Blackstone Mortgage Trust has ramped up its commercial property loans after seeing an influx of capital from debt repayments and new capital raising.
The publicly traded lending arm of private equity giant Blackstone originated $1.6 billion in new loans in the first quarter. That was the highest level of quarterly originations in more than two years, and the firm currently has another $2 billion in originations set to close.
The burst of deals follows receiving $1.8 billion in loan repayments and raising $1 billion in new capital in the quarter.
Taking a proactive approach to reducing its impaired loan balances and raising new capital has put the company in a strong position in the current environment of capital market volatility and economic uncertainty from the impact of the Trump administration’s tariff policy on the broader market, Katie Keenan, CEO of Blackstone Mortgage, said Wednesday on the company’s earnings conference call.
While tariff policy has created greater uncertainty and a slowdown could weigh on the broader market over time, Keenan said that real estate values have already reset lower and set up an opportunity for investors.
“For well-positioned investors, volatility creates opportunity, and here at [Blackstone Mortgage], we are capitalizing in a turbulent market,” Keenan said. “We provide certainty and can grow our share while benefiting from the incrementally better risk-adjusted returns available as the market retrenches and our large-scale global origination footprint gives us a tremendous advantage in identifying the most compelling investment opportunities as the market evolves.”
With a current loan receivable portfolio of $19 billion, Blackstone Mortgage is looking to raise that balance after repayments on outstanding loans. The lender averaged about $750 million in repayments each quarter last year and received $200 million in the first quarter.
The inflow of capital from repayments added to the lender’s current balance of $1.6 billion in lending liquidity.
“We'll continue to look for great new investment opportunities,” Keenan said. “In terms of growth, we're looking to grow the portfolio from here up towards that $20 billion number.”
Office lending fades
About 90% of Blackstone Mortgage's loan origination activity this year has been on multifamily, industrial, and self-storage properties. The office sector has become less of a focus for the firm.
“Our capital allocation strategy has translated to improved credit composition on our overall asset base,” Keenan said. “Our portfolio is 95% performing today, up from 88% at the trough. U.S. office exposure, once nearly 40%, is down to just 21% today, while multifamily industrial and self-storage are now nearly half.”
Last month, Blackstone Mortgage provided a $97 million loan for the refinancing of the 216-unit 7600 Broadway apartments in San Antonio, according to a commercial real estate collateralized loan offering. The bond deal raised $1 billion for the firm.
The company could return to the bond market again this year for an additional capital raise, Keenan said.
“In the first weeks of the market volatility [in April], there were some [collateralized loan obligations] that had been out there that got put on the shelf, as was the case across the [commercial mortgage-backed securities] market,” Keenan said. “But what we've seen in the recent weeks is a settling down. There's capital in the market and, if anything, there's as many buyers as sellers, perhaps more buyers.”
So, if the mortgage-backed bond market continues to settle down, “it looks like a good option for us,” she added. “The origination volumes that we're creating are obviously very conducive to potentially coming back to the [collateralized loan] market later in the year. We like that as a potential capital source.”