spreads have normalized that liquidity has returned to the market the diversity and reach of our platform's Bath sourcing engine are crucial differentiating factors.

<unk>.

Im assuming that you guys are even in <unk>.

Bob.

And with a market leading capital markets team, we've continued to drive down our cost of borrowing.

Sharply lower.

Short term rate environment confident that you can continue to achieve those hurdle rates given the scale.

These advantages on both sides of our business allow be accentuated to produce compelling returns on both an absolute and relative basis.

Yeah, I would say that's right I think the opportunity to redeploy the capital within the Oreo portfolio and the impaired loan portfolio has a really strong offset to a lower rate environment.

Tim Hayes: Yeah, I would say that's right. I think the opportunity to redeploy the capital within the REO portfolio and the impaired loan portfolio is a really strong offset to a lower rate environment.

I'll turn it over to Austin to speak in more detail about our investment portfolio and balance sheet.

Before I do I'd like to spend a minute on be excellencies opportune positioning to that.

Tony Marone: I would also add we only lose about 1 basis point of rate move, so it's not as drastic as you might be thinking.

I would also add I think it was about one.

60 basis points of rate move so it's not as drastic as you might be.

Our portfolio is turning over unlocking earnings from more challenged legacy deals and steadily increasing the proportion of our capital invested in high quality current vintage assets.

Okay I appreciate that thank you guys.

[Analyst 2]: Okay. I appreciate that. Thank you, guys.

Thank you we will take our last question from Don <unk> with Wells Fargo.

Operator: Thank you. We will take our last question from Don Fendetti with Wells Fargo.

Our balance sheet is in fantastic shape, and we remain at the forefront of both structural and cost of capital innovation.

Hi, can you talk a bit more about what youre seeing in office market fundamentals and then I think you had six upgrades and I guess at this point.

[Analyst 2]: Hi. Can you talk a bit more about what you're seeing in office market fundamentals? I mean, I think you had six upgrades. I guess at this point, is it possible that you'll end up being a bit over-reserved in your office book?

All of this has translated to healthy earnings generation supporting our dividend.

The forward trajectory of our business is embedded in this quarter's results that'd be sent to your stock price has got to catch up now.

Is it possible that youll end up being a bit over reserved in your office book.

Notwithstanding the tremendous progress we have made in the last several years.

Yeah. Thanks, Dan This Austin.

Tim Hayes: Yeah, thanks, Don. This is Austin. I definitely would say we are seeing stability and improvement across office. I think you see that, as you noted, in the movements in terms of our upgrades this quarter, six office loans upgraded. Two of them were removed from our watch list. That's really driven by leasing that we're seeing at these assets. I definitely think we're starting to see more broad-based green shoots, liquidity coming back into the market. As I noted earlier, we sold one of our impaired office assets post-quarter end. Continue to see more transaction activity, more capital coming off the sidelines for the sector. I'd say in terms of reserves, we obviously go through those every quarter. We feel like our reserve levels are appropriate. We feel good about where we set those. It's obviously a detailed asset-by-asset analysis that we do.

Definitely would say we are seeing.

Today trades within 10% of the load through this period and continues to provide a highly attractive 10, 4% dividend yield.

Ability and improvement across across office I think you see that as you noted in the the.

The movements in terms of our upgrades.

This disconnect has created the opportunity for us to repurchase over $100 million of stock. So far this year at a meaningful discount to book value.

This quarter six office loans upgraded two of them were removed from our watch list, that's really driven by leasing that were seeing at these assets.

As my tenure as CEO comes to a close I could not be more excited about the momentum of this business and our highly capable leadership team.

And so I definitely think we're starting to see.

More broad base green shoots liquidity coming back into the market as I noted earlier.

I'd also like to express my deep gratitude to the analysts and Investor community for your support and attention to be sent to you over the years.

Sold one of our inherent office assets post quarter end, so continuing to see more transaction activity more capital coming off the sidelines for that sector.

Congratulations to Tim and Austin on their new roles and Austin over to you.

I'd say in terms of reserves, we obviously go through those every quarter, we feel like our reserve levels are appropriate.

Thanks Katie.

<unk> strong third party or third quarter investment activity demonstrates the distinct advantages of our platform is differentiated scale and sourcing.

We feel good about where they where we set those.

Obviously on a detailed asset by asset.

As we closed $1 billion of total investments Crossbowman originations net lease assets and are performing bank loan portfolio that we acquired at a discount.

Analysis that we do and so we feel good about about where those are.

Tim Hayes: We feel good about where those are.

Okay, and then on a follow up I mean, you've got another quarter here, where there was fairly steady credit migration. How are you thinking about like movement to four from three in the near term do you feel like Youre in a steady state.

[Analyst 2]: Okay. On a follow-up, you've had another quarter here where there was fairly steady credit migration. How are you thinking about movement to four from three in the near term? Do you feel like you're in a steady state?

Our loan originations remain concentrated in our highest conviction sectors with 75% and multifamily and diversified industrial portfolios and over 60% in international markets, where we are capturing excess spread relative to comparable deals in the U S.

I would say that the direction of travel for credit is clearly positive in the portfolio with no new impairments.

Tim Hayes: I'd say that the direction of travel for credit is clearly positive in the portfolio with no new impairments. I'd say the direction is quite clear. Obviously, we're continuing to work through things. In terms of credit migration, we feel like we've basically resolved 70% of our impaired loans at this point and have a good line of sight to a significant amount more. We feel really good about the overall path here in terms of credit performance.

We continue to achieve attractive net interest margins setting up investments to achieve our leverage spread of more than 9% over base rents or low teens. All in returns and importantly credit characteristics remain very attractive with strong cash flow profiles light value add business plans.

I'd say.

The direction is quite clear, obviously, we're continuing to work through things but.

In terms of credit migration, we feel like we've.

Basically resolving 70% of our impaired loans at this point and a good line of sight to a significant amount more we feel really good about the overall.

LTV of 67% <unk>.

The overall path here in terms of credit performance.

Investments this quarter included a 90% lease.

Okay. Thank you.

Diversified UK industrial portfolio and of Wella monetize stabilized multifamily properties near Miami.

[Analyst 2]: Okay, thank you.

Thank you that will conclude our question and answer session. At this time I would like to turn the call back over to Tim Hayes for any additional or closing remarks.

Operator: Thank you. That will conclude our question and answer session. At this time, I'd like to turn the call back over to Tim Hayes for any additional or closing remarks.

We also steadily grew our net lease portfolio investing another $90 million across 60 properties third quarter, bringing the total portfolio to $222 million at DXP sure.

Thank you Katie and to everyone joining today's call. Please reach out with any questions.

Tim Hayes: Thank you, Katie. To everyone joining today's call, please reach out with any questions.

Goodbye.

Importantly, we have maintained a rigorous approach to credit.

Wiring assets within durable industries, and generating strong EBITDAR coverage nearly three times on average and at significant discounts to replacement cost.

[music].

With another $100 million and our closing pipeline, we continue to expand our presence in the net lease sector.

Yes.

Okay.

Sure.

To that end this quarter being sent to you acquired a 50% interest in our $600 million portfolio granular loans secured by fully occupied net lease retail assets.

[music].

With a low weighted average origination LTV of 52%.

In place debt yield over 12%.

We were uniquely positioned to evaluate this portfolio leveraging our experience net lease and loan portfolio acquisition teams to underwrite and execute this transaction.

[Analyst 1]: Thanks, Katie.

Acquiring high quality performing loans at discounts from banks remains one of our top investment teams across our platform.

These transactions have a high barrier to entry.

Operator: Thank you.

[Unknown Speaker]: Please stand by. The conference will begin shortly.

Firing bespoke sourcing capabilities or capacity to underwrite granular portfolios quickly and accurately and the operational wherewithal to onboard and manage hundreds of loans seamlessly.

France will begin shortly.

[music].

At Blackstone, we have invested in building market, leading capabilities to execute leveraging the scale of our team and our data.

And the price is quite compelling.

High credit quality loans with convexity and duration.

Matic sectors outsized risk adjusted returns.

And with bank M&A accelerating we see more opportunities like this on the horizon.

Turning to the portfolio market tail winds are driving increasing investor demand for assets large and small and supporting positive credit outcomes.

We collected $1 6 billion of total repayments in the third quarter, including four loans greater than 200 million to secured by Texas multifamily assets and two abroad, a European hotel portfolio I know London office building.

We had no new impaired loans this quarter, we resolved two previously impaired loans at a premium to aggregate carrying values and we upgraded eight clubs, including six office once removing two from our watch list.

Our loan portfolio is now 96% performing in our impaired loan balance continues to decline now at 71% below last year's peak.

We expect to complete additional resolutions next quarter with one impaired office asset sold last week and others in advanced stages.

<unk> are taking note with acquisition volume is picking up across sectors.

Together, 25%, our Oreo portfolio today is in the Bay area, including our largest asset a fully renovated hotel how that nearly 60% below the prior owner's basis and more than 70% below replacement cost.

San Francisco has long been amongst the most cyclical markets in the country and today, we are positioned to capitalize on the upswing.

I mean, a strong capital markets backdrop, <unk> has taken advantage refinancing and extending over $2 billion of corporate debt in the last 12 months.

Debt markets have been resilient through recent market volatility with spreads still sitting within 20 basis points of all time tights.

We borrowed over 15 basis points tighter than the third quarter compared to the prior quarter improves.

Improving our cost of capital and advancing our overarching goal to generate an attractive stable stream of current income for our investors.

And with that I'll pass it over to Tony to unpack our financial results.

You Austin and good morning, everyone.

In the third quarter <unk> reported GAAP net income of 37 cents per share and distributable earnings or <unk> 24 per share.

B E prior to charge offs, which excludes realized losses related to two long resolutions with 48 per share.

An increase of <unk> <unk> from the prior quarter and one of our 47.

Got it.

D benefited from <unk> continued execution on key initiatives with investment activity loan resolutions and accretive capital markets execution, all contributing to this quarter's strong results.

We also recognized <unk> default interest from our multifamily loan that repaid in full.

Looking forward, we expect our earnings will continue to benefit from capital redeployment and resolutions of impaired loans, including the two that closed on the last day of the quarter as we unlock the earnings potential of that capital.

For reference we collected six tenths of interest for impaired loans, this quarter, which were excluded from earnings or cost recovery.

We ended the quarter with book value of $20.99 per share it was largely stable quarter over quarter.

<unk> strong credit performance loan resolutions executed above carrying values and accretive share repurchases.

When considering the 47 dividend <unk> provided an 8% annualized economic return to stockholders this quarter.

<unk> repurchased $16 million of common stock in Q3 at an average share price of $18 69.

A significant discount to book value.

And so far in Q4, we've accelerated buybacks through recent market volatility repurchasing another $61 million of stock at an even lower level.

In total we repurchased nearly $140 million of shares since establishing our program in 2024.

Last week received board approval to replenish our $150 million buyback capacity.

Our book value at 930 $712 million 14.

$4 16 per share seasonal reserves, which declined from $755 million $4 39 per share in the prior quarter.

As we crystallize $42 million of specific seasonal reserves in connection with two impaired loan resolution.

As Katie mentioned earlier these resolutions were executed at a premium to aggregate carrying values contributing to an $11 million net reserve reversal in our specific seasonal reserve.

And offsetting the modest $10 million.

Ours are.

Turning to our balance sheet <unk> remains well positioned to address today's attractive investment environment.

The equity down to three five times strong liquidity of $1 3 billion.

And over $7 billion of available financing capacity as of quarter end.

And in October we closed a new $250 million non mark to market credit facility with an international Bank recent.

Our recently established their CRE loan warehousing business targeted Blackstone as one of their first and largest relationships.

Another example of our strong position in the market and ability to drive differentiated results for stockholders.

We continue to take advantage of the supportive capital markets backdrop further optimize our cost of capital as we re priced $400 million of corporate term loan during the quarter.

Reducing spread by 100 basis points and upsizing the deal by $50 million.

Strong demand from institutional investors.

And just last week, we collapsed <unk> 2000, 20-F, L. III, CLO, which we replaced with balance sheet financing at a lower spread.

CLO market remains robust with new issuance nearly tripling last year's total and tracking its strongest year since 2022.

We've been a consistent issuer in this market completing our fifth transaction earlier this year and we are well positioned to take advantage of the supportive market backdrop.

Before opening the call to Q&A I will turn it over to <unk>, chairman and incoming CEO, Tim Johnson for a few closing remarks, thanks, Tony first and foremost I'd like to thank Katy for her dedicated service to be X M. T. The board and our shareholders 80 leaves <unk> in a tremendous spot with a global portfolio, that's delivering for our investors.

And a team that's poised to capture this exciting investment environment.

I've had the pleasure of working alongside Katy throughout her Blackstone tenure and I'm extremely grateful for all the hard work strategic insight and strong execution she's brought with her each and every day.

She's been an inspiring partner and leader that will leave a lasting impression on our business well.

While we'll no doubt Ms. Katy we wish her well in her next chapter and are confident the team will step up in a place.

Personally I'm excited to have been appointed CEO of <unk> and to work closely with Austin to continue to build on the momentum our business has today.

<unk> has always been the backbone of <unk> investment process.

I'm looking forward to working more with all of you along the way and with that I'll now ask the operator to open the call to questions.

Okay.

As a reminder, please press star one to ask a question.

We ask you limit yourself to one question and one follow up question to allow as many callers join the queue as possible. We will take our first question from Catharine <unk> with BTG.

Okay.

Thank you and good morning, everybody.

Just first off congratulations and best of luck in your new role.

It's been an absolute pleasure, having you in this position.

And then.

Second just wanted to follow up on your prepared remarks, where you mentioned a recovery in transaction activity and return of liquidity to the CRE markets.

Two items around that first off can you provide a little bit more color on exactly where you're seeing that is that U S and Europe or is it just pockets that you are seeing that recovery and then second if that recovery in transactions is more here in the U S, which is what it seems like to us could we see a larger portion of your origination activity.

Pivot back to U S loans, instead of more Europe loans, which you've been doing so far this year.

Thanks, Tom This is Tim I'll take that I'd say liquidity certainly has returned to markets I would say both in the U S and in Europe.

As you pointed out a bit stronger on a relative basis in the U S and mainly driven by a more established the MBS market here in the United States as Katie referenced tracking toward an all time high in terms of liquidity. So.

So I would say, it's a little bit further ahead as you would expect in the U S versus Europe, but both places are continuing to see capital markets.

Open up and be pretty strong in terms of the U S versus Europe on an ongoing basis, what we love is being able to have a platform that can look across.

All of the regions and establish.

Are you on relative value at any moment in time, so that does shift overtime.

The U S continues to be the biggest market for us just a larger transaction market. Overall, so I think youll continue to see this be the largest share of our investment activity over a long period of time, but we certainly look at both in play relative value across both.

I appreciate that Tim Thank you.

Second one for me maybe.

Maybe Austin.

Of the Oreo portfolio, Ken first of all can you remind us of the potential earnings uplift as that capital comes back over time and second do you need to set aside incremental capital for the New York City Hotel that you took on balance sheet during the quarter or is that we're in pretty good shape already.

Yes, thanks for the question.

I would say generally.

We haven't given specific numbers in terms of the potential earnings uplift, but obviously the Oreo assets are not generating our targeted returns and we certainly see the opportunity to as we turn over the portfolio exit these RVO assets over time to drive additional earnings power as we do that.

Specifically with regards to Capex and conditions I would say firstly, we have a tremendous amount.

The insight into the needs are.

Across across these assets.

And we we really don't feel.

There is a significant component of capex needed to the extent. They said it is needed. We certainly have the capability to do that with over $1 $3 billion of.

Of liquidity.

But I'd say.

The condition of these assets across the board.

It's pretty good.

We feel comfortable with our positioning.

Got it I appreciate the answers thanks, everyone.

Thank you we'll take our next question from Harsha <unk> with Green Street.

Thank you.

Maybe one on how you're thinking about.

Originating new loans versus buying back into the cap structure.

A particular premium or discount to book at rich.

You're thinking that buybacks I, perhaps more accretive than you would originations.

<unk>.

Sounds like <unk>.

It's stepping up on the origination front.

So on the buyback front, so I'm just trying to understand.

Matthew Gladstone.

Quite active in so that's I'd say, that's a pretty dynamic analysis, but we've captured the we've taken advantage of the opportunity to buyback when the stock is traded at levels that we think are quite attractive.

Provide very high return on investment.

That's how we look at it we continue to look at it dynamically overtime.

Got it.

And then maybe one or two of makeup of the investment portfolio this quarter.

It's like roughly two codes.

Originations this quarter.

So their traditional floating rate loan portfolio and <unk>.

And that leads in backyard portfolio acquisitions.

BB thinking about these fixed rate loans, that's sort of being in the lab.

To be able to.

You will see our floating rate exposure to ahead of what most would expecting too.

We're expecting to see lower floating dates in the future.

Yes. Thank.

I can take that.

Yeah, you're correct in that we really are looking across different channels to deploy our capital right now one of the things we like about net lease in these bank portfolios is that.

They do add some duration and create a natural hedge to our sort of traditional floating rate business.

Bank portfolios in particular, as we noted earlier, we're buying those at a discount to par.

And that that provide some upside convexity to the extent those those loans repay more quickly than we underwrite.

We like that as well from a from a risk adjusted return basis.

So I think youll continue to see us look across different types of investments across these channels to really think about the best relative value.

And really started to diversify the composition of our earnings.

Got it thank you.

Thank you we will take our next question from Jade Rahmani.

With K B W.

C&I lending and also a couple of theory items so the.

The commercial mortgage REIT sector also seems to have been caught in this down draft and my main question is whether you've seen any spillover effects into the CRE markets as yet and if youre doing anything differently, perhaps more defensively to prepare for any weakness that may unfold.

Thanks Jade.

We're not seeing it in real estate credit.

We are in an environment with real estate credit, where we've gone through a pretty significant downturn.

And now we are quite clearly in recovery mode.

Coming out of that downturn, so I would say the real estate credit market has been somewhat uniquely tested already and has experienced the challenge is not to say that there might not be other challenges around the quarter, but it definitely is more battle tested I would say overall and so that translates through to what we see on the new origination side of things in terms of credit quality.

Generically youre going to have a more tighter.

Tighter lending market coming out of a cycle like we've been through we're credit standards are higher.

And so we're not seeing that type of deterioration that that's been referenced elsewhere.

We're seeing much like what youre seeing in the <unk> portfolio itself improves credit overall.

Thank you and in terms of the pace of <unk> investments and originations.

Notwithstanding the bank loan JV, which I believe would have higher roe's than the traditional business.

Was there anything that drove a more muted pace of originations.

Perhaps it was on the liability management side, putting in place the new repo line.

You know the tighter spreads on the term loan as well as calling the CLO was that in preparation of stronger originations and maybe weighed on volume in the quarter.

Yeah Jade this is Austin.

We obviously made a $1 billion in total investments this quarter, which we think is a good about.

I would say that we have a $1 $7 billion in closing as well as our pipeline of opportunities remains really robust. So I'd say, we're actively investing in the environment.

I would say there might've been a modest impact.

In Italy with some of the volatility we saw sort of in the spring around some of the tariffs, which may have impacted some certain timing of transactions overall, but over but really across all our channels. We really see a lot of interesting opportunities both in Europe, and the United States. So we feel good about the level of a tree.

Action activity going forward.

Thank you.

Thank you we'll take our next question from Doug Harter with UBS.

Awesome, Thanks sort of touching on that last point.

How do you see.

The pace of kind of the net.

Net deployment.

In the portfolio.

In the coming quarters.

How do you think about what is the right.

Level of leverage that you guys are targeting.

I'd say I'll take the first in terms of deployment I think it's pretty good indication of what you saw this past quarter, where we're having a healthy amount of prepayment activity and then turning that directly into new investment activities. So I think we're at a place where we feel pretty good about being kind of at a run rate in terms of repayments and deployment overall.

So I think that that would remain consistent.

Consistent.

And on the leverage side like how are you thinking about what is the right level of leverage to run this business.

At this part of the cycle.

Yeah, Doug on leverage obviously, you were at three five times today, which is right in the middle of the range that we target and.

And so I think we've always been sort of in that.

Mid threes over the last quite period. So we certainly have liquidity and capacity to sort of go up a little bit from there.

And again, we're seeing good opportunity. So we feel very comfortable with the balance sheet today and where we are.

From that perspective.

Thank you.

We'll take our next question from Rick Shane with J P. Morgan.

Hey, guys. Thanks for taking my question and I apologize to like everybody, we're bouncing around between calls surfaces and cover <unk>.

Colleges.

Look when we look at the.

Implied.

Dividend yield is a function of block it's about 9%.

You guys are here.

Yeah.

You think about the past covering that dividend, which is obviously not only well, but there are indications.

Hany in that dividend.

Can you walk us through sort of what the different levers in terms of higher yields reducing non accruals reducing oreo.

What you think are sort of rank those opportunities.

And perhaps give us some sense of what the contribution of aegis.

Yes, Thanks, Rick I'd say, obviously it was good to cover the dividend this quarter in terms of.

Distributable earnings ex charge offs at 48 relative to 47% dividend as Tony noted a couple of onetime small items in there, but pretty close to the dividend.

Ex those and as you said and as we've said for a while we set the dividend.

With a long term view in mind, and where we really still have earnings left to unlock as in the Oreo.

And the impaired loan portfolio, where we can turn.

Those assets into higher returning investments.

Long term sustainable.

Physician.

Okay.

Got it okay and.

Yes.

Is there.

When you think about for example on Cmos radar outlook.

You know, obviously, you're modestly asset sensitive, but theres so much opportunity in terms of recycling capital.

<unk>.

I'm, assuming you guys or even all the way up.

Sharply lower.

Short term rate environment confident that you can continue to achieve those hurdle rates given the scale.

Yeah, I would say that's right I think the opportunity to redeploy the capital within the Oreo portfolio and the impaired loan portfolio has a really strong offset to a lower rate environment.

I would also add we got confused about what's your.

Basis points of rate move so it's not as drastic as you might be thinking.

Okay I appreciate that thank you guys.

Thank you we will take our last question from Don Vendetti with Wells Fargo.

Can you talk a bit more about what youre seeing in office market fundamentals I mean, I think you had six upgrades.

At this point.

It's possible that youll end up being a bit over reserved in your office book.

Yes, Thanks, Dan This Austin I definitely would say we are seeing.

Stability and improvement across across office I think you see that as you noted in the the movements in terms of our upgrades. This quarter six office loans upgraded two of them were removed from our watch list, that's really driven by leasing that were seeing at these assets.

And so I definitely think we're starting to see.

More broad base green shoots liquidity coming back into the market as I noted earlier.

Sold one of our inherent office assets post quarter end, so continuing to see more transaction activity more capital coming off the sidelines for that sector.

I'd say in terms of reserves, we obviously go through those every quarter, we feel like our reserve levels are appropriate.

We feel good about where they where we set those its obviously a detailed asset by asset.

Dallas is that we do and so we feel good about about where those are.

Okay, and then on a follow up I mean, you've had another quarter here, where there was fairly steady credit migration. How are you thinking about like movement to four from three in the near term do you feel like Youre in a steady state.

I would say that the direction of travel for credit is clearly positive in the portfolio with no new impairments, So I'd say no.

The direction is quite clear, obviously, we're continuing to work through things but.

In terms of credit migration, we feel like we've.

Basically resolve being 70% of our impaired loans at this point and a good line of sight to a significant amount more we feel really good about the overall.

The overall path here in terms of credit performance.

Okay. Thank you.

Thank you that will conclude our question and answer session. At this time I would like to turn the call back over to Tim Hayes for any additional or closing remarks.

Thank you Katie and to everyone joining today's call. Please reach out with any questions.

Goodbye.

Okay.

Yeah.

Yes.

Yeah.

Okay.

Yes.

Yeah.

[music].

Yeah.

Okay.

Yes.

Please standby the conference will begin shortly.

[music].

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