Good day, and welcome to the Blackstone Mortgage Trust, First Quarter 2021 Investor Call hosted by Weston Tucker, Head of Shareholder Relations. My name is Jenny and I'm the event manager. Operator instructions were provided. I'd like to advise all parties this conference is being recorded. And now I'd like to hand over to Weston Tucker. Please go ahead.

Great! Thanks, Jenny. And good morning and welcome to Blackstone Mortgage Trust's first quarter conference call. I'm joined today by Steve Plavin, Chief Executive Officer; Katie Keenan, President; Tony Marone, Chief Financial Officer; and Doug Armer, Executive Vice President, Capital Markets. This morning we filed our 10-Q and issued a press release with a presentation of our results, which are available on our website and have been filed with the SEC. I’d like to remind everyone that today’s call may include forward-looking statements, which are uncertain and outside of the company’s control. Actual results may differ materially. For a discussion of some of the risks that could affect results, please see the Risk Factors section of our 10-K. We do not undertake any duty to update forward-looking statements. And we'll also refer to certain non-GAAP measures on the call; for reconciliations, you should refer to the press release and our 10-Q. This audiocast is copyrighted material of Blackstone Mortgage Trust and may not be duplicated without our consent. So a quick recap of our results. We reported GAAP net income per share of $0.54 for the fourth quarter, while distributable earnings were $0.59 per share. A few weeks ago we paid a dividend of $0.62 per share with respect to the fourth quarter. If you have any questions following today’s call, please let me know. And with that, I’ll now turn things over to Steve.

Thanks, Weston. The first quarter marked the reinvigoration of BXMT originations and the resumption of growth in our loan portfolio. Over the nearly eight years of BXMT activity, our business has shown a remarkably consistent trajectory and strategic direction. We source and execute on great investments with top sponsors. We innovate on both sides of the balance sheet. We manage liquidity and risk prudently and we create great returns for our shareholders. 2020 demonstrated the benefits of this approach with our strong credit and earnings performance through an unprecedented period. In 2021, our business is again building. In Q1, we closed $1.7 billion of new originations backed by very high-quality properties and strong growth factors in the market. We improved both the cost and structure of our funding with multiple capital markets executions. And we grew the loan portfolio by nearly $700 million; a solid first step in deploying our substantial dry powder. Our business has been consistently strong because of the fundamental advantages we realize from our management team being part of Blackstone. Blackstone's monumental scale across the real-estate universe provides unparalleled access to proprietary information that's extremely beneficial in our sourcing and underwriting. And the deep talent pool and experience within Blackstone has led to its great track record of investment performance and access to capital throughout cycles. Today, the emerging transaction environment provides a fruitful backdrop for our business. Markets are coming off the pandemic sidelines and executing on new investment opportunities. And with more widespread vaccine distribution and growing consumer confidence, we expect to see increasing economic activity that will benefit commercial real-estate performance. The BXMT business, drawing on the tremendous competitive advantages of the entire Blackstone platform, remains well-positioned for growth in our performance. And with that, I'll turn it over to Katie to address our activities in this quarter in more detail.

Thanks, Steve. The transaction activity in the market is expanding; we are seeing strong momentum in our business. Our investment activity accelerated this quarter as we closed nine new loans and grew our portfolio to a record $18.7 billion. Our substantial liquidity as well as the increasingly efficient financing available to us provides the runway for meaningful accretive portfolio growth within our existing capital base. And we are on our way with $2 billion of new loans closed or in closing, including $600 million already closed so far in April. Even more importantly, our new investment opportunities are highly attractive from a credit perspective. This quarter, we saw robust activity in sectors with strong tailwinds like industrial, multifamily, life sciences and growth markets. We continue to capitalize on areas where Blackstone is the market leader, providing us excellent insight into deal analysis and the ability to move and execute more quickly. Most of our loans this quarter supported new acquisitions, and our ability to use this information advantage to provide speed and certainty is particularly important. And our borrowers invested substantial new equity alongside our loans. $1.3 billion of our originations were with repeat sponsors where our long-term relationships continue to yield differentiated access to opportunities. We also closed loans with six new borrowers this quarter, indicative of our ever-growing client base. Remaining loans are in growing, standout markets like Austin, Texas, the Research Triangle in North Carolina and Miami, Florida, as well as solid core markets like Boston. We also saw the strategic benefit of our deep experience investing in Europe. We have a dominant position on the Blackstone platform in Europe, and especially in the context of a less liquid market environment, that has allowed us to consistently find attractive relative value opportunities over time. Our business in Europe yielded our largest deal of the quarter, a $575 million portion of a $1.2 billion loan to finance the acquisition of a 91% occupied industrial portfolio in Sweden. Blackstone's European industrial platform is best-in-class. This portfolio has strong, stable cash flow, a high-quality, granular tenant base and powerful momentum from growing e-commerce penetration in one of Europe's most resilient economies. Given the geography and nature of the acquisition, the situation required lenders who are capable of executing in the Swedish jurisdiction and who can provide certainty and speed, thereby creating a compelling lending opportunity on great real estate assets. We value large-scale transactions because they typically come with substantial equity from well-capitalized, experienced sponsors, institutional-quality assets and deal dynamics that sit well with our core strengths. In addition to the Swedish logistics deal, this quarter we also closed a $491 million, 65% loan-to-cost financing to support a new acquisition and the conversion to life sciences in East Cambridge, Mass., the best lab market in the world. As one of the largest owners in the market, we are deeply familiar with Cambridge life sciences, which allowed us to quickly develop confidence on credit while at the same time using our scale to commit to the whole large loan and win in a competitive process. As the capital markets pick up, we are seeing an increasing volume of repayments, which is a headwind on deployment but healthy for credit. The performance of our loans has remained very strong, consistent with our experience throughout 2020. We had seven upgrades and no downgrades this quarter as business plans progress across the portfolio in parallel with the reopening of the economy. As we see transaction activity growing, we are also focused on optimizing our balance sheet to drive down our cost of capital and further diversify our funding sources. In February, we priced an add-on to our term loan B at LIBOR plus 225 basis points, in line with the record trade levels of our December 2019 deal and reflective of our status as a top-quality issuer. We continue to drive improved pricing and market-leading structure on our credit facilities, a testament to the quality of our assets and the depth of our relationships. Earlier this month, we closed a $1 billion CLO, our fourth overall and third in the last 14 months. In addition to giving us access to attractive asset financing for newly originated loans, this CLO refinanced our first CLO, proving the long-term viability of this financing option as a permanent component of our strategy. In an increasingly competitive spread environment, our ability to access capital markets on compelling terms is a critical advantage, allowing us to capitalize our business efficiently and maintain our focus on high-quality sponsor assets and loans. With more lenders entering the market as the most severe effects of COVID recede, scale, relationships, creativity and expertise are more important than ever. We are seeing and evaluating lending opportunities around the world, maintaining our characteristic credit discipline and finding many attractive investments for our capital. Geared to the simple business model of low-leverage senior lending to great sponsors, capitalized by a match-term, high-integrity balance sheet, we had strong performance last year and that continues to be our North Star. Our performing portfolio of first mortgage loans financed by a well-priced and ever-improving balance sheet continues to produce attractive current income — about a 9% return on equity in the near-zero LIBOR environment. Thank you and I'll now turn the call over to Tony.

Thank you, Katie. And good morning, everyone. As Steve and Katie highlighted, this quarter's results take off 2021 with a resumption of more typical BXMT activity as we and the broader market continue to put the impacts of COVID-19 further behind us. This quarter we reported GAAP net income of $0.54 per share and distributable earnings of $0.59 per share, in line with the fourth quarter last year despite continued low interest rates globally. Our book value per share of $26.35 was also in line with 4Q as there was only a minimal change in our CECL loan loss reserve, which is one of the largest potential drivers of variability in our GAAP book value. We carried a $1.25 per share CECL reserve as of quarter end. So absent growth of this reserve, our book value would be $27.60. We are seeing the same level as we reported at 4Q 2019 before the impacts of COVID and the new CECL accounting standard. During the quarter, we originated $1.7 billion of new loans, driving our total portfolio to $18.7 billion. $1.3 billion of these loans closed in March and therefore had a needed contribution to our 1Q results. They position us well for incremental earnings going into the second quarter. Also we received nearly $800 million of repayments this quarter as overall transaction volume has resumed. However, we generated meaningfully less prepayment income in 1Q than a typical pre-COVID quarter. This reflects the seasoning of our portfolio resulting from the lower volume of repayments and originations we closed last year. Credit quality was stable this quarter with only 2% of loans on non-accruals, 100% interest collection and as I noted earlier no material movement in our CECL reserves. Average origination LTV of 65% continues to be a source of strength and stability for us. As markets return to normal, our borrowers are even further incentivized to protect the significant equity capital they have invested in our collateral assets. Our capital markets and portfolio financing activity also reflect a return to more normal markets and operations as we continue to grow our dynamic financing strategy. Totals for the quarter include that we closed a $200 million add-on to our $737 million A-1 secured term loan, capturing the attractive LIBOR plus 2.25% rate from our 4Q 2019 transaction. Similarly, after quarter end in April, we closed a $1 billion CLO, our fourth transaction since we began this strategy in 2017. We continue to improve the structural flexibility of our CLOs with the ability to add incremental assets to the CLO over the next six months, in addition to the dynamic replenishment and loan modification features we have utilized in our prior CLOs. Lastly, but significantly, we closed $1.3 billion of new transactions with our credit facility lenders to finance approximately 55% of our portfolio assets. These large, diversified credit facilities provide more flexible financing for us as we continue to expand and improve our terms and structure. As an example, this quarter we added Swedish Krona to one of our facilities to finance the $575 million equivalent loan Katie mentioned earlier and to generally support the growth of our lending activities in Europe. We closed the quarter with a low debt-to-equity ratio of only 2.6 times coupled with significant liquidity of $1.1 billion. As transaction volume has picked up, we look forward to continued growth in our loan portfolio as we deploy our dry powder into the $2 billion pipeline Katie mentioned earlier, which will generate earnings for our stockholders and provide a larger platform from which to pursue further accretive investment opportunities. Importantly, we continue to be vigilant with asset sector and borrower selection to protect our portfolio from any potential downside volatility as the global economy continues its recovery. Thank you for your support. And with that we are ready to open the call for questions.

Okay. And your first question comes from the line of Timothy Hayes at BTIG. Calling your line, please go ahead.

Hey, good morning. Great! Good morning guys, and congrats on a very strong quarter. My first question: it sounds like you're gearing up for some nice origination growth; the pipeline seems very strong. I know repayments can be difficult to predict but as the credit environment improves, I imagine repayments will pick up as well. So just wondering if you can give us an idea of your expectations for portfolio growth given the pipeline you noted and expectations for repayments over the coming quarters?

Thanks Tim and great to have you on the call. As far as repayments, to your point they are a bit unpredictable but what we're seeing consistently is that they are very well correlated with our origination activities. And so, we expect a similar trend to what we've had historically pre-COVID and with the existing capital base we have, we think we have a lot of runway for portfolio growth. So it's a little hard to predict specifically but the correlation really should hold.

Got it, okay. And then on the pipeline, I think I saw that your weighted average portfolio yield actually picked up a bit this quarter, while some of your peers have noted stress in terms of pressure on asset yields and seeing that come down with first quarter results. I'm just curious with your pipeline how all-in coupons look relative to the portfolio average and if you expect you're able to achieve similar ROE that you've been able to achieve, or maybe even relative to pre-COVID levels given the tapping on the financing side as well.

Yes. I think what we're seeing in the market is that returns on assets and returns on equity are pretty consistent on a spread basis from pre-COVID. Every quarter there's obviously a little bit of idiosyncrasy depending on which loans close in which quarter. But we've been very consistent. And I think to your point, we are seeing some spread pressure in the market on the lending side but we're also a very significant beneficiary from that on the borrowing side. And we're always very focused on making sure that our capital sources are enabling us to continue accessing the loans that we want to lend on even as we see spreads compressing in the market.

Got it, makes sense. And then just one more broad color for me: it's great to see stable credit trends in the portfolio. Maybe if you could just touch on New York City office exposure in general since you guys are pretty well-located there. Just wondering how underlying rents and occupancies have trended in those assets underlying your loans in that market and to office specifically. And just on the market in general, if you had any updated views on how Class A office will perform in gateway cities like New York City and if there is any kind of range of valuation haircuts you're expecting broadly?

Yes, I think as far as generally in the markets where we've been active, we're increasingly seeing corporations and CEOs comment on what we've seen for a while which is that in-person work is necessary for fostering culture and for development, collaboration and ingenuity — these dynamics. We think these are particularly important in the industries that create office demand even before COVID, like life sciences and content creation, where we've long been focused in terms of our lending activities. We like to lend on new, quality office buildings, healthier and more flexible spaces, with better amenities and in strong submarkets. These are the buildings that were expanding pre-COVID and where demand is being created, and that trend is continuing. So while the overall office market will take time to recover and we think the work-from-home dynamic will have some impact on values and rents, the impact will be uneven across office markets. It depends on quality, and we're already seeing that in different markets. We think our portfolio is in the right neighborhoods. Yes, our office loan this quarter is a great example of the long-term office lending philosophy we've had in the portfolio: a brand-new office building in East Austin, Texas, a low-leverage acquisition loan to an A-plus sponsor in a market where we're seeing great fundamentals. Overall, we feel like we've made the right asset selection in our portfolio and we're seeing the type of assets we lend on being the ones that perform.

Right, thanks. I'll hop back in the queue, thanks for the color Katie, I appreciate it.

And the next question comes from the line of Doug Harter from Credit Suisse. Please go ahead.

Good morning, Doug.

Good morning. You mentioned that income from prepayments was lower this quarter than pre-COVID quarters. Just wondering if you could size that and then just to help us understand kind of how that might look going forward given the seasoning you mentioned and maybe that will kind of draw crosses around when that might return to normal?

Hey Doug, it's Doug here. I'll take that one. Historically, if you look back over the last several years, we've had anywhere from $0.02 to $0.04 on a per-share basis of prepayment income. I think on average it's about $0.04. It tends to be lumpy. So that's not a regular number per quarter but that's the average over the last several years. This quarter was significantly less than that, closer to $0.01. It has been around between nothing and $0.01 in recent quarters. And that's a function, to your point, of the seasoning of the portfolio: decreased velocity in 2020 and then the resultant aging of the portfolio. Prepayment income obviously is a function of the aging of the loans. As the portfolio turns over, as originations and repayments resume and the portfolio returns to more typical demographics over the next several quarters, we'll see that velocity resume and the potential for prepayment income to return to prior levels.

Doug, just to make sure I understand: you're saying that it takes a couple more quarters of originating and having normal repayments and then it should probably get back to the $0.02 to $0.04, albeit lumpy range?

Yes. I don’t know whether we can put a specific number of quarters on it because it'll really depend on the blow-by-blow of the originations and repayments, but over the next period, as the portfolio turns over and the demographics return to a more normalized level, we'll see that happen. So it's some period of time in the intermediate term.

All right, that's very helpful. Thank you.

And your next question comes from the line of Charlie Arestia, J.P. Morgan. Please go ahead.

Hi, good morning everybody. Thanks for taking the questions. Were there any loan modifications that were executed during the quarter? I'm assuming you've seen a deceleration in those requests but just curious to hear your thoughts on how those conversations are going?

Sure. So we're really back in the mode of where we were pre-COVID with respect to loan modifications where we proactively go through our portfolio and look for opportunities to modify loans to keep the good credits that we like around for longer. We're seeing in the portfolio some restarted or expanded business plans. We're seeing assets progress in their business plans where we want to right-size the terms of the loans, and add more call protections. That's really the center of the loan modifications we have going on right now. The COVID-impact modifications — we have largely turned the page on those.

Okay, got it. Thanks, Katie. And then, if I could just get sort of asset-specific updates on your larger-rated loans. First, the $360 million Maui hotel: given recent developments in vaccine progress and stronger performance in leisure hotels, I would be curious to hear how things are progressing on that asset. And then second, the $920 million mixed-use in Spain: again, looking at reopening trends domestically versus what you read about happening in Europe, I'm wondering if you can get an update there and if there's a possibility of any specific reserve built on either of those loans. I realize there is plenty of runway on the maturities there but given the size of those and the risk ratings, I wanted to ask.

So on the Maui hotel, I think that what we've seen is that we are big believers in the post-COVID travel recovery across Blackstone. We're obviously investing in that theme. Yes, the combination of pent-up demand, accumulated savings, vaccine adoption and the lifting of travel restrictions suggests there will be a powerful recovery particularly in the leisure resort segment of the market. That asset is extremely well-positioned. It finished its renovation plan during COVID. Hawaii has extremely positive long-term supply-demand fundamentals. This property is right on the beach in Maui. So we see this hotel as a big beneficiary from the trends we expect. The hotel has been seeing some pickup in occupancy; it'll take time especially with a place like Hawaii given travel logistics, but once people have a better perception of safety and space, we think the Hawaii market is going to perform very well. On the asset you mentioned in Spain, we think the broader reopening is also a benefit to that portfolio. We're seeing collections pick up; it's still a business plan that will progress over time but no material changes there.

Thanks, very much.

And your next question comes from the line of Jade Rahmani from KBW. Please go ahead.

Thank you very much. I was wondering if perhaps Steve or Katie could share your thoughts on if there's any rollback in 1031 exchanges, how you think it might impact the real-estate market?

Hey Jade, this is Steve. I think changes to the 1031 exchange rules will impact certain net-leased assets and other assets that tend to be frequently traded in that marketplace. I don’t think it will have any real impacts on our business; I don’t see the 1031 market as being critical for valuations of the kinds of assets that our loans secure. There'll be a tax headwind for certain investors but I don't expect it to have a material impact on our business.

Thank you very much. And in terms of the nature of the originations, you mentioned multifamily as a bright spot. Just wondering if you're seeing any changes from the GSEs. Perhaps they've tightened spreads in order to manage some recent uptick in interest rates and are less active, and if that presents an opportunity for you?

Yes Jade, it's a great question. I think we are seeing a little bit of that on the margin. The GSEs have been a bit less active generally in recent months, and so on the margin we might be picking up some loans that might have been ready for GSE execution a little bit earlier. But by and large, the loans where we're active come from relationships and there's usually a transitional element to them. So we're typically a lender leading up to a GSE execution. So not a huge impact, but maybe a little bit on the margin.

Thanks very much.

And your next question comes from Don Fandetti from Wells. Please go ahead.

Good morning, Don.

The dynamics — hi, can you guys hear me?

Yes, we can hear you now.

Okay, great. I was wondering if you could talk about the competitive dynamic today in the U.S. and maybe also contrast that with Europe. And then just lastly, as you come out of COVID, are there any strategic changes or are you going to just continue forward with the same strategy?

Sure. So as far as the competitive dynamic, it's pretty similar to pre-COVID. There are certainly other lenders out there, but our advantages continue to shine through. We have great relationships with borrowers and financing counterparties. We have the ability to scale in ways that many others can't. We have differentiated access to information that allows us to move quickly and find the loans that we like. So we've always operated in a competitive environment and we've always been able to find a large volume of attractive opportunities. Europe has always been a bit less competitive; it's a less liquid market environment. There are fewer lenders that have the type of information advantage and scale that we have as part of the Blackstone platform. So we really like the Europe opportunity; it has been and continues to be a fruitful ground for investments. As for strategy, the last year validated what we've thought was a very strong approach: lending to well-capitalized sponsors, high-quality real estate that proves resilient, and having a match-term, high-integrity balance sheet. All of those things drove our performance and we think that's the right place to be going forward.

Okay, thank you.

And the final question comes from Stephen Laws, Raymond James. Please go ahead.

Hi, good morning. A number of things have been covered. But can you touch on prepayment income: how much prepayment income was in the quarter and how does that change year-over-year and sequentially which I guess are somewhat fair cost to normal since there was less portfolio turnover in the last 12 months than typical?

Hey, it's Tony on the prepayment income question. Yes, we don’t have a specific number to disclose on that line in the quarter, but what I would say is important is we only have 2% of the portfolio — two loans — on non-accrual. We are collecting 100% of interest generally across our loans, so predominantly the loans are all paying current. The receivables are all collectible and we're not building up any sort of large receivables or back-ended accruals that we're worried about collecting. So although I don’t have a number to share for prepayment income, I would say it's nothing that we need to be concerned about from a credit perspective.

Thanks, Tony. As a follow-up — a lot of things covered on the origination and pipeline but just one more: it looks like new office origination in Q1; can you talk about where that is in your pipeline or whether you're less hesitant to do that given more uncertainties around that asset class looking out? If that's the case, how should we think about your portfolio mix and property type changing if we look say 12 or 24 months forward?

Sure. So we did have one office origination in the quarter in Austin, Texas with one of our best sponsors. That loan is indicative of what we're interested in the market — the same types of loans we were lending on pre-COVID and expect to continue. We're seeing great opportunities in newer, quality office buildings with strong sponsors: buildings with the amenities and the quality tenants want. There's a lot of activity in submarket office and in core markets with low basis. So we continue to think we've made the right asset selection in the office space and that there are good opportunities at the lender level there. I don't think there will be a significant change over time; we'll continue to adhere to our disciplined approach to which office buildings we think will be winners and make low-leverage loans to the right sponsors in those markets.

Right. So it sounds like it stays above 50%, then just kind of roughly. Great, thank you very much for your time.

Thank you.

Thank you. Now I'll turn the call back over to Weston Tucker.

Great. Thanks everyone for joining us this morning. And if you have any questions, please follow up after the call.

Thank you. That concludes your conference call for the day, you may now disconnect. Thanks for joining. Enjoy the rest of your day and take care.