Blackstone Mortgage Trust Slashes Dividend Amid Rising Defaults
Driving the news: Blackstone Mortgage Trust Inc. (BXMT) is cutting its dividend by 24% as defaults climb and borrowers grapple with payments or refinancing.
Details: The board of the $3.4 billion real estate investment trust has approved a $150 million share repurchase to boost stock value, announced on Wednesday.
What they're saying: "We believe stockholder return is well served by balancing current return with optimization of book value and long-term earnings potential through our strategic capital allocation decisions,” said BXMT CEO Katie Keenan. "With strong liquidity, accelerating repayments, and an emerging investment pipeline, BXMT is well positioned to deploy capital accretively in this environment and continue its forward trajectory through the cycle."
The big picture: Commercial real estate mortgage REITs are facing increased stress due to rising interest rates and declining property values, leading to more defaults. Earlier this year, KKR Real Estate Finance Trust Inc. and Ares Commercial Real Estate Corp. also cut their dividends by 42% and 24%, respectively.
By the numbers:
- Dividend cut: BXMT is reducing its dividend to 47 cents from 62 cents, saving about $100 million annually for new loans or investments.
- Share performance: BXMT shares are down 7.7% year-to-date through Tuesday.
- Troubled loans: About a quarter of BXMT's loans are tied to US office buildings, which have seen values drop 37% from their early 2022 peak, compared to a 20% decline for all commercial property, per Green Street Commercial Property Price Index.
The backdrop: Carson Block of Muddy Waters predicted in December that BXMT could face a liquidity crisis and potentially default on its loans, forecasting issues would peak in the second half of this year. He reaffirmed his short position earlier this month on Bloomberg TV.
Recent developments: Last month, BXMT modified three loans in California and Texas for extensions and added three more California loans to its watch list due to near-term maturities, according to Keefe Bruyette & Woods, which rates BXMT as "market perform."
