Blackstone's battered mortgage fund slumps as empty offices intensify pressure (updated)
24/07/2024 19:16
(Adds comments from Blackstone Mortgage Trust's CEO in
paragraph 11)
By Michelle Conlin and Matt Tracy
NEW YORK, July 24 (Reuters) - Shares of commercial real
estate finance company Blackstone Mortgage Trust BXMT.N fell
10% on Wednesday as the firm cut its dividend 24%, facing
continued strains from vacant offices.
It is the latest sign of mounting woes in commercial real
estate. Analysts are predicting more weakness for lenders and
owners in the sector as American workers maintain their
pandemic-era remote work habits.
The shift has left broad swaths of office space empty, while
elevated interest rates have left many borrowers struggling to
make timely payments on their loans.
"For Blackstone to have to come out and cut dividends, I
have to imagine that's going to weigh on some people's minds,"
said Stephen Buschbom, research director at Trepp, an industry
data provider. "It wouldn't surprise me to see ripple effects
throughout the industry when the biggest player is having to
cut."
Blackstone Mortgage Trust set aside an additional $140
million in reserves for expected credit losses. Of its holdings
in U.S. office space, 55% is "watch-listed or impaired,"
according to an earnings presentation.
Still, borrowers for higher-quality offices are keeping up
repayments, it said.
Industry participants remain concerned about a sharp
downturn for commercial office space as nearly $1 trillion of
the $4.7 trillion of outstanding commercial mortgages come due
in 2024, according to the Mortgage Bankers Association.
The looming maturity comes against a backdrop of declining
property values and lower rent rolls.
Blackstone Mortgage Trust cut its dividend to $0.47 per
share in the third quarter, down from $0.62 paid in the second
quarter.
The company reported a loss of $61.06 million in the second
quarter and also authorized $150 million in stock buybacks, it
said on Wednesday.
Despite the loss, the company's CEO Katie Keenan cited
"long-term earnings potential" backed by its "strong liquidity,
accelerating repayments, and an emerging investment pipeline,"
the presentation showed.
The gloom in the office sector has also affected other
companies, including KKR Real Estate Finance Trust KREF.N
which slashed its dividend amid souring loans in February.
(Reporting By Michelle Conlin and Matt Tracy; Editing by Megan
Davies, Lananh Nguyen, Chris Reese and Rod Nickel)
((Michelle.Conlin@thomsonreuters.com; 646-223-5660;))