Company Quick10K Filing
Quick10K
Blackstone Mortgage Trust
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$35.28 126 $4,430
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-04-23 Earnings, Exhibits
8-K 2019-04-11 Earnings
8-K 2019-02-12 Earnings, Exhibits
8-K 2018-11-14 Other Events, Exhibits
8-K 2018-10-23 Earnings, Exhibits
8-K 2018-07-31 Other Events, Exhibits
8-K 2018-07-24 Earnings, Exhibits
8-K 2018-06-20 Officers, Shareholder Vote, Exhibits
8-K 2018-03-27 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-03-02 Other Events
GRUB Grubhub 6,230
GT Goodyear Tire & Rubber 3,990
FBP First Bancorp 2,400
WTS Watts Water Technologies 2,360
CBLK Carbon Black 1,280
CAC Camden National 712
AIHS Senmiao Technology 120
REAC Renewable Energy Acquisition 0
NPWZ Neah Power Systems 0
ISBA Isabella Bank 0
BXMT 2019-03-31
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-3.1 d713863dex31.htm
EX-3.2 d713863dex32.htm
EX-10.1 d713863dex101.htm
EX-10.2 d713863dex102.htm
EX-10.3 d713863dex103.htm
EX-10.4 d713863dex104.htm
EX-10.5 d713863dex105.htm
EX-31.1 d713863dex311.htm
EX-31.2 d713863dex312.htm
EX-32.1 d713863dex321.htm
EX-32.2 d713863dex322.htm

Blackstone Mortgage Trust Earnings 2019-03-31

BXMT 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 d713863d10q.htm 10-Q 10-Q
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 MARCH 31, 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

 

LOGO

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)

 

 

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 April 16, 2019 was 125,666,822.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

PART I.

  

FINANCIAL INFORMATION

  

ITEM 1.

  

FINANCIAL STATEMENTS

     2  
  

Consolidated Financial Statements (Unaudited):

  
  

Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018

     2  
  

Consolidated Statements of Operations for the Three Months Ended March 31, 2019 and 2018

     3  
  

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2019 and 2018

     4  
  

Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2019 and 2018

     5  
  

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018

     6  
  

Notes to Consolidated Financial Statements

     8  

ITEM 2.

  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     43  

ITEM 3.

  

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     63  

ITEM 4.

  

CONTROLS AND PROCEDURES

     65  

PART II.

  

OTHER INFORMATION

  

ITEM 1.

  

LEGAL PROCEEDINGS

     66  

ITEM 1A.

  

RISK FACTORS

     66  

ITEM 2.

  

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     66  

ITEM 3.

  

DEFAULTS UPON SENIOR SECURITIES

     66  

ITEM 4.

  

MINE SAFETY DISCLOSURES

     66  

ITEM 5.

  

OTHER INFORMATION

     66  

ITEM 6.

  

EXHIBITS

     67  

SIGNATURES

     68  

 

1


Table of Contents

PART I. FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS

Blackstone Mortgage Trust, Inc.

Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)

 

     March 31,
2019
    December 31,
2018
 

Assets

    

Cash and cash equivalents

   $ 79,437     $ 105,662  

Loans receivable, net

     14,508,735       14,191,200  

Other assets

     208,048       170,513  
  

 

 

   

 

 

 

Total Assets

   $ 14,796,220     $ 14,467,375  
  

 

 

   

 

 

 

Liabilities and Equity

    

Secured debt agreements, net

   $ 9,208,010     $ 8,974,756  

Loan participations sold, net

     107,237       94,418  

Securitized debt obligations, net

     1,286,417       1,285,471  

Convertible notes, net

     610,684       609,911  

Other liabilities

     132,283       128,212  
  

 

 

   

 

 

 

Total Liabilities

     11,344,631       11,092,768  
  

 

 

   

 

 

 

Commitments and contingencies

     —         —    

Equity

    

Class A common stock, $0.01 par value, 200,000,000 shares authorized, 125,666,550 and 123,435,738 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively

     1,257       1,234  

Additional paid-in capital

     4,039,805       3,966,540  

Accumulated other comprehensive loss

     (30,756     (34,222

Accumulated deficit

     (570,908     (569,428
  

 

 

   

 

 

 

Total Blackstone Mortgage Trust, Inc. stockholders’ equity

     3,439,398       3,364,124  

Non-controlling interests

     12,191       10,483  
  

 

 

   

 

 

 

Total Equity

     3,451,589       3,374,607  
  

 

 

   

 

 

 

Total Liabilities and Equity

   $ 14,796,220     $ 14,467,375  
  

 

 

   

 

 

 

 

Note:

The consolidated balance sheets as of March 31, 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 March 31, 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 15 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
March 31,
 
     2019     2018  

Income from loans and other investments

    

Interest and related income

   $ 224,759     $ 155,425  

Less: Interest and related expenses

     118,688       69,989  
  

 

 

   

 

 

 

Income from loans and other investments, net

     106,071       85,436  

Other expenses

    

Management and incentive fees

     19,790       15,492  

General and administrative expenses

     9,313       8,708  
  

 

 

   

 

 

 

Total other expenses

     29,103       24,200  
  

 

 

   

 

 

 

Income before income taxes

     76,968       61,236  

Income tax provision

     101       120  
  

 

 

   

 

 

 

Net income

     76,867       61,116  
  

 

 

   

 

 

 

Net income attributable to non-controlling interests

     (302     (158
  

 

 

   

 

 

 

Net income attributable to Blackstone Mortgage Trust, Inc.

   $ 76,565     $ 60,958  
  

 

 

   

 

 

 

Net income per share of common stock basic and diluted

   $ 0.62     $ 0.56  
  

 

 

   

 

 

 

Weighted-average shares of common stock outstanding, basic and diluted

     124,333,048       108,397,598  
  

 

 

   

 

 

 

 

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
March 31,
 
     2019     2018  

Net income

   $ 76,867     $ 61,116  

Other comprehensive income

    

Unrealized gain on foreign currency translation

     5,414       10,738  

Realized and unrealized loss on derivative financial instruments

     (1,948     (2,935
  

 

 

   

 

 

 

Other comprehensive income

     3,466       7,803  
  

 

 

   

 

 

 

Comprehensive income

     80,333       68,919  

Comprehensive income attributable to non-controlling interests

     (302     (158
  

 

 

   

 

 

 

Comprehensive income attributable to Blackstone Mortgage Trust, Inc.

   $ 80,031     $ 68,761  
  

 

 

   

 

 

 

 

 

 

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, 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
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

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
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

5


Table of Contents

Blackstone Mortgage Trust, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

     Three Months Ended
March 31,
 
     2019     2018  

Cash flows from operating activities

    

Net income

   $ 76,867     $ 61,116  

Adjustments to reconcile net income to net cash provided by operating activities

    

Non-cash compensation expense

     7,768       6,976  

Amortization of deferred fees on loans and debt securities

     (13,356     (11,229

Amortization of deferred financing costs and premiums/discount on debt obligations

     7,265       6,331  

Changes in assets and liabilities, net

    

Other assets

     (4,780     (354

Other liabilities

     3,808       9,739  
  

 

 

   

 

 

 

Net cash provided by operating activities

     77,572       72,579  
  

 

 

   

 

 

 

Cash flows from investing activities

    

Origination and fundings of loans receivable

     (799,326     (1,978,213

Principal collections and sales proceeds from loans receivable and debt securities

     463,483       1,001,682  

Origination and exit fees received on loans receivable

     5,501       18,881  

Receipts under derivative financial instruments

     2,956       22  

Payments under derivative financial instruments

     (970     (7,397

Return of collateral deposited under derivative agreements

     4,000       10,740  

Collateral deposited under derivative agreements

     (9,090     (13,210
  

 

 

   

 

 

 

Net cash used in investing activities

     (333,446     (967,495
  

 

 

   

 

 

 

 

6

continued…

See accompanying notes to consolidated financial statements.


Table of Contents

Blackstone Mortgage Trust, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

     Three Months Ended
March 31,
 
     2019     2018  

Cash flows from financing activities

    

Borrowings under secured debt agreements

   $ 721,571     $ 1,949,135  

Repayments under secured debt agreements

     (483,748     (1,265,100

Proceeds from sale of loan participations

     12,802       37,483  

Payment of deferred financing costs

     (11,200     (10,217

Contributions from non-controlling interests

     1,470       375  

Distributions to non-controlling interests

     (64     (1,575

Net proceeds from issuance of convertible notes

     —         214,463  

Net proceeds from issuance of class A common stock

     65,377       —    

Dividends paid on class A common stock

     (76,530     (66,888
  

 

 

   

 

 

 

Net cash provided by financing activities

     229,678       857,676  
  

 

 

   

 

 

 

Net decrease in cash, cash equivalents, and restricted cash

     (26,196     (37,240

Cash, cash equivalents, and restricted cash at beginning of year

     105,662       102,518  

Effects of currency translation on cash, cash equivalents, and restricted cash

     (29     9,200  
  

 

 

   

 

 

 

Cash, cash equivalents, and restricted cash at end of year

   $ 79,437     $ 74,478  
  

 

 

   

 

 

 

Supplemental disclosure of cash flows information

    

Payments of interest

   $ (107,971   $ (55,582
  

 

 

   

 

 

 

Payments of income taxes

   $ (74   $ (135
  

 

 

   

 

 

 

Supplemental disclosure of non-cash investing and financing activities

 

 

Dividends declared, not paid

   $ (77,913   $ (67,080
  

 

 

   

 

 

 

Loan principal payments held by servicer, net

   $ 37,285     $ 4,684  
  

 

 

   

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

7


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 L.P., 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, 42nd 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

 

8


Table of Contents

Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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 15 for additional discussion of our VIEs.

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, Cash Equivalents, and Restricted Cash

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.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

Restricted cash represents cash held in a segregated bank account related to a letter of credit.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash in our consolidated balance sheets to the total amount shown in our consolidated statements of cash flows ($ in thousands):

 

     March 31,
2019
     March 31,
2018
 

Cash and cash equivalents

   $ 79,437      $ 57,396  

Restricted cash

     —          17,082  
  

 

 

    

 

 

 

Total cash, cash equivalents, and restricted cash shown in our consolidated statements of cash flows

   $ 79,437      $ 74,478  
  

 

 

    

 

 

 

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 $291.3 million as of March 31, 2019. 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.

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.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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 not 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 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.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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.

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 debt 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.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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 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 14. 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.

 

   

Restricted cash: The carrying amount of restricted cash 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,

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

 

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.

 

   

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.

 

   

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 12 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 13 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.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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 10 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).

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 June 2016, the FASB issued ASU 2016-13 “Financial Instruments — Credit Losses — Measurement of Credit Losses on Financial Instruments (Topic 326),” or 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 not have any provision for loan losses in our consolidated financial statements.

 

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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):

 

     March 31,
2019
    December 31,
2018
 

Number of loans

     122       125  

Principal balance

   $ 14,603,831     $ 14,293,970  

Net book value

   $ 14,508,735     $ 14,191,200  

Unfunded loan commitments (1)

   $ 3,123,059     $ 3,405,945  

Weighted-average cash coupon (2)

     5.63     5.67

Weighted-average all-in yield (2)

     5.99     6.00

Weighted-average maximum maturity (years) (3)

     3.8       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 March 31, 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 March 31, 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 March 31, 2019, 65% of our loans by principal balance were subject to yield maintenance or other prepayment restrictions and 35% 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

       799,326       —         799,326

Loan repayments

       (495,492 )       —         (495,492 )

Unrealized gain (loss) on foreign currency translation

       6,027       (49 )       5,978

Deferred fees and other items

       —         (5,501 )       (5,501 )

Amortization of fees and other items.

       —         13,224       13,224
    

 

 

     

 

 

     

 

 

 

March 31, 2019

     $ 14,603,831     $ (95,096 )     $ 14,508,735
    

 

 

     

 

 

     

 

 

 

 

(1)

Other items primarily consist of purchase discounts or premiums, exit fees, and deferred origination expenses.

 

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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):

 

March 31, 2019

Property Type

   Number of
Loans
   Net Book
Value
   Total Loan
Exposure (1)(2)
   Percentage of
Portfolio

Office

       52      $ 7,080,970      $ 7,133,812        47 %

Hotel

       18        2,612,768        2,694,028        18

Multifamily

       35        2,238,435        2,256,289        15

Industrial

       5        681,091        685,513        5

Retail

       4        457,968        460,423        3

Condominium

       3        278,110        328,500        2

Self-Storage

       2        282,684        283,956        2

Other

       3        876,709        1,210,851        8
    

 

 

      

 

 

      

 

 

      

 

 

 
       122      $ 14,508,735      $ 15,053,372        100 %
    

 

 

      

 

 

      

 

 

      

 

 

 

Geographic Location

   Number of
Loans
   Net Book
Value
   Total Loan
Exposure (1)(2)
   Percentage of
Portfolio

United States

                   

Northeast

       33      $ 4,481,059      $ 4,512,296        32 %

West

       26        2,996,086        3,072,901        20

Southeast

       18        2,249,064        2,261,069        15

Midwest

       9        1,170,535        1,178,563        8

Southwest

       13        479,835        482,734        3

Northwest

       3        156,639        157,462        1
    

 

 

      

 

 

      

 

 

      

 

 

 

Subtotal

       102        11,533,218        11,665,025        79

International

                   

United Kingdom

       9        1,154,538        1,507,808        10

Spain

       1        1,069,279        1,075,640        7

Canada

       5        341,106        338,462        2

Australia

       3        329,780        332,107        2

Belgium

       1        69,057        69,378        —  

Germany

       1        11,757        64,952        —  
    

 

 

      

 

 

      

 

 

      

 

 

 

Subtotal

       20        2,975,517        3,388,347        21
    

 

 

      

 

 

      

 

 

      

 

 

 

Total

       122      $ 14,508,735      $ 15,053,372        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 $449.5 million of such non-consolidated senior interests as of March 31, 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.

 

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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.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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.

The following table allocates the principal balance and net book value of our loans receivable based on our internal risk ratings ($ in thousands):

 

March 31, 2019     December 31, 2018  

Risk
Rating

  Number
of Loans
  Net Book
Value
  Total Loan
Exposure (1)(2)
  Risk
Rating
    Number
of Loans
  Net Book
Value
  Total Loan
Exposure (1)(2)
 
1   3     $     255,229         $     255,899         1       2     $     181,366         $     182,740    
2   37     4,275,769       4,350,775       2       38     3,860,432       3,950,025  
3   82     9,977,737       10,446,698       3       85     10,149,402       10,608,079  
4   —       —         —         4       —       —         —    
5   —       —         —         5       —       —         —    
 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

 

 
  122     $14,508,735       $15,053,372       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 $449.5 million and $446.9 million of such non-consolidated senior interests as of March 31, 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 March 31, 2019 and December 31, 2018.

We did not have any impaired loans, nonaccrual loans, or loans in maturity default as of March 31, 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 March 31, 2019 and December 31, 2018, our Multifamily Joint Venture held $343.4 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.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

4.

OTHER ASSETS AND LIABILITIES

The following table details the components of our other assets ($ in thousands):

 

     March 31,
2019
   December 31,
2018

Debt securities held-to-maturity (1)

     $ 95,877      $ 96,167

Accrued interest receivable

       61,148        56,679

Loan portfolio payments held by servicer (2)

       39,784        6,133

Derivative assets

       5,384        9,916

Collateral deposited under derivative agreements

       5,090        —  

Prepaid expenses

       512        647

Prepaid taxes

       3        6

Other

       250        965
    

 

 

      

 

 

 

Total

     $ 208,048      $ 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 15 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.

The following table details the components of our other liabilities ($ in thousands):

 

     March 31,
2019
   December 31,
2018

Accrued dividends payable

     $ 77,913      $ 76,530

Accrued interest payable

       28,904        25,588

Accrued management and incentive fees payable

       19,790        18,586

Accounts payable and other liabilities

       3,950        4,583

Derivative liabilities

       1,726        2,925
    

 

 

      

 

 

 

Total

     $ 132,283      $ 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
     March 31, 2019    December 31, 2018

Secured credit facilities

     $ 9,093,821      $ 8,870,897

Asset-specific financings

       97,699        81,739

Revolving credit agreement

       43,845        43,845
    

 

 

      

 

 

 

Total secured debt agreements

     $ 9,235,365      $ 8,996,481
    

 

 

      

 

 

 

Deferred financing costs (1)

       (27,355 )        (21,725 )
    

 

 

      

 

 

 

Net book value of secured debt

     $ 9,208,010      $ 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.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

Secured Credit Facilities

The following tables detail our secured credit facilities ($ in thousands):

 

     March 31, 2019  
     Credit Facility Borrowings     Collateral
Assets (2)
 

Lender

   Potential (1)      Outstanding      Available (1)  

Deutsche Bank

   $ 1,865,813      $ 1,865,813      $ —       $ 2,357,198  

Wells Fargo

     1,992,903        1,748,737        244,166       2,556,230  

JP Morgan

     1,078,749        1,078,749        —         1,357,997  

Barclays

     890,620        890,620        —         1,113,275  

Citibank

     878,104        801,474        76,630       1,114,229  

Bank of America

     793,804        793,804        —         992,805  

MetLife

     675,329        675,329        —         857,689  

Morgan Stanley

     444,653        414,456        30,197       589,931  

Société Générale

     321,182        321,182        —         410,165  

Goldman Sachs

     237,149        237,149        —         314,526  

Goldman Sachs — Multi. JV (3)

     169,506        169,506        —         221,202  

Bank of America — Multi. JV (3)

     97,002        97,002        —         122,167  
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 9,444,814      $ 9,093,821      $ 350,993     $ 12,007,414  
  

 

 

    

 

 

    

 

 

   

 

 

 

 

(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 $9.1 billion for the three months ended March 31, 2019. As of March 31, 2019, we had aggregate borrowings of $9.1 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 March 31, 2019, outstanding borrowings under these facilities had a weighted-average maturity, including extension options, of 3.2 years.

 

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

     December 31, 2018  
     Credit Facility Borrowings     Collateral
Assets (2)
 

Lender

   Potential (1)      Outstanding      Available (1)  

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 $7.7 billion for the three months ended December 31, 2018. As of December 31, 2018, we had aggregated 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.

 

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Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

The following tables outline the key terms of our credit facilities as of March 31, 2019:

 

Lender

 

Currency

  Guarantee (1)   Margin Call (2)  

Term/Maturity

Goldman Sachs — Multi. JV (3)

  $       25 %       Collateral marks only   July 12, 2020 (5)

JP Morgan

  $ / £       50 %       Collateral marks only   January 7, 2021 (6)

Bank of America — Multi. JV (3)

  $       43 %       Collateral marks only   July 19, 2021 (7)

Deutsche Bank

  $ / €       60 % (8)       Collateral marks only   August 9, 2021 (8)

Morgan Stanley

  $ / £ / €       25 %       Collateral marks only   March 1, 2022

Barclays

  $       25 %       Collateral marks only   March 29, 2023 (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 % (4)       Collateral marks only   Term matched (13)(14)

 

(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)

In addition to the 25% guarantee across all borrowings, there is an incremental guarantee of $131.4 million related to $474.4 million of specific borrowings outstanding.

(5)

Includes a one-year extension option which may be exercised at our sole discretion.

(6)

Maturity dates for $520.6 million of specific borrowings outstanding are term-matched to the respective collateral assets.

(7)

Includes two one-year extension options which may be exercised at our sole discretion.

(8)

Includes two one-year extension options which may be exercised at our sole discretion. Specific borrowings outstanding of $860.5 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.

(9)

Includes three one-year extension options which may be exercised at our sole discretion.

(10)

Includes four 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.

(14)

This secured credit facility is term-matched other than $128.2 million of specific borrowings that have a maturity date of May 8, 2019.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

Currency

   Potential
Borrowings
   Outstanding
Borrowings (1)
   Floating Rate
Index (2)
   Spread (3)   Advance
Rate (4)

$

       $         7,356,109        $         7,047,922        USD LIBOR        1.70 %       79.6 %

       €       816,557        €       779,119        EURIBOR        1.51 %       80.0 %

£

       £       546,781        £       546,781        GBP LIBOR        2.06 %       77.8 %

C$

     C$         371,131      C$         371,122        CDOR        1.80 %       82.1 %

A$

     A$         255,270      A$         255,270        BBSY        1.90 %       78.0 %
        

 

 

          

 

 

           

 

 

     

 

 

 
       $         9,444,814        $         9,093,821             1.72 %       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.

Asset-Specific Financings

The following tables detail our asset-specific financings ($ in thousands):

 

     March 31, 2019

Asset-Specific Financings

   Count    Principal
Balance
   Book
Value
   Wtd. Avg.
Yield/Cost (1)
  Guarantee (2)    Wtd. Avg.
Term (3)

Collateral assets

       2      $ 122,699      $ 112,093        L+6.05 %       n/a        Aug. 2022

Financing provided

       2      $ 97,699      $ 91,624        L+4.06 %       n/a        Aug. 2022
     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)

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.

The weighted-average outstanding balance of our asset-specific financings was $88.9 million for the three months ended March 31, 2019 and $68.0 million for the three 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

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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 three months ended March 31, 2019, the weighted-average outstanding borrowings under the revolving credit agreement was $43.8 million and we recorded interest expense of $969,000, including $268,000 of amortization of deferred fees and expenses. As of March 31, 2019, we had $43.8 million of borrowings outstanding under the agreement.

During the three months ended December 31, 2018, the weighted-average outstanding borrowings under the revolving credit agreement was $63.5 million and we recorded interest expense of $1.2 million, including $297,000 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 $2.6 billion as of each measurement date plus 75% of the net cash proceeds of future equity issuances subsequent to March 31, 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 March 31, 2019 and December 31, 2018, we were in compliance with these covenants.

 

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.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

The following tables detail our loan participations sold ($ in thousands):

 

     March 31, 2019

Loan Participations Sold

   Count    Principal
Balance
   Book
Value
   Yield/
Cost (1)
  Guarantee (2)    Term

Total loan

       1      $ 140,504      $ 139,504        L+5.96 %       n/a        Feb. 2022

Senior participation (3)(4)

       1        107,330        107,237        L+4.06 %       n/a        Feb. 2022
     December 31, 2018

Loan Participations Sold

   Count    Principal
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)(4)

       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 March 31, 2019 and December 31, 2018, our loan participations sold were non-recourse to us.

(3)

During the three months ended March 31, 2019 and 2018, we recorded $1.7 million and $1.5 million, respectively, of interest expense related to our loan participations sold.

(4)

The difference between principal balance and book value of loan participations sold is due to deferred financing costs of $93,000 and $110,000 as of March 31, 2019 and December 31, 2018, respectively.

 

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Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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 15 for further discussion of our CLO and 2017 Single Asset Securitization.

The following tables detail our securitized debt obligations ($ in thousands):

 

     March 31, 2019

Securitized Debt Obligations

   Count    Principal
Balance
   Book Value    Wtd. Avg.
Yield/Cost (1)
  Term (2)

Collateralized Loan Obligation

                       

Collateral assets

       24      $ 1,000,000      $ 1,000,000        L+3.74 %       June 2022

Financing provided

       1        817,500        811,940        L+1.64 %       June 2035

2017 Single Asset Securitization

                       

Collateral assets (3)

       1        691,178        688,117        L+3.60 %       June 2023

Financing provided

       1        474,620        474,477        L+1.65 %       June 2033

Total

                       

Collateral assets

       25      $ 1,691,178      $ 1,688,117        L+3.68 %    
    

 

 

      

 

 

      

 

 

      

 

 

     

Financing provided (4)

       2      $ 1,292,120      $ 1,286,417        L+1.65 %    
    

 

 

      

 

 

      

 

 

      

 

 

     
     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 March 31, 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 months ended March 31, 2019 and 2018, we recorded $13.5 million and $11.0 million, respectively, of interest expense related to our securitized debt obligations.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

8.

CONVERTIBLE NOTES, NET

As of March 31, 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 not been exceeded as of March 31, 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 $34.56 on March 29, 2019, the last trading day in the quarter ended March 31, 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 initial debt 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 initial debt 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.

 

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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):

 

     March 31,
2019
     December 31,
2018
 

Face value

   $ 622,500      $ 622,500  

Unamortized discount

     (11,021      (11,740

Deferred financing costs

     (795      (849
  

 

 

    

 

 

 

Net book value

   $ 610,684      $ 609,911  
  

 

 

    

 

 

 

The following table details our interest expense related to the Convertible Notes ($ in thousands):

 

     Three Months Ended
     March 31,
     2019    2018

Cash coupon

     $ 7,015      $ 6,783

Discount and issuance cost amortization

       772        1,189
    

 

 

      

 

 

 

Total interest expense

     $ 7,787      $ 7,972
    

 

 

      

 

 

 

Accrued interest payable for the Convertible Notes was $7.8 million and $6.0 million as of March 31, 2019 and December 31, 2018, respectively. Refer to Note 2 for additional discussion of our accounting policies for the Convertible Notes.

 

9.

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.

 

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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):

 

March 31, 2019

  

December 31, 2018

Foreign Currency

Derivatives

     Number of
Instruments
     Notional
Amount
  

Foreign Currency
Derivatives

     Number of
Instruments
     Notional
Amount

Sell GBP Forward

         3           £       262,000    Sell GBP Forward          3           £       192,300

Sell AUD Forward

         4        A$         210,700    Sell AUD Forward          2        A$         187,600

Sell EUR Forward

         1           €       179,600    Sell EUR Forward          1           €       185,000

Sell CAD Forward

         2        C$         78,700    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):

 

March 31, 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    1.4

Interest Rate Caps

   8      $       178,430      2.5%   USD LIBOR    0.3

Interest Rate Caps

   1      C$       21,709      3.0%   CDOR    0.7

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 March 31, 2019, we estimate that an additional $63,000 will be reclassified from accumulated other comprehensive income (loss) as an increase to interest income.

Non-designated Hedges

During the three months ended March 31, 2019 and 2018, we recorded gains of $660,000 and $215,000, respectively, related to non-designated hedges that were reported as a component of interest expense in our consolidated financial statements.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

The following tables summarize our non-designated hedges (notional amount in thousands):

 

March 31, 2019

Non-designated Hedges

   Number of
Instruments
   Notional
Amount

Buy GBP / Sell EUR Forward

       1                12,857

Buy CAD / Sell USD Forward

       1        C$         4,200

Buy USD / Sell CAD Forward

       1        C$         4,200

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
     March 31,
2019
   December 31,
2018
   March 31,
2019
   December 31,
2018

Derivatives designated as hedging instruments:

                   

Foreign exchange contracts

     $ 4,862      $ 8,210      $ 1,720      $ 1,307

Interest rate derivatives

       228        590        —          —  
    

 

 

      

 

 

      

 

 

      

 

 

 

Total

     $ 5,090      $ 8,800      $ 1,720      $ 1,307
    

 

 

      

 

 

      

 

 

      

 

 

 

Derivatives not designated as hedging instruments:

                   

Foreign exchange contracts

     $ 294      $ 1,116      $ 6      $ 1,618

Interest rate derivatives

       —          —          —          —  
    

 

 

      

 

 

      

 

 

      

 

 

 

Total

     $ 294      $ 1,116      $ 6      $ 1,618
    

 

 

      

 

 

      

 

 

      

 

 

 

Total Derivatives

     $ 5,384      $ 9,916      $ 1,726      $ 2,925
    

 

 

      

 

 

      

 

 

      

 

 

 

 

(1)

Included in other assets in our consolidated balance sheets.

(2)

Included in other liabilities in our consolidated balance sheets.

 

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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 (Loss)
Gain Recognized in
OCI on Derivatives
  Location of  Gain
Reclassified from
Accumulated
OCI into Income
  Amount of
Gain Reclassified
from Accumulated
OCI into Income

Derivatives in Hedging Relationships

   Three Months
Ended March 31,
  Three Months Ended
March 31,
   2019   2018   2019    2018

Net Investment Hedges

                     

Foreign exchange contracts (1)

     $ (1,646 )     $ (2,953 )       Interest Expense     $ —        $ —  

Cash Flow Hedges

                     

Interest rate derivatives

       (134 )       127       Interest Expense (2)       168        109
    

 

 

     

 

 

         

 

 

      

 

 

 

Total

     $ (1,780 )     $ (2,826 )         $ 168      $ 109
    

 

 

     

 

 

         

 

 

      

 

 

 

 

(1)

During the three months ended March 31, 2019 and 2018, we paid net cash settlements of $2.0 million and $7.4 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 March 31, 2019, we recorded total interest and related expenses of $118.7 million, which included a $168,000 expense reduction related to income generated by our cash flow hedges. During the three months ended March 31, 2018, we recorded total interest and related expenses of $70.0 million which included a $109,000 expense reduction related to 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 March 31, 2019, we were in a net asset position with each such derivative counterparty, and posted collateral of $5.1 million 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.

 

10.

EQUITY

Stock and Stock Equivalents

Authorized Capital

As of March 31, 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 March 31, 2019.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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.

The following table details our issuance of class A common stock during the three months ended March 31, 2019:

 

     Three Months Ended
March 31, 2019

Shares issued (1)

       1,909,628

Gross share issue price (2)

     $ 34.63

Net share issue price (3)

     $ 34.28

Net proceeds (4)

     $ 65,389

 

(1)

Issuance represents shares issued under our at-the-market program.

(2)

Represents the weighted-average gross price per share paid by the 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 13 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:

 

     Three Months Ended March 31,  

Common Stock Outstanding (1)

   2019      2018  

Beginning balance

     123,664,577        108,081,077  

Issuance of class A common stock (2)

     1,909,909        455  

Issuance of restricted class A common stock, net

     320,903        309,775  

Issuance of deferred stock units

     7,964        7,871  
  

 

 

    

 

 

 

Ending balance

     125,903,353        108,399,178  
  

 

 

    

 

 

 

 

(1)

Includes deferred stock units held by members of our board of directors of 236,803 and 205,088 as of March 31, 2019 and 2018, respectively.

(2)

Includes 281 and 455 shares issued under our dividend reinvestment program during the three months ended March 31, 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

 

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Table of Contents

Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

component allows stockholders and new investors, subject to our approval, to purchase shares of class A common stock directly from us. During the three months ended March 31, 2019 and 2018, we issued 281 shares and 455 shares, respectively, of class A common stock under the dividend reinvestment component of the plan. As of March 31, 2019, a total of 9,994,957 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 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 needs. During the three months ended March 31, 2019, we issued and sold 1,909,628 shares of class A common stock under ATM Agreements, generating net proceeds totaling $65.4 million. We did not sell any shares of our class A common stock under ATM Agreements during the three months ended March 31, 2018. As of March 31, 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 March 15, 2019, we declared a dividend of $0.62 per share, or $77.9 million, that was paid on April 15, 2019, to stockholders of record as of March 29, 2019. The following table details our dividend activity ($ in thousands, except per share data):

 

     Three Months Ended
March 31,
 
     2019      2018  

Dividends declared per share of common stock

   $ 0.62      $ 0.62  

Total dividends declared

   $ 77,913      $ 67,066  

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.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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 March 31,  
     2019      2018  

Net income (1)

   $ 76,565      $ 60,958  

Weighted-average shares outstanding, basic and diluted

     124,333,048        108,397,598  
  

 

 

    

 

 

 

Per share amount, basic and diluted

   $ 0.62      $ 0.56  
  

 

 

    

 

 

 

 

(1)

Represents net income attributable to Blackstone Mortgage Trust, Inc.

Other Balance Sheet Items

Accumulated Other Comprehensive Loss

As of March 31, 2019, total accumulated other comprehensive loss was $30.8 million, primarily representing (i) $99.3 million of cumulative unrealized currency translation adjustments on assets and liabilities denominated in foreign currencies and (ii) an offsetting $68.5 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.

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 March 31, 2019, our Multifamily Joint Venture’s total equity was $81.3 million, of which $69.1 million was owned by us, and $12.2 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.

 

11.

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 Agreement. 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.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

During the three months ended March 31, 2019 and 2018, we incurred management fees payable to our Manager of $13.1 million and $11.1 million, respectively. In addition, during the three months ended March 31, 2019 and 2018, we incurred incentive fees payable to our Manager of $6.7 million and $4.4 million, respectively.

As of March 31, 2019 and December 31, 2018 we had accrued management and incentive fees payable to our Manager of $19.8 million and $18.6 million, respectively.

General and Administrative Expenses

General and administrative expenses consisted of the following ($ in thousands):

 

     Three Months
Ended March 31,
 
     2019      2018  

Professional services (1)

   $ 1,096      $ 1,223  

Operating and other costs (1)

     449        509  
  

 

 

    

 

 

 

Subtotal

     1,545        1,732  

Non-cash compensation expenses

     

Restricted class A common stock earned

     7,643        6,851  

Director stock-based compensation

     125        125  
  

 

 

    

 

 

 

Subtotal

     7,768        6,976  
  

 

 

    

 

 

 

Total general and administrative expenses

   $ 9,313      $ 8,708  
  

 

 

    

 

 

 

 

(1)

During the three months ended March 31, 2019 and 2018, we recognized an aggregate $169,000 and $101,000, respectively, of expenses related to our Multifamily Joint Venture.

 

12.

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 March 31, 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

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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 months ended March 31, 2019 and 2018, we recorded a current income tax provision of $101,000 and $120,000, respectively, primarily related to activities of our taxable REIT subsidiaries and various state and local taxes. We did not have any deferred tax assets or liabilities as of March 31, 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.

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 March 31, 2019, tax years 2015 through 2018 remain subject to examination by taxing authorities.

 

13.

STOCK-BASED INCENTIVE PLANS

We are externally managed by our Manager and do not currently have any employees. However, as of March 31, 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 the issuance of stock-based instruments.

We had stock-based incentive awards outstanding under nine benefit plans as of March 31, 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 March 31, 2019, there were 3,977,788 shares available under the Current 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

       (153,653 )        31.13

Forfeited

       (14,001 )        31.52
    

 

 

      

 

 

 

Balance as of March 31, 2019

       1,782,157      $ 32.84
    

 

 

      

 

 

 

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

These shares generally vest in installments over a three-year period, pursuant to the terms of the respective award agreements and the terms of the Current Plans. The 1,782,157 shares of restricted class A common stock outstanding as of March 31, 2019 will vest as follows: 796,115 shares will vest in 2019; 650,663 shares will vest in 2020; and 335,379 shares will vest in 2021. As of March 31, 2019, total unrecognized compensation cost relating to unvested share-based compensation arrangements was $52.6 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 1.2 years from March 31, 2019.

 

14.

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):

 

     March 31, 2019    December 31, 2018
     Level 1    Level 2    Level 3    Total    Level 1    Level 2    Level 3    Total

Assets

                                       

Derivatives

     $ —        $ 5,384      $ —        $ 5,384      $ —        $ 9,916      $ —        $ 9,916

Liabilities

                                       

Derivatives

     $ —        $ 1,726      $ —        $ 1,726      $ —        $ 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.

 

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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):

 

    March 31, 2019     December 31, 2018  
    Book
Value
    Face
Amount
    Fair
Value
    Book
Value
    Face
Amount
    Fair
Value
 

Financial assets

           

Cash and cash equivalents

  $ 79,437     $ 79,437     $ 79,437     $ 105,662     $ 105,662     $ 105,662  

Loans receivable, net

    14,508,735       14,603,831       14,605,743       14,191,200       14,293,970       14,294,836  

Debt securities held-to-maturity (1)

    95,877       98,579       97,200       96,167       99,000       96,600  

Financial liabilities

           

Secured debt agreements, net

    9,208,010       9,235,365       9,235,365       8,974,756       8,996,481       8,996,481  

Loan participations sold, net

    107,237       107,330       107,330       94,418       94,528       94,528  

Securitized debt obligations, net

    1,286,417       1,292,120       1,290,833       1,285,471       1,292,120       1,283,086  

Convertible notes, net

    610,684       622,500       627,050       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, restricted cash, and convertible notes are measured using observable, quoted market prices, or Level 1 inputs. Estimates of fair value for debt securities held to maturity and securitized debt obligations 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.

 

15.

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 and 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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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):

 

     March 31, 2019    December 31, 2018

Assets:

         

Loans receivable, net

     $ 1,463,702      $ 1,500,000

Other assets

       41,565        5,440
    

 

 

      

 

 

 

Total assets

     $ 1,505,267      $ 1,505,440
    

 

 

      

 

 

 

Liabilities:

         

Securitized debt obligations, net

     $ 1,286,417      $ 1,285,471

Other liabilities

       2,342        2,155
    

 

 

      

 

 

 

Total liabilities

     $ 1,288,759      $ 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. We are not obligated to provide, have not provided, and do not intend to provide, financial support to the 2018 Single Asset Securitization, and therefore, our maximum exposure to loss is limited to our book value of $95.9 million as of March 31, 2019. Refer to Note 16 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.

 

16.

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 March 31, 2019 and December 31, 2018, our consolidated balance sheet included $19.8 million and $18.6 million of accrued management and incentive fees payable to our Manager, respectively. During the three months ended March 31, 2019, we paid management and incentive fees to our Manager of $18.6 million, compared to $14.3 million during the same period of 2018. In addition, during the three months ended March 31, 2019, we reimbursed our Manager for expenses incurred on our behalf of $188,000 compared to $190,000 during the same period of 2018.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

As of March 31, 2019, our Manager held 882,524 shares of unvested restricted class A common stock, which had an aggregate grant date fair value of $27.9 million, and vest in installments over three years from the date of issuance. During the three months ended March 31, 2019 and 2018, we recorded non-cash expenses related to shares held by our Manager of $3.8 million and $3.2 million, respectively. Refer to Note 13 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 three months ended March 31, 2019 or 2018.

During the three months ended March 31, 2019 and 2018, we incurred $86,000 and $141,000, respectively, of expenses for various administrative, compliance, and capital market data services to third-party service providers that are affiliates of our Manager.

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.

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.

 

17.

COMMITMENTS AND CONTINGENCIES

Unfunded Commitments Under Loans Receivable

As of March 31, 2019, we had unfunded commitments of $3.1 billion related to 89 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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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

Principal Debt Repayments

Our contractual principal debt repayments as of March 31, 2019 were as follows ($ in thousands):

 

     Total
Obligation
     Payment Timing  
     Less Than
1 Year
     1 to 3
Years
     3 to 5
Years
     More Than
5 Years
 

Principal repayments under secured debt agreements (1)

   $ 9,235,365      $ 392,854      $ 3,484,304      $ 5,172,469      $ 185,738  

Principal repayments of convertible notes (2)

     622,500        —          —          622,500        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total (3)

   $ 9,857,865      $ 392,854      $ 3,484,304      $ 5,794,969      $ 185,738  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(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)

Reflects the outstanding principal balance of convertible notes, excluding any potential conversion premium. Refer to Note 8 for further details on our convertible notes.

(3)

As of March 31, 2019, the total does not include $107.3 million of loan participations sold, $449.5 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.

Litigation

From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of March 31, 2019, we were not involved in any material legal proceedings.

Board of Directors’ Compensation

As of March 31, 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.

 

18.

SUBSEQUENT EVENTS

On April 23, 2019, we closed on a $500.0 million senior secured term loan facility, or the Secured Term Loan. The Secured Term Loan accrues interest at a floating rate equal to LIBOR plus 2.50% and was issued at a 99.75% price. It has a maturity date of April 23, 2026 and is open to prepayment after October 23, 2019. The covenant package includes an 83.33% maximum debt-to-total assets covenant consistent with those in our secured debt agreements and does not include any borrowing base covenant.

Certain investment funds advised by affiliates of our Manager were allocated an aggregate $55.0 million participation in the 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.

 

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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 L.P., 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 March 31, 2019 we recorded earnings per share of $0.62, declared a dividend of $0.62 per share, and reported $0.71 per share of Core Earnings. In addition, our book value per share as of March 31, 2019 was $27.32. 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.

 

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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
     March 31, 2019    December 31, 2018

Net income (1)

     $ 76,565      $ 73,643

Weighted-average shares outstanding, basic and diluted

       124,333,048        121,588,404
    

 

 

      

 

 

 

Net income per share, basic and diluted

     $ 0.62      $ 0.61
    

 

 

      

 

 

 

Dividends declared per share

     $ 0.62      $ 0.62
    

 

 

      

 

 

 

 

(1)

Represents net income attributable to Blackstone Mortgage Trust, Inc.

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.

 

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The following table provides a reconciliation of Core Earnings to GAAP net income ($ in thousands, except per share data):

 

     Three Months Ended
     March 31, 2019    December 31, 2018

Net income (1)

     $ 76,565      $ 73,643

Non-cash compensation expense

       7,768        7,666

Hedging and foreign currency income, net (2)

       3,271        1,942

Other items

       95        394
    

 

 

      

 

 

 

Core Earnings

     $ 87,699      $ 83,645
    

 

 

      

 

 

 

Weighted-average shares outstanding, basic and diluted

       124,333,048        121,588,404
    

 

 

      

 

 

 

Core Earnings per share, basic and diluted

     $ 0.71      $ 0.69
    

 

 

      

 

 

 

 

(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.

Book Value Per Share

The following table calculates our book value per share ($ in thousands, except per share data):

 

     March 31, 2019    December 31, 2018

Stockholders’ equity

     $ 3,439,398      $ 3,364,124

Shares

         

Class A common stock

       125,666,550        123,435,738

Deferred stock units

       236,803        228,839
    

 

 

      

 

 

 

Total outstanding

       125,903,353        123,664,577
    

 

 

      

 

 

 

Book value per share

     $ 27.32      $ 27.20
    

 

 

      

 

 

 

II. Loan Portfolio

During the quarter ended March 31, 2019, we originated or acquired $698.7 million of loans. Loan fundings during the quarter totaled $806.2 million, including $6.9 million of non-consolidated senior interests. Loan repayments during the quarter totaled $508.2 million, including $12.7 million of non-consolidated senior interests. We generated interest income of $224.8 million and incurred interest expense of $118.7 million during the quarter, which resulted in $106.1 million of net interest income during the three months ended March 31, 2019.

 

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Portfolio Overview

The following table details our loan origination activity ($ in thousands):

 

     Three Months Ended
March 31, 2019
   Three Months Ended
December 31, 2018

Loan originations (1)

     $ 698,732      $ 3,500,066

Loan fundings (2)

     $ 806,241      $ 2,667,915

Loan repayments (3)

       (508,224 )        (594,728 )
    

 

 

      

 

 

 

Total net fundings

     $ 298,017      $ 2,073,187
    

 

 

      

 

 

 

 

(1)

Includes new loan originations and additional commitments made under existing loans.

(2)

Loan fundings during the three months ended March 31, 2019 and December 31, 2018 included $6.9 million and $667,000, respectively, of additional fundings under related non-consolidated senior interests.

(3)

Loan repayments during the three months ended March 31, 2019 and December 31, 2018 included $12.7 million and $12.2 million, respectively, of additional repayments of loan exposure under related non-consolidated senior interests.

 

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The following table details overall statistics for our investment portfolio as of March 31, 2019 ($ in thousands):

 

           Total Investment Exposure  
     Balance Sheet
Portfolio (1)
    Loan
Exposure (1)(2)
    Other
Investments (3)
     Total
Investment
Portfolio
 

Number of investments

     122       122       1        123  

Principal balance

   $ 14,603,831     $ 15,053,372     $ 1,030,595      $ 16,083,967  

Net book value

   $ 14,508,735     $ 14,508,735     $ 95,877      $ 14,604,612  

Unfunded loan commitments (4)

   $ 3,123,059     $ 3,186,128     $ —        $ 3,186,128  

Weighted-average cash coupon (5)

     5.63     5.59     L + 2.75      5.57

Weighted-average all-in yield (5)

     5.99     5.95     L + 2.99      5.92

Weighted-average maximum maturity (years) (6)

     3.8       3.8       6.2        3.9  

Loan to value (LTV) (7)

     63.4     63.5     42.6      62.2

 

(1)

Excludes investment exposure to the $98.6 million subordinate risk retention interest we own in the $1.0 billion 2018 Single Asset Securitization. Refer to Notes 4 and 15 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 $449.5 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 $98.6 million subordinate risk retention investment as a component of other assets on our consolidated balance sheet. Refer to Notes 4 and 15 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 March 31, 2019, 96% of our loans by total loan exposure earned a floating rate of interest, primarily indexed to USD LIBOR, and 4% earned a fixed rate of interest. Cash coupon and all-in yield assume applicable floating benchmark rates as of March 31, 2019 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.

(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 March 31, 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.

 

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The charts below detail the geographic distribution and types of properties securing our investment portfolio, as of March 31, 2019:

 

LOGO

Refer to section VI of this Item 2 for details of our loan portfolio, on a loan-by-loan basis.

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):

 

       March 31, 2019

Risk

Rating

     Number
of Loans
     Net Book
Value
     Total Loan
Exposure (1)(2)
    1          3        $ 255,229        $ 255,899
    2          37          4,275,769          4,350,775
    3          82          9,977,737          10,446,698
    4          —            —            —  
    5          —            —            —  
        

 

 

        

 

 

        

 

 

 
           122        $ 14,508,735        $ 15,053,372
        

 

 

        

 

 

        

 

 

 

 

(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 $449.5 million of such non-consolidated senior interests as of March 31, 2019.

(2)

Excludes investment exposure to the $1.0 billion 2018 Single Asset Securitization. Refer to Notes 4 and 15 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 March 31, 2019 and December 31, 2018.

 

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Multifamily Joint Venture

As of March 31, 2019, our Walker & Dunlop Multifamily Joint Venture held $343.4 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.

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):