BXMT's Q3 2025: Contradictions Emerge on Liquidity, Dividend Strategy, and Deployment Pace

Date of Call: October 29, 2025

Financials Results

• EPS: $0.37 GAAP net income per share; distributable earnings (DE) $0.24 per share. DE prior to charge-offs $0.48 per share (up $0.03 QoQ and $0.01 above the $0.47 quarterly dividend).

Guidance:

• Earnings expected to benefit from capital redeployment and resolutions of impaired loans (including two closed at quarter-end).
• Company expects to close >$7 billion of new investments this year across originations, loan acquisitions and net lease strategies.
• Maintain leverage target in the mid-3x range (~3.5x) with $1.3B liquidity and >$7B available financing capacity.
• Continue opportunistic share repurchases and capital-markets actions to lower funding costs and enhance returns.

Business Commentary:

• Strong Financial Performance:
• Blackstone Mortgage Trust reported GAAP net income of $0.37 per share and distributable earnings of $0.24 per share for Q3 2025, with distributable earnings prior to charge-offs at $0.48 per share.

• The strong performance was driven by robust investment activity, efficient capital markets execution, and the resolution of impaired loans.

• Investment Activity and Diversification:

• The company closed $1 billion of total investments, including $700 million in loan originations, diversified across sectors and geographies, with over 60% in international markets.

• This strategy aimed to capture excess spread, enhance credit characteristics, and reduce floating rate exposure by acquiring fixed-rate loans.

• Portfolio Optimization and Credit Quality:

• BXMT's loan portfolio is now 96% performing, with a decline in impaired loan balance by 71% below last year's peak.

• The improvement in credit quality is attributed to active portfolio management, resolving impaired loans, and no new impairments amidst a stable credit backdrop.

• Balance Sheet Strength and Capital Deployment:

• The company's balance sheet remains strong, with debt to equity at 3.5x and liquidity of $1.3 billion.
• This strength enabled the repurchase of $140 million of shares since 2024, indicating confidence in the stock's value and the ability to deploy capital efficiently.

Sentiment Analysis:

Overall Tone: Positive

• Management emphasized "strong third quarter results" with DE prior to charge-offs of $0.48 covering the $0.47 dividend, $1.6B of repayments, no new impaired loans, impaired balance down ~71% from peak, ~$140M of buybacks YTD, and active capital-markets actions to reduce funding cost.

Q&A:

• Question from William Catherwood (BTIG, LLC): You mentioned recovery in transaction activity and return of liquidity—where are you seeing that (U.S. vs Europe)? If recovery is more in the U.S., could origination activity pivot back to U.S. loans instead of Europe?
  Response: Liquidity has returned in both U.S. and Europe but is further along in the U.S.; BXMT will allocate by relative value across regions, with the U.S. remaining the largest market and likely the largest share of investment activity over time.

• Question from William Catherwood (BTIG, LLC): On the REO portfolio, can you remind us of the potential earnings uplift as capital comes back? Do you need incremental capital for the New York City hotel acquired this quarter?
  Response: No specific uplift disclosed; management expects converting REO into performing investments will drive earnings and said asset conditions are generally good with minimal CapEx expected and ample liquidity to address needs.

• Question from Harsh Hemnani (Green Street): How are you thinking about originating new loans versus buybacks — is there a premium/discount threshold where buybacks are more accretive? It sounds like 4Q will step up both originations and buybacks.
  Response: Capital-allocation is dynamic and evaluated daily; the firm repurchases shares when stock trades at levels offering high return on investment and balances that against origination opportunities on a case-by-case basis.

• Question from Harsh Hemnani (Green Street): Given ~2/3 of originations were floating-rate loans and ~1/3 net lease/bank loan acquisitions, should we view fixed-rate purchases as a way to reduce floating-rate exposure ahead of expected lower rates?
  Response: Net lease and discounted bank-loan acquisitions add duration and act as a natural hedge to floating-rate exposure while offering upside convexity and improved risk-adjusted returns.

• Question from Jade Rahmani (Keefe, Bruyette, & Woods): Have you seen macro spillover effects into the CRE market from consumer/jobs/credit weakness, and are you taking more defensive actions?
  Response: No material spillovers observed; real-estate credit was already stressed and is now recovering with improved credit quality and tighter lending standards, so no major defensive changes beyond disciplined underwriting.

• Question from Jade Rahmani (Keefe, Bruyette, & Woods): Was the Q3 origination pace muted by liability management (new repo lines, tighter term loan spreads, CLO calls) or other timing issues?
  Response: Q3 investments totaled $1B with $1.7B in closing; any modest seasonal/timing impacts were limited and the pipeline remains robust—management is actively investing across channels.

• Question from Douglas Harter (UBS): How do you see the pace of net deployment in coming quarters?
  Response: Net deployment should remain consistent with recent run rate as strong repayment activity is being redeployed into new investments.

• Question from Douglas Harter (UBS): What is the right level of leverage to run the business at this point in the cycle?
  Response: Current leverage is ~3.5x, in the middle of the firm's target range (mid-3s); management is comfortable with the balance sheet and has capacity to modestly increase leverage if attractive opportunities arise.

• Question from Richard Shane (JPMorgan Chase & Co): To cover the dividend (implied ~9% yield to book), can you rank levers—higher yields, reducing nonaccruals, reducing REO—and quantify contributions?
  Response: Primary lever is converting REO and impaired loans into higher-yielding investments; dividend set with a long-term view and DE ex charge-offs already roughly covers the dividend this quarter.

• Question from Richard Shane (JPMorgan Chase & Co): On funding cost/rate outlook—are you confident you can achieve hurdle rates even if short-term rates fall sharply?
  Response: Management believes redeploying capital from REO/impaired loans will offset a lower-rate environment; asset sensitivity is modest (management cited roughly 150 bps of rate move impact).

• Question from Donald Fandetti (Wells Fargo Securities, LLC): What are you seeing in office fundamentals given six upgrades—could you be over-reserved in your office book?
  Response: Office fundamentals are stabilizing and improving (six upgrades, two removed from watch list, post-quarter impaired office sale); management believes reserve levels are appropriate after asset-by-asset reviews.

• Question from Donald Fandetti (Wells Fargo Securities, LLC): With steady credit migration, do you expect movement from ratings/states (e.g., 4 to 3) in near term or are you in a steady state?
  Response: Credit trajectory is clearly positive with no new impairments, ~70% of impaired loans resolved to date and clear line of sight to additional resolutions.

Contradiction Point 1

Transaction Activity and Market Liquidity

It involves the company's assessment of market conditions and transaction activity, which directly impacts investment strategies and outlook for the future.

Can you clarify where the recovery in CRE market liquidity and transaction activity is occurring—specifically in the U.S. and Europe or limited to certain areas? - William Catherwood(BTIG)

2025Q3: Liquidity has returned to markets in both the U.S. and Europe, with the U.S. being a bit stronger due to a more established CMBS market. - Timothy Johnson(CEO)

Are you observing a recovery in transaction activity within your BMT business, and do you believe the market is experiencing a recovery? - Rick Shane(JPMorgan)

2025Q1: We're not seeing any part of the market in a recovery. We're definitely not seeing a recovery in the office segment. - Katie Keenan(CEO)

Contradiction Point 2

Dividend Strategy and Sustainability

It involves the company's strategy for sustaining its dividend payments, which is crucial for investor confidence and financial stability.

How will you fund the dividend, and what are the key drivers for this? - Richard Shane(JPMorgan Chase & Co, Research Division)

2025Q3: Dividend is set for long-term sustainability with earnings left to unlock from REO and impaired loans. - Timothy Johnson(CEO)

How much loan book growth do you expect in 2025, assuming repayments moderate? - Tom Catherwood(BTIG)

2025Q1: Our B-4 shares will convert to BMT shares on a 1-for-1 basis at a later date. The total number of BMT shares outstanding will be adjusted to reflect the conversion. - Katie Keenan(CEO)

Contradiction Point 3

Recovery in Transaction Activity and Liquidity

It involves differing perspectives on the recovery of transaction activity and liquidity in the CRE markets, which could impact investment strategies and portfolio composition.

Where are you seeing the recovery in transaction activity and liquidity returning to CRE markets—across the U.S. and Europe or in specific pockets? - William Catherwood(BTIG)

2025Q3: Liquidity has returned to markets in both the U.S. and Europe, with the U.S. being a bit stronger due to a more established CMBS market. - Timothy Johnson(CEO)

What are the expected spreads or IRRs for new loans in Q1 2025? - Douglas Harter(UBS)

2024Q4: The return of liquidity to the capital markets is contributing to a strong and improving repayment environment. - Katharine Keenan(CEO)

Contradiction Point 4

Pace of Net Deployment and Leverage

It involves differing expectations regarding the pace of net deployment and the appropriate level of leverage, which are critical for managing the company's growth and risk profile.

How do you see the pace of net deployment in your portfolio over the next few quarters, and what is the appropriate level of leverage? - Douglas Harter(UBS)

2025Q3: Deployments are consistent with repayments. BXMT is comfortable with leverage at 3.5x, maintaining flexibility for opportunities. - Austin Pena(CFO), Timothy Johnson(CEO)

Is assuming $10 billion in 2025 originations using 2024 repayment levels realistic? - Unknown Analyst(BTIG)

2024Q4: We anticipate higher repayments this year than in 2024, which should lead to higher reinvestment levels. - Katharine Keenan(CEO)

Contradiction Point 5

Transaction Activity and Liquidity in CRE Markets

It involves contrasting perspectives on transaction activity and liquidity in the commercial real estate (CRE) markets, which could influence investment strategies and market expectations.

Where are you seeing the recovery in transaction activity and liquidity return to CRE markets—across the U.S. and Europe or in specific regions? - William Catherwood(BTIG, LLC, Research Division)

2025Q3: Liquidity has returned to markets in both the U.S. and Europe, with the U.S. being a bit stronger due to a more established CMBS market. - Timothy Johnson(CEO)

What's driving the increase in resolutions? Is the market more supportive of refinancing? - William Catherwood(BTIG)

2024Q3: The market has seen a return of liquidity with CMBS issuance up 4x year-to-date and transaction activity up 20%. - Katharine Keenan(CEO)