false2019Q200010616302023-032023-032022-082022-08002022-022022-022022-04Dec. 31, 20292015 2017 2018--12-31BLACKSTONE MORTGAGE TRUST, INC.The collateral assets for the 2017 Single Asset Securitization include the total loan amount, of which we securitized $500.0 million.During the three and six months ended June 30, 2019, we recorded $8.4 million and $20.9 million, respectively, of interest expense related to our securitized debt obligations. During the three and six months ended June 30, 2018, we recorded $12.0 million and $23.1 million, respectively, of interest expense related to our securitized debt obligations.Loan term represents weighted-average final maturity, assuming all extension options are exercised by the borrower. Repayments of securitized debt obligations are tied to timing of the related collateral loan asset repayments. The term of these obligations represents the rated final distribution date of the securitizations.As of June 30, 2019, all of our loans financed by securitized debt obligations earned a floating rate of interest. As of December 31, 2018, 98% of our loans financed by securitized debt obligations earned a floating rate of interest. In addition to cash coupon, all-in yield includes the amortization of deferred origination and extension fees, loan origination costs, purchase discounts, and accrual of exit fees. 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Table of Contents
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM
10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FOR THE TRANSITION PERIOD FROM
                    
TO
                    
Commission File Number:
001-14788
 
Blackstone Mortgage Trust, Inc.
(Exact name of Registrant as specified in its charter)
     
Maryland
 
94-6181186
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
345 Park Avenue, 42nd Floor
New York
,
New York
10154
(Address of principal executive offices)(Zip Code)
(
212
)
655-0220
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
 
Securities registered pursuant to Section 12(b) of the Act: 
         
Title of each class
 
Trading
symbol(s)
 
Name of each exchange
on which registered
Class A common stock
, par value $0.01 per share
 
BXMT
 
New York Stock Exchange
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    
Yes
  
    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    
Yes
  
    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
             
Large accelerated filer
 
  
 
Accelerated filer
 
  
 
 
 
 
 
 
 
Non-accelerated
filer
 
  
 
Smaller reporting company
 
  
 
 
 
 
 
 
 
 
 
Emerging growth company
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  
    
No
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The number of the registrant’s outstanding shares of class A common stock, par value $0.01 per share, outstanding as of July 16, 2019 was
134,288,584
.
 
 
 

 
 
Table of Contents
 
 
TABLE OF CONTENTS
             
PART I.
     
 
             
ITEM 1.
     
2
 
             
 
Consolidated Financial Statements (Unaudited):
   
 
             
     
2
 
             
     
3
 
             
     
4
 
             
     
5
 
             
     
7
 
             
     
9
 
             
ITEM 2.
     
42
 
             
ITEM 3.
     
61
 
             
ITEM 4.
     
64
 
             
PART II.
     
 
             
ITEM 1.
     
65
 
             
ITEM 1A.
     
65
 
             
ITEM 2.
     
65
 
             
ITEM 3.
     
65
 
             
ITEM 4.
     
65
 
             
ITEM 5.
     
65
 
             
ITEM 6.
     
66
 
           
68  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Blackstone Mortgage Trust, Inc.
Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)
                 
 
June 30,
   
December 31,
 
 
2019
   
2018
 
Assets
   
     
 
Cash and cash equivalents
  $
80,584
    $
105,662
 
Loans receivable, net
   
14,280,919
     
14,191,200
 
Other assets
   
203,501
     
170,513
 
                 
Total Assets
  $
14,565,004
    $
14,467,375
 
                 
                 
Liabilities and Equity
   
     
 
Secured debt agreements, net
  $
8,257,370
    $
8,974,756
 
Loan participations sold, net
   
     
94,418
 
Securitized debt obligations, net
   
1,287,364
     
1,285,471
 
Secured term loan, net
   
491,598
     
—  
 
Convertible notes, net
   
611,472
     
609,911
 
Other liabilities
   
140,775
     
128,212
 
                 
Total Liabilities
   
10,788,579
     
11,092,768
 
                 
                 
Commitments and contingencies
   
     
—  
 
                 
Equity
   
     
 
Class A common stock, $0.01 par value, 200,000,000 shares authorized, 134,288,258 and 123,435,738 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively
   
1,343
     
1,234
 
Additional
paid-in
capital
   
4,354,571
     
3,966,540
 
Accumulated other comprehensive loss
   
(29,420
)    
(34,222
)
Accumulated deficit
   
(579,131
)    
(569,428
)
                 
Total Blackstone Mortgage Trust, Inc. stockholders’ equity
   
3,747,363
     
3,364,124
 
Non-controlling
interests
   
29,062
     
10,483
 
                 
Total Equity
   
3,776,425
     
3,374,607
 
                 
Total Liabilities and Equity
  $
     14,565,004
    $
     14,467,375
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
 
 
 
 
 
 
 
 
Note: The consolidated balance sheets as of June 30, 2019 and December 31, 2018 include assets of consolidated variable interest entities, or VIEs, that can only be used to settle obligations of each respective VIE, and liabilities of consolidated VIEs for which creditors do not have recourse to Blackstone Mortgage Trust, Inc. As of both June 30, 2019 and December 31, 2018, assets of the consolidated VIEs totaled $1.5 billion and liabilities of the consolidated VIEs totaled $1.3 billion. Refer to Note 16 for additional discussion of the VIEs.
See accompanying notes to consolidated financial statements.
 
 
2
 
 

 
Table of Contents
Blackstone Mortgage Trust, Inc.
Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)
                                 
 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
 
2019
   
2018
   
2019
   
2018
 
Income from loans and other investments
   
     
     
     
 
Interest and related income
  $
223,369
    $
191,479
    $
448,128
    $
346,904
 
Less: Interest and related expenses
   
116,891
     
87,733
     
235,579
     
157,722
 
                                 
Income from loans and other investments, net
   
106,478
     
103,746
     
212,549
     
189,182
 
Other expenses
   
     
     
     
 
Management and incentive fees
   
20,984
     
22,388
     
40,774
     
37,880
 
General and administrative expenses
   
9,897
     
8,747
     
19,210
     
17,454
 
                                 
Total other expenses
   
30,881
     
31,135
     
59,984
     
55,334
 
                                 
Income before income taxes
   
75,597
     
72,611
     
152,565
     
133,848
 
Income tax provision
   
46
     
104
     
147
     
224
 
                                 
Net income
   
75,551
     
72,507
     
152,418
     
133,624
 
                                 
Net income attributable to
non-controlling
interests
   
(377
)    
(195
)    
(680
)    
(353
)
                                 
Net income attributable to Blackstone Mortgage Trust,  Inc.
  $
75,174
    $
72,312
    $
151,738
    $
133,271
 
                                 
Net income per share of common stock basic and diluted
  $
0.59
    $
0.66
    $
1.21
    $
1.23
 
                                 
Weighted-average shares of common stock outstanding, basic and diluted
   
  126,475,244
     
  109,069,078
     
   125,410,064
     
  108,735,193
 
                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to consolidated financial statements.
 
 
3
 

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Consolidated Statements of Comprehensive Income (Unaudited)
(in thousands)
                                 
 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
 
2019
   
2018
   
2019
   
2018
 
Net income
  $
75,551
    $
72,507
    $
152,418
    $
133,624
 
Other comprehensive income
   
     
     
     
 
Unrealized loss on foreign currency translation
   
(9,578
)    
(35,088
)    
(4,164
)    
(24,350
)
Realized and unrealized gain on derivative financial instruments
   
10,914
     
24,855
     
8,966
     
21,920
 
                                 
Other comprehensive income (loss)
   
1,336
     
(10,233
)    
4,802
     
(2,430
)
                                 
Comprehensive income
   
76,887
     
62,274
     
157,220
     
131,194
 
Comprehensive income attributable to
non-controlling
interests
   
(377
)    
(195
)    
(680
)    
(353
)
                                 
Comprehensive income attributable to Blackstone Mortgage Trust, Inc.
  $
     76,510
    $
     62,079
    $
     156,540
    $
     130,841
 
                                 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to consolidated financial statements.
 
4
 

 
Table of Contents
Blackstone Mortgage Trust, Inc.
Consolidated Statements of Changes in Equity (Unaudited)
(in thousands)
                                                         
 
Blackstone Mortgage Trust, Inc.
   
   
   
 
Class A
Common
Stock
   
Additional
Paid-In

Capital
   
Accumulated Other
Comprehensive
(Loss) Income
   
Accumulated
Deficit
   
Stockholders’
Equity
   
Non-controlling

Interests
   
Total
Equity
 
Balance at December 31, 2018
  $
1,234
    $
3,966,540
    $
(34,222
)   $
(569,428
)   $
3,364,124
    $
10,483
    $
3,374,607
 
Shares of class A common stock issued, net
   
23
     
65,358
     
—  
     
—  
     
65,381
     
—  
     
65,381
 
Restricted class A common stock earned
   
—  
     
7,639
     
—  
     
—  
     
7,639
     
—  
     
7,639
 
Dividends reinvested
   
—  
     
143
     
—  
     
(132
)    
11
     
—  
     
11
 
Deferred directors’ compensation
   
—  
     
125
     
—  
     
—  
     
125
     
—  
     
125
 
Other comprehensive income
   
—  
     
—  
     
3,466
     
—  
     
3,466
     
—  
     
3,466
 
Net income
   
—  
     
—  
     
—  
     
76,565
     
76,565
     
302
     
76,867
 
Dividends declared on common stock, $0.62 per share
   
—  
     
—  
     
—  
     
(77,913
)    
(77,913
)    
—  
     
(77,913
)
Contributions from
non-controlling
interests
   
—  
     
—  
     
—  
     
—  
     
—  
     
1,470
     
1,470
 
Distributions to
non-controlling
interests
   
—  
     
—  
     
—  
     
—  
     
—  
     
(64
)    
(64
)
                                                         
Balance at March 31, 2019
  $
1,257
    $
4,039,805
    $
(30,756
)   $
(570,908
)   $
3,439,398
    $
12,191
    $
3,451,589
 
                                                         
Shares of class A common stock issued, net
   
86
     
306,866
     
     
     
306,952
     
     
306,952
 
Restricted class A common stock earned
   
     
7,629
     
     
     
7,629
     
     
7,629
 
Dividends reinvested
   
     
146
     
     
(138
)    
8
     
     
8
 
Deferred directors’ compensation
   
     
125
     
     
     
125
     
     
125
 
Other comprehensive income
   
     
     
1,336
     
     
1,336
     
     
1,336
 
Net income
   
     
     
     
75,174
     
75,174
     
377
     
75,551
 
Dividends declared on common stock, $0.62 per share
   
     
     
     
(83,259
)    
(83,259
)    
     
(83,259
)
Contributions from
non-controlling
interests
   
     
     
     
     
     
17,158
     
17,158
 
Distributions to
non-controlling
interests
   
     
     
     
     
     
(664
)    
(664
)
                                                         
Balance at June 30, 2019
  $
   1,343
    $
   4,354,571
    $
(29,420
)   $
(579,131
)   $
   3,747,363
    $
29,062
    $
   3,776,425
 
                                                         
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to consolidated financial statements.
 
5
 

 
Table of Contents
Blackstone Mortgage Trust, Inc.
Consolidated Statements of Changes in Equity (Unaudited)
(in thousands)
                                                         
 
Blackstone Mortgage Trust, Inc.
   
   
   
 
Class A Common
Stock
   
Additional 
Paid-In
Capital
   
Accumulated Other Comprehensive
(Loss) 
Income
   
Accumulated
Deficit
   
Stockholders’
Equity
   
Non-controlling
Interests
   
Total
Equity
 
Balance at December 31, 2017
  $
1,079
    $
3,506,861
    $
(29,706
)   $
(567,168
)   $
2,911,066
    $
6,340
    $
2,917,406
 
Shares of class A common stock issued, net
   
3
     
—  
     
—  
     
—  
     
3
     
—  
     
3
 
Restricted class A common stock earned
   
—  
     
6,848
     
—  
     
—  
     
6,848
     
—  
     
6,848
 
Issuance of convertible notes
   
—  
     
1,462
     
—  
     
—  
     
1,462
     
—  
     
1,462
 
Dividends reinvested
   
—  
     
122
     
—  
     
(108
)    
14
     
—  
     
14
 
Deferred directors’ compensation
   
—  
     
125
     
—  
     
—  
     
125
     
—  
     
125
 
Other comprehensive income
   
—  
     
—  
     
7,803
     
—  
     
7,803
     
—  
     
7,803
 
Net income
   
—  
     
—  
     
—  
     
60,958
     
60,958
     
158
     
61,116
 
Dividends declared on common stock, $0.62 per share
   
—  
     
—  
     
—  
     
(67,066
)    
(67,066
)    
—  
     
(67,066
)
Contributions from
non-controlling
interests
   
—  
     
—  
     
—  
     
—  
     
—  
     
375
     
375
 
Distributions to
non-controlling
interests
   
—  
     
—  
     
—  
     
—  
     
—  
     
(1,575
)    
(1,575
)
                                                         
Balance at March 31, 2018
  $
1,082
    $
3,515,418
    $
(21,903
)   $
(573,384
)   $
2,921,213
    $
5,298
    $
2,926,511
 
                                                         
Shares of class A common stock issued, net
   
32
     
102,463
     
—  
     
—  
     
102,495
     
—  
     
102,495
 
Restricted class A common stock earned
   
—  
     
6,653
     
—  
     
—  
     
6,653
     
—  
     
6,653
 
Conversion of convertible notes
   
—  
     
(20
   
—  
     
—  
     
(20
   
—  
     
(20
Dividends reinvested
   
—  
     
128
     
—  
     
(115
)    
13
     
—  
     
13
 
Deferred directors’ compensation
   
—  
     
125
     
—  
     
—  
     
125
     
—  
     
125
 
Other comprehensive income
   
—  
     
—  
     
(10,233
)    
—  
     
(10,233
)    
—  
     
(10,233
)
Net income
   
—  
     
—  
     
—  
     
72,313
     
72,313
     
195
     
72,508
 
Dividends declared on common stock, $0.62 per share
   
—  
     
—  
     
—  
     
(69,079
)    
(69,079
)    
—  
     
(69,079
)
Contributions from
non-controlling
interests
   
—  
     
—  
     
—  
     
—  
     
—  
     
2,100
     
2,100
 
Distributions to
non-controlling
interests
   
—  
     
—  
     
—  
     
—  
     
—  
     
(2,411
)    
(2,411
)
                                                         
Balance at June 30, 2018
  $
   1,114
    $
   3,624,767
    $
   (32,136
)   $
   (570,265
)   $
   3,023,480
    $
   5,182
    $
   3,028,662
 
                                                         
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to consolidated financial statements.
 
6
 
 

 
Table of Contents
Blackstone Mortgage Trust, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
                 
 
Six Months Ended
June 30,
 
 
2019
   
2018
 
Cash flows from operating activities
   
     
 
Net income
  $
152,418
    $
133,624
 
Adjustments to reconcile net income to net cash provided by operating activities
   
     
 
Non-cash
compensation expense
   
15,522
     
13,754
 
Amortization of deferred fees on loans and debt securities
   
(28,511
)    
(24,161
)
Amortization of deferred financing costs and premiums/discount on debt obligations
   
15,232
     
13,631
 
Changes in assets and liabilities, net
   
     
 
Other assets
   
(1,285
)    
(16,582
)
Other liabilities
   
3,808
     
14,745
 
                 
Net cash provided by operating activities
   
157,184
     
135,011
 
                 
Cash flows from investing activities
   
     
 
Origination and fundings of loans receivable
   
(1,922,219
)    
(4,200,035
)
Principal collections and sales proceeds from loans receivable and debt securities
   
    1,807,121
     
    1,966,125
 
Origination and exit fees received on loans receivable
   
17,721
     
62,200
 
Receipts under derivative financial instruments
   
9,893
     
20,784
 
Payments under derivative financial instruments
   
(2,941
)    
(7,452
)
Collateral deposited under derivative agreements
   
(9,090
)    
(17,750
)
Return of collateral deposited under derivative agreements
   
9,090
     
21,870
 
                 
Net cash used in investing activities
   
(90,425
)    
(2,154,258
)
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
continued...
See accompanying notes to consolidated financial statements.
 
 
7
 
 

 
Table of Contents
Blackstone Mortgage Trust, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
 
 
                 
 
Six Months Ended
June 30,
 
 
2019
   
2018
 
Cash flows from financing activities
   
     
 
Borrowings under secured debt agreements
  $
1,464,038
    $
4,602,835
 
Repayments under secured debt agreements
   
(2,172,557
)    
(2,824,358
)
Proceeds from sale of loan participations
   
21,346
     
72,384
 
Repayment of loan participations
 
 
(115,874
)
 
 
—  
 
Net proceeds from issuance of secured term loans
   
498,750
     
—  
 
Payment of deferred financing costs
   
(23,323
)    
(15,815
)
Contributions from
non-controlling
interests
   
18,628
     
2,475
 
Distributions to
non-controlling
interests
   
(728
)    
(3,986
)
Net proceeds from issuance of convertible notes
 
 
—  
 
 
 
214,775
 
Repayment of convertible notes
 
 
—  
 
 
 
(192
)
Net proceeds from issuance of class A common stock
   
372,329
     
102,496
 
Dividends paid on class A common stock
   
(154,443
)    
(133,968
)
                 
Net cash (used in) provided by financing activities
   
(91,834
)    
2,016,646
 
                 
Net decrease in cash and cash equivalents
   
(25,075
)    
(2,601
)
Cash and cash equivalents at beginning of period
   
105,662
     
102,518
 
Effects of currency translation on cash and cash equivalents
   
(3
)    
7,140
 
                 
Cash and cash equivalents at end of period
  $
80,584
    $
107,057
 
                 
Supplemental disclosure of cash flows information
   
     
 
Payments of interest
  $
(219,573
)   $
(138,451
)
                 
Payments of income taxes
  $
(99
)   $
(263
)
                 
Supplemental disclosure of non-cash investing and financing activities
   
   
Dividends declared, not paid
  $
(83,259
)   $
(69,094
)
                 
Loan principal payments held by servicer, net
  $
32,975
    $
1,330
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to consolidated financial statements.
 
 
8
 
 

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. ORGANIZATION
References herein to “Blackstone Mortgage Trust,” “Company,” “we,” “us” or “our” refer to Blackstone Mortgage Trust, Inc. and its subsidiaries unless the context specifically requires otherwise.
Blackstone Mortgage Trust is a real estate finance company that originates senior loans collateralized by commercial real estate in North America, Europe, and Australia. Our investment objective is to preserve and protect shareholder capital while producing attractive risk-adjusted returns primarily through dividends generated from current income from our loan portfolio. We are externally managed by BXMT Advisors L.L.C., or our Manager, a subsidiary of The Blackstone Group Inc., or Blackstone, and are a real estate investment trust, or REIT, traded on the New York Stock Exchange, or NYSE, under the symbol “BXMT.” Our principal executive offices are located at 345 Park Avenue, 42
nd
Floor, New York, New York 10154. We were incorporated in Maryland in 1998, when we reorganized from a California common law business trust into a Maryland corporation.
We conduct our operations as a REIT for U.S. federal income tax purposes. We generally will not be subject to U.S. federal income taxes on our taxable income to the extent that we annually distribute all of our net taxable income to stockholders and maintain our qualification as a REIT. We also operate our business in a manner that permits us to maintain an exclusion from registration under the Investment Company Act of 1940, as amended. We are organized as a holding company and conduct our business primarily through our various subsidiaries.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information and the instructions to Form
10-Q
and Rule
10-01
of Regulation
S-X.
The consolidated financial statements, including the notes thereto, are unaudited and exclude some of the disclosures required in audited financial statements. We believe we have made all necessary adjustments, consisting of only normal recurring items, so that the consolidated financial statements are presented fairly and that estimates made in preparing our consolidated financial statements are reasonable and prudent. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form
10-K
for the fiscal year ended December 31, 2018 filed with the Securities and Exchange Commission, or the SEC.
Basis of Presentation
The accompanying consolidated financial statements include, on a consolidated basis, our accounts, the accounts of our wholly-owned subsidiaries, majority-owned subsidiaries, and variable interest entities, or VIEs, of which we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.
Certain reclassifications have been made in the presentation of the prior period secured debt agreements in Note 5 to conform to the current period presentation.
Principles of Consolidation
We consolidate all entities that we control through either majority ownership or voting rights. In addition, we consolidate all VIEs of which we are considered the primary beneficiary. VIEs are defined as entities in which equity investors (i) do not have the characteristics of a controlling financial interest and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The entity that consolidates a VIE is known as its primary beneficiary and is generally the entity with (i) the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE.
In the third quarter of 2018, we contributed a loan to a single asset securitization vehicle, or the 2018 Single Asset Securitization, which is a VIE, and invested in the related subordinate risk retention position. We are not the primary beneficiary of the VIE because we do not have the power to direct the activities that most significantly affect the VIE’s economic performance and, therefore, do not consolidate the 2018 Single Asset Securitization on our balance sheet. We have classified the subordinate risk retention position as a
held-to-maturity
debt security that is included in other assets on our consolidated balance sheets. Refer to Note 16 for additional discussion of our VIEs.
 
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Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
In April 2017, we entered into a joint venture, or our Multifamily Joint Venture, with Walker & Dunlop Inc. to originate, hold, and finance multifamily bridge loans. Pursuant to the terms of the agreements governing the joint venture, Walker & Dunlop contributed 15% of the venture’s equity capital and we contributed 85%. We consolidate the Multifamily Joint Venture as we have a controlling financial interest. The
non-controlling
interests included on our consolidated balance sheets represent the equity interests in our Multifamily Joint Venture that are owned by Walker & Dunlop. A portion of our Multifamily Joint Venture’s consolidated equity and results of operations are allocated to these
non-controlling
interests based on Walker & Dunlop’s pro rata ownership of our Multifamily Joint Venture.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates.
Revenue Recognition
Interest income from our loans receivable portfolio and debt securities is recognized over the life of each investment using the effective interest method and is recorded on the accrual basis. Recognition of fees, premiums, and discounts associated with these investments is deferred and recorded over the term of the loan or debt security as an adjustment to yield.
Income accrual is generally suspended for loans at the earlier of the date at which payments become 90 days past due or when, in the opinion of our Manager, recovery of income and principal becomes doubtful.
Income is then recorded on the basis of cash received until accrual is resumed when the loan becomes contractually current and performance is demonstrated to be resumed. In addition, for loans we originate, the related origination expenses are deferred and recognized as a component of interest income, however expenses related to loans we acquire are included in general and administrative expenses as incurred.
Cash and Cash Equivalents
Cash and cash equivalents represent cash held in banks and liquid investments with original maturities of three months or less.
We may have bank balances in excess of federally insured amounts; however, we deposit our cash and cash equivalents with high credit-quality institutions to minimize credit risk exposure. We have not experienced, and do not expect, any losses on our cash or cash equivalents.
During the second quarter of 2018, the letter of credit related to our restricted cash balance was cancelled and the cash was transferred out of our segregated bank account. As of both June 30, 2019 and December 31, 2018, we had 
no
restricted cash on our consolidated balance sheets.
Through 
our subsidiaries, we have oversight of certain servicing accounts held with third-party servicers, or Servicing Accounts, which relate to borrower escrows and other cash balances aggregating $
360.1
 million and $
320.0
 million as of June 30, 2019 and December 31, 2018, respectively. This cash is maintained in segregated bank accounts, and these amounts are not included in the assets and liabilities presented in our consolidated balance sheets. Cash in these Servicing Accounts will be transferred by the respective third-party servicer to the borrower or us under the terms of the applicable loan agreement upon occurrence of certain future events. We do not generate any revenue or incur any expenses as a result of these Servicing Accounts.
Loans Receivable and Provision for Loan Losses
We originate and purchase commercial real estate debt and related instruments generally to be held as long-term investments at amortized cost. We are required to periodically evaluate each of these loans for possible impairment. Impairment is indicated when it is deemed probable that we will not be able to collect all amounts due to us pursuant to the contractual terms of the loan. If a loan is determined to be impaired, we write down the loan through a charge to the provision for loan losses. Impairment of these loans, which are collateral dependent, is measured by comparing the estimated fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. These valuations require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed necessary by our Manager. Actual losses, if any, could ultimately differ from these estimates.
 
 
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Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
Our Manager performs a quarterly review of our portfolio of loans. In conjunction with this review, our Manager assesses the risk factors of each loan, and assigns it a risk rating based on a variety of factors, including, without limitation, loan-to-value ratio, or LTV, debt yield, property type, geographic and local market dynamics, physical condition, cash flow volatility, leasing and tenant profile, loan structure and exit plan, and project sponsorship. Based on a 5-point scale, our loans are rated “1” through “5,” from less risk to greater risk, which ratings are defined as follows:
   
1 -
Very Low Risk
       
 
2 -
Low Risk
       
 
3 -
Medium Risk
       
 
4 -
High Risk/Potential for Loss: 
A loan that has a risk of realizing a principal loss.
       
 
5 -
Impaired/Loss Likely:
A loan that has a very high risk of realizing a principal loss or has otherwise incurred a principal loss.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Securities
Held-to-Maturity
We classify our debt securities as
held-to-maturity,
as we have the intent and ability to hold these securities until maturity. We include our debt securities in other assets on our consolidated balance sheets at amortized cost.
If, based on current information and events, there is an adverse change in cash flows expected to be collected from the cash flows previously projected for one of our debt securities, an other-than-temporary impairment is deemed to have occurred. A change in expected cash flows is considered adverse if the present value of the revised cash flows (taking into consideration both the timing and amount of cash flows expected to be collected), discounted using the debt security’s current yield, is less than the present value of the previously estimated remaining cash flows. If an other-than-temporary impairment is considered to have occurred, the debt security is written down to fair value. The total other-than-temporary impairment is bifurcated into (i) the amount related to expected credit losses, and (ii) the amount related to fair value adjustments in excess of expected credit losses. The other-than-temporary impairment related to expected credit losses is calculated by comparing the amortized cost basis of the security to the present value of cash flows expected to be collected, discounted at the security’s current yield, and is recognized in earnings in the consolidated statement of operations. The remaining other-than-temporary impairment that is
no
t
related to expected credit losses is recognized in other comprehensive income (loss). A portion of other-than-temporary impairments recognized through earnings is accreted back to the amortized cost basis of the security through interest income, while amounts recognized through other comprehensive income (loss) are amortized over the life of the security with no impact on earnings.
Derivative Financial Instruments
We classify all derivative financial instruments as either other assets or other liabilities on our consolidated balance sheets at fair value.
On the date we enter into a derivative contract, we designate each contract as (i) a hedge of a net investment in a foreign operation, or net investment hedge, (ii) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability, or cash flow hedge, (iii) a hedge of a recognized asset or liability, or fair value hedge, or (iv) a derivative instrument not to be designated as a hedging derivative, or
non-designated
hedge. For all derivatives other than those designated as
non-designated
hedges, we formally document our hedge relationships and designation at the contract’s inception. This documentation includes the identification of the hedging instruments and the hedged items, its risk management objectives, strategy for undertaking the hedge transaction and our evaluation of the effectiveness of its hedged transaction.
On a quarterly basis, we also formally assess whether the derivative we designated in each hedging relationship is expected to be, and has been, highly effective in offsetting changes in the value or cash flows of the hedged items. If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued and the changes in fair value of the instrument are included in net income prospectively. Changes in the fair value of our derivative instruments that qualify as hedges are reported as a component of accumulated other comprehensive income (loss) on our consolidated financial statements. Deferred gains and losses are reclassified out of accumulated other comprehensive income (loss) and into net income in the same period or periods during which
 
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Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
the hedged transaction affects earnings, and are presented in the same line item as the earnings effect of the hedged item. For cash flow hedges, this is typically when the periodic swap settlements are made, while for net investment hedges, this occurs when the hedged item is sold or substantially liquidated. To the extent a derivative does not qualify for hedge accounting and is deemed a non-designated hedge, the changes in its fair value are included in net income concurrently.
Secured Debt Agreements
Where applicable, we record investments financed with repurchase agreements as separate assets and the related borrowings under any repurchase agreements are recorded as separate liabilities on our consolidated balance sheets. Interest income earned on the investments and interest expense incurred on the repurchase agreements are reported separately on our consolidated statements of operations.
Senior Loan Participations
In certain instances, we finance our loans through the
 non-recourse
 syndication of a senior loan interest to a third-party. Depending on the particular structure of the syndication, the senior loan interest may remain on our GAAP balance sheet or, in other cases, the sale will be recognized and the senior loan interest will no longer be included in our consolidated financial statements. When these sales are not recognized under GAAP we reflect the transaction by recording a loan participations sold liability on our consolidated balance sheet, however this gross presentation does not impact stockholders’ equity or net income. When the sales are recognized, our balance sheet only includes our remaining subordinate loan and not the
 non-consolidated
 senior interest we sold.
Secured Term Loan
We record our secured term loans as liabilities on our consolidated balance sheets. Where applicable, any issue discount or transaction expenses are deferred and amortized through the maturity date of the secured term loan as additional non-cash interest expense. 
Convertible Notes
The “Debt with Conversion and Other Options” Topic of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, requires the liability and equity components of convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement, to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The initial proceeds from the sale of convertible notes are allocated between a liability component and an equity component in a manner that reflects interest expense at the rate of similar nonconvertible debt that could have been issued at such time. The equity component represents the excess initial proceeds received over the fair value of the liability component of the notes as of the date of issuance. We measured the estimated fair value of the debt component of our convertible notes as of the respective issuance dates based on our nonconvertible debt borrowing rate. The equity component of each series of our convertible notes is reflected within additional
paid-in
capital on our consolidated balance sheet, and the resulting issue discount is amortized over the period during which such convertible notes are expected to be outstanding (through the maturity date) as additional
non-cash
interest expense. The additional
non-cash
interest expense attributable to such convertible notes will increase in subsequent periods through the maturity date as the notes accrete to their par value over the same period.
Deferred Financing Costs
The deferred financing costs that are included as a reduction in the net book value of the related liability on our consolidated balance sheets include issuance and other costs related to our debt obligations. These costs are amortized as interest expense using the effective interest method over the life of the related obligations.
Fair Value of Financial Instruments
The “Fair Value Measurements and Disclosures” Topic of the FASB, or ASC 820, defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements under GAAP. Specifically, this guidance defines fair value based on exit price, or the price that would be received upon the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date.
ASC 820 also establishes a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring financial instruments. Market price observability is affected by a number of factors, including the type
  
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Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
of financial instrument, the characteristics specific to the financial instrument, and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination, as follows:
     
 
Level 1: Generally includes only unadjusted quoted prices that are available in active markets for identical financial instruments as of the reporting date.
     
 
Level 2: Pricing inputs include quoted prices in active markets for similar instruments, quoted prices in less active or inactive markets for identical or similar instruments where multiple price quotes can be obtained, and other observable inputs, such as interest rates, yield curves, credit risks, and default rates.
     
 
Level 3: Pricing inputs are unobservable for the financial instruments and include situations where there is little, if any, market activity for the financial instrument. These inputs require significant judgment or estimation by management of third-parties when determining fair value and generally represent anything that does not meet the criteria of Levels 1 and 2.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The estimated value of each asset reported at fair value using Level 3 inputs is determined by an internal committee composed of members of senior management of our Manager, including our Chief Executive Officer, Chief Financial Officer, and other senior officers.
Certain of our other assets are reported at fair value either (i) on a recurring basis, as of each
quarter-end,
or (ii) on a nonrecurring basis, as a result of impairment or other events. Our assets that are recorded at fair value are discussed further in Note 15. We generally value our assets recorded at fair value by either (i) discounting expected cash flows based on assumptions regarding the collection of principal and interest and estimated market rates, or (ii) obtaining assessments from third-party dealers. For collateral-dependent loans that are identified as impaired, we measure impairment by comparing our Manager’s estimation of the fair value of the underlying collateral, less costs to sell, to the book value of the respective loan. These valuations may require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed necessary by our Manager.
We are also required by GAAP to disclose fair value information about financial instruments, which are not otherwise reported at fair value in our consolidated balance sheet, to the extent it is practicable to estimate a fair value for those instruments. These disclosure requirements exclude certain financial instruments and all
non-financial
instruments.
The following methods and assumptions are used to estimate the fair value of each class of financial instruments, for which it is practicable to estimate that value:
     
 
Cash and cash equivalents: The carrying amount of cash and cash equivalents approximates fair value.
     
 
Loans receivable, net: The fair values of these loans were estimated by our Manager based on a discounted cash flow methodology, taking into consideration various factors including capitalization rates, discount rates, leasing, occupancy rates, availability and cost of financing, exit plan, sponsorship, actions of other lenders, and indications of market value from other market participants.
     
 
Debt securities
held-to-maturity:
The fair value of these instruments was estimated by utilizing third-party pricing service providers. In determining the value of a particular investment, pricing service providers may use broker-dealer quotations, reported trades, or valuation estimates from their internal pricing models to determine the reported price.
     
 
Derivative financial instruments: The fair value of our foreign currency and interest rate contracts was estimated using advice from a third-party derivative specialist, based on contractual cash flows and observable inputs comprising foreign currency rates and credit spreads.
     
 
Secured debt agreements, net: The fair value of these instruments was estimated based on the rate at which a similar credit facility would currently be priced.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
     
 
Loan participations sold, net: The fair value of these instruments was estimated based on the value of the related loan receivable asset.
     
 
Securitized debt obligations, net: The fair value of these instruments was estimated by utilizing third-party pricing service providers. In determining the value of a particular investment, pricing service providers may use broker-dealer quotations, reported trades, or valuation estimates from their internal pricing models to determine the reported price.
     
 
Secured term loan, net: The fair value of these instruments was estimated by utilizing third-party pricing service providers. In determining the value of a particular investment, pricing service providers may use broker-dealer quotations, reported trades, or valuation estimates from their internal pricing models to determine the reported price.
     
 
Convertible notes, net: Each series of the convertible notes is actively traded and their fair values were obtained using quoted market prices.
 
 
 
 
 
 
 
Income Taxes
Our financial results generally do not reflect provisions for current or deferred income taxes on our REIT taxable income. We believe that we operate in a manner that will continue to allow us to be taxed as a REIT and, as a result, we generally do not expect to pay substantial corporate level taxes other than those payable by our taxable REIT subsidiaries. If we were to fail to meet these requirements, we may be subject to federal, state, and local income tax on current and past income, and penalties. Refer to Note 13 for additional information.
Stock-Based Compensation
Our stock-based compensation consists of awards issued to our Manager and certain individuals employed by an affiliate of our Manager that vest over the life of the awards, as well as deferred stock units issued to certain members of our board of directors. Stock-based compensation expense is recognized for these awards in net income on a variable basis over the applicable vesting period of the awards, based on the value of our class A common stock. Refer to Note 14 for additional information.
Earnings per Share
Basic earnings per share, or Basic EPS, is computed in accordance with the
two-class
method and is based on the net earnings allocable to our class A common stock, including restricted class A common stock and deferred stock units, divided by the weighted-average number of shares of our class A common stock, including restricted class A common stock and deferred stock units outstanding during the period. Our restricted class A common stock is considered a participating security, as defined by GAAP, and has been included in our Basic EPS under the
two-class
method as these restricted shares have the same rights as our other shares of class A common stock, including participating in any gains or losses.
Diluted earnings per share, or Diluted EPS, is determined using the treasury stock method, and is based on the net earnings allocable to our class A common stock, including restricted class A common stock and deferred stock units, divided by the weighted-average number of shares of our class A common stock, including restricted class A common stock and deferred stock units. Refer to Note 11 for additional discussion of earnings per share.
Foreign Currency
In the normal course of business, we enter into transactions not denominated in United States, or U.S., dollars. Foreign exchange gains and losses arising on such transactions are recorded as a gain or loss in our consolidated statements of operations. In addition, we consolidate entities that have a
non-U.S.
dollar functional currency.
Non-U.S.
dollar denominated assets and liabilities are translated to U.S. dollars at the exchange rate prevailing at the reporting date and income, expenses, gains, and losses are translated at the average exchange rate over the applicable period. Cumulative translation adjustments arising from the translation of
non-U.S.
dollar denominated subsidiaries are recorded in other comprehensive income (loss).
  
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Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
Underwriting Commissions and Offering Costs
Underwriting commissions and offering costs incurred in connection with common stock offerings are reflected as a reduction of additional
paid-in
capital. Costs incurred that are not directly associated with the completion of a common stock offering are expensed when incurred.
Recent Accounting Pronouncements
In April 2019, the FASB issued ASU
2019-04,
“Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” or ASU
2019-04.
ASU
2019-04
amends existing guidance originally issued by (i) ASU
 2016-13
 “Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments (Topic 326),” or ASU
 2016-13,
(ii) ASU
2017-12
“Derivatives and Hedging Topic 815: Targeted Improvements to Accounting for Hedging Activities,” or ASU
2017-12,
and (iii) ASU
2016-01
“Financial Instruments – Overall (Subtopic
825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities,” or ASU
 2016-01.
The amendments in ASU
 2019-04
that relate to ASU
 2016-13
clarify specific issues related to the implementation of the current expected credit loss model, which are effective for fiscal years beginning after December 15, 2019 and are to be adopted through a cumulative-effect adjustment to retained earnings as of January 1, 2020. The amendments in ASU
2019-04
that relate to ASU
2017-12
primarily update guidance related to fair value hedges and do not have an impact on our consolidated financial statements. The amendments in ASU
2019-04
that relate to ASU
2016-01
primarily update guidance related to equity securities and do not have an impact on our consolidated financial statements.
In June 2016, the FASB issued ASU
 2016-13.
 ASU
 2016-13
 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU
 2016-13
 will replace the “incurred loss” model under existing guidance with an “expected loss” model for instruments measured at amortized cost, and require entities to record allowances for
 available-for-sale
 debt securities rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU
 2016-13
 is effective for fiscal years beginning after December 15, 2019 and is to be adopted through a cumulative-effect adjustment to retained earnings as of January 1, 2020. While we are currently evaluating the impact ASU
 2016-13
 will have on our consolidated financial statements, we expect that the adoption will result in an increased amount of provisions for potential loan losses as well as the recognition of such provisions earlier in the lending cycle. We currently do
no
t have any provision for loan losses in our consolidated financial statements.
 
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Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
3. LOANS RECEIVABLE, NET
The following table details overall statistics for our loans receivable portfolio ($ in thousands):
                 
 
June 30, 2019
   
December 31, 2018
 
Number of loans
   
123
     
125
 
Principal balance
  $
     14,372,950
    $
     14,293,970
 
Net book value
  $
14,280,919
    $
14,191,200
 
Unfunded loan commitments
(1)
  $
3,217,266
    $
3,405,945
 
Weighted-average cash coupon
(2)
   
5.42
%    
5.67
%
Weighted-average
all-in
yield
(2)
   
5.77
%    
6.00
%
Weighted-average maximum maturity (years)
(3)
   
3.7
     
3.9
 
___________________                
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                     
(1)  
 
Unfunded commitments will primarily be funded to finance our borrowers’ construction or development of real estate-related assets, capital improvements of existing assets, or lease-related expenditures. These commitments will generally be funded over the term of each loan, subject in certain cases to an expiration date.
 
(2)
 
As of June 30, 2019, 99% of our loans by principal balance earned a floating rate of interest, primarily indexed to USD LIBOR, and 1% earned a fixed rate of interest. As of December 31, 2018, 98% of our loans by principal balance earned a floating rate of interest, primarily indexed to USD LIBOR, and 2% earned a fixed rate of interest. Cash coupon and
all-in
yield assume applicable floating benchmark rates as of June 30, 2019 and December 31, 2018, respectively, for weighted-average calculation. In addition to cash coupon,
all-in
yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees.
 
(3)
 
Maximum maturity assumes all extension options are exercised by the borrower, however our loans may be repaid prior to such date. As of June 30, 2019, 63% of our loans by principal balance were subject to yield maintenance or other prepayment restrictions and 37% were open to repayment by the borrower without penalty. As of December 31, 2018, 75% of our loans were subject to yield maintenance or other prepayment restrictions and 25% were open to repayment by the borrower without penalty.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Activity relating to our loans receivable portfolio was as follows ($ in thousands):
 
                         
 
Principal
Balance
   
Deferred Fees /
Other Items
(1)
   
Net Book
Value
 
December 31, 2018
  $
     14,293,970
    $
     (102,770
)   $
     14,191,200
 
Loan fundings
   
1,922,219
     
     
1,922,219
 
Loan repayments
   
(1,833,414
)    
     
(1,833,414
)
Unrealized (loss) gain on foreign currency translation
   
(9,825
)    
204
     
(9,621
)
Deferred fees and other items
   
     
(17,721
)    
(17,721
)
Amortization of fees and other items
   
     
28,256
     
28,256
 
                         
June 30, 2019
  $
14,372,950
    $
(92,031
)   $
14,280,919
 
                         
____________  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)  
 
Other items primarily consist of purchase discounts or premiums, exit fees, and deferred origination expenses.
 
 
 
 
 
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Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
The tables below detail the property type and geographic distribution of the properties securing the loans in our portfolio ($ in thousands):
June 30, 2019
 
Property Type
 
Number of
Loans
 
Net Book
Value
  
Total Loan
Exposure
(1)(2)
  
Percentage of
Portfolio
 
Office
 
  54
 $
   7,205,141
  $
   7,258,497
   
  
48
%
 
Hotel
 
  17
  
2,380,920
   
2,460,389
   
  17   
 
Multifamily
 
  38
  
2,243,177
   
2,272,201
   
  15   
 
Industrial
 
    5
  
685,128
   
688,981
   
    5   
 
Retail
 
    3
  
381,509
   
386,617
   
    3   
 
Self-Storage
 
    2
  
281,990
   
282,978
   
    2   
 
Condominium
 
    1
  
228,817
   
230,258
   
    2   
 
Other
 
    3
  
874,237
   
1,199,331
   
    8   
 
               
 
123
 
$
14,280,919
 
 
$
14,779,252
 
 
 
100
%
 
            
Geographic Location
 
Number of
Loans
 
Net Book
Value
  
Total Loan
Exposure
(1)(2)
  
Percentage of
Portfolio
 
United States
 
  
   
   
 
Northeast
 
  27
 $
3,999,237
  $
   4,025,533
   
  
28
%
 
West
 
  26
  
2,953,508
   
2,995,900
   
  20   
 
Southeast
 
  21
  
2,409,038
   
2,420,751
   
  16   
 
Midwest
 
 10
  
1,109,007
   
1,115,860
   
    8   
 
Southwest
 
  14
  
546,008
   
548,794
   
    4   
 
Northwest
 
    4
  
175,039
   
175,770
   
    1   
 
               
Subtotal
 
  102
  
11,191,837
   
11,282,608
   
  77   
 
International
 
  
   
   
 
United Kingdom
 
  11
  
1,270,547
   
1,616,321
   
  11   
 
Spain
 
    1
  
1,057,616
   
1,063,416
   
    7   
 
Australia
 
    3
  
343,650
   
345,741
   
    2   
 
Germany
 
    1
  
196,985
   
250,975
   
    2   
 
Canada
 
    4
  
150,302
   
149,942
   
1
 
Belgium
 
    1
  
69,982
   
70,249
   
 
               
Subtotal
 
  21
  
3,089,082
   
3,496,644
   
  23   
 
               
Total
 
123
 $
14,280,919
  $
14,779,252
   
100
%
 
____________
 
(1)  
 
In certain instances, we finance our loans through the
non-recourse
sale of a senior loan interest that is not included in our consolidated financial statements. See Note 2 for further discussion. Total loan exposure encompasses the entire loan we originated and financed, including $406.3 million of such
non-consolidated
senior interests as of June 30, 2019.
 
(2)
 
Excludes investment exposure to the $1.0 billion 2018 Single Asset Securitization. See Note 4 for details of the subordinated risk retention interest we own in the 2018 Single Asset Securitization.
 
 
17
 
  

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
December 31, 2018
 
Property Type
 
Number of
Loans
 
Net Book
Value
  
Total Loan
Exposure
(1)(2)
  
Percentage of
Portfolio
 
Office
 
  55
 $
   7,104,842
  $
   7,164,466
   
  
49
%
 
Hotel
 
  18
  
2,591,565
   
2,673,763
   
  18   
 
Multifamily
 
  34
  
2,193,699
   
2,206,740
   
  15   
 
Industrial
 
    5
  
680,808
   
685,776
   
    5   
 
Retail
 
    4
  
451,099
   
452,900
   
    3   
 
Condominium
 
    4
  
304,545
   
368,104
   
    2   
 
Self-Storage
 
    2
  
278,473
   
280,043
   
    2   
 
Other
 
    3
  
586,169
   
909,052
   
    6   
 
               
 
125
 $
14,191,200
  $
14,740,844
   
100%
 
               
            
Geographic Location
 
Number of
Loans
 
Net Book
Value
  
Total Loan
Exposure
(1)(2)
  
Percentage of
Portfolio
 
United States
 
  
   
   
 
Northeast
 
  32
 $
4,322,114
  $
4,359,938
   
  31%
 
West
 
  29
  
3,137,072
   
3,222,706
   
  22   
 
Southeast
 
  19
  
2,258,033
   
2,271,664
   
  15   
 
Midwest
 
    9
  
1,161,637
   
1,170,619
   
    8   
 
Southwest
 
  13
  
478,665
   
481,745
   
    3   
 
Northwest
 
    4
  
238,844
   
239,872
   
    2   
 
               
Subtotal
 
106
  
11,596,365
   
11,746,544
   
  81   
 
International
 
  
   
   
 
Spain
 
    1
  
1,124,174
   
1,131,334
   
    8   
 
United Kingdom
 
    7
  
754,299
   
1,094,663
   
    7   
 
Canada
 
    5
  
316,268
   
313,229
   
    2   
 
Australia
 
    3
  
310,372
   
312,893
   
    2   
 
Belgium
 
    1
  
70,621
   
71,007
   
—  
 
Germany
 
    1
  
11,585
   
63,637
   
—  
 
Netherlands
 
    1
  
7,516
   
7,537
   
—  
 
               
Subtotal
 
  19
  
2,594,835
   
2,994,300
   
  19   
 
               
Total
 
125
 $
14,191,200
  $
14,740,844
   
100%
 
____________ 
(1)  
 
In certain instances, we finance our loans through the
non-recourse
sale of a senior loan interest that is not included in our consolidated financial statements. See Note 2 for further discussion. Total loan exposure encompasses the entire loan we originated and financed, including $446.9 million of such
non-consolidated
senior interests as of December 31, 2018.
 
(2)
 
Excludes investment exposure to the $1.0 billion 2018 Single Asset Securitization. See Note 4 for details of the subordinated risk retention interest we own in the 2018 Single Asset Securitization.
 
Loan Risk Ratings
As further described in Note 2, our Manager evaluates our loan portfolio on a quarterly basis. In conjunction with our quarterly loan portfolio review, our Manager assesses the risk factors of each loan, and assigns a risk rating based on several factors. Factors considered in the assessment include, but are not limited to, risk of loss, current LTV, debt yield, collateral performance, structure, exit plan, and sponsorship. Loans are rated “1” (less risk) through “5” (greater risk), which ratings are defined in Note 2.
 
18
 
 

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
The following table allocates the principal balance and net book value of our loans receivable based on our internal risk ratings ($ in thousands):
                                                 
June 30, 2019
   
 
December 31, 2018
 
Risk Rating
   
Number of Loans
 
Net Book Value
   
Total Loan Exposure
(1)(2)
   
 
Number of Loans
 
Net Book Value
   
Total Loan Exposure
(1)(2)
 
 
1  
   
    4
  $
275,427
    $
275,806
   
 
    2
  $
181,366
    $
182,740
 
 
2  
   
  38
   
4,208,307
     
4,235,448
   
 
  38
   
3,860,432
     
3,950,025
 
 
3  
   
  78
   
9,630,494
     
10,100,685
   
 
  85
   
10,149,402
     
10,608,079
 
 
4  
   
    3
   
166,691
     
167,313
   
 
—  
   
—  
     
—  
 
 
5  
   
    —
   
     
   
 
—  
   
—  
     
—  
 
                                                 
 
   
123
  $
14,280,919
    $
14,779,252
   
 
125
  $
14,191,200
    $
14,740,844
 
                                                 
 
 
 
 
 
 
 
____________
 
 
 
 
 
 
 
 
         
 
(1)
   
In certain instances, we finance our loans through the non-recourse sale of a senior loan interest that is not included in our consolidated financial statements. See Note 2 for further discussion. Total loan exposure encompasses the entire loan we originated and financed, including $
406.3
 million and $
446.9
 million of such non-consolidated senior interests as of June 30, 2019 and December 31, 2018, respectively.
 
(2)
   
Excludes investment exposure to the $
1.0
 billion 2018 Single Asset Securitization. See Note 4 for details of the subordinated risk retention interest we own in the 2018 Single Asset Securitization.
 
 
 
 
 
 
 
 
 
 
 
The weighted-average risk rating of our total loan exposure was 2.7 as of both June 30, 2019 and December 31, 2018. We did not have any impaired loans, nonaccrual loans, or loans in maturity default as of June 30, 2019 or December 31, 2018.
Multifamily Joint Venture
As discussed in Note 2, we entered into a Multifamily Joint Venture in April 2017. As of June 30, 2019 and December 31, 2018, our Multifamily Joint Venture held $505.0 million and $334.6 million of loans, respectively, which are included in the loan disclosures above. Refer to Note 2 for additional discussion of our Multifamily Joint Venture.
4. OTHER ASSETS AND LIABILITIES
The following table details the components of our other assets ($ in thousands):
                 
 
  June 30, 2019  
   
December 31, 2018
 
Debt securities held-to-maturity
(1)
  $
94,595
    $
96,167
 
Accrued interest receivable
   
51,065
     
56,679
 
Loan portfolio payments held by servicer
(2)
   
43,236
     
6,133
 
Derivative assets
   
14,000
     
9,916
 
Prepaid expenses
   
278
     
647
 
Prepaid taxes
   
3
     
6
 
Other
   
324
     
965
 
                 
Total
  $
     203,501
    $
     170,513
 
                 
____________  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                     
(1)  
 
Represents the subordinate risk retention interest in the $1.0 billion 2018 Single Asset Securitization, with a yield to full maturity of L+
10.0
% and a maximum maturity date of June 9, 2025, assuming all extension options are exercised by the borrower. Refer to Note 16 for additional discussion.
 
(2)
 
Represents loan principal and interest payments held by our third-party loan servicer as of the balance sheet date which were remitted to us during the subsequent remittance cycle.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19
 
  

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
The following table details the components of our other liabilities ($ in thousands):
                 
 
  June 30, 2019  
   
December 31, 2018
 
Accrued dividends payable
  $
83,259
    $
76,530
 
Accrued interest payable
   
25,933
     
25,588
 
Accrued management and incentive fees payable
   
20,984
     
18,586
 
Accounts payable and other liabilities
   
5,631
     
4,583
 
Derivative liabilities
   
4,968
     
2,925
 
                 
Total
  $
     140,775
    $
     128,212
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5. SECURED DEBT AGREEMENTS, NET
Our secured debt agreements include secured credit facilities, asset-specific financings, and a revolving credit agreement. The following table details our secured debt agreements ($ in thousands):
                 
 
Secured Debt Agreements
 
 
Borrowings Outstanding
 
 
  June 30, 2019  
   
  December 31, 2018  
 
Secured credit facilities
  $
8,065,675
    $
8,870,897
 
Asset-specific financings
   
217,938
     
81,739
 
Revolving credit agreement
   
     
43,845
 
                 
Total secured debt agreements
  $
8,283,613
    $
8,996,481
 
                 
Deferred financing costs
(1)
   
(26,243
)    
(21,725
)
                 
Net book value of secured debt
  $
8,257,370
    $
8,974,756
 
                 
___________  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                     
(1)  
 
Costs incurred in connection with our secured debt agreements are recorded on our consolidated balance sheet when incurred and recognized as a component of interest expense over the life of each related agreement.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20
 
 

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
Secured Credit Facilities
During the six months ended June 30, 2019, we increased the maximum facility size of
two
of our existing credit facilities, providing an aggregate additional $
310.0
 million of credit capacity. The following tables detail our secured credit facilities ($ in thousands):
                                 
 
June 30, 2019
 
 
Credit Facility Borrowings
   
Collateral
   
Lender
 
Potential
(1)
   
Outstanding
   
Available
(1)
   
Assets
(2)
 
Deutsche Bank
  $
   1,861,121
    $
   1,861,121
    $
     —
    $
   2,353,629
 
Wells Fargo
   
1,742,942
     
1,251,130
     
491,812
     
2,285,101
 
Citibank
   
1,006,592
     
922,804
     
83,788
     
1,278,710
 
Barclays
   
933,424
     
902,146
     
31,278
     
1,166,780
 
JP Morgan
   
959,907
     
861,744
     
98,163
     
1,221,674
 
Bank of America
   
768,871
     
768,871
     
     
962,378
 
Morgan Stanley
   
434,199
     
378,990
     
55,209
     
576,614
 
Société Générale
   
321,182
     
321,182
     
     
419,034
 
Goldman Sachs
   
292,753
     
247,753
     
45,000
     
401,422
 
MetLife
   
233,616
     
233,616
     
     
296,356
 
Goldman Sachs - Multi. JV
(3)
   
219,316
     
219,316
     
     
293,877
 
Bank of America - Multi. JV
(3)
   
97,002
     
97,002
     
     
123,856
 
                                 
  $
   8,870,925
    $
   8,065,675
    $
   805,250
    $
   11,379,431
 
                                 
____________
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                     
(1)  
 
Potential borrowings represents the total amount we could draw under each facility based on collateral already approved and pledged. When undrawn, these amounts are immediately available to us at our sole discretion under the terms of each credit facility.
 
(2)
 
Represents the principal balance of the collateral assets.
 
(3)
 
These facilities finance the loan investments of our consolidated Multifamily Joint Venture. Refer to Note 2 for additional discussion of our Multifamily Joint Venture.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The weighted-average outstanding balance of our secured credit facilities was $8.8 billion for the six months ended June 30, 2019. As of June 30, 2019, we had aggregate borrowings of $8.1 billion outstanding under our secured credit facilities, with a weighted-average cash coupon of LIBOR plus 1.71% per annum, a weighted-average
all-in
cost of credit, including associated fees and expenses, of LIBOR plus 1.89% per annum, and a weighted-average advance rate of 79.5%. As of June 30, 2019, outstanding borrowings under these facilities had a weighted-average maturity, including extension options, of 3.2 years.
  
21
 
 

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
                                 
 
December 31, 2018
 
 
Credit Facility Borrowings
   
Collateral
   
Lender
 
Potential
(1)
   
Outstanding
   
Available
(1)
   
Assets
(2)
 
Deutsche Bank
  $
   1,839,698
    $
   1,839,698
    $
    —  
    $
2,325,047
 
Wells Fargo
   
1,908,509
     
1,822,154
     
86,355
     
2,514,513
 
JP Morgan
   
1,010,628
     
1,010,628
     
—  
     
1,266,259
 
Barclays
   
890,620
     
890,620
     
—  
     
1,113,275
 
Citibank
   
852,470
     
663,917
     
188,553
     
1,076,085
 
Bank of America
   
873,446
     
873,446
     
—  
     
1,090,117
 
MetLife
   
675,329
     
675,329
     
—  
     
852,733
 
Morgan Stanley
   
341,241
     
276,721
     
64,520
     
457,496
 
Société Générale
   
321,182
     
321,182
     
—  
     
404,048
 
Goldman Sachs
   
230,140
     
230,140
     
—  
     
295,368
 
Goldman Sachs - Multi. JV
(3)
   
170,060
     
170,060
     
—  
     
212,983
 
Bank of America - Multi. JV
(3)
   
97,002
     
97,002
     
—  
     
121,636
 
                                 
  $
9,210,325
    $
8,870,897
    $
   339,428
    $
   11,729,560
 
                                 
____________
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                     
(1)  
 
Potential borrowings represents the total amount we could draw under each facility based on collateral already approved and pledged. When undrawn, these amounts are immediately available to us at our sole discretion under the terms of each credit facility.
 
(2)
 
Represents the principal balance of the collateral assets.
 
(3)
 
These facilities finance the loan investments of our consolidated Multifamily Joint Venture. Refer to Note 2 for additional discussion of our Multifamily Joint Venture.
 
 
 
 
 
 
 
 
 
 
 
 
The weighted-average outstanding balance of our secured credit facilities was $7.1 billion for the six months ended December 31, 2018. As of December 31, 2018, we had aggregate borrowings of $8.9 billion outstanding under our secured credit facilities, with a weighted-average cash coupon of LIBOR plus 1.72% per annum, a weighted-average
all-in
cost of credit, including associated fees and expenses, of LIBOR plus 1.90% per annum, and a weighted-average advance rate of 79.5%. As of December 31, 2018, outstanding borrowings under these facilities had a weighted-average maturity, including extension options, of 3.5 years.
Borrowings under each facility are subject to the initial approval of eligible collateral loans by the lender and the maximum advance rate and pricing rate of individual advances are determined with reference to the attributes of the respective collateral loan.
  
22
 

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
The following tables outline the key terms of our credit facilities as of June 30, 2019:
                                 
Lender
 
Currency
   
Guarantee
(1)
   
Margin Call
(2)
   
Term/Maturity
 
Goldman Sachs - Multi. JV
(3)
   
$
   
25%
   
Collateral marks only
     
July 12, 2020
(6)
 
JP Morgan
   
$ / £
   
50%
   
Collateral marks only
     
January 7, 2021
(7)
 
Bank of America - Multi. JV
(3)
   
$
   
43%
   
Collateral marks only
     
July 19, 2021
(8)
 
Deutsche Bank
   
$ / 
   
59%
(4)
   
Collateral marks only
     
August 9, 2021
(4)
 
Morgan Stanley
   
$ / £ / 
   
25%
   
Collateral marks only
     
March 1, 2022
 
Barclays
   
$ / £ / 
   
25%
   
Collateral marks only
     
June 18, 2024
(9)
 
MetLife
   
$
   
50%
   
Collateral marks only
     
April 22, 2023
(10)
 
Bank of America
   
$
   
50%
   
Collateral marks only
     
May 21, 2023
(11)
 
Goldman Sachs
   
$
   
25%
   
Collateral marks only
     
October 22, 2023
(12)
 
Citibank
   
$ / £ / 
 / A$ / C$
   
25%
   
Collateral marks only
     
Term matched
(13)
 
Société Générale
   
$ / £ / 
   
25%
   
Collateral marks only
     
Term matched
(13)
 
Wells Fargo
   
$ / C$
   
25%
(5)
   
Collateral marks only
     
Term matched
(13)
 
____________  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
(1)  
 
Other than amounts guaranteed based on specific collateral asset types, borrowings under our credit facilities are
non-recourse
to us.
(2)
 
Margin call provisions under our credit facilities do not permit valuation adjustments based on capital markets events, and are limited to collateral-specific credit marks.
(3)
 
These facilities finance the loan investments of our consolidated Multifamily Joint Venture. Refer to Note 2 for additional discussion of our Multifamily Joint Venture.
(4)
 
Includes two
one-year
extension options which may be exercised at our sole discretion. Specific borrowings outstanding of $850.7 million are 100% guaranteed and the related maturity dates are term-matched to the respective collateral assets. The remainder of the credit facility borrowings are 25% guaranteed.
(5)
 
In addition to the 25% guarantee across all borrowings, there is an incremental guarantee of $171.5 million related to $314.0 million of specific borrowings outstanding.
(6)
 
Includes a
one-year
extension option which may be exercised at our sole discretion.
(7)
 
Maturity dates for $520.6 million of specific borrowings outstanding are term-matched to the respective collateral assets.
(8)
 
Includes two
one-year
extension options which may be exercised at our sole discretion.
(9)
 
Includes four
 
one-year
 
extension options which may be exercised at our sole discretion.
(10)  
 
Includes three
one-year
extension options which may be exercised at our sole discretion.
(11)
 
Includes two
one-year
extension options which may be exercised at our sole discretion.
(12)
 
Includes three
one-year
extension options which may be exercised at our sole discretion.
(13)
 
These secured credit facilities have various availability periods during which new advances can be made and which are generally subject to each lender’s discretion. Maturity dates for advances outstanding are tied to the term of each respective collateral asset.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                 
Currency
 
Potential
Borrowings
(1)
   
Outstanding
Borrowings
   
Floating Rate  Index
(2)
 
Spread
(3)
 
Advance
Rate
(4)
 
$
   
$  6,948,419
     
$  6,199,362
   
USD LIBOR
 
1.69 %
   
79.6 %
 
   
     797,442
     
     748,028
   
EURIBOR
 
1.50 %
   
80.0 %
 
£
   
£     564,386
     
£     564,386
   
GBP LIBOR
 
2.05 %
   
77.9 %
 
A$
   
A$     255,270
     
A$   255,270
   
BBSY
 
1.90 %
   
78.0 %
 
C$
   
C$     156,919
     
C$   156,925
   
CDOR
 
1.83 %
   
80.7 %
 
                                 
   
$  8,870,925
     
$  8,065,675
   
 
1.71 %
   
79.5 %
 
____________  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                     
(1)  
 
Potential borrowings represents the total amount we could draw under each facility based on collateral already approved and pledged. When undrawn, these amounts are immediately available to us at our sole discretion under the terms of each credit facility.
 
(2)
 
Floating rate indices are generally matched to the payment timing under the terms of each secured credit facility and its respective collateral assets.
 
(3)
 
Represents weighted-average spread over the applicable floating rate index, based on borrowings outstanding.
 
(4)
 
Represents weighted-average advance rate based on the approved outstanding principal balance of the collateral assets pledged.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
23
 
 
 
 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
Asset-Specific Financings
The following tables detail our asset-specific financings ($ in thousands):
                                             
 
June 30, 2019
 
Asset-Specific Financings
 
Count
 
Principal
Balance
   
Book Value
   
Wtd. Avg.
Yield/Cost
(1)
   
Guarantee
(2)
   
Wtd. Avg.
Term
(3)
 
Collateral assets
 
4
  $
281,620
    $
268,864
     
L+4.94
%    
n/a
     
Mar. 2023
 
Financing provided
 
4
   
217,938
     
209,912
     
L+3.53
%    
84,547
     
Mar. 2023
 
       
 
December 31, 2018
 
Asset-Specific Financings
 
Count
 
Principal
Balance
   
Book Value
   
Wtd. Avg.
Yield/Cost
(1)
   
Guarantee
(2)
   
Wtd. Avg.
Term
(3)
 
Collateral assets
 
1
  $
106,739
    $
104,807
     
L+6.08
%    
n/a
     
Aug. 2022
 
Financing provided
 
1
   
81,739
     
80,938
     
L+4.07
%    
n/a
     
Aug. 2022
 
____________
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                     
(1)  
 
These floating rate loans and related liabilities are indexed to the various benchmark rates relevant in each arrangement in terms of currency and payment frequency. Therefore the net exposure to each benchmark rate is in direct proportion to our net assets indexed to that rate. In addition to cash coupon, yield/cost includes the amortization of deferred origination fees / financing costs.
 
(2)
 
Other than amounts guaranteed on an asset-by-asset basis, borrowings under our asset-specific financings are non-recourse to us.
 
(3)
 
The weighted-average term is determined based on the maximum maturity of the corresponding loans, assuming all extension options are exercised by the borrower. Each of our asset-specific financings is term-matched to the corresponding collateral loans.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The weighted-average outstanding balance of our asset-specific financings was $106.3 million for the six months ended June 30, 2019 and $50.4 million for the six months ended December 31, 2018.
Revolving Credit Agreement
We have a $250.0 million full recourse secured revolving credit agreement with Barclays that is designed to finance first mortgage originations for up to nine months as a bridge to term financing or syndication. Advances under the agreement are subject to availability under a specified borrowing base and accrue interest at a per annum pricing rate equal to the sum of (i) an applicable base rate or Eurodollar rate and (ii) an applicable margin, in each case, dependent on the applicable type of loan collateral. The maturity date of the facility is April 4, 2020.
During the six months ended June 30, 2019, the weighted-average outstanding borrowings under the revolving credit agreement was $28.8 million and we recorded interest expense of $1.6 million, including $522,000 of amortization of deferred fees and expenses. As of June 30, 2019, we had
no
outstanding borrowings under the agreement.
During the six months ended December 31, 2018, the weighted-average outstanding borrowings under the revolving credit agreement was $31.7 million and we recorded interest expense of $1.7 million, including $551,000 of amortization of deferred fees and expenses. As of December 31, 2018, we had $43.8 million of borrowings outstanding under the agreement.
Debt Covenants
Each of the guarantees related to our secured debt agreements contain the following uniform financial covenants: (i) our ratio of earnings before interest, taxes, depreciation, and amortization, or EBITDA, to fixed charges, as defined in the agreements, shall be not less than
1.4
to
1.0
; (ii) our tangible net worth, as defined in the agreements, shall not be less than $2.8 billion as of each measurement date plus 75% of the net cash proceeds of future equity issuances subsequent to June 30, 2019; (iii) cash liquidity shall not be less than the greater of (x) $10.0 million or (y) 5% of our recourse indebtedness; and (iv) our indebtedness shall not exceed 83.33% of our total assets. As of June 30, 2019 and December 31, 2018, we were in compliance with these covenants. 
Refer to Note 8 for information regarding financial covenants contained in the agreements governing our senior secured term loan facility.
 
24
 
 
 
 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
6. LOAN PARTICIPATIONS SOLD, NET
The financing of a loan by the
non-recourse
sale of a senior interest in the loan through a participation agreement generally does not qualify as a sale under GAAP. Therefore, in the instance of such sales, we present the whole loan as an asset and the loan participation sold as a liability on our consolidated balance sheet until the loan is repaid. The obligation to pay principal and interest on these liabilities is generally based on the performance of the related loan obligation. The gross presentation of loan participations sold does not impact stockholders’ equity or net income.
We did not have any loan participations sold as of June 30, 2019. During the three and six months ended June 30, 2019, we recorded $1.6 million and $3.2 million, respectively, of interest expense related to our loan participations sold. During the three and six months ended June 30, 2018, we recorded $2.0 million and $3.5 million, respectively, of interest expense related to our loan participations sold. The following table details our loan participations sold as of December 31, 2018 ($ in thousands):
                                                 
 
December 31, 2018
 
 
   
Principal
   
 
   
 
   
   
 
Loan Participations Sold
 
Count
   
Balance
   
Book Value
   
Yield/
Cost
(1)
   
Guarantee
(2)
   
Term
 
Total loan
   
    1    
    $
123,745
    $
122,669
     
L+
5.92
%    
n/a
     
Feb. 2022
 
Senior participation
(3)
   
    1    
     
94,528
     
94,418
     
L+
4.07
%    
n/a
     
Feb. 2022
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                         
____________  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
(1)  
 
Our floating rate loans and related liabilities are indexed to the various benchmark rates relevant in each arrangement in terms of currency and payment frequency. Therefore the net exposure to each benchmark rate is in direct proportion to our net assets indexed to that rate. In addition to cash coupon, yield/cost includes the amortization of deferred fees / financing costs.
(2)
 
As of December 31, 2018, our loan participations sold were
non-recourse
to us.
(3)
 
The difference between principal balance and book value of loan participations sold is due to deferred financing costs of $110,000 as of December 31, 2018.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7. SECURITIZED DEBT OBLIGATIONS, NET
We have financed a pool of our loans through a collateralized loan obligation, or the CLO, and have also financed one of our loans through a single asset securitization vehicle, or the 2017 Single Asset Securitization. The CLO and the 2017 Single Asset Securitization have issued securitized debt obligations that are
non-recourse
to us. Both the CLO and the 2017 Single Asset Securitization are consolidated in our financial statements. Refer to Note 16 for further discussion of our CLO and 2017 Single Asset Securitization.
  
25
 
 

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
The following tables detail our securitized debt obligations ($ in thousands):
                                         
 
June 30, 2019
 
Securitized Debt Obligations
 
Count
   
Principal
Balance
   
Book Value
   
Wtd. Avg.
Yield/Cost
(1)
   
Term
(2)
 
Collateralized Loan Obligation
   
     
     
     
     
 
Collateral assets
   
23
    $
1,000,000
    $
1,000,000
     
L+
3.67
%    
June 2022
 
Financing provided
   
1
     
817,500
     
812,857
     
L+
1.70
%    
June 2035
 
2017 Single Asset Securitization
   
     
     
     
     
 
Collateral assets
(3)
   
1
     
695,956
     
693,272
     
L+
3.60
%    
June 2023
 
Financing provided
   
1
     
474,620
     
474,507
     
L+
1.65
%    
June 2033
 
Total
   
     
     
     
     
 
Collateral assets
   
24
    $
     1,695,956
    $
     1,693,272
     
L+
3.64
%    
 
                                         
Financing provided
(4)
   
2
    $
1,292,120
    $
1,287,364
     
L+
1.68
%    
 
                                         
       
 
December 31, 2018
 
Securitized Debt Obligations
 
Count
   
Principal
Balance
   
Book Value
   
Wtd. Avg.
Yield/Cost
(1)
   
Term
(2)
 
Collateralized Loan Obligation
   
     
     
     
     
 
Collateral assets
   
26
    $
1,000,000
    $
1,000,000
     
6.25
%    
Apr. 2022
 
Financing provided
   
1
     
817,500
     
811,023
     
L+
1.74
%    
June 2035
 
2017 Single Asset Securitization
   
     
     
     
     
 
Collateral assets
(3)
   
1
     
682,297
     
678,770
     
L+
3.60
%    
June 2023
 
Financing provided
   
1
     
474,620
     
474,448
     
L+
1.65
%    
June 2033
 
Total
   
     
     
     
     
 
Collateral assets
   
27
    $
1,682,297
    $
1,678,770
     
6.19
%    
 
                                         
Financing provided
(4)
   
2
    $
1,292,120
    $
1,285,471
     
L+
1.71
%    
 
                                         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                         
____________  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
(1)  
 
As of June 30, 2019, all of our loans financed by securitized debt obligations earned a floating rate of interest. As of December 31, 2018,
98
% of our loans financed by securitized debt obligations earned a floating rate of interest. In addition to cash coupon,
all-in
yield includes the amortization of deferred origination and extension fees, loan origination costs, purchase discounts, and accrual of exit fees.
All-in
yield for the total portfolio assume applicable floating benchmark rates for weighted-average calculation.
(2)
 
Loan term represents weighted-average final maturity, assuming all extension options are exercised by the borrower. Repayments of securitized debt obligations are tied to timing of the related collateral loan asset repayments. The term of these obligations represents the rated final distribution date of the securitizations.
(3)
 
The collateral assets for the 2017 Single Asset Securitization include the total loan amount, of which we securitized $
500.0
million.
(4)
 
During the three and six months ended June 30, 2019, we recorded $
12.5
 million and $
25.0
 million, respectively, of interest expense related to our securitized debt obligations. During the three and six months ended June 30, 2018, we recorded $
12.0
 million and $
23.1
 million, respectively, of interest expense related to our securitized debt obligations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
26
 
 

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
8. SECURED TERM LOAN, NET
In April 2019 we entered into a senior secured term loan facility, or the Secured Term Loan. As of June 30, 2019, the following Secured Term Loan was outstanding ($ in thousands):
                                 
Term Loan Issuance
 
Face Value
   
Coupon Rate
   
All-in
 Cost
(1)
   
Maturity
 
Term Loan B
  $
     500,000
     
L+2.50
%    
L+2.80
%  
April 23, 2026
 
____________  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
(1)  
 
Includes issue discount and transaction expenses that are amortized through interest expense over the life of the Secured Term Loan.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Secured Term Loan is partially amortizing, with an amount equal to 1.0% per annum of the original principal balance due in quarterly installments beginning on September 30, 2019. The issue discount and transaction expenses on the Secured Term Loan were $1.3 million and $7.4 million, respectively, which will be amortized into interest expense over the life of the Secured Term Loan.
The guarantee under our Secured Term Loan contains the financial covenant that our indebtedness shall not exceed 83.33% of our total assets.
As of June 30, 2019, we were in compliance with this covenant. Refer to Note 2 for additional discussion of our accounting policies for the Secured Term Loan.
 
 
9. CONVERTIBLE NOTES, NET
As of June 30, 2019, the following convertible senior notes, or Convertible Notes, were outstanding ($ in thousands):
                                         
Convertible Notes Issuance
 
Face Value
   
Coupon Rate
   
All-in
 Cost
(1)
   
Conversion Rate
(2)
   
Maturity
 
May 2017
  $
     402,500
     
4.38
%    
4.85
%    
28.0324
     
May 5, 2022
 
March 2018
  $
220,000
     
4.75
%    
5.33
%    
27.6052
     
March 15, 2023
____________  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
(1)  
 
Includes issuance costs that are amortized through interest expense over the life of the Convertible Notes using the effective interest method.
(2)
 
Represents the shares of class A common stock per $1,000 principal amount of Convertible Notes, which is equivalent to a conversion price of $
35.67
and $
36.23
per share of class A common stock, respectively, for the May 2017 and March 2018 convertible notes. The cumulative dividend threshold as defined in the respective May 2017 and March 2018 convertible notes supplemental indentures have
no
t been exceeded as of June 30, 2019.
 
 
 
 
 
 
 
 
 
The Convertible Notes are convertible at the holders’ option into shares of our class A common stock, only under specific circumstances, prior to the close of business on January 31, 2022 and December 14, 2022 for the May 2017 and March 2018 convertible notes, respectively, at the applicable conversion rate in effect on the conversion date.
Thereafter, the Convertible Notes are convertible at the option of the holder at any time until the second scheduled trading day immediately preceding the maturity date. We may not redeem the Convertible Notes prior to maturity. The last reported sale price of our class A common stock of $35.58 on June 28, 2019, the last trading day in the quarter ended June 30, 2019, was less than the per share conversion price of the May 2017 and March 2018 convertible notes. We have the intent and ability to settle each series of the Convertible Notes in cash and, as a result, the Convertible Notes did not have any impact on our diluted earnings per share.
Upon our issuance of the May 2017 convertible notes, we recorded a $979,000 discount based on the implied value of the conversion option and an assumed effective interest rate of 4.57%, as well as $8.4 million of issue discount and issuance costs. Including the amortization of the discount and issuance costs, our total cost of the May 2017 convertible notes issuance is 4.91% per annum.
Upon our issuance of the March 2018 convertible notes, we recorded a $1.5 million discount based on the implied value of the conversion option and an assumed effective interest rate of 5.25%, as well as $5.2 million of issue discount and issuance costs. Including the amortization of the discount and issuance costs, our total cost of the March 2018 convertible notes issuance is 5.49% per annum.
  
27
 
  

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
The following table details the net book value of our Convertible Notes on our consolidated balance sheets ($ in thousands):
                 
 
June 30, 2019
   
December 31, 2018
 
Face value
  $
     622,500
    $
     622,500
 
Unamortized discount
   
(10,288
)    
(11,740
)
Deferred financing costs
   
(740
)    
(849
)
                 
Net book value
  $
611,472
    $
609,911
 
                 
 
 
 
 
 
 
 
The following table details our interest expense related to the Convertible Notes ($ in thousands):
                                 
 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
 
2019
   
2018
   
2019
   
2018
 
Cash coupon
  $
     7,015
    $
9,274
    $
14,030
    $
16,056
 
Discount and issuance cost amortization
   
788
     
1,206
     
1,560
     
2,395
 
                                 
Total interest expense
  $
7,803
    $
     10,480
    $
     15,590
    $
     18,451
 
                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of both June 30, 2019 and December 31, 2018, accrued interest payable for the Convertible Notes was 
$
6.0
 
million. Refer to Note 2 for additional discussion of our accounting policies for the Convertible Notes.
10. DERIVATIVE FINANCIAL INSTRUMENTS
The sole objective of our use of derivative financial instruments is to minimize the risks and/or costs associated with our investments and/or financing transactions. These derivatives may or may not qualify as net investment, cash flow, or fair value hedges under the hedge accounting requirements of ASC 815 – “Derivatives and Hedging.” Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks. Refer to Note 2 for additional discussion of the accounting for designated and non-designated hedges.
The use of derivative financial instruments involves certain risks, including the risk that the counterparties to these contractual arrangements do not perform as agreed. To mitigate this risk, we only enter into derivative financial instruments with counterparties that have appropriate credit ratings and are major financial institutions with which we and our affiliates may also have other financial relationships.
Net Investment Hedges of Foreign Currency Risk
Certain of our international investments expose us to fluctuations in foreign interest rates and currency exchange rates. These fluctuations may impact the value of our cash receipts and payments in terms of our functional currency, the U.S. dollar. We use foreign currency forward contracts to protect the value or fix the amount of certain investments or cash flows in terms of the U.S. dollar.
  
28
  

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
 
The following table details our outstanding foreign exchange derivatives that were designated as net investment hedges of foreign currency risk (notional amount in thousands):
 
                                     
June 30, 2019
 
December 31, 2018
 
Foreign Currency
Derivatives             
 
Number of
Instruments
 
 
Notional
Amount
   
Foreign Currency
Derivatives             
 
Number of
Instruments
 
 
Notional
Amount
 
Sell GBP Forward
 
4
 
  £
360,600
   
Sell GBP Forward
 
3
 
  £
192,300
 
Sell EUR Forward
 
2
 
 
339,200
   
Sell AUD Forward
 
2
 
  A$
187,600
 
Sell AUD Forward
 
4
 
  A$
123,900
   
Sell EUR Forward
 
1
 
 
185,000
 
Sell CAD Forward
 
2
 
  C$
39,100
   
Sell CAD Forward
 
1
 
  C$
70,600
 
 
 
 
 
 
 
 
 
 
Cash Flow Hedges of Interest Rate Risk
Certain of our transactions expose us to interest rate risks, which include a fixed versus floating rate mismatch between our assets and liabilities. We use derivative financial instruments, which include interest rate caps and swaps, and may also include interest rate options, floors, and other interest rate derivative contracts, to hedge interest rate risk.
The following tables detail our outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (notional amount in thousands):
                                     
June 30, 2019
Interest Rate Derivatives
 
Number of
Instruments
 
 
Notional
Amount
   
Strike
   
Index
   
Wtd.-Avg.

Maturity (Years)
Interest Rate Swaps
 
2
 
  C$
17,273
     
1.0%
     
CDOR
   
1.2
Interest Rate Caps
 
3
 
  $
     66,502
     
2.4%
     
USD LIBOR
   
0.2
Interest Rate Caps
 
1
 
  C$
21,709
     
3.0%
     
CDOR
   
0.5
 
December 31, 2018
Interest Rate Derivatives
 
Number of
Instruments
 
 
Notional
Amount
   
Strike
   
Index
   
Wtd.-Avg.

Maturity (Years)
Interest Rate Swaps
 
3
 
  C$
90,472
     
1.0%
     
CDOR
   
0.5
Interest Rate Caps
 
9
 
  $
204,248
     
2.4%
     
USD LIBOR
   
0.5
Interest Rate Caps
 
2
 
  C$
39,998
     
2.5%
     
CDOR
   
0.6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on our floating rate debt. During the twelve months following June 30, 2019, we estimate that an additional $82,000 will be reclassified from accumulated other comprehensive income (loss) as an increase to interest income.
 
 
Non-designated
Hedges
During the three and six months ended June 30, 2019, we recorded losses of $516,000 and gains of $144,000, respectively, related to
non-designated
hedges that were reported as a component of interest expense in our consolidated financial statements. During the three and six months ended June 30, 2018, we recorded losses of $69,000 and gains of $146,000, respectively, related to such non-designated hedges.
 
 
29
 
 

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
The following tables summarize our non-designated hedges (notional amount in thousands):
             
June 30, 2019
 
Non-designated
Hedges
 
Number of
Instruments
 
Notional
Amount
 
Buy AUD / Sell USD Forward
 
1
  A$
99,000
 
Buy USD / Sell AUD Forward
 
1
 
A$
99,000
 
Buy CAD / Sell USD Forward
 
3
 
C$
19,400
 
Buy USD / Sell CAD Forward
 
3
 
C$
19,400
 
Buy GBP / Sell EUR Forward
 
1
 
12,857
 
   
December 31, 2018
 
Non-designated
Hedges
 
Number of
Instruments
 
Notional
Amount
 
Buy AUD / Sell USD Forward
 
1
  A$
55,000
 
Buy USD / Sell AUD Forward
 
1
  A$
55,000
 
Buy GBP / Sell USD Forward
 
1
  £
23,200
 
Buy USD / Sell GBP Forward
 
1
  £
23,200
 
Buy GBP / Sell EUR Forward
 
1
 
12,857
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Valuation of Derivative Instruments
The following table summarizes the fair value of our derivative financial instruments ($ in thousands):
                                 
 
Fair Value of Derivatives in an
Asset Position
(1)
as of
   
Fair Value of Derivatives in a
Liability Position
(2)
as of
 
 
June 30, 2019
   
December 31, 2018
   
June 30, 2019
   
December 31, 2018
 
Derivatives designated as hedging instruments:
   
     
     
     
 
Foreign exchange contracts
  $
12,002
    $
8,210
    $
3,945
    $
1,307
 
Interest rate derivatives
   
145
     
590
     
     
—  
 
                                 
Total
  $
12,147
    $
8,800
    $
3,945
    $
1,307
 
                                 
Derivatives not designated as hedging instruments:
   
     
     
     
 
Foreign exchange contracts
  $
1,853
    $
1,116
    $
1,023
    $
1,618
 
Interest rate derivatives
   
     
—  
     
     
—  
 
                                 
Total
  $
1,853
    $
1,116
    $
1,023
    $
1,618
 
                                 
Total Derivatives
  $
14,000
    $
9,916
    $
4,968
    $
2,925
 
                                 
____________  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  (1) Included in other assets in our consolidated balance sheets.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  (2) Included in other liabilities in our consolidated balance sheets.
 
 
 
 
 
 
 
 
 
   
30
 
 

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
The following table presents the effect of our derivative financial instruments on our consolidated statements of operations ($ in thousands):
 
                                         
 
Amount of Gain (Loss)
Recognized in
OCI on Derivatives
   
Location of
Gain (Loss)
Reclassified from
Accumulated
OCI into Income
   
Amount of Gain
(Loss) Reclassified from
Accumulated OCI into Income
 
Derivatives in Hedging Relationships
 
Three Months
Ended
June 30,
2019
   
Six Months
Ended
June 30,
2019
   
Three Months
Ended
June 30,
2019
   
Six Months
Ended
June 30,
2019
   
 
Net Investment Hedges
   
     
     
     
     
 
Foreign exchange contracts
(1)
  $
10,941
    $  
9,295
     
Interest Expense
    $
    $
 
Cash Flow Hedges
   
     
     
     
     
 
Interest rate derivatives
   
(33
)    
(166
)    
Interest Expense
(2)
 
   
(6
)    
163
 
 
 
                                       
Total
  $
10,908
    $
9,129
     
    $
(6
)   $
163
 
                                         
____________    
     
     
     
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)  
 
During the three and six months ended June 30, 2019, we received net cash settlements of $5.0 million and $7.0 million, respectively, on our foreign currency forward contracts. Those amounts are included as a component of accumulated other comprehensive loss on our consolidated balance sheets.
(2)
 
During the three months ended June 30, 2019, we recorded total interest and related expenses of $116.9 million, which included $6,000 related to our cash flow hedges. During the six months ended June 30, 2019, we recorded total interest and related expenses of $235.6 million, which included a $163,000 expense reduction related to income generated by our cash flow hedges.
 
 
 
 
 
 
 
 
 
 
 
 
 
         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit-Risk Related Contingent Features
We have entered into agreements with certain of our derivative counterparties that contain provisions where if we were to default on any of our indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, we may also be declared in default on our derivative obligations. In addition, certain of our agreements with our derivative counterparties require that we post collateral to secure net liability positions. As of June 30, 2019, we were in a net asset position with one of our derivative counterparties and in a net liability position with our other derivative counterparty and did not have any collateral posted under these derivative contracts. As of December 31, 2018, we were in a net asset position with each such derivative counterparty and did not have any collateral posted under these derivative contracts.    
11. EQUITY
Stock and Stock Equivalents
Authorized Capital
As of June 30, 2019, we had the authority to issue up to 300,000,000 shares of stock, consisting of 200,000,000 shares of class A common stock and 100,000,000 shares of preferred stock. Subject to applicable NYSE listing requirements, our board of directors is authorized to cause us to issue additional shares of authorized stock without stockholder approval. In addition, to the extent not issued, currently authorized stock may be reclassified between class A common stock and preferred stock. We did not have any shares of preferred stock issued and outstanding as of June 30, 2019.
Class A Common Stock and Deferred Stock Units
Holders of shares of our class A common stock are entitled to vote on all matters submitted to a vote of stockholders and are entitled to receive such dividends as may be authorized by our board of directors and declared by us, in all cases subject to the rights of the holders of shares of outstanding preferred stock, if any.
  
31
 
 

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
The following table details our issuance of class A common stock during the six months ended June 30, 2019:
                         
 
Class A Common Stock Offerings
   
2019 Total /
Wtd. Avg.
   
 
June 2019
   
At-the-Market
 2019
(1)
   
Shares issued
   
8,625,000
     
1,909,628
     
10,534,628
 
Gross share issue price
(2)
  $
     36.00
    $
34.63
    $
     35.75
 
Net share issue price
(3)
  $
35.62
    $
34.28
    $
35.38
 
Net proceeds
(4)
  $
306,952
    $
65,389
    $
372,341
 
____________  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
       
(1)
   
Issuance represents shares issued under our
at-the-market
program.
(2)
   
Represents the weighted-average gross price per share paid by underwriters or sales agents, as applicable.
(3)
   
Represents the weighted-average net proceeds per share after underwriting or sales discounts and commissions.
(4)
   
Net proceeds represents proceeds received from the underwriters less applicable transaction costs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
We also issue restricted class A common stock under our stock-based incentive plans. Refer to Note 14 for additional discussion of these long-term incentive plans. In addition to our class A common stock, we also issue deferred stock units to certain members of our board of directors in lieu of cash compensation for services rendered. These deferred stock units are
non-voting,
but carry the right to receive dividends in the form of additional deferred stock units in an amount equivalent to the cash dividends paid to holders of shares of class A common stock.
The following table details the movement in our outstanding shares of class A common stock, including restricted class A common stock and deferred stock units:
                 
 
Six Months Ended June 30,
 
Common Stock Outstanding
(1)
 
2019
   
2018
 
Beginning balance
   
123,664,577
     
108,081,077
 
Issuance of class A common stock
(2)
   
10,535,181
     
3,252,325
 
Issuance of restricted class A common stock, net
   
317,339
     
305,703
 
Issuance of deferred stock units
   
15,697
     
15,919
 
                 
Ending balance
   
134,532,794
     
111,655,024
 
                 
____________  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
       
(1)
   
Includes deferred stock units held by members of our board of directors of 244,536 and 213,136 as of June 30, 2019 and 2018, respectively.
(2)
   
Includes 553 and 876 shares issued under our dividend reinvestment program during the six months ended June 30, 2019 and 2018, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividend Reinvestment and Direct Stock Purchase Plan
On
March 25, 2014
, we adopted a dividend reinvestment and direct stock purchase plan, under which we registered and reserved for issuance, in the aggregate, 10,000,000 shares of class A common stock. Under the dividend reinvestment component of this plan, our class A common stockholders can designate all or a portion of their cash dividends to be reinvested in additional shares of class A common stock. The direct stock purchase component allows stockholders and new investors, subject to our approval, to purchase shares of class A common stock directly from us. During the three and six months ended June 30, 2019, we issued 272 shares and 553 shares, respectively, of class A common stock under the dividend reinvestment component of the plan compared to 421 shares and 876 shares
, respectively, 
for the same periods in 2018. As of June 30, 2019, a total of
9,994,685
shares of class A common stock remained available for issuance under the dividend reinvestment and direct stock purchase plan.
At the Market Stock Offering Program
On November 14, 2018, we entered into six equity distribution agreements, or ATM Agreements, pursuant to which we may sell, from time to time, up to an aggregate sales price of $500.0 million of our class A common stock. Sales of class A common stock made pursuant to our ATM Agreements may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended. Actual sales will depend on a variety of factors including market conditions, the trading price of our class A common stock, our capital needs, and our determination of the appropriate sources of funding to meet such
 
32
 
 

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
needs. During the six months ended June 30, 2019, we issued and sold 1,909,628 shares of class A common stock under ATM Agreements, generating net proceeds totaling $65.4 million. During the six months ended June 30, 2018, we issued and sold 3,251,449 shares of class A common stock under ATM Agreements, with net proceeds totaling $102.5 million. As of June 30, 2019, shares of our class A common stock with an aggregate sales price of $363.8 million remained available for issuance under our ATM Agreements.
Dividends
We generally intend to distribute substantially all of our taxable income, which does not necessarily equal net income as calculated in accordance with GAAP, to our stockholders each year to comply with the REIT provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. Our
dividend policy remains subject to revision at the discretion of our board of directors. All distributions will be made at the discretion of our board of directors and will depend upon our taxable income, our financial condition, our maintenance of REIT status, applicable law, and other factors as our board of directors deems relevant.
On
June 14, 2019
, we declared a dividend of $
0.62
per share, or $83.3 million, that was paid on
July 15, 2019
, to stockholders of record as of
June 28, 2019
.
The following table details our dividend activity ($ in thousands, except per share data):
 
                                 
 
Three Months Ended 
June 30,
   
Six Months Ended
June 30,
 
 
2019
   
2018
   
2019
   
2018
 
Dividends declared per share of common stock
  $
0.62
    $
0.62
    $
1.24
    $
1.24
 
Total dividends declared
  $
     83,259
    $
     69,094
    $
     161,172
    $
     136,174
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings Per Share
We calculate our basic and diluted earnings per share using the
two-class
method for all periods presented as the unvested shares of our restricted class A common stock qualify as participating securities, as defined by GAAP. These restricted shares have the same rights as our other shares of class A common stock, including participating in any dividends, and therefore have been included in our basic and diluted net income per share calculation. Our Convertible Notes are excluded from dilutive earnings per share as we have the intent and ability to settle these instruments in cash.
The following table sets forth the calculation of basic and diluted net income per share of class A common stock based on the weighted-average of both restricted and unrestricted class A common stock outstanding ($ in thousands, except per share data):
                                 
 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
 
2019
   
2018
   
2019
   
2018
 
Net income
(1)
  $
75,174
    $
72,312
    $
151,738
    $
133,271
 
Weighted-average shares outstanding, basic and diluted
   
126,475,244
     
109,069,078
     
125,410,064
     
108,735,193
 
                                 
Per share amount, basic and diluted
  $
0.59
    $
0.66
    $
1.21
    $
1.23
 
                                 
__________
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
               
(1)  
Represents net income attributable to Blackstone Mortgage Trust, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Balance Sheet Items
Accumulated Other Comprehensive Loss
As of June 30, 2019, total accumulated other comprehensive loss was $29.4 million, primarily representing (i) $108.8 million of cumulative unrealized currency translation adjustments on assets and liabilities denominated in foreign currencies and (ii) an offsetting $79.4 million of net realized and unrealized gains related to changes in the fair value of derivative instruments. As of December 31, 2018, total accumulated other comprehensive loss was $34.2 million, primarily representing (i) $104.6 million of cumulative unrealized currency translation adjustments on assets and liabilities denominated in foreign currencies and (ii) an offsetting $70.4 million of net realized and unrealized gains related to changes in the fair value of derivative instruments.
  
33
 
 

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
Non-Controlling
Interests
The
non-controlling
interests included on our consolidated balance sheets represent the equity interests in our Multifamily Joint Venture that are not owned by us. A portion of our Multifamily Joint Venture’s consolidated equity and results of operations are allocated to these
non-controlling
interests based on their pro rata ownership of our Multifamily Joint Venture. As of June 30, 2019, our Multifamily Joint Venture’s total equity was $193.7 million, of which $164.6 million was owned by us, and $29.1 million was allocated to
non-controlling
interests. As of December 31, 2018, our Multifamily Joint Venture’s total equity was $69.9 million, of which $59.4 million was owned by us, and $10.5 million was allocated to
non-controlling
interests.
12. OTHER EXPENSES
Our other expenses consist of the management and incentive fees we pay to our Manager and our general and administrative expenses.
Management and Incentive Fees
Pursuant to a management agreement between our Manager and us, or our Management Agreement, our Manager earns a base management fee in an amount equal to 1.50% per annum multiplied by our outstanding equity balance, as defined in the Management
A
greement. In addition, our
Manager is entitled to an incentive fee in an amount equal to the product of (i) 20% and (ii) the excess of (a) our Core Earnings (as defined in our Management
Agreement) for the previous
12-month
period over (b) an amount equal to 7.00% per annum multiplied by our outstanding Equity, provided that our Core Earnings over the prior three-year period is greater than zero. Core Earnings, as defined in our Management Agreement, is generally equal to our net income (loss) prepared in accordance with GAAP, excluding (i) certain
non-cash
items (ii) the net income (loss) related to our legacy portfolio and (iii) incentive management fees.
During the three and six months ended June 30, 2019, we incurred $13.3 million and $26.4 million, respectively, of management fees payable to our Manager, compared to $11.1 million and $22.2 million during the same periods in 2018. In addition, during the three and six months ended June 30, 2019, we incurred $7.7 million and $14.4 million, respectively, of incentive fees payable to our Manager, compared to $11.3 million and $15.7 million during the same periods in 2018.
As of June 30, 2019 and December 31, 2018 we had accrued management and incentive fees payable to our Manager of $21.0 million and $18.6 million, respectively.
 
34
 
 

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
General and Administrative Expenses
General and administrative expenses consisted of the following ($ in thousands):
                                 
 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
 
2019
   
2018
   
2019
   
2018
 
Professional services
(1)
  $
1,249
    $
1,139
    $
2,439
    $
2,361
 
Operating and other costs
(1)
   
894
     
830
     
1,249
     
1,339
 
                                 
Subtotal
   
2,143
     
1,969
     
3,688
     
3,700
 
Non-cash compensation expenses
   
     
     
     
 
Restricted class A common stock earned
   
7,629
     
6,653
     
15,272
     
13,504
 
Director stock-based compensation
   
125
     
125
     
250
     
250
 
                                 
 Subtotal
   
7,754
     
6,778
     
15,522
     
13,754
 
 
                               
 Total general and administrative expenses
  $
9,897
    $
8,747
    $
19,210
    $
17,454
 
                                 
____________    
     
     
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
       
(1)
   
During the three and six months ended June 30, 2019, we recognized an aggregate $164,000 and $333,000, respectively, of expenses related to our Multifamily Joint Venture. During the three and six months ended June 30, 2018, we recognized an aggregate $124,000 and $225,000, respectively, of expenses related to our Multifamily Joint Venture.
 
 
 
 
 
 
 
 
 
 
 
13. INCOME TAXES
We have elected to be taxed as a REIT under the Internal Revenue Code for U.S. federal income tax purposes. We generally must distribute annually at least 90% of our net taxable income, subject to certain adjustments and excluding any net capital gain, in order for U.S. federal income tax not to apply to our earnings that we distribute. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our net taxable income, we will be subject to U.S. federal income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws.
Our qualification as a REIT also depends on our ability to meet various other requirements imposed by the Internal Revenue Code, which relate to organizational structure, diversity of stock ownership, and certain restrictions with regard to the nature of our assets and the sources of our income. Even if we qualify as a REIT, we may be subject to certain U.S. federal income and excise taxes and state and local taxes on our income and assets. If we fail to maintain our qualification as a REIT for any taxable year, we may be subject to material penalties as well as federal, state, and local income tax on our taxable income at regular corporate rates and we would not be able to qualify as a REIT for the subsequent four full taxable years. As of June 30, 2019 and December 31, 2018, we were in compliance with all REIT requirements.
Securitization transactions could result in the creation of taxable mortgage pools for federal income tax purposes. As a REIT, so long as we own 100% of the equity interests in a taxable mortgage pool, we generally would not be adversely affected by the characterization of the securitization as a taxable mortgage pool. Certain categories of stockholders, however, such as foreign stockholders eligible for treaty or other benefits, stockholders with net operating losses, and certain
tax-exempt
stockholders that are subject to unrelated business income tax, or UBTI, could be subject to increased taxes on a portion of their dividend income from us that is attributable to the taxable mortgage pool. We currently own no UBTI producing assets and we do not intend to purchase or generate assets that produce UBTI distributions in the future.
During the three and six months ended June 30, 2019, we recorded a current income tax provision of $46,000 and $147,000, respectively, primarily related to activities of our taxable REIT subsidiaries and various state and local taxes. During the three and six months ended June 30, 2018, we recorded a current income tax provision of $104,000 and $224,000, respectively. We did not have any deferred tax assets or liabilities as of June 30, 2019 or December 31, 2018.
 
Effective January 1, 2018, under legislation from the Tax Cuts and Jobs Act of 2017, the maximum U.S. federal corporate income tax rate was reduced from 35% to 21%. Accordingly, to the extent that the activities of our taxable REIT subsidiaries generate taxable income in future periods, they may be subject to lower U.S. federal income tax rates.
  
35
 
 

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
We have net operating losses, or NOLs, generated by our predecessor business that may be carried forward and utilized in current or future periods. As a result of our issuance of 25,875,000 shares of class A common stock in May 2013, the availability of our NOLs is generally limited to $
2.0
 million per annum
by change of control provisions promulgated by the Internal Revenue Service with respect to the ownership of Blackstone Mortgage Trust. As of December 31, 2018, we had estimated NOLs of $159.0 million that will expire in 2029, unless they are utilized by us prior to expiration.
As of June 30, 2019, tax years 2015 through 2018 remain subject to examination by taxing authorities.
14. STOCK-BASED INCENTIVE PLANS
We are externally managed by our Manager and do not currently have any employees. However, as of June 30, 2019, our Manager, certain individuals employed by an affiliate of our Manager, and certain members of our board of directors were compensated, in part, through our issuance of stock-based instruments.
We had stock-based incentive awards outstanding under nine benefit plans as of June 30, 2019. Seven of such benefit plans have expired and
no
new awards may be issued under them. Under our two current benefit plans, a maximum of 5,000,000 shares of our class A common stock may be issued to our Manager, our directors and officers, and certain employees of affiliates of our Manager. As of June 30, 2019, there were
3,973,619
shares available under our current benefit plans.
The following table details the movement in our outstanding shares of restricted class A common stock and the weighted-average grant date fair value per share:
                 
 
Restricted Class A
Common Stock
   
Weighted-Average

Grant Date Fair
Value Per Share
 
Balance as of December 31, 2018
   
1,614,907
    $
32.94
 
Granted
   
334,904
     
31.54
 
Vested
   
(420,780
)    
32.15
 
Forfeited
   
(17,565
)    
31.55
 
                 
Balance as of June 30, 2019
   
1,511,466
    $
32.87
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
These shares generally vest in installments over a three-year period, pursuant to the terms of the respective award agreements and the terms of our current benefit plans. The 1,511,466 shares of restricted class A common stock outstanding as of June 30, 2019 will vest as follows: 527,627 shares will vest in 2019; 649,043 shares will vest in 2020; and 334,796 shares will vest in 2021. As of June 30, 2019, total unrecognized compensation cost relating to unvested share-based compensation arrangements was $44.9 million based on the grant date fair value of shares granted subsequent to July 1, 2018. The compensation cost of our share based compensation arrangements for awards granted before July 1, 2018 is based on $31.43, the closing price of our class A common stock on the last trading day prior to July 1, 2018. This cost is expected to be recognized over a weighted-average period of 1.1 years from June 30, 2019.
  
36
 
 

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
15. FAIR VALUES
Assets and Liabilities Measured at Fair Value
The following table summarizes our assets and liabilities measured at fair value on a recurring basis ($ in thousands):
                                                                 
 
June 30, 2019
   
December 31, 2018
 
 
  Level 1  
   
  Level 2  
   
  Level 3  
   
  Total  
   
  Level 1  
   
  Level 2  
   
  Level 3  
   
  Total  
 
Assets
   
     
     
     
     
     
     
     
 
Derivatives
  $
     —  
    $
14,000
    $
     —  
    $
14,000
    $
 —  
    $
 9,916
    $
 —  
    $
9,916
 
Liabilities
   
     
     
     
     
     
     
     
 
Derivatives
  $
     —  
    $
4,968
    $
     —  
    $
4,968
    $
—  
    $
2,925
    $
 —  
    $
2,925
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Refer to Note 2 for further discussion regarding fair value measurement.
Fair Value of Financial Instruments
As discussed in Note 2, GAAP requires disclosure of fair value information about financial instruments, whether or not recognized in the statement of financial position, for which it is practicable to estimate that value.
  
37
 
 

 
Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
The following table details the book value, face amount, and fair value of the financial instruments described in Note 2 ($ in thousands):
                                                 
 
June 30, 2019
   
December 31, 2018
 
 
Book
Value
   
Face
Amount
   
Fair
Value
   
Book
Value
   
Face
Amount
   
Fair
Value
 
Financial assets
   
     
     
     
     
     
 
Cash and cash equivalents
  $
80,584
    $
80,584
    $
80,584
    $
105,662
    $
105,662
    $
105,662
 
Loans receivable, net
   
  14,280,919
     
  14,372,950
     
  14,375,273
     
  14,191,200
     
  14,293,970
     
  14,294,836
 
Debt securities
held-to-maturity
(1)
   
94,595
     
97,174
     
96,239
     
96,167
     
99,000
     
96,600
 
Financial liabilities
   
     
     
     
     
     
 
Secured debt agreements, net
   
8,257,370
     
8,283,613
     
8,283,613
     
8,974,756
     
8,996,481
     
8,996,481
 
Loan participations sold, net
   
     
     
     
94,418
     
94,528
     
94,528
 
Securitized debt obligations, net
   
1,287,364
     
1,292,120
     
1,291,784
     
1,285,471
     
1,292,120
     
1,283,086
 
Secured term loan, net
   
491,598
     
500,000
     
501,095
     
—  
     
—  
     
—  
 
Convertible notes, net
   
611,472
     
622,500
     
649,275
     
609,911
     
622,500
     
605,348
 
____________
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Included in other assets on our consolidated balance sheets.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Estimates of fair value for cash and cash equivalents and convertible notes are measured using observable, quoted market prices, or Level 1 inputs. Estimates of fair value for debt securities
held-to-maturity,
securitized debt obligations, and the secured term loan are measured using observable, quoted market prices, in inactive markets, or Level 2 inputs. All other fair value significant estimates are measured using unobservable inputs, or Level 3 inputs. See Note 2 for further discussion regarding fair value measurement of certain of our assets and liabilities.
16. VARIABLE INTEREST ENTITIES
Consolidated Variable Interest Entities
We have financed a portion of our loans through the CLO and the 2017 Single Asset Securitization, both of which are VIEs. We are the primary beneficiary of, and therefore consolidate, the CLO and the 2017 Single Asset Securitization on our balance sheet as we (i) control the relevant interests of the CLO and the 2017 Single Asset Securitization that give us power to direct the activities that most significantly affect the CLO and the 2017 Single Asset Securitization, and (ii) have the right to receive benefits and obligation to absorb losses of the CLO and the 2017 Single Asset Securitization through the subordinate interests we own.
  
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Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
 
The following table details the assets and liabilities of our consolidated CLO and 2017 Single Asset Securitization VIEs ($ in thousands):
                 
 
June 30, 2019
   
December 31, 2018
 
Assets:
   
     
 
Loans receivable, net
  $
1,467,626
    $
1,500,000
 
Other assets
   
37,043
     
5,440
 
                 
Total assets
  $
1,504,669
    $
1,505,440
 
                 
Liabilities:
   
     
 
Securitized debt obligations, net
  $
1,287,364
    $
1,285,471
 
Other liabilities
   
1,997
     
2,155
 
                 
Total liabilities
  $
     1,289,361
    $
     1,287,626
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets held by these VIEs are restricted and can be used only to settle obligations of the VIEs, including the subordinate interests owned by us. The liabilities of these VIEs are
non-recourse
to us and can only be satisfied from the assets of the VIEs. The consolidation of these VIEs results in an increase in our gross assets, liabilities, interest income and interest expense, however it does not affect our stockholders’ equity or net income.
Non-Consolidated
Variable Interest Entities
In the third quarter of 2018, we contributed a $517.5 million loan to the $1.0 billion 2018 Single Asset Securitization, which is a VIE, and invested in the related $99.0 million subordinate risk retention position. We are not the primary beneficiary of the VIE because we do not have the power to direct the activities that most significantly affect the VIE’s economic performance and, therefore, do not consolidate the 2018 Single Asset Securitization on our balance sheet. We have classified the subordinate risk retention position as a held-to-maturity debt security that is included in other assets on our consolidated balance sheets. Our maximum exposure to loss from the 2018 Single Asset Securitization is limited to our book value of $94.6 million as of June 30, 2019. Refer to Note 17 for further details of this transaction.
We are not obligated to provide, have not provided, and do not intend to provide financial support to these consolidated and
non-consolidated
VIEs.
17. TRANSACTIONS WITH RELATED PARTIES
We are managed by our Manager pursuant to the Management Agreement, the current term of which expires on
December 19, 2019
, and will be automatically renewed for a
one-year
term upon such date and each anniversary thereafter unless earlier terminated.
As of June 30, 2019 and December 31, 2018, our consolidated balance sheets included $21.0 million and $18.6 million of accrued management and incentive fees payable to our Manager, respectively. During the three and six months ended June 30, 2019, we paid management and incentive fees of $19.8 million and $38.4 million, respectively, to our Manager, compared to $15.5 million and $29.8 million during the same periods of 2018. In addition, during the three and six months ended June 30, 2019, we reimbursed our Manager for expenses incurred on our behalf of $242,000 and $430,000, respectively, compared to $215,000 and $405,000 during the same periods of 2018.
As of June 30, 2019, our Manager held 723,542 shares of unvested restricted class A common stock, which had an aggregate grant date fair value of $22.9 million, and vest in installments over three years from the date of issuance. During the three and six months ended June 30, 2019, we recorded
non-cash
expenses related to shares held by our Manager of $3.9 million and $7.7 million, respectively, compared to $3.2 million and $6.4 million during the same periods of 2018. Refer to Note 14 for further details on our restricted class A common stock.
An affiliate of our Manager is the special servicer of the CLO. This affiliate did not earn any special servicing fees related to the CLO during the six months ended June 30, 2019 or 2018.
  
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Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
During the three and six months ended June 30, 2019, we incurred $90,000 and $176,000, respectively, of expenses for various administrative, compliance, and capital market data services to third-party service providers that are affiliates of our Manager, compared to $153,000 and $293,000 during the same periods of 2018.
 
In the second quarter of 2019, certain Blackstone-advised investment vehicles acquired an aggregate $55.0 million participation, or 11% of the total Secured Term Loan as a part of a broad syndication
lead-arranged
by JP Morgan. Blackstone Advisory Partners L.P., an affiliate of our Manager, was engaged as a book-runner for the transaction and received a fee of $500,000 in such capacity. Both of these transactions were on terms equivalent to those of unaffiliated parties.
 
In the second quarter of 2019, we originated 
191.8 million of a total
391.3 million senior loan to a borrower that is wholly owned by a Blackstone-advised investment vehicle. We will forgo all
non-economic
rights under the loan, including voting rights, so long as the Blackstone-advised investment vehicle controls the borrower. The senior loan terms were negotiated by a third-party without our involvement and our 49% interest in the senior loan was made on such market terms.
In the first quarter of 2019, we originated £240.1 million of a total £490.0 million senior loan to a borrower that is wholly owned by a Blackstone-advised investment vehicle. We will forgo all
non-economic
rights under the loan, including voting rights, so long as the Blackstone-advised investment vehicle controls the borrower. The senior loan terms were negotiated by a third-party without our involvement and our 49% interest in the senior loan was made on such market terms.
During the six months ended June 30, 2018, we originated two loans whereby each respective borrower engaged an affiliate of our Manager to act as title insurance agent in connection with each transaction. We did not incur any expenses or receive any revenues as a result of these transactions. We did not have any similar transactions during the six months ended June 30, 2019.
In the second quarter of 2018, we acquired from an unaffiliated third-party a 50% interest in a $1.0 billion senior loan to a borrower that is partially owned by a Blackstone-advised investment vehicle. In the third quarter of 2018, we contributed this loan to the 2018 Single Asset Securitization and invested in the related subordinate risk retention position. We will forgo all
non-economic
rights under the loan, including voting rights, so long as Blackstone-advised investment vehicles own the borrower above a certain threshold. Refer to Note 16 for further details on this transaction.
In the first quarter of 2018, we originated
1.0 billion of a total
7.3 billion senior term facility, or the Senior Term Facility, for the acquisition of a portfolio of Spanish real estate assets and a Spanish real estate management and loan servicing company by a joint venture between Banco Santander S.A. and certain Blackstone-advised investment vehicles. These investment vehicles own 51% of the joint venture, and we will forgo all
 non-economic
 rights under the Senior Term Facility, including voting rights, so long as Blackstone-advised investment vehicles control the joint venture. The Senior Term Facility was negotiated by the joint venture with third-party investment banks without our involvement, and our 14% interest in the Senior Term Facility was made on such market terms.
In the first quarter of 2018, we originated a $330.0 million senior loan, the proceeds of which were used by the borrower to repay an existing loan owned by a Blackstone-advised investment vehicle.
18. COMMITMENTS AND CONTINGENCIES
Unfunded Commitments Under Loans Receivable
As of June 30, 2019, we had unfunded commitments of $3.2 billion related to 91 loans receivable, which amounts will generally be funded to finance our borrowers’ construction or development of real estate-related assets, capital improvements of existing assets, or lease-related expenditures. These commitments will generally be funded over the term of each loan, subject in certain cases to an expiration date.
  
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Table of Contents
 
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
Principal Debt Repayments
Our contractual principal debt repayments as of June 30, 2019 were as follows ($ in thousands):
                                         
 
   
Payment Timing
 
 
Total
   
Less Than
   
1 to 3
   
3 to 5
   
More Than
 
 
Obligation
   
1 Year
   
Years
   
Years
   
5 Years
 
Principal repayments under secured debt agreements
(1)
  $
8,283,613
    $
109,374
    $
3,266,552
    $
4,520,799
    $
386,888
 
Principal repayments of secured term loans
(2)
   
500,000
     
3,750
     
10,000
     
10,000
     
476,250
 
Principal repayments of convertible notes
(3)
   
622,500
     
     
402,500
     
220,000
     
 
                                         
Total
(4)
  $
    9,406,113
    $
    113,124
    $
    3,679,052
    $
    4,750,799
    $
    863,138
 
                                         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                         
____________  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
(1)  
 
The allocation of repayments under our secured debt agreements is based on the earlier of (i) the maturity date of each facility, or (ii) the maximum maturity date of the collateral loans, assuming all extension options are exercised by the borrower.
(2)
 
The Secured Term Loan is partially amortizing, with an amount equal to 1.0% per annum of the original principal balance due in quarterly installments. Refer to Note 8 for further details on our secured term loan.
(3)
 
Reflects the outstanding principal balance of Convertible notes, excluding any potential conversion premium. Refer to Note 9 for further details on our Convertible notes.
(4)
 
Does not include $406.3 million of
non-consolidated
senior interests and $1.3 billion of securitized debt obligations, as the satisfaction of these liabilities will not require cash outlays from us.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Board of Directors’ Compensation
As of June 30, 2019, of the eight members of our board of directors, our
five
independent directors are entitled to annual compensation of $175,000 each, $75,000 of which will be paid in the form of cash and $100,000 in the form of deferred stock units. The other three board members, including our chairman and our chief executive officer, are not compensated by us for their service as directors. In addition, (i) the chair of our audit committee receives additional annual cash compensation of $20,000, (ii) the other members of our audit committee receive additional annual cash compensation of $10,000, and (iii) the chairs of each of our compensation and corporate governance committees receive additional annual cash compensation of $10,000.
 
Litigation
From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of June 30, 2019, we were not involved in any material legal proceedings.
  
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Table of Contents
 
     
ITEM 2.
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
References herein to “Blackstone Mortgage Trust,” “Company,” “we,” “us,” or “our” refer to Blackstone Mortgage Trust, Inc. and its subsidiaries unless the context specifically requires otherwise.
The following discussion should be read in conjunction with the unaudited consolidated financial statements and notes thereto appearing elsewhere in this quarterly report on Form
10-Q.
In addition to historical data, this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect our current views with respect to, among other things, our business, operations and financial performance. You can identify these forward-looking statements by the use of words such as “intend,” “goal,” “estimate,” “expect,” “project,” “projections,” “plans,” “seeks,” “anticipates,” “should,” “could,” “may,” “designed to,” “foreseeable future,” “believe,” “scheduled,” and similar expressions. Such forward-looking statements are subject to various risks, uncertainties and assumptions. Our actual results or outcomes may differ materially from those in this discussion as a result of various factors, including but not limited to those discussed in Item 1A. Risk Factors in our annual report on Form
10-K
for the year ended December 31, 2018 and elsewhere in this quarterly report on Form
10-Q.
Introduction
Blackstone Mortgage Trust is a real estate finance company that originates senior loans collateralized by commercial real estate in North America, Europe, and Australia. Our investment objective is to preserve and protect shareholder capital while producing attractive risk-adjusted returns primarily through dividends generated from current income from our loan portfolio. We are externally managed by BXMT Advisors L.L.C., or our Manager, a subsidiary of The Blackstone Group Inc., or Blackstone, and are a real estate investment trust, or REIT, traded on the New York Stock Exchange, or NYSE, under the symbol “BXMT.” We are headquartered in New York City.
We conduct our operations as a REIT for U.S. federal income tax purposes. We generally will not be subject to U.S. federal income taxes on our taxable income to the extent that we annually distribute all of our net taxable income to stockholders and maintain our qualification as a REIT. We also operate our business in a manner that permits us to maintain an exclusion from registration under the Investment Company Act of 1940, as amended. We are organized as a holding company and conduct our business primarily through our various subsidiaries.
I. Key Financial Measures and Indicators
 
As a real estate finance company, we believe the key financial measures and indicators for our business are earnings per share, dividends declared, Core Earnings, and book value per share. For the three months ended June 30, 2019 we recorded earnings per share of $0.59, declared a dividend of $0.62 per share, and reported $0.68 per share of Core Earnings. In addition, our book value per share as of June 30, 2019 was $27.85. As further described below, Core Earnings is a measure that is not prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. We use Core Earnings to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan activity and operations.
Earnings Per Share and Dividends Declared
The following table sets forth the calculation of basic and diluted net income per share and dividends declared per share ($ in thousands, except per share data):
                 
 
Three Months Ended
 
 
June 30, 2019
   
March 31, 2019
 
Net income
(1)
  $
75,174
    $
76,565
 
Weighted-average shares outstanding, basic and diluted
   
    126,475,244
     
    124,333,048
 
                 
Net income per share, basic and diluted
  $
0.59
    $
0.62
 
                 
Dividends declared per share
  $
0.62
    $
0.62
 
                 
____________
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  (1) Represents net income attributable to Blackstone Mortgage Trust, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
42
 
 
 
 
Table of Contents
 
Core Earnings
Core Earnings is a
non-GAAP
measure, which we define as GAAP net income (loss), including realized gains and losses not otherwise included in GAAP net income (loss), and excluding (i) net income (loss) attributable to our CT Legacy Portfolio, (ii)
 non-cash
equity compensation expense, (iii) depreciation and amortization, (iv) unrealized gains (losses), and (v) certain
non-cash
items. Core Earnings may also be adjusted from time to time to exclude
one-time
events pursuant to changes in GAAP and certain other
non-cash
charges as determined by our Manager, subject to approval by a majority of our independent directors.
We believe that Core Earnings provides meaningful information to consider in addition to our net income and cash flow from operating activities determined in accordance with GAAP. This adjusted measure helps us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations. Although, according to the management agreement between our Manager and us, or our Management Agreement, we calculate the incentive and base management fees due to our Manager using Core Earnings before our incentive fee expense, we report Core Earnings after incentive fee expense, as we believe this is a more meaningful presentation of the economic performance of our class A common stock.
Core Earnings does not represent net income or cash generated from operating activities and should not be considered as an alternative to GAAP net income, or an indication of our GAAP cash flows from operations, a measure of our liquidity, or an indication of funds available for our cash needs. In addition, our methodology for calculating Core Earnings may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures, and accordingly, our reported Core Earnings may not be comparable to the Core Earnings reported by other companies.
The following table provides a reconciliation of Core Earnings to GAAP net income ($ in thousands, except per share data):
                 
 
Three Months Ended
 
 
June 30, 2019
   
March 31, 2019
 
Net income
(1)
  $
75,174
    $
76,565
 
Non-cash
compensation expense
   
7,754
     
7,768
 
Hedging and foreign currency income, net
(2)
   
3,237
     
3,271
 
Other items
   
58
     
95
 
                 
Core Earnings
  $
86,223
    $
87,699
 
                 
Weighted-average shares outstanding, basic and diluted
   
126,475,244
     
124,333,048
 
                 
Core Earnings per share, basic and diluted
  $
0.68
    $
0.71
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                 
____________
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
         
 
(1)
   
Represents net income attributable to Blackstone Mortgage Trust.
 
(2)
   
Primarily represents the forward points earned on our foreign currency forward contracts, which reflect the interest rate differentials between the applicable base rate for our foreign currency investments and USD LIBOR. These forward contracts effectively convert the rate exposure to USD LIBOR, resulting in additional interest income earned in U.S. dollar terms. These amounts are not included in GAAP net income, but rather as a component of Other Comprehensive Income in our consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
43
 
 
 
 
Table of Contents
 
Book Value Per Share
The following table calculates our book value per share ($ in thousands, except per share data):
                 
 
June 30, 2019
   
March 31, 2019
 
Stockholders’ equity
  $
3,747,363
    $
3,439,398
 
Shares
   
     
 
Class A common stock
   
134,288,258
     
125,666,550
 
Deferred stock units
   
244,536
     
236,803
 
                 
Total outstanding
   
134,532,794
     
125,903,353
 
                 
Book value per share
  $
27.85
    $
27.32
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
II. Loan Portfolio
 
During the quarter ended June 30, 2019, we originated or acquired $1.3 billion of loans. Loan fundings during the quarter totaled $1.1 billion, including $15.3 million of
non-consolidated
senior interests. Loan repayments during the quarter totaled $1.4 billion, including $48.3 million of
non-consolidated
senior interests. We generated interest income of $223.4 million and incurred interest expense of $116.9 million during the quarter, which resulted in $106.5 million of net interest income during the three months ended June 30, 2019.
Portfolio Overview
The following table details our loan origination activity ($ in thousands):
                 
 
Three Months Ended
   
Six Months Ended
 
 
June 30, 2019
   
June 30, 2019
 
Loan originations
(1)
  $
1,256,527
    $
1,955,259
 
Loan fundings
(2)
  $
1,138,222
    $
1,944,463
 
Loan repayments
(3)
   
(1,386,255
)    
(1,894,478
)
                 
Total net (repayments) fundings
  $
(248,033
)   $
49,985
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                 
____________  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
         
 
(1)
   
Includes new loan originations and additional commitments made under existing loans.
 
(2)
   
Loan fundings during the three and six months ended June 30, 2019 include $15.3 million and $22.2 million, respectively, of additional fundings under related
non-consolidated
senior interests.
 
(3)
   
Loan repayments during the three and six months ended June 30, 2019 include $48.3 million and $61.1 million, respectively, of additional repayments of loan exposure under related
non-consolidated
senior interests.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Table of Contents
 
The following table details overall statistics for our investment portfolio as of June 30, 2019 ($ in thousands):
                                                 
 
   
Total Investment Exposure
 
 
Balance Sheet
Portfolio
(1)
   
Loan
Exposure
(1)(2)
   
Other
Investments
(3)
   
   
   
Total Investment
Portfolio
 
Number of investments
   
123
     
123
     
1
     
     
     
124
 
Principal balance
  $
   14,372,950
    $
   14,779,252
    $
   1,015,906
     
     
    $
   15,795,158
 
Net book value
  $
14,280,919
    $
14,280,919
    $
94,595
     
     
    $
14,375,514
 
Unfunded loan commitments
(4)
  $
3,217,266
    $
3,262,605
    $
—  
     
     
    $
3,262,605
 
Weighted-average cash coupon
(5)
   
L + 3.37
%    
L + 3.42
%    
L + 2.75
%    
     
     
L + 3.38
%
Weighted-average
all-in
yield
(5)
   
L + 3.73
%    
L + 3.76
%    
L + 2.99
%    
     
     
L + 3.71
%
Weighted-average maximum maturity (years)
(6)
   
3.7
     
3.7
     
6.0
     
     
     
3.9
 
Loan to value (LTV)
(7)
   
63.9
%    
64.0
%    
42.6
%    
     
     
62.7
%
____________
   
   
 
 
 
 
 
 
 
     
(1)  
 
Excludes investment exposure to the $97.2 million subordinate risk retention interest we own in the $1.0 billion 2018 Single Asset Securitization. Refer to Notes 4 and 16 to our consolidated financial statements for further discussion of the 2018 Single Asset Securitization.
(2)
 
In certain instances, we finance our loans through the
non-recourse
sale of a senior loan interest that is not included in our consolidated financial statements. Total loan exposure encompasses the entire loan we originated and financed, including $406.3 million of such
non-consolidated
senior interests that are not included in our balance sheet portfolio.
(3)
 
Includes investment exposure to the $1.0 billion 2018 Single Asset Securitization. We do not consolidate the 2018 Single Asset Securitization on our consolidated financial statements, and instead reflect our $97.2 million subordinate risk retention investment as a component of other assets on our consolidated balance sheet. Refer to Notes 4 and 16 to our consolidated financial statements for further discussion of the 2018 Single Asset Securitization.
(4)
 
Unfunded commitments will primarily be funded to finance our borrowers’ construction or development of real estate-related assets, capital improvements of existing assets, or lease-related expenditures. These commitments will generally be funded over the term of each loan, subject in certain cases to an expiration date.
(5)
 
As of June 30, 2019, 97% of our loans by total loan exposure earned a floating rate of interest, primarily indexed to USD LIBOR, and 3% earned a fixed rate of interest. The weighted-average cash coupon and
all-in
yield are expressed in terms excluding the relevant floating benchmark rates as of June 30, 2019. In addition to cash coupon,
all-in
yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees.
(6)
 
Maximum maturity assumes all extension options are exercised by the borrower, however our loans and other investments may be repaid prior to such date. As of June 30, 2019, 67% of our loans and other investments were subject to yield maintenance or other prepayment restrictions and 33% were open to repayment by the borrower without penalty.
(7)
 
Based on LTV as of the dates loans and other investments were originated or acquired by us.
 
 
 
 
 
 
 
The charts below detail the geographic distribution and types of properties securing our investment portfolio, as of June 30, 2019:
 
 
 
 
 
Refer to section VI of this Item 2 for details of our loan portfolio, on a
loan-by-loan
basis.
 
  
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Asset Management
We actively manage the investments in our loan portfolio and exercise the rights afforded to us as a lender, including collateral level budget approvals, lease approvals, loan covenant enforcement, escrow/reserve management, collateral release approvals, and other rights that we may negotiate.
As discussed in Note 2 to our consolidated financial statements, our Manager performs a quarterly review of our loan portfolio, assesses the performance of each loan, and assigns it a risk rating between “1” and “5,” from less risk to greater risk. The following table allocates the principal balance and total loan exposure balances based on our internal risk ratings ($ in thousands):
                         
 
June 30, 2019
 
Risk
Rating
 
Number
  of Loans  
   
Net Book
Value
   
Total Loan
Exposure
(1)(2)
 
1
   
    4
    $
275,427
    $
275,806
 
2
   
  38
     
4,208,307
     
4,235,448
 
3
   
  78
     
9,630,494
     
10,100,685
 
4
   
    3
     
166,691
     
167,313
 
5
   
—  
     
—  
     
—  
 
                         
   
123
    $
   14,280,919
    $
   14,779,252
 
                         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                         
____________  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
(1)  
 
In certain instances, we finance our loans through the
non-recourse
sale of a senior loan interest that is not included in our consolidated financial statements. See Note 2 to our consolidated financial statements for further discussion. Total loan exposure encompasses the entire loan we originated and financed, including $406.3 million of such
non-consolidated
senior interests as of June 30, 2019.
(2)
 
Excludes investment exposure to the $1.0 billion 2018 Single Asset Securitization. Refer to Notes 4 and 16 to our consolidated financial statements for details of the subordinated risk retention interest we own in the 2018 Single Asset Securitization.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The weighted-average risk rating of our total loan exposure was 2.7 as of both June 30, 2019 and December 31, 2018.
Multifamily Joint Venture
As of June 30, 2019, our Multifamily Joint Venture held $505.0 million of loans, which are included in the loan disclosures above. Refer to Note 2 to our consolidated financial statements for additional discussion of our Multifamily Joint Venture.
 
 
46
 
 
 
 
Table of Contents
 
Portfolio Financing
Our portfolio financing arrangements include secured credit facilities, asset-specific financings, a revolving credit agreement, loan participations sold,
non-consolidated
senior interests, and securitized debt obligations.
The following table details our portfolio financing ($ in thousands):
                 
 
Portfolio Financing
 
 
Outstanding Principal Balance
 
 
June 30, 2019
   
December 31, 2018
 
Secured credit facilities
  $
8,065,675
    $
8,870,897
 
Asset-specific financings
   
217,938
     
81,739
 
Revolving credit agreement
   
—  
     
43,845
 
Loan participations sold
   
—  
     
94,528
 
Non-consolidated
senior interests
(1)
   
406,302
     
446,874
 
Securitized debt obligations
   
1,292,120
     
1,292,120
 
                 
Total portfolio financing
  $
     9,982,035
    $
     10,830,003
 
                 
 
 
 
 
 
 
 
                 
____________ 
   
     
 
 
 
 
 
 
 
 
     
(1)  
 
These
non-consolidated
senior interests provide structural leverage for our net investments which are reflected in the form of mezzanine loans or other subordinate interests on our balance sheet and in our results of operations.
 
 
 
 
 
 
 
Secured Credit Facilities
The following table details our secured credit facilities ($ in thousands):
                                     
 
June 30, 2019
 
 
Credit Facility Borrowings
   
 
Collateral
   
Lender
 
Potential
(1)
   
Outstanding
   
Available
(1)
   
 
Assets
(2)
 
Deutsche Bank
  $
1,861,121
    $
1,861,121
    $
—  
   
  $
2,353,629
 
Wells Fargo
   
1,742,942
     
1,251,130
     
491,812
   
   
2,285,101
 
Citibank
   
1,006,592
     
922,804
     
83,788
   
   
1,278,710
 
Barclays
   
933,424
     
902,146
     
31,278
   
   
1,166,780
 
JP Morgan
   
959,907
     
861,744
     
98,163
   
   
1,221,674
 
Bank of America
   
768,871
     
768,871
     
—  
   
   
962,378
 
Morgan Stanley
   
434,199
     
378,990
     
55,209
   
   
576,614
 
Société Générale
   
321,182
     
321,182
     
—  
   
   
419,034
 
Goldman Sachs
   
292,753
     
247,753
     
45,000
   
   
401,422
 
MetLife
   
233,616
     
233,616
     
—  
   
   
296,356
 
Goldman Sachs - Multi. JV
(3)
   
219,316
     
219,316
     
—  
   
   
293,877
 
Bank of America - Multi. JV
(3)
   
97,002
     
97,002
     
—  
   
   
123,856
 
                                     
  $
     8,870,925
    $
     8,065,675
    $
     805,250
   
  $
     11,379,431
 
                                     
 
 
 
 
 
 
 
                                         
____________ 
 
 
 
 
 
 
 
 
     
(1)  
 
Potential borrowings represents the total amount we could draw under each facility based on collateral already approved and pledged. When undrawn, these amounts are immediately available to us at our sole discretion under the terms of each credit facility.
(2)
 
Represents the principal balance of the collateral assets.
(3)
 
These facilities finance the loan investments of our consolidated Multifamily Joint Venture. Refer to Note 2 to our consolidated financial statements for additional discussion of our Multifamily Joint Venture.
 
 
 
 
 
 
 
 
 
47
 
 
 
  
Table of Contents
 
Asset-Specific Financings
The following tables detail our asset-specific financings ($ in thousands):
                                             
 
June 30, 2019
 
 
 
Principal
   
Book
   
Wtd. Avg.
   
   
Wtd. Avg.
 
Asset-Specific Financings
 
Count
 
Balance
   
Value
   
Yield/Cost
(1)
   
Guarantee
(2)
   
Term
(3)
 
Collateral assets
 
4
  $
     281,620
    $
     268,864
     
L+4.94
%    
n/a
     
Mar. 2023
 
Financing provided
 
4
   
217,938
     
209,912
     
L+3.53
%    
84,547
     
Mar. 2023
 
 
 
 
 
 
 
 
     
___________ 
(1)  
 
These floating rate loans and related liabilities are indexed to the various benchmark rates relevant in each arrangement in terms of currency and payment frequency. Therefore the net exposure to each benchmark rate is in direct proportion to our net assets indexed to that rate. In addition to cash coupon, yield/cost includes the amortization of deferred origination fees / financing costs.
(2)
 
Other than amounts guaranteed on an
asset-by-asset
basis, borrowings under our asset-specific financings are
non-recourse
to us.
(3)
 
The weighted-average term is determined based on the maximum maturity of the corresponding loans, assuming all extension options are exercised by the borrower. Each of our asset-specific financings are term-matched to the corresponding collateral loans.
 
 
 
 
 
 
 
Revolving Credit Agreement
We have a $250.0 million full recourse secured revolving credit agreement with Barclays that is designed to finance first mortgage originations for up to nine months as a bridge to term financing or syndication. Advances under the agreement are subject to availability under a specified borrowing base and accrue interest at a per annum pricing rate equal to the sum of (i) an applicable base rate or Eurodollar rate and (ii) an applicable margin, in each case, dependent on the applicable type of loan collateral. The maturity date of the facility is April 4, 2020. As of June 30, 2019, we had no outstanding borrowings under the agreement.    
Non-Consolidated
Senior Interests
In certain instances, we finance our loans through the
non-recourse
sale of a senior loan interest that is not included in our consolidated financial statements. These
non-consolidated
senior interests provide structural leverage for our net investments which are reflected in the form of mezzanine loans or other subordinate interests on our balance sheet and in our results of operations. The following table details the subordinate interests retained on our balance sheet and the related
non-consolidated
senior interests as of June 30, 2019 ($ in thousands):
                                             
 
June 30, 2019
 
 
 
Principal
   
Book
   
Wtd. Avg.
   
   
Wtd. Avg.
 
Non-Consolidated
Senior Interests
 
Count
 
Balance
   
Value
   
Yield/Cost
(1)
   
Guarantee
   
Term
 
Total loan
 
2
  $
   501,446
     
n/a
     
6.03
%    
n/a
     
Oct. 2022
 
Senior participation
 
2
   
406,302
     
n/a
     
4.49
%    
n/a
     
Oct. 2022
 
 
 
 
 
 
 
 
     
___________ 
(1)  
 
Our floating rate loans and related liabilities were indexed to the various benchmark rates relevant in each arrangement in terms of currency and payment frequency. Therefore the net exposure to each benchmark rate is in direct proportion to our net assets indexed to that rate. In addition to cash coupon,
all-in
yield/cost includes the amortization of deferred fees / financing costs.
 
 
 
 
 
 
 
 
 
48
 
 

Table of Contents
 
Securitized Debt Obligations
The following table details our securitized debt obligations ($ in thousands):
                                     
 
June 30, 2019
 
 
 
Principal
   
Book
   
Wtd. Avg.
   
 
Securitized Debt Obligations
 
Count
 
Balance
   
Value
   
Yield/Cost
(1)
   
Term
(2)
 
Collateralized Loan Obligation
 
   
     
     
     
 
Collateral assets
 
23
  $
1,000,000
    $
1,000,000
     
L+3.67
%    
June 2022
 
Financing provided
 
1
   
817,500
     
812,857
     
L+1.70
%    
June 2035
 
2017 Single Asset Securitization
 
   
     
     
     
 
Collateral assets
(3)
 
1
   
695,956
     
693,272
     
L+3.60
%    
June 2023
 
Financing provided
 
1
   
474,620
     
474,507
     
L+1.65
%    
June 2033
 
Total
 
   
     
     
     
 
Collateral assets
 
24
  $
1,695,956
    $
1,693,272
     
L+3.64
%    
 
                                     
Financing provided
(4)
 
2
  $
     1,292,120
    $
     1,287,364
     
L+1.68
%    
 
                                     
 
 
 
 
 
 
 
     
_____________ 
(1)  
 
In addition to cash coupon,
all-in
yield includes the amortization of deferred origination and extension fees, loan origination costs, purchase discounts, and accrual of exit fees.
All-in
yield for the total portfolio assume applicable floating benchmark rates for weighted-average calculation.
(2)
 
Loan term represents weighted-average final maturity, assuming all extension options are exercised by the borrower. Repayments of securitized debt obligations are tied to timing of the related collateral loan asset repayments. The term of these obligations represents the rated final distribution date of the securitizations.
(3)
 
The collateral assets for the 2017 Single Asset Securitization include the total loan amount, of which we securitized $500.0 million.
(4)
 
During the three and six months ended June 30, 2019, we recorded $12.5 million and $25.0 million, respectively, of interest expense related to our securitized debt obligations.
 
 
 
 
 
 
 
Refer to Notes 7 and 16 to our consolidated financial statements for additional details of our securitized debt obligations.
 
 
49
 
 
 
 
Table of Contents
 
Corporate Financing
Secured Term Loan
As of June 30, 2019, the following Secured Term Loan was outstanding ($ in thousands):
                                 
Term Loan Issuance
 
Face Value
   
Coupon Rate
   
All-in
 Cost
(1)
   
Maturity
 
Term Loan B
  $
     500,000
     
L+2.50
%    
L+2.80
%    
April 23, 2026
 
 
 
 
 
 
 
 
     
____________
(1)  
 
Includes issue discount and transaction expenses that are amortized through interest expense over the life of the Secured Term Loan.
 
 
 
 
 
 
 
Refer to Notes 2 and 8 to our consolidated financial statements for additional discussion of our Secured Term Loan.
Convertible Notes
As of June 30, 2019, the following convertible senior notes, or Convertible Notes, were outstanding ($ in thousands):
                                 
Convertible Notes Issuance
 
Face Value
   
Coupon Rate
   
All-in
 Cost
(1)
   
Maturity
 
May 2017
  $
402,500
     
4.38
%    
4.85
%    
May 5, 2022
 
March 2018
  $
     220,000
     
4.75
%    
5.33
%    
March 15, 2023
 
 
 
 
 
 
 
 
     
____________ 
(1)  
 
Includes issuance costs that are amortized through interest expense over the life of the Convertible Notes using the effective interest method.
 
 
 
 
 
 
 
Refer to Notes 2 and 9 to our consolidated financial statements for additional discussion of our Convertible Notes.
Floating Rate Portfolio
Generally, our business model is such that rising interest rates will increase our net income, while declining interest rates will decrease net income. As of June 30, 2019, 97% of our loans by total loan exposure earned a floating rate of interest and were financed with liabilities that pay interest at floating rates, which resulted in an amount of net equity that is positively correlated to rising interest rates, subject to the impact of interest rate floors on certain of our floating rate loans. As of June 30, 2019, the remaining 3% of our loans by total loan exposure earned a fixed rate of interest, but are financed with liabilities that pay interest at floating rates, which resulted in a negative correlation to rising interest rates to the extent of our financing. In certain instances where we have financed fixed rate assets with floating rate liabilities, we have purchased interest rate swaps or caps to limit our exposure to increases in interest rates on such liabilities.
Our liabilities are generally currency and index-matched to each collateral asset, resulting in a net exposure to movements in benchmark rates that varies by currency silo based on the relative proportion of floating rate assets and liabilities. The following table details our loan portfolio’s net exposure to interest rates by currency as of June 30, 2019 ($/
/£/A$/C$ in thousands):
                                         
 
USD
   
EUR
   
GBP
   
AUD
   
CAD
 
Floating rate loans
(1)
  $
     11,282,609
   
    1,161,786
    £
    953,511
    A$
     492,509
    C$
     149,054
 
Floating rate debt
(1)(2)(3)
   
(8,153,001
)    
(748,028
)    
(564,386
)    
(368,276
)    
(139,652
)
                                         
Net floating rate exposure
(4)
  $
3,129,608
   
413,758
    £
389,125
    A$
124,233
    C$
9,402
 
                                         
 
 
 
 
 
 
 
     
____________
(1)  
 
Our floating rate loans and related liabilities are indexed to the various benchmark rates relevant in each case in terms of currency and payment frequency. Therefore the net exposure to each benchmark rate is in direct proportion to our net assets indexed to that rate.
(2)
 
Includes borrowings under secured debt agreements,
non-consolidated
senior interests, securitized debt obligations, and secured term loans.
(3)
 
Balance includes two interest rate swaps totaling C$17.3 million ($13.2 million as of June 30, 2019) that are used to hedge a portion of our fixed rate debt.
(4)
 
In addition, we have interest rate caps of $66.5 million and C$21.7 million ($16.6 million as of June 30, 2019) to limit our exposure to increases in interest rates.
 
 
 
 
 
 
 
 
 
50
 
 

 
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III. Our Results of Operations
 
Operating Results
The following table sets forth information regarding our consolidated results of operations ($ in thousands, except per share data):
                                                 
 
Three Months Ended
June 30,
   
2019 vs
   
Six Months Ended
June 30,
   
2019 vs
   
 
2019
   
2018
   
2018
   
2019
   
2018
   
2018
 
Income from loans and other investments
   
     
     
     
     
     
 
Interest and related income
  $
223,369
    $
191,479
    $
31,890
    $
448,128
    $
346,904
    $
101,224
 
Less: Interest and related expenses
   
116,891
     
87,733
     
29,158
     
235,579
     
157,722
     
77,857
 
                                                 
Income from loans and other investments, net
   
106,478
     
103,746
     
2,732
     
212,549
     
189,182
     
23,367
 
Other expenses
   
     
     
     
     
     
 
Management and incentive fees
   
20,984
     
22,388
     
(1,404
)    
40,774
     
37,880
     
2,894
 
General and administrative expenses
   
9,897
     
8,747
     
1,150
     
19,210
     
17,454
     
1,756
 
                                                 
Total other expenses
   
30,881
     
31,135
     
(254
)    
59,984
     
55,334
     
4,650
 
                                                 
Income before income taxes
   
75,597
     
72,611
     
2,986
     
152,565
     
133,848
     
18,717
 
Income tax provision
   
46
     
104
     
(58
)    
147
     
224
     
(77
)
                                                 
Net income
   
75,551
     
72,507
     
3,044
     
152,418
     
133,624
     
18,794
 
                                                 
Net income attributable to
non-controlling
interests
   
(377
)    
(195
)    
(182
)    
(680
)    
(353
)    
(327
)
                                                 
Net income attributable to Blackstone Mortgage Trust, Inc.
  $
75,174
    $
72,312
    $
2,862
    $
   151,738
    $
   133,271
    $
18,467
 
                                                 
Net income per share - basic and diluted
  $
0.59
    $
0.66
    $
(0.07
)   $
1.21
    $
1.23
    $
(0.02
)
Dividends declared per share
  $
0.62
    $
0.62
    $
—  
    $
1.24
    $
1.24
    $
—  
 
 
 
 
 
 
 
 
Income from loans and other investments, net
Income from loans and other investments, net increased $2.7 million and $23.4 million during the three and six months ended June 30, 2019, respectively, as compared to the corresponding periods in 2018. The increases in both periods were primarily due to (i) an increase in the
weighted-average
principal balance of our loan portfolio by $2.3 billion and $3.4 billion during the three and six months ended June 30, 2019, respectively, as compared to the corresponding periods in 2018, and (ii) an increase in LIBOR. This was offset by the increase in the
weighted-average
principal balance of our outstanding financing arrangements, which increased by $1.9 billion and $2.9 billion during the three and six months ended June 30, 2019, respectively, as compared to the corresponding periods in 2018.
Other expenses
Other expenses are composed of management and incentive fees payable to our Manager and our general and administrative expenses. Other expenses decreased by $254,000 during the three months ended June 30, 2019 compared to the corresponding period in 2018 due to a decrease of $3.6 million of incentive fees payable to our Manager. This was partially offset by (i) an increase of $2.2 million of management fees payable to our Manager, primarily as a result of net proceeds received from the sale of shares of our class A common stock during 2018 and 2019, (ii) $1.0 million of additional
non-cash
restricted stock amortization related to shares awarded under our long-term incentive plans, and (iii) an increase of $173,000 of general operating expenses.
Other expenses increased by $4.7 million during the six months ended June 30, 2019 compared to the six months ended June 30, 2018 due to (i) an increase of $4.2 million of management fees payable to our Manager, primarily as a result of net proceeds received from the sale of shares of our class A common stock during 2018 and 2019, and (ii) $1.8 million of additional
non-cash
restricted stock amortization related to shares awarded under our long-term incentive plans. This was partially offset by (i) a decrease of $1.3 million of incentive fees payable to our Manager, and (ii) a decrease of $13,000 of general operating expenses.
 
 
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Table of Contents
 
Net income attributable to
non-controlling
interests
During the three and six months ended June 30, 2019, we recognized $377,000 and $680,000, respectively, of net income attributable to
non-controlling
interests related to our Multifamily Joint Venture.
Dividends per share
During the three months ended June 30, 2019, we declared a dividend of $0.62 per share, or $83.3 million, which was paid on July 15, 2019 to common stockholders of record as of June 28, 2019. During the three months ended June 30, 2018, we declared a dividend of $0.62 per share, or $69.1 million.
During the six months ended June 30, 2019, we declared aggregate dividends of $1.24 per share, or $161.2 million. During the six months ended June 30, 2018, we declared aggregate dividends of $1.24 per share, or $136.2 million.
IV. Liquidity and Capital Resources
 
Capitalization
We have capitalized our business to date through, among other things, the issuance and sale of shares of our class A common stock, borrowings under secured debt agreements, and the issuance of secured term loans and issuance and sale of convertible notes. As of June 30, 2019, we had 134,288,258 shares of our class A common stock outstanding representing $3.8 billion of stockholders’ equity, $8.3 billion of outstanding borrowings under secured debt agreements, $500.0 million of outstanding Secured Term Loans, and $622.5 million of Convertible Notes outstanding.
As of June 30, 2019, our secured debt agreements consisted of secured credit facilities with an outstanding balance of $8.1 billion and $217.9 million of asset-specific financings. We also finance our business through
non-consolidated
senior interests. As of June 30, 2019, we had $406.3 million of
non-consolidated
senior interests outstanding. In addition, as of June 30, 2019, our consolidated balance sheet included $1.3 billion of securitized debt obligations related to our CLO and our 2017 Single Asset Securitization.
See Notes 5, 7, 8, and 9 to our consolidated financial statements for additional details regarding our secured debt agreements, securitized debt obligations, Secured Term Loan, and Convertible Notes, respectively.
Debt-to-Equity
Ratio and Total Leverage Ratio
The following table presents our
debt-to-equity
ratio and total leverage ratio:
                 
 
June 30, 2019
   
December 31, 2018
 
Debt-to-equity
ratio
(1)
   
2.5x
     
2.8x
 
Total leverage ratio
(2)
   
3.2x
     
3.7x
 
____________
 
 
 
 
 
 
 
     
(1)  
 
Represents (i) total outstanding secured debt agreements, secured term loans, and convertible notes, less cash, to (ii) total equity, in each case at period end.
(2)
 
Represents (i) total outstanding secured debt agreements, secured term loans, convertible notes,
non-consolidated
senior interests, and securitized debt obligations, less cash, to (ii) total equity, in each case at period end.
 
 
 
 
 
 
Sources of Liquidity
Our primary sources of liquidity include cash and cash equivalents, available borrowings under our secured debt agreements, and net receivables from servicers related to loan repayments which are set forth in the following table ($ in thousands):
                 
 
June 30, 2019
   
December 31, 2018
 
Cash and cash equivalents
  $
80,584
    $
105,662
 
Available borrowings under secured debt agreements
   
848,132
     
359,618
 
Loan principal payments held by servicer, net
(1)
   
32,975
     
4,855
 
                 
  $
961,691
    $
470,135
 
                 
___________
 
 
 
 
 
 
 
     
(1)  
 
Represents loan principal payments held by our third-party servicer as of the balance sheet date which were remitted to us during the subsequent remittance cycle, net of the related secured debt balance.
 
 
 
 
 
 
 
 
52
 
 
 
  
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In addition to our current sources of liquidity, we have access to liquidity through public offerings of debt and equity securities. To facilitate such offerings, in July 2016, we filed a shelf registration statement with the Securities and Exchange Commission, or the SEC, that is effective for a term of three years and expires at the end of July 2019. The amount of securities to be issued pursuant to this shelf registration statement was not specified when it was filed and there is no specific dollar limit on the amount of securities we may issue. The securities covered by this registration statement include: (i) class A common stock; (ii) preferred stock; (iii) debt securities; (iv) depositary shares representing preferred stock; (v) warrants; (vi) subscription rights; (vii) purchase contracts; and (viii) units consisting of one or more of such securities or any combination of these securities. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.
We may also access liquidity through a dividend reinvestment plan and direct stock purchase plan, under which 9,994,685 shares of class A common stock were available for issuance as of June 30, 2019, and our
at-the-market
stock offering program, pursuant to which we may sell, from time to time, up to $363.8 million of additional shares of our class A common stock as of June 30, 2019. Refer to Note 11 to our consolidated financial statements for additional details.
Our existing loan portfolio also provides us with liquidity as loans are repaid or sold, in whole or in part, and the proceeds from such repayments become available for us to reinvest.
Liquidity Needs
In addition to our ongoing loan origination activity, our primary liquidity needs include interest and principal payments under our $8.3 billion of outstanding borrowings under secured debt agreements, our Secured Term Loan, our Convertible Notes, our unfunded loan commitments, dividend distributions to our stockholders, and operating expenses.
 
 
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Contractual Obligations and Commitments
Our contractual obligations and commitments as of June 30, 2019 were as follows ($ in thousands):
                                         
 
   
Payment Timing
 
 
Total
   
Less Than
   
1 to 3
   
3 to 5
   
More Than
 
 
Obligation
   
1 Year
   
Years
   
Years
   
5 Years
 
Unfunded loan commitments
(1)
  $
3,217,266
    $
339,879
    $
2,283,777
    $
563,163
    $
30,447
 
Principal repayments under secured debt agreements
(2)
   
8,283,613
     
109,374
     
3,266,552
     
4,520,799
     
386,888
 
Principal repayments of secured term loans
(3)
   
500,000
     
3,750
     
10,000
     
10,000
     
476,250
 
Principal repayments of convertible notes
(4)
   
622,500
     
—  
     
402,500
     
220,000
     
—  
 
Interest payments
(2)(5)
   
1,251,672
     
380,896
     
593,970
     
230,215
     
46,591
 
                                         
Total
(6)
  $
  13,875,051
    $
  833,899
    $
  6,556,799
    $
  5,544,177
    $
  940,176
 
                                         
 
 
 
 
 
 
                                         
____________
 
 
 
 
 
 
 
     
(1)  
 
The allocation of our unfunded loan commitments is based on the earlier of the commitment expiration date or the loan maturity date.
(2)
 
The allocation of repayments under our secured debt agreements for both principal and interest payments is based on the earlier of (i) the maturity date of each facility, or (ii) the maximum maturity date of the collateral loans, assuming all extension options are exercised by the borrower.
(3)
 
The Secured Term Loan is partially amortizing, with an amount equal to 1.0% per annum of the original principal balance due in quarterly installments. Refer to Note 8 to our consolidated financial statements for further details on our secured term loan.
(4)
 
Reflects the outstanding principal balance of convertible notes, excluding any potential conversion premium. Refer to Note 9 to our consolidated financial statements for further details on our convertible notes.
(5)
 
Represents interest payments on our secured debt agreements, convertible notes, and Secured Term Loan. Future interest payment obligations are estimated assuming the amounts outstanding and the interest rates in effect as of June 30, 2019 will remain constant into the future. This is only an estimate as actual amounts borrowed and interest rates will vary over time.
(6)
 
Total does not include $406.3 million of
non-consolidated
senior interests and $1.3 billion of securitized debt obligations, as the satisfaction of these liabilities will not require cash outlays from us.
 
 
 
 
 
 
We are also required to settle our foreign currency forward contracts and interest rate swaps with our derivative counterparties upon maturity which, depending on foreign exchange and interest rate movements, may result in cash received from or due to the respective counterparty. The table above does not include these amounts as they are not fixed and determinable. Refer to Note 10 to our consolidated financial statements for details regarding our derivative contracts.
We are required to pay our Manager a base management fee, an incentive fee, and reimbursements for certain expenses pursuant to our Management Agreement. The table above does not include the amounts payable to our Manager under our Management Agreement as they are not fixed and determinable. Refer to Note 12 to our consolidated financial statements for additional terms and details of the fees payable under our Management Agreement.
As a REIT, we generally must distribute substantially all of our net taxable income to stockholders in the form of dividends to comply with the REIT provisions of the Internal Revenue Code. Our taxable income does not necessarily equal our net income as calculated in accordance with GAAP, or our Core Earnings as described above.
Cash Flows
The following table provides a breakdown of the net change in our cash, cash equivalents, and restricted cash ($ in thousands):
                 
 
Six Months Ended June 30,
 
 
2019
   
2018
 
Cash flows provided by operating activities
  $
   157,184
    $
135,011
 
Cash flows used in investing activities
   
(90,425
)    
(2,154,258
)
Cash flows (used in) provided by financing activities
   
(91,834
)    
   2,016,646
 
                 
Net decrease in cash and cash equivalents
  $
(25,075
)   $
(2,601
)
                 
 
 
 
 
 
 
We experienced a net decrease in cash and cash equivalents of $25.1 million for the six months ended June 30, 2019, compared to a net decrease of $2.6 million for the six months ended June 30, 2018. During the six months ended June 30, 2019, we (i) received $1.8 billion of proceeds from loan principal collections, (ii) received
 
 
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$498.8 million of net proceeds from the issuance of a secured term loan, and (iii) received $372.3 million in net proceeds from the issuance of shares of class A common stock. We used the proceeds from these activities to (i) fund $1.9 billion of new loans and (ii) repay a net $708.5 million under our secured debt agreements during the six months ended June 30, 2019.
Refer to Note 3 to our consolidated financial statements for further discussion of our loan activity. Refer to Notes 5, 8, and 11 to our consolidated financial statements for additional discussion of our secured debt agreements, secured term loan, and equity.
V. Other Items
 
Income Taxes
We have elected to be taxed as a REIT under the Internal Revenue Code for U.S. federal income tax purposes. We generally must distribute annually at least 90% of our net taxable income, subject to certain adjustments and excluding any net capital gain, in order for U.S. federal income tax not to apply to our earnings that we distribute. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our net taxable income, we will be subject to U.S. federal income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws.
Our qualification as a REIT also depends on our ability to meet various other requirements imposed by the Internal Revenue Code, which relate to organizational structure, diversity of stock ownership, and certain restrictions with regard to the nature of our assets and the sources of our income. Even if we qualify as a REIT, we may be subject to certain U.S. federal income and excise taxes and state and local taxes on our income and assets. If we fail to maintain our qualification as a REIT for any taxable year, we may be subject to material penalties as well as federal, state and local income tax on our taxable income at regular corporate rates and we would not be able to qualify as a REIT for the subsequent four full taxable years. As of June 30, 2019 and December 31, 2018, we were in compliance with all REIT requirements.
Refer to Note 13 to our consolidated financial statements for additional discussion of our income taxes.
Off-Balance
Sheet Arrangements
We have no
off-balance
sheet arrangements.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires our Manager to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Actual results could differ from these estimates. There have been no material changes to our Critical Accounting Policies described in our annual report on Form
10-K
filed with the SEC on February 12, 2019.
Refer to Note 2 to our consolidated financial statements for the description of our significant accounting policies.
 
 
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Table of Contents
  
VI. Loan Portfolio Details
 
The following table provides details of our loan portfolio, on a
loan-by-loan
basis, as of June 30, 2019 ($ in millions):
                                                                             
 
Loan Type
(1)
 
Origination
Date
(2)
 
Total
Loan
(3)(4)
   
Principal
Balance
(3)(4)
   
Net Book
Value
   
Cash
Coupon
(5)
   
All-in

Yield
(5)
   
Maximum
Maturity
(6)
 
                Location                 
 
Property
Type
 
Loan Per
SQFT / Unit / Key
 
LTV
(2)
   
Risk
Rating
1
 
Senior loan
 
3/22/2018
  $
        1,063.4
     
$     1,063.4
    $
     1,057.6
     
L + 3.15%
     
L + 3.40%
   
3/15/2023
 
Diversified - Spain
 
Mixed-Use
 
n/a
   
71%
   
3
2
 
Senior loan
 
5/11/2017
   
752.6
     
696.0
     
693.3
     
L + 3.40%
     
L + 3.60%
   
6/10/2023
 
Washington DC
 
Office
 
$340 / sqft
   
62%
   
3
3
 
Senior loan
(3)
 
8/6/2015
   
469.1
     
469.1
     
85.4
     
5.75%
     
5.77%
   
10/29/2022
 
Diversified - EUR
 
Other
 
n/a
   
71%
   
3
4
 
Senior loan
 
5/1/2015
   
355.0
     
342.4
     
341.9
     
L + 2.85%
     
L + 3.02%
   
5/1/2023
 
New York
 
Office
 
$434 / sqft
   
68%
   
2
5
 
Senior loan
 
1/7/2015
   
350.0
     
331.0
     
330.5
     
L + 2.50%
     
L + 2.76%
   
1/9/2021
 
New York
 
Office
 
$283 / sqft
   
53%
   
2
6
 
Senior loan
 
2/13/2018
   
330.0
     
327.6
     
327.4
     
L + 3.42%
     
L + 3.52%
   
3/9/2023
 
New York
 
Multi
 
$793,303 / unit
   
62%
   
3
7
 
Senior loan
 
10/23/2018
   
352.4
     
322.7
     
320.7
     
L + 3.40%
     
L + 3.72%
   
10/23/2021
 
New York
 
Mixed-Use
 
$293 / sqft
   
65%
   
3
8
 
Senior loan
 
3/31/2017
   
339.3
     
314.4
     
312.1
     
L + 3.50%
     
L + 3.87%
   
8/9/2023
 
Maui
 
Hotel
 
$414,267 / key
   
61%
   
3
9
 
Senior loan
 
1/11/2019
   
304.8
     
304.8
     
300.7
     
L + 4.35%
     
L + 4.70%
   
1/11/2026
 
Diversified - UK
 
Other
 
$147 / sqft
   
66%
   
3
10
 
Senior loan
 
11/30/2018
   
291.3
     
275.6
     
273.2
     
L + 2.83%
     
L + 3.20%
   
12/9/2023
 
New York
 
Hotel
 
$225,514 / key
   
73%
   
3
11
 
Senior loan
 
11/30/2018
   
253.9
     
247.4
     
245.3
     
L + 2.80%
     
L + 3.17%
   
12/9/2023
 
San Francisco
 
Hotel
 
$363,291 / key
   
73%
   
3
12
 
Senior loan
 
12/11/2018
   
310.0
     
241.2
     
238.5
     
L + 2.55%
     
L + 2.96%
   
12/9/2023
 
Chicago
 
Office
 
$203 / sqft
   
78%
   
3
13
 
Senior loan
 
8/3/2016
   
275.9
     
239.5
     
240.0
     
L + 4.66%
     
L + 5.32%
   
8/9/2021
 
New York
 
Office
 
$330 / sqft
   
57%
   
3
14
 
Senior loan
 
12/22/2017
   
225.0
     
225.0
     
223.9
     
L + 2.80%
     
L + 3.16%
   
1/9/2023
 
Chicago
 
Multi
 
$326,087 / unit
   
65%
   
3
15
 
Senior loan
 
5/9/2018
   
219.0
     
219.0
     
217.9
     
L + 2.60%
     
L + 2.87%
   
5/9/2023
 
New York
 
Industrial
 
$62 / sqft
   
70%
   
2
16
 
Senior loan
 
7/31/2018
   
284.5
     
213.5
     
211.2
     
L + 3.10%
     
L + 3.55%
   
8/9/2022
 
San Francisco
 
Office
 
$542 / sqft
   
50%
   
2
17
 
Senior loan
 
6/23/2015
   
212.1
     
212.1
     
211.9
     
L + 3.65%
     
L + 3.78%
   
5/8/2022
 
Washington DC
 
Office
 
$238 / sqft
   
72%
   
2
18
 
Senior loan
 
4/15/2016
   
225.0
     
208.7
     
207.8
     
L + 3.25%
     
L + 3.84%
   
5/9/2023
 
New York
 
Office
 
$194 / sqft
   
40%
   
3
19
 
Senior loan
 
4/12/2018
   
259.3
     
194.1
     
193.5
     
L + 2.93%
     
L + 3.32%
   
11/20/2022
 
New York
 
Office
 
$36 / sqft
   
58%
   
1
20
 
Senior loan
 
6/4/2018
   
189.4
     
189.3
     
188.8
     
L + 3.50%
     
L + 3.86%
   
6/9/2024
 
New York
 
Hotel
 
$313,015 / key
   
52%
   
3
21
 
Senior loan
 
6/27/2019
   
218.1
     
187.6
     
185.5
     
L + 2.80%
     
L + 3.32%
   
8/15/2026
 
Berlin - DEU
 
Office
 
$197 / sqft
   
62%
   
3
22
 
Senior loan
 
12/22/2016
   
204.5
     
185.8
     
185.6
     
L + 3.50%
     
L + 4.07%
   
1/9/2022
 
New York
 
Office
 
$261 / sqft
   
64%
   
3
23
 
Senior loan
 
4/9/2018
   
1,486.5
     
185.0
     
172.8
     
L + 8.50%
     
L + 10.64%
   
6/9/2025
 
New York
 
Office
 
$525 / sqft
   
48%
   
2
24
 
Senior loan
 
5/16/2017
   
189.2
     
181.4
     
180.7
     
L + 3.90%
     
L + 4.35%
   
5/16/2021
 
Chicago
 
Office
 
$136 / sqft
   
59%
   
3
25
 
Senior loan
 
10/23/2018
   
278.4
     
181.2
     
179.6
     
L + 2.65%
     
L + 2.88%
   
11/9/2024
 
Atlanta
 
Office
 
$170 / sqft
   
64%
   
2
26
 
Senior loan
 
3/8/2016
   
181.2
     
181.2
     
180.4
     
L + 2.75%
     
L + 2.97%
   
9/9/2023
 
Orange County
 
Office
 
$228 / sqft
   
52%
   
2
27
 
Senior loan
 
9/14/2018
   
177.0
     
177.0
     
175.8
     
L + 3.50%
     
L + 3.85%
   
9/14/2023
 
Canberra - AU
 
Mixed-Use
 
$460 / sqft
   
68%
   
3
28
 
Senior loan
 
4/3/2018
   
178.6
     
176.6
     
175.7
     
L + 2.75%
     
L + 3.08%
   
4/9/2024
 
Dallas
 
Mixed-Use
 
$500 / sqft
   
64%
   
3
29
 
Senior loan
 
11/23/2018
   
188.8
     
174.2
     
172.4
     
L + 2.62%
     
L + 2.87%
   
2/15/2024
 
Diversified - UK
 
Office
 
$518 / sqft
   
50%
   
3
30
 
Senior loan
 
8/31/2017
   
183.0
     
174.2
     
173.5
     
L + 3.00%
     
L + 3.40%
   
9/9/2022
 
Orange County
 
Office
 
$206 / sqft
   
64%
   
3
 
 
 
 
 
 
 
 
continued…
 
 
56
 
 
 
  
Table of Contents
  
                                                                             
 
Loan Type
(1)
 
Origination Date
(2)
 
Total
Loan
(3)(4)
   
Principal
Balance
(3)(4)
   
Net Book Value
   
Cash Coupon
(5)
   
All-in

Yield
(5)
   
Maximum Maturity
(6)
 
                Location                 
 
Property Type
 
Loan Per SQFT / Unit / Key
 
LTV
(2)
   
Risk Rating
31
 
Senior loan
 
9/4/2018
   
172.7
     
151.6
     
150.3
     
L + 3.00%
     
L + 3.39%
   
9/9/2023
 
Las Vegas
 
Hotel
 
$183,533 / key
   
70%
   
3
32
 
Senior loan
 
8/23/2017
   
165.0
     
144.3
     
143.6
     
L + 3.25%
     
L + 3.64%
   
10/9/2022
 
Los Angeles
 
Office
 
$293 / sqft
   
74%
   
2
33
 
Senior loan
 
12/21/2017
   
182.5
     
136.4
     
135.3
     
L + 3.25%
     
L + 3.68%
   
1/9/2023
 
Atlanta
 
Office
 
$102 / sqft
   
51%
   
2
34
 
Senior loan
 
10/5/2016
   
134.3
     
134.3
     
134.4
     
L + 4.35%
     
L + 4.80%
   
10/9/2021
 
Diversified - US
 
Hotel
 
$68,081 / key
   
61%
   
2
35
 
Senior loan
 
6/24/2015
   
135.0
     
134.3
     
134.0
     
L + 3.50%
     
L + 3.72%
   
4/9/2023
 
Honolulu
 
Hotel
 
$225,285 / key
   
67%
   
2
36
 
Senior loan
 
6/29/2017
   
140.2
     
134.2
     
133.6
     
L + 2.85%
     
L + 3.30%
   
7/9/2022
 
Los Angeles
 
Multi
 
$318,072 / unit
   
68%
   
2
37
 
Senior loan
 
11/14/2017
   
133.0
     
133.0
     
132.4
     
L + 2.75%
     
L + 3.00%
   
6/9/2023
 
Los Angeles
 
Hotel
 
$532,000 / key
   
56%
   
2
38
 
Senior loan
 
7/20/2017
   
193.2
     
129.8
     
128.0
     
L + 5.10%
     
L + 6.13%
   
8/9/2022
 
San Francisco
 
Office
 
$321 / sqft
   
58%
   
3
39
 
Senior loan
 
5/11/2017
   
135.9
     
128.0
     
127.4
     
L + 3.40%
     
L + 3.91%
   
6/10/2023
 
Washington DC
 
Office
 
$294 / sqft
   
38%
   
2
40
 
Senior loan
 
11/2/2017
   
140.0
     
124.9
     
124.2
     
L + 3.20%
     
L + 3.62%
   
11/9/2022
 
Boston
 
Industrial
 
$164 / sqft
   
69%
   
2
41
 
Senior loan
 
12/14/2018
   
135.6
     
117.3
     
116.5
     
L + 2.90%
     
L + 3.27%
   
1/9/2024
 
Diversified - US
 
Industrial
 
$47 / sqft
   
57%
   
3
42
 
Senior loan
 
6/28/2019
   
125.0
     
117.2
     
116.6
     
L + 2.75%
     
L + 2.91%
   
2/1/2024
 
Los Angeles
 
Office
 
$185 / sqft
   
48%
   
3
43
 
Senior loan
 
7/28/2016
   
119.0
     
116.4
     
116.4
     
L + 3.60%
     
L + 3.92%
   
8/9/2021
 
Atlanta
 
Office
 
$184 / sqft
   
70%
   
2
44
 
Senior loan
 
4/30/2018
   
162.7
     
115.3
     
113.9
     
L + 3.25%
     
L + 3.51%
   
4/30/2023
 
London - UK
 
Office
 
$519 / sqft
   
60%
   
3
45
 
Senior loan
 
6/28/2019
   
185.3
     
114.7
     
112.8
     
L + 3.70%
     
L + 4.33%
   
6/27/2024
 
London - UK
 
Office
 
$374 / sqft
   
72%
   
3
46
 
Senior loan
 
2/20/2014
   
110.0
     
110.0
     
109.8
     
L + 3.95%
     
L + 4.16%
   
3/9/2021
 
New York
 
Office
 
$161 / sqft
   
74%
   
2
47
 
Senior loan
 
9/20/2018
   
129.6
     
108.4
     
108.1
     
L + 4.00%
     
L + 4.06%
   
8/16/2023
 
Diversified - AU
 
Other
 
$175 / sqft
   
53%
   
3
48
 
Senior loan
 
10/17/2016
   
108.0
     
108.0
     
107.8
     
L + 3.95%
     
L + 3.98%
   
10/21/2021
 
Diversified - UK
 
Self-Storage
 
$148 / sqft
   
73%
   
3
49
 
Senior loan
 
3/21/2018
   
113.2
     
106.2
     
105.5
     
L + 3.10%
     
L + 3.36%
   
3/21/2024
 
Jacksonville
 
Office
 
$106 / sqft
   
72%
   
2
50
 
Senior loan
 
3/13/2018
   
123.0
     
103.4
     
102.6
     
L + 3.50%
     
L + 3.83%
   
4/9/2025
 
Honolulu
 
Hotel
 
$160,368 / key
   
50%
   
3
51
 
Senior loan
 
3/10/2016
   
106.7
     
103.0
     
102.5
     
L + 2.60%
     
L + 2.94%
   
12/9/2022
 
Chicago
 
Multi
 
$556,723 / unit
   
63%
   
3
52
 
Senior loan
 
10/16/2018
   
113.7
     
102.1
     
101.3
     
L + 3.25%
     
L + 3.57%
   
11/9/2023
 
San Francisco
 
Hotel
 
$222,332 / key
   
72%
   
3
53
 
Senior loan
 
12/20/2018
   
105.0
     
101.6
     
101.1
     
L + 2.95%
     
L + 3.24%
   
1/1/2022
 
Seattle
 
Multi
 
$255,161 / unit
   
65%
   
3
54
 
Senior loan
 
12/21/2018
   
123.1
     
100.4
     
99.3
     
L + 2.60%
     
L + 3.00%
   
1/9/2024
 
Chicago
 
Office
 
$196 / key
   
72%
   
2
55
 
Senior loan
 
5/16/2014
   
100.0
     
99.5
     
99.3
     
L + 3.85%
     
L + 4.11%
   
4/9/2022
 
Miami
 
Office
 
$214 / sqft
   
67%
   
3
56
 
Senior loan
 
11/30/2018
   
105.1
     
98.8
     
98.2
     
L + 2.70%
     
L + 3.04%
   
12/9/2023
 
Diversified - US
 
Hotel
 
$75,534 / key
   
57%
   
2
57
 
Senior loan
 
12/9/2014
   
104.5
     
92.5
     
92.4
     
L + 3.65%
     
L + 3.80%
   
12/9/2021
 
Diversified - US
 
Office
 
$80 / sqft
   
65%
   
2
58
 
Senior loan
 
6/1/2018
   
128.2
     
90.8
     
89.7
     
L + 3.40%
     
L + 3.75%
   
5/28/2023
 
London - UK
 
Office
 
$616 / sqft
   
70%
   
3
59
 
Senior loan
 
6/19/2019
   
95.0
     
90.0
     
89.6
     
L + 2.60%
     
L + 2.89%
   
7/9/2024
 
Phoenix
 
Multi
 
$279,503 / unit
   
72%
   
3
60
 
Senior loan
 
12/10/2018
   
112.7
     
88.9
     
87.8
     
L + 2.95%
     
L + 3.34%
   
12/3/2024
 
London - UK
 
Office
 
$425 / sqft
   
72%
   
3
 
 
 
 
 
 
 
 
continued…
 
 
57
 
 

   
Table of Contents
  
                                                                             
 
Loan Type
(1)
 
Origination Date
(2)
 
Total
Loan
(3)(4)
   
Principal
Balance
(3)(4)
   
Net Book Value
   
Cash Coupon
(5)
   
All-in

Yield
(5)
   
Maximum Maturity
(6)
 
                Location                 
 
Property Type
 
Loan Per SQFT / Unit / Key
 
LTV
(2)
   
Risk Rating
61
 
Senior loan
 
3/28/2019
   
98.4
     
88.5
     
88.2
     
L + 3.25%
     
L + 3.40%
   
1/9/2024
 
New York
 
Hotel
 
$114,327 / key
   
63%
   
3
62
 
Senior loan
 
2/18/2015
   
87.7
     
87.7
     
87.6
     
L + 3.75%
     
L + 4.09%
   
3/9/2020
 
Diversified - CA
 
Office
 
$181 / sqft
   
71%
   
3
63
 
Senior loan
 
4/12/2018
   
103.1
     
86.5
     
85.9
     
L + 2.75%
     
L + 3.14%
   
5/9/2023
 
San Francisco
 
Office
 
$226 / sqft
   
72%
   
2
64
 
Senior loan
 
2/9/2017
   
86.5
     
86.5
     
86.0
     
L + 4.50%
     
L + 4.85%
   
5/29/2023
 
London - UK
 
Office
 
$845 / sqft
   
69%
   
3
65
 
Senior loan
 
11/30/2018
   
151.1
     
85.8
     
84.7
     
L + 2.55%
     
L + 2.82%
   
12/9/2024
 
Washington DC
 
Office
 
$268 / sqft
   
60%
   
3
66
 
Senior loan
 
6/18/2019
   
90.0
     
85.0
     
84.1
     
L + 3.15%
     
L + 3.52%
   
7/9/2024
 
Napa Valley
 
Hotel
 
$890,052 / key
   
74%
   
3
67
 
Senior loan
 
5/22/2014
   
84.2
     
84.2
     
84.0
     
L + 3.75%
     
L + 3.95%
   
6/15/2021
 
Orange County
 
Office
 
$146 / sqft
   
74%
   
2
68
 
Senior loan
 
6/29/2016
   
83.4
     
78.1
     
78.1
     
L + 2.80%
     
L + 3.28%
   
7/9/2021
 
Miami
 
Office
 
$301 / sqft
   
64%
   
2
69
 
Senior loan
 
3/31/2017
   
97.2
     
77.3
     
77.1
     
L + 4.30%
     
L + 4.69%
   
4/9/2022
 
New York
 
Office
 
$379 / sqft
   
64%
   
3
70
 
Senior loan
 
2/20/2019
   
128.9
     
74.5
     
73.2
     
L + 3.25%
     
L + 3.89%
   
2/19/2024
 
London - UK
 
Office
 
$366 / sqft
   
61%
   
3
71
 
Senior loan
 
6/4/2015
   
73.0
     
73.0
     
73.8
     
L + 4.25%
     
L + 4.13%
   
12/15/2021
 
Diversified - CAN
 
Hotel
 
$55,926 / key
   
54%
   
2
72
 
Senior loan
 
8/18/2017
   
70.2
     
70.2
     
70.0
     
L + 4.10%
     
L + 4.46%
   
8/18/2022
 
Brussels - BE
 
Office
 
$112 / sqft
   
59%
   
3
73
 
Senior loan
 
7/26/2018
   
84.1
     
70.1
     
69.9
     
L + 2.75%
     
L + 2.85%
   
7/1/2024
 
Columbus
 
Multi
 
$65,962 / unit
   
69%
   
3
74
 
Senior loan
 
6/27/2019
   
84.0
     
70.0
     
69.4
     
L + 2.50%
     
L + 2.77%
   
7/9/2024
 
West Palm Beach
 
Office
 
$481 / sqft
   
70%
   
3
75
 
Senior loan
 
10/17/2018
   
80.4
     
66.5
     
66.0
     
L + 2.60%
     
L + 3.16%
   
11/9/2023
 
San Francisco
 
Office
 
$415 / sqft
   
68%
   
3
76
 
Senior loan
 
4/5/2018
   
85.3
     
65.9
     
65.4
     
L + 3.10%
     
L + 3.51%
   
4/9/2023
 
Diversified - US
 
Industrial
 
$24 / sqft
   
54%
   
3
77
 
Senior loan
 
5/8/2017
   
80.0
     
65.2
     
64.6
     
L + 3.75%
     
L + 4.72%
   
5/8/2022
 
Washington DC
 
Office
 
$372 / sqft
   
73%
   
2
78
 
Senior loan
 
5/9/2017
   
73.7
     
64.7
     
64.5
     
L + 3.85%
     
L + 4.30%
   
5/9/2022
 
New York
 
Multi
 
$389,948 / unit
   
67%
   
3
79
 
Senior loan
 
4/25/2019
   
210.0
     
63.9
     
62.9
     
L + 3.50%
     
L + 3.72%
   
9/1/2025
 
Los Angeles
 
Office
 
$93 / sqft
   
67%
   
3
80
 
Senior loan
 
6/29/2017
   
64.2
     
62.6
     
62.3
     
L + 3.40%
     
L + 3.71%
   
7/9/2023
 
New York
 
Multi
 
$182,457 / unit
   
69%
   
4
81
 
Senior loan
 
10/5/2018
   
60.4
     
60.4
     
59.8
     
L + 5.50%
     
L + 5.65%
   
10/5/2021
 
Sydney - AU
 
Office
 
$641 / sqft
   
78%
   
3
82
 
Senior loan
 
7/13/2017
   
86.3
     
60.0
     
59.6
     
L + 3.75%
     
L + 4.18%
   
8/9/2022
 
Honolulu
 
Hotel
 
$192,926 / key
   
66%
   
3
83
 
Senior loan
 
11/30/2016
   
65.2
     
56.7
     
56.6
     
L + 3.10%
     
L + 3.39%
   
12/9/2021
 
Chicago
 
Retail
 
$1,167 / sqft
   
54%
   
3
84
 
Senior loan
 
10/6/2017
   
55.9
     
55.8
     
55.6
     
L + 2.95%
     
L + 3.21%
   
10/9/2022
 
Nashville
 
Multi
 
$99,598 / unit
   
74%
   
2
85
 
Senior loan
 
6/26/2019
   
67.6
     
53.0
     
52.3
     
L + 3.35%
     
L + 3.66%
   
6/20/2024
 
London - UK
 
Office
 
$599 / sqft
   
61%
   
3
86
 
Senior loan
 
3/11/2014
   
52.8
     
52.8
     
52.7
     
L + 4.50%
     
L + 4.76%
   
4/9/2021
 
New York
 
Multi
 
$593,109 / unit
   
65%
   
4
87
 
Senior loan
 
11/23/2016
   
55.4
     
51.9
     
51.7
     
L + 3.50%
     
L + 3.80%
   
12/9/2022
 
New York
 
Multi
 
$216,432 / unit
   
65%
   
4
88
 
Senior loan
 
11/1/2017
   
52.1
     
51.8
     
51.6
     
L + 2.95%
     
L + 3.21%
   
11/9/2022
 
Denver
 
Multi
 
$154,127 / unit
   
74%
   
2
89
 
Senior loan
 
12/27/2016
   
57.2
     
49.5
     
49.4
     
L + 4.65%
     
L + 5.08%
   
1/9/2022
 
New York
 
Multi
 
$1,260,476 / unit
   
64%
   
3
90
 
Senior loan
 
6/12/2019
   
55.0
     
48.3
     
48.2
     
L + 3.25%
     
L + 3.78%
   
7/1/2022
 
Grand Rapids
 
Multi
 
$92,529 / unit
   
69%
   
3
 
 
 
 
 
 
 
 
continued…
 
 
58
  
 
 
 
Table of Contents
   
                                                                             
 
Loan Type
(1)
 
Origination Date
(2)
 
Total
Loan
(3)(4)
   
Principal
Balance
(3)(4)
   
Net Book Value
   
Cash Coupon
(5)
   
All-in

Yield
(5)
   
Maximum Maturity
(6)
 
                Location                 
 
Property Type
 
Loan Per SQFT / Unit / Key
 
LTV
(2)
   
Risk Rating
91
 
Senior loan
 
11/19/2015
   
48.7
     
46.0
     
46.0
     
L + 4.00%
     
L + 4.50%
   
10/9/2019
 
New York
 
Office
 
$1,180 / sqft
   
57%
   
2
92
 
Senior loan
 
9/25/2018
   
49.3
     
45.0
     
44.7
     
L + 3.50%
     
L + 3.79%
   
9/1/2023
 
Chicago
 
Multi
 
$61,202 / unit
   
70%
   
3
93
 
Senior loan
 
5/20/2015
   
45.0
     
44.0
     
43.9
     
L + 3.00%
     
L + 3.08%
   
11/1/2022
 
Los Angeles
 
Office
 
$205 / sqft
   
59%
   
1
94
 
Senior loan
 
5/24/2018
   
81.3
     
43.6
     
43.0
     
L + 4.10%
     
L + 4.59%
   
6/9/2023
 
Boston
 
Office
 
$84 / sqft
   
55%
   
3
95
 
Senior loan
 
11/16/2018
   
211.9
     
43.5
     
41.4
     
L + 4.10%
     
L + 4.73%
   
12/9/2023
 
Fort Lauderdale
 
Mixed-Use
 
$115 / sqft
   
59%
   
3
96
 
Senior loan
 
8/29/2017
   
51.2
     
43.5
     
43.3
     
L + 3.10%
     
L + 3.52%
   
10/9/2022
 
Southern California
 
Industrial
 
$91 / sqft
   
65%
   
3
97
 
Senior loan
 
6/26/2015
   
42.1
     
40.7
     
40.7
     
L + 3.75%
     
L + 4.14%
   
7/9/2020
 
San Diego
 
Office
 
$186 / sqft
   
73%
   
3
98
 
Senior loan
 
2/20/2019
   
51.2
     
39.3
     
38.8
     
L + 3.50%
     
L + 3.91%
   
3/9/2024
 
Calgary - CAN
 
Office
 
$108 / sqft
   
52%
   
3
99
 
Senior loan
 
11/30/2018
   
40.0
     
36.9
     
36.7
     
L + 2.95%
     
L + 3.38%
   
12/1/2023
 
Las Vegas
 
Multi
 
$76,872 / unit
   
70%
   
3
100
 
Senior loan
(3)
 
9/22/2017
   
91.0
     
32.4
     
9.1
     
L + 5.56%
     
L + 6.25%
   
10/9/2022
 
San Francisco
 
Multi
 
$446,078 / unit
   
46%
   
3
101
 
Senior loan
 
6/26/2019
   
30.0
     
30.0
     
29.9
     
L + 3.25%
     
L + 3.65%
   
10/1/2020
 
Lake Charles
 
Multi
 
$111,940 / unit
   
73%
   
3
102
 
Senior loan
 
10/31/2018
   
63.3
     
29.8
     
29.4
     
L + 5.00%
     
L + 5.58%
   
11/9/2023
 
New York
 
Multi
 
$77,341 / unit
   
57%
   
3
103
 
Senior loan
 
5/31/2019
   
29.3
     
29.3
     
29.3
     
L + 3.75%
     
L + 3.75%
   
3/1/2021
 
Denver
 
Multi
 
$195,333 / unit
   
59%
   
2
104
 
Senior loan
 
10/31/2018
   
59.3
     
29.1
     
28.8
     
L + 5.00%
     
L + 5.96%
   
11/9/2023
 
New York
 
Condo
 
$122 / sqft
   
64%
   
3
105
 
Senior loan
 
1/30/2018
   
28.0
     
28.0
     
27.9
     
L + 2.90%
     
L + 3.26%
   
2/9/2023
 
Houston
 
Multi
 
$135,266 / unit
   
66%
   
3
106
 
Senior loan
 
8/30/2018
   
28.7
     
27.1
     
26.9
     
L + 3.00%
     
L + 3.42%
   
9/1/2022
 
Boise
 
Multi
 
$106,553 / unit
   
73%
   
3
107
 
Senior loan
 
12/15/2017
   
22.5
     
22.5
     
22.4
     
L + 3.25%
     
L + 4.31%
   
12/9/2020
 
Diversified - US
 
Hotel
 
$8,465 / key
   
50%
   
2
108
 
Senior loan
 
9/1/2016
   
21.3
     
21.3
     
21.5
     
L + 4.20%
     
L + 4.81%
   
9/1/2022
 
Atlanta
 
Multi
 
$93,025 / unit
   
72%
   
1
109
 
Senior loan
 
6/4/2015
   
21.2
     
21.2
     
21.2
     
4.82%
(7)
 
   
5.23%
(7)
 
 
12/23/2021
 
Montreal - CAN
 
Office
 
$58 / sqft
   
45%
   
2
110
 
Senior loan
 
4/26/2019
   
20.0
     
20.0
     
19.8
     
L + 2.93%
     
L + 3.38%
   
5/1/2024
 
Nashville
 
Multi
 
$198,020 / unit
   
73%
   
3
111
 
Senior loan
 
12/21/2018
   
22.9
     
20.0
     
19.9
     
L + 3.25%
     
L + 3.48%
   
1/1/2024
 
Daytona Beach
 
Multi
 
$74,627 / unit
   
77%
   
3
112
 
Senior loan
 
6/15/2018
   
22.0
     
19.3
     
19.3
     
L + 3.35%
     
L + 3.43%
   
7/1/2022
 
Phoenix
 
Multi
 
$67,333 / unit
   
78%
   
3
113
 
Senior loan
 
11/2/2017
   
17.9
     
17.1
     
17.1
     
L + 3.90%
     
L + 4.01%
   
11/1/2020
 
Phoenix
 
Multi
 
$65,768 / unit
   
59%
   
2
114
 
Senior loan
 
3/9/2018
   
17.8
     
17.0
     
17.0
     
L + 3.75%
     
L + 3.77%
   
4/1/2023
 
Los Angeles
 
Multi
 
$131,095 / unit
   
75%
   
2
115
 
Senior loan
 
6/4/2015
   
16.4
     
16.4
     
16.5
     
5.15%
     
5.27%
   
9/4/2020
 
Diversified - CAN
 
Self-Storage
 
$3,578 / unit
   
61%
   
1
116
 
Senior loan
 
6/21/2019
   
14.8
     
14.5
     
14.4
     
L + 3.30%
     
L + 3.41%
   
7/1/2022
 
Portland
 
Multi
 
$130,180 / unit
   
66%
   
3
117
 
Senior loan
 
10/20/2017
   
17.2
     
14.0
     
13.9
     
L + 4.25%
     
L + 4.35%
   
11/1/2021
 
Houston
 
Multi
 
$110,714 / unit
   
56%
   
3
118
 
Senior loan
 
4/30/2019
   
15.5
     
13.5
     
13.4
     
L + 3.00%
     
L + 3.32%
   
5/1/2024
 
Houston
 
Multi
 
$43,608 / unit
   
78%
   
3
119
 
Senior loan
 
2/28/2019
   
15.3
     
12.6
     
12.5
     
L + 3.00%
     
L + 3.33%
   
3/1/2024
 
San Antonio
 
Multi
 
$54,704 / unit
   
75%
   
3
120
 
Senior loan
 
6/29/2018
   
11.6
     
11.6
     
11.6
     
L + 2.95%
     
L + 3.32%
   
7/1/2020
 
Washington DC
 
Multi
 
$61,053 / unit
   
60%
   
2
 
 
 
 
 
 
 
 
 
 
continued…
 
 
59
 
 
 
 
Table of Contents
  
                                                                             
 
Loan Type
(1)
 
Origination Date
(2)
 
Total
Loan
(3)(4)
   
Principal
Balance
(3)(4)
   
Net Book Value
   
Cash Coupon
(5)
   
All-in

Yield
(5)
   
Maximum
Maturity
(6)
 
                Location                 
 
Property Type
 
Loan Per SQFT / Unit / Key
 
LTV
(2)
   
Risk Rating
121
 
Senior loan
 
5/30/2018
   
10.1
     
10.1
     
10.1
     
L + 3.90%
     
L + 3.97%
   
6/1/2021
 
Phoenix
 
Multi
 
$112,222 / unit
   
74%
   
3
122
 
Senior loan
 
10/31/2018
   
10.0
     
10.0
     
10.0
     
L + 3.35%
     
L + 3.58%
   
11/1/2020
 
Boise
 
Multi
 
$156,250 / unit
   
74%
   
2
123
 
Senior loan
 
7/21/2017
   
7.3
     
7.3
     
7.3
     
L + 5.25%
     
L + 6.02%
   
9/1/2019
 
Phoenix
 
Multi
 
$56,154 / unit
   
78%
   
2
                                                                             
 
 
  $
18,041.9
     
$14,779.3
    $
14,280.9
     
L + 3.42%
     
L + 3.76%
   
3.7 yrs
 
 
 
   
64%
   
2.7
                                                                             
 
 
 
 
 
 
 
 
     
____________
(1)
 
Senior loans include senior mortgages and similar credit quality loans, including related contiguous subordinate loans and pari passu participations in senior mortgage loans.
(2)
 
Date loan was originated or acquired by us, and the LTV as of such date. Dates are not updated for subsequent loan modifications or upsizes.
(3)
 
In certain instances, we finance our loans through the
non-recourse
sale of a senior loan interest that is not included in our consolidated financial statements. As of June 30, 2019, two loans in our portfolio have been financed with an aggregate $406.3 million of
non-consolidated
senior interest, which are included in the table above.
(4)
 
Portfolio excludes our $97.2 million subordinate risk retention interest in the $1.0 billion 2018 Single Asset Securitization. Refer to Notes 4 and 16 to our consolidated financial statements for details of the 2018 Single Asset Securitization.
(5)
 
As of June 30, 2019, our floating rate loans were indexed to various benchmark rates, with 79% of floating rate loans by loan exposure indexed to USD LIBOR. The weighted-average cash coupon and
all-in
yield are expressed in terms excluding the relevant floating rate benchmark rates as of June 30, 2019. In addition to cash coupon,
all-in
yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees.
(6)
 
Maximum maturity assumes all extension options are exercised, however our loans may be repaid prior to such date.
(7)
 
Loan consists of one or more floating and fixed rate tranches. Coupon and
all-in
yield assume applicable floating benchmark rates for weighted-average calculation.
 
 
 
 
 
 
 
 
 
 
60
 
 
 

  
Table of Contents
  
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 
 
 
 
 
 
 
Interest Rate Risk
Loan Portfolio Net Interest Income
Generally, our business model is such that rising interest rates will increase our net income, while declining interest rates will decrease net income. As of June 30, 2019, 97% of our loans by total loan exposure earned a floating rate of interest and were financed with liabilities that pay interest at floating rates, which resulted in an amount of net equity that is positively correlated to rising interest rates, subject to the impact of interest rate floors on certain of our floating rate loans. As of June 30, 2019, the remaining 3% of our loans by total loan exposure earned a fixed rate of interest, but are financed with liabilities that pay interest at floating rates, which resulted in a negative correlation to rising interest rates to the extent of our financing. In certain instances where we have financed fixed rate assets with floating rate liabilities, we have purchased interest rate swaps or caps to limit our exposure to increases in interest rates on such liabilities.
 
 
61
 
 
 
 
 
 
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The following table projects the impact on our interest income and expense, net of incentive fees, for the twelve-month period following June 30, 2019, assuming an immediate increase or decrease of both 25 and 50 basis points in the applicable interest rate benchmark by currency ($ in thousands):
                                                 
 
Assets (Liabilities)
  Sensitive to Changes in  
Interest Rates
(1)(2)
   
   
Interest Rate Sensitivity
as of June 30, 2019
 
 
   
Increase in Rates
   
Decrease in Rates
 
Currency
 
   
      25 Basis      
Points
   
      50 Basis      
Points
   
      25 Basis      
Points
   
      50 Basis      
Points
   
USD
  $
11,282,609
     
Income
    $
     22,480
    $
45,000
    $
(21,181
)   $
(41,079
)
   
(8,153,001
)    
Expense
     
(16,156
)    
(32,283
)    
16,223
     
32,483
 
                                                 
  $
3,129,608
     
Net interest
    $
6,324
    $
12,717
    $
(4,958
)   $
(8,596
)
                                                 
GBP
  $
1,210,577
     
Income
    $
1,869
    $
4,291
    $
(1,716
)   $
(3,257
)
   
(716,545
)    
Expense
     
(1,433
)    
(2,866
)    
1,433
     
2,866
 
                                                 
  $
494,032
     
Net interest
    $
436
    $
1,425
    $
(283
)   $
(391
)
                                                 
EUR
  $
1,321,299
     
Income
    $
—  
    $
1,273
    $
—  
    $
—  
 
   
(850,732
)    
Expense
     
—  
     
(762
)    
—  
     
—  
 
                                                 
  $
470,567
     
Net interest
    $
—  
    $
511
    $
—  
    $
—  
 
                                                 
AUD
  $
345,741
     
Income
    $
573
    $
1,264
    $
(223
)   $
(227
)
   
(258,530
)    
Expense
     
(517
)    
(1,034
)    
517
     
1,034
 
                                                 
  $
87,211
     
Net interest
    $
56
    $
230
    $
294
    $
807
 
                                                 
CAD
(3)
  $
113,825
     
Income
    $
169
    $
397
    $
(149
)   $
(298
)
   
(106,646
)    
Expense
     
(213
)    
(427
)    
213
     
427
 
                                                 
  $
7,179
     
Net interest
    $
(44
)   $
(30
)   $
64
    $
129
 
                                                 
   
     
Total net interest
    $
6,772
    $
14,853
    $
(4,883
)   $
(8,051
)
                                                 
____________ 
   
     
     
     
     
     
 
 
 
 
 
 
 
 
 
     
(1)
 
Our floating rate loans and related liabilities are indexed to the various benchmark rates relevant in each case in terms of currency and payment frequency. Therefore the net exposure to each benchmark rate is in direct proportion to our net assets indexed to that rate. Increases (decreases) in interest income and expense are presented net of incentive fees. Refer to Note 12 to our consolidated financial statements for additional details of our incentive fee calculation.
(2)
 
Includes borrowings under secured debt agreements,
non-consolidated
senior interests, securitized debt obligations, and secured term loans.
(3)
 
Liabilities balance includes two interest rate swaps totaling C$17.3 million ($13.2 million as of June 30, 2019) that are used to hedge a portion of our fixed rate debt.
 
 
 
 
 
 
 
 
Loan Portfolio Value
As of June 30, 2019, 3% of our loans by total loan exposure earned a fixed rate of interest and as such, the values of such loans are sensitive to changes in interest rates. We generally hold all of our loans to maturity and so do not expect to realize gains or losses on our fixed rate loan portfolio as a result of movements in market interest rates.
Risk of
Non-Performance
In addition to the risks related to fluctuations in cash flows and asset values associated with movements in interest rates, there is also the risk of
non-performance
on floating rate assets. In the case of a significant increase in interest rates, the additional debt service payments due from our borrowers may strain the operating cash flows of the collateral real estate assets and, potentially, contribute to
non-performance
or, in severe cases, default. This risk is partially mitigated by various facts we consider during our underwriting process, which in certain cases include a requirement for our borrower to purchase an interest rate cap contract.
Credit Risks
Our loans and investments are also subject to credit risk. The performance and value of our loans and investments depend upon the sponsors’ ability to operate the properties that serve as our collateral so that they produce cash
 
62
 
 
 
 
 
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flows adequate to pay interest and principal due to us. To monitor this risk, our Manager’s asset management team reviews our investment portfolios and in certain instances is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary.
In addition, we are exposed to the risks generally associated with the commercial real estate market, including variances in occupancy rates, capitalization rates, absorption rates, and other macroeconomic factors beyond our control. We seek to manage these risks through our underwriting and asset management processes.
Capital Market Risks
We are exposed to risks related to the equity capital markets, and our related ability to raise capital through the issuance of our class A common stock or other equity instruments. We are also exposed to risks related to the debt capital markets, and our related ability to finance our business through borrowings under credit facilities or other debt instruments. As a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore requires us to utilize debt or equity capital to finance our business. We seek to mitigate these risks by monitoring the debt and equity capital markets to inform our decisions on the amount, timing, and terms of capital we raise.
Counterparty Risk
The nature of our business requires us to hold our cash and cash equivalents and obtain financing from various financial institutions. This exposes us to the risk that these financial institutions may not fulfill their obligations to us under these various contractual arrangements. We mitigate this exposure by depositing our cash and cash equivalents and entering into financing agreements with high credit-quality institutions.
The nature of our loans and investments also exposes us to the risk that our counterparties do not make required interest and principal payments on scheduled due dates. We seek to manage this risk through a comprehensive credit analysis prior to making an investment and active monitoring of the asset portfolios that serve as our collateral.
Currency Risk
Our loans and investments that are denominated in a foreign currency are also subject to risks related to fluctuations in currency rates. We mitigate this exposure by matching the currency of our foreign currency assets to the currency of the borrowings that finance those assets. As a result, we substantially reduce our exposure to changes in portfolio value related to changes in foreign currency rates. In certain circumstances, we may also enter into foreign currency derivative contracts to further mitigate this exposure.
The following table outlines our assets and liabilities that are denominated in a foreign currency (£/
/A$/C$ in thousands):
                                 
 
June 30, 2019
 
Foreign currency assets
(1)
  £
    1,328,501
   
    1,162,363
    A$
     498,907
    C$
     201,396
 
Foreign currency liabilities
(1)
   
(871,348
)    
(744,680
)    
(369,601
)    
(157,274
)
Foreign currency contracts - notional
   
(360,600
)    
(339,200
)    
(123,900
)    
(39,100
)
                                 
Net exposure to exchange rate fluctuations
  £
96,553
   
78,483
    A$
5,406
    C$
5,022
 
                                 
____________
   
     
     
     
 
 
 
 
 
 
 
 
 
     
(1)  
 
Balances include
non-consolidated
senior interests of £302.0 million.
 
 
 
 
 
 
 
 
We estimate that a 10% appreciation of the United States dollar relative to the British Pound Sterling and the Euro would result in a decline in our net assets in U.S. dollar terms of $58.0 million and $47.5 million, respectively, as of June 30, 2019. Substantially all of our net asset exposure to the Canadian and Australian dollar has been hedged with foreign currency forward contracts.
 
63
 
  

 
Table of Contents
 
ITEM 4.
CONTROLS AND PROCEDURES
 
 
 
 
 
 
 
 
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule
13a-15(e)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this quarterly report on Form
10-Q
was made under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by SEC rules and forms and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Controls over Financial Reporting
There have been no changes in our “internal control over financial reporting” (as defined in Rule
13a-15(f)
of the Exchange Act) that occurred during the period covered by this quarterly report on Form
10-Q
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
64
 
 
 
 
Table of Contents
 
PART II. OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
 
 
 
 
 
 
 
 
 
From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of June 30, 2019, we were not involved in any material legal proceedings.
ITEM 1A.
RISK FACTORS
 
 
 
 
 
 
 
 
 
There have been no material changes to the risk factors previously disclosed under Item 1A of our Annual Report on Form
10-K
for the year ended December 31, 2018.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
 
 
 
 
 
 
 
 
None.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
 
 
 
 
 
 
 
 
 
None.
ITEM 4.
MINE SAFETY DISCLOSURES
 
 
 
 
 
 
 
 
 
Not applicable.
ITEM 5.
OTHER INFORMATION
 
 
 
 
 
 
 
 
 
None.
 
65
 
  
 
 
Table of Contents
 
ITEM 6.
EXHIBITS
 
 
 
         
 
    3.1
   
         
 
    3.2
   
         
 
  10.1
   
         
 
  10.2
   
         
 
  10.3
   
         
 
  10.4
   
         
 
  31.1
   
         
 
  31.2
   
         
 
  32.1 +
   
         
 
  32.2 +
   
         
 
101.INS
   
XBRL Instance Document – the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document
         
 
101.SCH
   
XBRL Taxonomy Extension Schema Document
         
 
101.CAL
   
XBRL Taxonomy Extension Calculation Linkbase Document
         
 
101.LAB
   
XBRL Taxonomy Extension Label Linkbase Document
         
 
101.PRE
   
XBRL Taxonomy Extension Presentation Linkbase Document
         
 
101.DEF
   
XBRL Taxonomy Extension Definition Linkbase Document
         
 
____________          
   
 
 
 
+ This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933, as amended, or the Exchange Act.
 
 
 
 
 
 
 
 
 
66
 
 
 
 
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The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
 
67
 
 
 
 
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
 
 
BLACKSTONE MORTGAGE TRUST, INC.
         
July 23, 2019
 
 
/s/ Stephen D. Plavin
Date
 
 
Stephen D. Plavin
 
 
Chief Executive Officer
 
 
(Principal Executive Officer)
         
July 23, 2019
 
 
/s/ Anthony F. Marone, Jr.
Date
 
 
Anthony F. Marone, Jr.
 
 
Chief Financial Officer
 
 
(Principal Financial Officer and
 
 
Principal Accounting Officer)
 
 
 
 
 
 
 
 
 
 
 
68