Blackstone Mortgage Trust Posts Loss as Reserves Nearly Triple
Blackstone Mortgage Trust swung to an $81.2 million net loss in the second quarter as credit-loss provisions tripled from a year earlier.
Blackstone Mortgage Trust (BXMT), the commercial real estate lender externally managed by Blackstone, reported a GAAP net loss of $(0.48) a share in the second quarter, compared with net income of $0.04 a share a year earlier. The loss attributable to the company totaled $81.2 million, versus net income of $7.0 million in the second quarter of 2024.
The swing traced to a sharp rise in credit-loss provisioning rather than a revenue shortfall. Total net revenue actually rose to $158.1 million from $133.6 million a year earlier, lifted by owned real estate revenue that nearly doubled to $75.5 million from $38.8 million, even as income from loans and other investments slipped to $82.6 million from $94.8 million. What overwhelmed that gain was a CECL reserve expense that widened to $134.4 million from $45.6 million, roughly tripling year-over-year and standing as the primary driver of the net loss.
The reserve build continued into the balance sheet. CECL reserves rose $106 million quarter-over-quarter to $410 million in total, including $219 million of asset-specific reserves, a sharper increase than the $55 million added in the first quarter, when the company reported a smaller $6.3 million net loss. Book value per share fell to $19.31 as of June 30 from $20.20 at the end of March, a decline of about 4.4% in three months.
Credit quality showed a mixed picture beneath the reserve build. The watchlist saw a 23% net reduction, with one loan upgraded and three downgraded, but three new loans were flagged as impaired, two of them office properties, even as one impaired multifamily loan was resolved through a transfer to owned real estate. A separate loan-performance metric that had climbed from 96% in the third quarter of 2023 to 99% by year-end has since eased to 98% in the first quarter and 97% in the second, a slower deterioration than the net loss might suggest but a deterioration nonetheless.
Distributable earnings, the metric more closely tied to the dividend, told a steadier story. Distributable EPS rose to $0.31 in the second quarter from $0.21 in the first, though that gain reflected realized gains; stripped of those gains, distributable EPS held at $0.48, matching the first quarter and extending a four-quarter slide from $0.51 in the third quarter of 2023 and $0.49 in the fourth.
The balance sheet contracted alongside the credit costs. Total assets fell to $19.40 billion at June 30 from $20.00 billion at the end of 2023, with loans receivable, net, declining to $16.94 billion from $17.78 billion. Secured debt, net, dropped more sharply, to $8.71 billion from $10.12 billion, while the company shifted financing toward securitized debt obligations, which rose to $2.73 billion from $2.14 billion, and senior secured notes, which climbed to $1.22 billion from $785 million after a $500 million issuance of notes due 2031 in the quarter. Non-mark-to-market debt held at 88% of the total, with one new such facility added during the quarter alongside 16 bank counterparties and $1.2 billion of liquidity.
Blackstone Mortgage Trust continued to redirect new investment toward residential, industrial and net-lease assets, which made up 78% of the quarter's $1.4 billion in investments and 80% on a trailing-twelve-month basis, a mix the company has flagged as a strategic priority. It also disclosed a new Homebuilder Finance Joint Venture established during the quarter, a 45%-owned vehicle that acquired $100 million of single-family construction loans at the company's share, marking the first appearance of the segment in its results.