Blackstone’s battered mortgage fund slumps as empty offices intensify pressure
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Blackstone’s battered mortgage fund slumps as empty offices intensify pressure
Michelle Conlin and Matt Tracy
Updated Wed, July 24, 2024 at 7:16 p.m. GMT+1·2 min read
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By Michelle Conlin and Matt Tracy
NEW YORK (Reuters) -Shares of commercial real estate finance company Blackstone Mortgage Trust 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 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)
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