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, 2017

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)

 

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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   ☐  (Do not check if a smaller reporting company)    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, as of April 18, 2017 was 94,827,579.

 

 

 


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, 2017 and December  31, 2016

     2  
 

Consolidated Statements of Operations for the Three Months Ended March  31, 2017 and 2016

     3  
 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2017 and 2016

     4  
 

Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2017 and 2016

     5  
 

Consolidated Statements of Cash Flows for the Three Months Ended March  31, 2017 and 2016

     6  
 

Notes to Consolidated Financial Statements

     8  

ITEM 2.

 

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

     34  

ITEM 3.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     51  

ITEM 4.

 

CONTROLS AND PROCEDURES

     53  

PART II.

 

OTHER INFORMATION

  

ITEM 1.

 

LEGAL PROCEEDINGS

     54  

ITEM 1A.

 

RISK FACTORS

     54  

ITEM 2.

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     54  

ITEM 3.

 

DEFAULTS UPON SENIOR SECURITIES

     54  

ITEM 4.

 

MINE SAFETY DISCLOSURES

     54  

ITEM 5.

 

OTHER INFORMATION

     54  

ITEM 6.

 

EXHIBITS

     55  

SIGNATURES

     57  


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,     December 31,  
     2017     2016  

Assets

    

Cash and cash equivalents

   $ 64,275     $ 75,567  

Loans receivable, net

     8,721,768       8,692,978  

Other assets

     168,616       44,070  
  

 

 

   

 

 

 

Total Assets

   $ 8,954,659     $ 8,812,615  
  

 

 

   

 

 

 

Liabilities and Equity

    

Secured debt agreements, net

   $ 5,760,191     $ 5,716,354  

Loan participations sold, net

     354,131       348,077  

Convertible notes, net

     167,475       166,762  

Other liabilities

     176,880       87,819  
  

 

 

   

 

 

 

Total Liabilities

     6,458,677       6,319,012  
  

 

 

   

 

 

 

Commitments and contingencies

     —         —    

Equity

    

Class A common stock, $0.01 par value, 200,000,000 shares authorized, 94,818,348 and 94,540,263 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively

     948       945  

Additional paid-in capital

     3,096,006       3,089,997  

Accumulated other comprehensive loss

     (52,357     (56,202

Accumulated deficit

     (548,615     (541,137
  

 

 

   

 

 

 

Total Equity

     2,495,982       2,493,603  
  

 

 

   

 

 

 

Total Liabilities and Equity

   $     8,954,659     $     8,812,615  
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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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,
 
     2017      2016  

Income from loans and other investments

     

Interest and related income

   $ 118,517      $ 123,025  

Less: Interest and related expenses

     46,674        45,381  
  

 

 

    

 

 

 

Income from loans and other investments, net

     71,843        77,644  

Other expenses

     

Management and incentive fees

     12,921        13,613  

General and administrative expenses

     7,428        6,795  
  

 

 

    

 

 

 

Total other expenses

     20,349        20,408  

Gain on investments at fair value

     —          66  

Income from equity investment in unconsolidated subsidiary

     —          138  
  

 

 

    

 

 

 

Income before income taxes

     51,494        57,440  

Income tax provision

     89        241  
  

 

 

    

 

 

 

Net income

     51,405        57,199  
  

 

 

    

 

 

 

Net income attributable to non-controlling interests

     —          (152
  

 

 

    

 

 

 

Net income attributable to Blackstone Mortgage Trust, Inc.

   $ 51,405      $ 57,047  
  

 

 

    

 

 

 

Net income per share of common stock basic and diluted

   $ 0.54      $ 0.61  
  

 

 

    

 

 

 

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

     94,993,386        94,067,769  
  

 

 

    

 

 

 

Dividends declared per share of common stock

   $ 0.62      $ 0.62  
  

 

 

    

 

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

Blackstone Mortgage Trust, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

(in thousands)

 

     Three Months Ended
March 31,
 
     2017     2016  

Net income

   $ 51,405     $ 57,199  

Other comprehensive income

    

Unrealized gain on foreign currency remeasurement

     7,770       5,979  

Realized and unrealized loss on derivative financial instruments

     (3,925     (6,666
  

 

 

   

 

 

 

Other comprehensive income (loss)

     3,845       (687
  

 

 

   

 

 

 

Comprehensive income

     55,250       56,512  

Comprehensive income attributable to non-controlling interests

     —         (152
  

 

 

   

 

 

 

Comprehensive income attributable to Blackstone Mortgage Trust, Inc.

   $ 55,250     $ 56,360  
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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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) Gain
    Accumulated
Deficit
    Stockholders’
Equity
    Non-controlling
Interests
    Total
Equity
 

Balance at December 31, 2015

  $ 937     $ 3,070,200     $ (32,758   $ (545,791   $ 2,492,588     $ 13,143     $ 2,505,731  

Shares of class A common stock issued, net

    2       —         —         —         2       —         2  

Restricted class A common stock earned

    —         4,593       —         —         4,593       —         4,593  

Dividends reinvested

    —         88       —         (82     6       —         6  

Deferred directors’ compensation

    —         94       —         —         94       —         94  

Other comprehensive loss

    —         —         (687     —         (687     —         (687

Net income

    —         —         —         57,047       57,047       152       57,199  

Dividends declared on common stock

    —         —         —         (58,226     (58,226     —         (58,226

Distributions to non-controlling interests

    —         —         —         —         —         (6,879     (6,879
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2016

  $ 939     $ 3,074,975     $ (33,445   $ (547,052   $ 2,495,417     $ 6,416     $ 2,501,833  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2016

  $ 945     $ 3,089,997     $ (56,202   $ (541,137   $ 2,493,603     $ —       $ 2,493,603  

Shares of class A common stock issued, net

    3       —         —         —         3       —         3  

Restricted class A common stock earned

    —         5,810       —         —         5,810       —         5,810  

Dividends reinvested

    —         105       —         (96     9       —         9  

Deferred directors’ compensation

    —         94       —         —         94       —         94  

Other comprehensive income

    —         —         3,845       —         3,845       —         3,845  

Net income

    —         —         —         51,405       51,405       —         51,405  

Dividends declared on common stock

    —         —         —         (58,787     (58,787     —         (58,787
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2017

  $ 948     $ 3,096,006     $ (52,357   $ (548,615   $ 2,495,982     $ —       $ 2,495,982  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

Blackstone Mortgage Trust, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

     Three Months Ended
March 31,
 
     2017     2016  

Cash flows from operating activities

    

Net income

   $ 51,405     $ 57,199  

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

    

Non-cash compensation expense

     5,907       4,852  

Amortization of deferred fees on loans

     (8,808     (8,954

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

     4,535       4,053  

Income from equity investment in unconsolidated subsidiary

     —         (138

Distributions of income from unconsolidated subsidiary

     —         6,837  

Gain on investments at fair value

     —         (66

Changes in assets and liabilities, net

    

Other assets

     1,699       4,254  

Other liabilities

     2,636       (2,256
  

 

 

   

 

 

 

Net cash provided by operating activities

     57,374       65,781  
  

 

 

   

 

 

 

Cash flows from investing activities

    

Origination and fundings of loans receivable

     (702,353     (586,066

Principal collections and sales proceeds from loans receivable and other assets

     567,321       420,513  

Origination and exit fees received on loans receivable

     12,429       10,424  

Receipts under derivative financial instruments

     1,903       —    

Payments under derivative financial instruments

     (3,752     —    

Change in restricted cash

     —         9,122  
  

 

 

   

 

 

 

Net cash used in investing activities

     (124,452     (146,007
  

 

 

   

 

 

 

continued…

See accompanying notes to consolidated financial statements.

 

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Table of Contents

Blackstone Mortgage Trust, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

     Three Months Ended
March 31,
 
     2017     2016  

Cash flows from financing activities

    

Borrowings under secured debt agreements

   $ 789,865     $ 629,897  

Repayments under secured debt agreements

     (672,161     (466,536

Repayment of loan participations

     —         (9,600

Payment of deferred financing costs

     (3,895     (5,260

Receipts under derivative financial instruments

     —         11,478  

Payments under derivative financial instruments

     —         (3,260

Distributions to non-controlling interests

     —         (6,879

Net proceeds from issuance of class A common stock

     8       6  

Dividends paid on class A common stock

     (58,615     (58,097
  

 

 

   

 

 

 

Net cash provided by financing activities

     55,202       91,749  
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (11,876     11,523  

Cash and cash equivalents at beginning of period

     75,567       96,450  

Effects of currency translation on cash and cash equivalents

     584       2,649  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 64,275     $ 110,622  
  

 

 

   

 

 

 

Supplemental disclosure of cash flows information

    

Payments of interest

   $ (39,287   $ (38,121
  

 

 

   

 

 

 

Payments of income taxes

   $ (50   $ (151
  

 

 

   

 

 

 

Supplemental disclosure of non-cash investing and financing activities

 

 

Dividends declared, not paid

   $ (58,787   $ (58,226
  

 

 

   

 

 

 

Participations sold, net

   $ —       $ (9,600
  

 

 

   

 

 

 

Loan principal payments held by servicer, net

   $ 42,715     $ 75,378  
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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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 and purchases senior loans collateralized by properties in North America and Europe. 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.

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. Management believes it has 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 its 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, 2016 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.

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 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.

As of both March 31, 2017 and December 31, 2016, we did not consolidate any VIEs.

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 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 until the loan is advanced and is then recorded over the term of the loan as an

 

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Table of Contents

Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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 and Cash Equivalents

Cash and cash equivalents represent cash held in banks, cash on hand, 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.

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 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.

During the second quarter of 2015, we acquired a portfolio of loans from General Electric Capital Corporation and certain of its affiliates, or the GE portfolio, for a total purchase price of $4.7 billion. We allocated the aggregate purchase price between each loan based on its fair value relative to the overall portfolio, which allocation resulted in purchase discounts or premiums determined on an asset-by-asset basis. Each loan accretes from its allocated purchase price to its expected collection value over the life of the loan, consistent with the other loans in our portfolio.

Equity Investment in Unconsolidated Subsidiary

Our carried interest in CT Opportunity Partners I, LP, or CTOPI, was accounted for using the equity method. CTOPI’s assets and liabilities were not consolidated into our financial statements due to our determination that (i) it was not a VIE and (ii) the other investors in CTOPI had sufficient rights to preclude consolidation by us. As such, we reported our allocable percentage of the net assets of CTOPI on our consolidated balance sheets. The investment was fully realized as of December 31, 2016 and we no longer have any equity investments in unconsolidated subsidiaries in our consolidated financial statements.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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. Changes in the fair value of the effective portion of our hedges are reflected in accumulated other comprehensive income (loss) on our consolidated financial statements. Changes in the fair value of the ineffective portion of our hedges are included in net income. Amounts are reclassified out of accumulated other comprehensive income (loss) and into net income when the hedged item is sold, substantially liquidated, or de-designated. To the extent a derivative does not qualify for hedge accounting and is deemed a non-designated hedge, the changes in its value are included in net income.

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 issuance date based on our nonconvertible debt borrowing rate. The equity component of the 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 the 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 the convertible notes will increase in subsequent periods through the maturity date as the notes accrete to their par value over the same period.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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, 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.

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, that 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.

 

   

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, 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.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

   

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.

 

   

Convertible notes, net: The convertible notes are 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.

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.

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.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

Recent Accounting Pronouncements

In November 2016, the FASB issued ASU 2016-18 “Statement of Cash Flows (Topic 230): Restricted Cash,” or ASU 2016-18. ASU 2016-18 is intended to clarify how entities present restricted cash in the statement of cash flows. The guidance requires entities to show the changes in the total of cash and cash equivalents and restricted cash in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash in the statement of cash flows. When cash and cash equivalents and restricted cash are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet. This reconciliation can be presented either on the face of the statement of cash flows or in the notes to the financial statements. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017 and is to be applied retrospectively. Upon the adoption of the new guidance, we will change the presentation of restricted cash in our statement of cash flows to conform to the new requirements.

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 the beginning of the first reporting period in which the guidance is effective. 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 on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),or ASU 2014-09. ASU 2014-09 broadly amends the accounting guidance for revenue recognition. ASU 2014-09 is effective for the first interim or annual period beginning after December 15, 2017, and is to be applied retrospectively. We do not anticipate that the adoption of ASU 2014-09 will have a material impact on our consolidated financial statements.

 

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Table of Contents

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, 2017     December 31, 2016  

Number of loans

     103       107  

Principal balance

   $     8,759,696     $     8,727,218  

Net book value

   $ 8,721,768     $ 8,692,978  

Unfunded loan commitments(1)

   $ 1,149,842     $ 882,472  

Weighted-average cash coupon(2)

     5.15     5.01

Weighted-average all-in yield(2)

     5.57     5.36

Weighted-average maximum maturity (years)(3)

     3.3       3.2  

 

(1)  

 

Unfunded commitments will primarily be funded to finance property improvements or lease-related expenditures by the borrowers. These future commitments will be funded over the term of each loan, subject in certain cases to an expiration date.

(2)

 

As of March 31, 2017, our floating rate loans were indexed to various benchmark rates, with 84% of floating rate loans by principal balance indexed to USD LIBOR. In addition, $217.8 million of our floating rate loans earned interest based on floors that are above the applicable index, with an average floor of 1.22%, as of March 31, 2017. As of December 31, 2016, our floating rate loans were indexed to various benchmark rates, with 84% of floating rate loans indexed to USD LIBOR. In addition, $216.3 million of our floating rate loans earned interest based on floors that are above the applicable index, with an average floor of 1.27%, as of December 31, 2016. In addition to cash coupon, all-in yield includes the amortization of deferred origination fees, loan origination costs, purchase discounts, and accrual of both extension and exit fees. Cash coupon and all-in yield assume applicable floating benchmark rates for weighted-average calculation.

(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, 2017, 59% of our loans by principal balance were subject to yield maintenance or other prepayment restrictions and 41% were open to repayment by the borrower without penalty. As of December 31, 2016, 64% of our loans were subject to yield maintenance or other prepayment restrictions and 36% 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, 2016

   $     8,727,218      $     (34,240)      $     8,692,978  

Loan fundings

     702,353        —          702,353  

Loan repayments

     (695,758      —          (695,758

Unrealized gain (loss) on foreign currency translation

     25,883        (67      25,816  

Deferred fees and other items(1)

     —          (12,429      (12,429

Amortization of fees and other items(1)

     —          8,808        8,808  
  

 

 

    

 

 

    

 

 

 

March 31, 2017

   $ 8,759,696      $ (37,928    $ 8,721,768  
  

 

 

    

 

 

    

 

 

 

 

(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, 2017

Property Type

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

Office

     54    $   4,808,211      $   4,833,513        50%

Hotel

     16      2,104,014        2,175,505        22   

Retail

       7      524,318        944,818        10   

Multifamily

       8      515,170        517,376          5   

Manufactured housing

       9      295,559        295,359          3   

Condominium

       1      49,276        226,478          2   

Other

       8      425,220        740,328          8   
  

 

  

 

 

    

 

 

    

 

   103    $ 8,721,768      $ 9,733,377      100%
  

 

  

 

 

    

 

 

    

 

Geographic Location

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

United States

           

Northeast

     24    $ 2,493,379      $   2,510,088        26%

West

     23      1,998,995        2,185,476        22   

Southeast

     20      1,453,309        1,877,334        19   

Midwest

       7      702,238        704,199          7   

Southwest

       7      318,348        317,136          3   

Northwest

       2      215,617        218,088          2   
  

 

  

 

 

    

 

 

    

 

Subtotal

     83      7,181,886        7,812,321        79   

International

           

United Kingdom

       9      983,679        1,317,265        14   

Canada

       8      494,223        490,326          5   

Germany

       1      11,271        62,510          1   

Netherlands

       2      50,709        50,955          1   
  

 

  

 

 

    

 

 

    

 

Subtotal

     20      1,539,882        1,921,056        21   
  

 

  

 

 

    

 

 

    

 

Total

   103    $ 8,721,768      $ 9,733,377      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 $1.0 billion of such non-consolidated senior interests as of March 31, 2017.

 

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Table of Contents

Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

December 31, 2016

 

Property Type

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

Office

       55      $   4,800,609      $   4,889,456          50%  

Hotel

       18        1,889,732        1,957,334          20     

Retail

         9        769,813        1,173,592          12     

Multifamily

         8        521,097        523,529            5     

Manufactured housing

         9        296,290        296,252            3     

Condominium

         2        66,070        258,360            3     

Other

         6        349,367        658,211            7     
  

 

 

    

 

 

    

 

 

    

 

 

 
     107      $ 8,692,978      $ 9,756,734        100%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Geographic Location

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

United States

           

Northeast

       26      $ 2,548,257      $ 2,562,149          26%  

Southeast

       21        1,492,530        1,899,748          19     

West

       22        1,628,811        1,828,667          19     

Midwest

         7        695,713        698,093            7     

Southwest

         8        380,639        379,766            4     

Northwest

         3        227,747        293,564            3     
  

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal

       87        6,973,697        7,661,987          78     

International

           

United Kingdom

         9        977,136        1,305,816          13     

Canada

         8        487,835        483,923            5     

Germany

         1        204,241        254,644            3     

Netherlands

         2        50,069        50,364            1     
  

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal

       20        1,719,281        2,094,747          22     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     107      $ 8,692,978      $ 9,756,734        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 $1.0 billion of such non-consolidated senior interests as of December 31, 2016.

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.

 

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Table of Contents

Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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, 2017          December 31, 2016  

Risk Rating

     Number of Loans    Net Book Value      Total Loan Exposure(1)          Risk Rating      Number of Loans    Net Book Value      Total Loan Exposure(1)  
  1            6    $ 303,849      $ 304,170          1            8    $ 361,100      $ 361,574  
  2          47      3,670,002        3,679,119          2          52      4,011,992        4,083,678  
  3          49      4,727,107        5,729,339          3          46      4,299,026        5,290,668  
  4            1      20,810        20,749          4            1      20,860        20,814  
  5        —        —          —            5        —        —          —    
  

 

  

 

 

    

 

 

         

 

  

 

 

    

 

 

 
   103    $ 8,721,768      $ 9,733,377           107    $ 8,692,978      $ 9,756,734  
  

 

  

 

 

    

 

 

         

 

  

 

 

    

 

 

 

 

(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 $1.0 billion of such non-consolidated senior interests as of both March 31, 2017 and December 31, 2016.

The weighted-average risk rating of our total loan exposure was 2.6 and 2.5 as of March 31, 2017 and December 31, 2016, respectively. The increase in weighted-average risk rating was primarily driven by repayments of loans with lower risk ratings, and not rating downgrades in the existing portfolio.

We did not have any impaired loans, nonaccrual loans, or loans in maturity default as of March 31, 2017 or December 31, 2016.

4. EQUITY INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

Our equity investment in unconsolidated subsidiary consisted solely of our carried interest in CTOPI, a fund sponsored and managed by an affiliate of our Manager. The investment was fully realized as of December 31, 2016 and we no longer have any investments in unconsolidated subsidiaries on our consolidated financial statements.

Our carried interest in CTOPI entitled us to earn promote revenue in an amount equal to 17.7% of the fund’s profits, after a 9% preferred return and 100% return of capital to the CTOPI partners. We recognized $138,000 of promote income from CTOPI in respect of our carried interest and recorded such amounts as income in our consolidated statements of operations during the three months ended March 31, 2016.

CTOPI Incentive Management Fee Grants

In January 2011, we created a management compensation pool for employees equal to 45% of the CTOPI promote distributions received by us. During the three months ended March 31, 2016, we recognized $170,000 of expenses under the CTOPI incentive plan. Such amounts were recognized as a component of general and administrative expenses in our consolidated statements of operations.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

5. OTHER ASSETS AND LIABILITIES

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

 

     March 31,      December 31,  
     2017      2016  

Loan portfolio payments held by servicer(1)

   $ 135,516      $ 6,294  

Accrued interest receivable

     30,962        32,871  

Derivative assets

     1,424        4,086  

Prepaid expenses

     700        803  

Prepaid taxes

     14        16  
  

 

 

    

 

 

 

Total

   $     168,616      $     44,070  
  

 

 

    

 

 

 

 

(1)  

 

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,      December 31,  
     2017      2016  

Secured debt repayments pending servicer remittance(1)

   $ 91,763      $ 5,372  

Accrued dividends payable

     58,787        58,615  

Accrued management and incentive fees payable

     12,921        12,798  

Accrued interest payable

     11,673        9,049  

Accounts payable and other liabilities

     1,736        1,985  
  

 

 

    

 

 

 

Total

   $     176,880      $     87,819  
  

 

 

    

 

 

 

 

(1)  

 

Represents pending transfers from our third-party loan servicer that were remitted to our banking counterparties during the subsequent remittance cycle.

6. SECURED DEBT AGREEMENTS, NET

Our secured debt agreements include credit facilities, the GE portfolio acquisition facility, 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, 2017      December 31, 2016  

Credit facilities

   $ 3,958,064      $ 3,572,837  

GE portfolio acquisition facility

     1,250,524        1,479,582  

Asset-specific financings

     567,577        679,207  

Revolving credit agreement

     —          —    
  

 

 

    

 

 

 

Total secured debt agreements

   $ 5,776,165      $ 5,731,626  
  

 

 

    

 

 

 

Deferred financing costs(1)

     (15,974      (15,272
  

 

 

    

 

 

 

Net book value of secured debt

   $ 5,760,191      $ 5,716,354  
  

 

 

    

 

 

 

 

(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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Table of Contents

Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

Credit Facilities

During the three months ended March 31, 2017, we increased the maximum facility size of two of our credit facilities, providing an additional £250.0 million and €250.0 million of credit capacity, respectively, and we converted one of our asset-specific financings to a $500.0 million credit facility. The following tables detail our credit facilities ($ in thousands):

 

     March 31, 2017  
     Maximum      Collateral      Credit Borrowings  

Lender

   Facility Size(1)      Assets(2)      Potential(3)      Outstanding      Available(3)  

Wells Fargo

   $ 2,000,000      $ 1,895,248      $ 1,468,184      $ 1,238,872      $ 229,312  

MetLife

     1,000,000        1,104,478        866,114        866,114        —    

Bank of America

     750,000        813,305        641,066        641,066        —    

Citibank(4)

     766,300        509,582        393,933        295,777        98,156  

Deutsche Bank

     500,000        374,119        278,851        278,851        —    

Morgan Stanley(5)

     627,500        329,767        260,623        220,969        39,654  

Société Générale(6)

     426,080        281,623        220,915        214,678        6,237  

JP Morgan(7)

     500,000        359,098        277,914        201,737        76,177  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $     6,569,880      $     5,667,220      $     4,407,600      $     3,958,064      $     449,536  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2016  
     Maximum      Collateral      Credit Borrowings  

Lender

   Facility Size(1)      Assets(2)      Potential(3)      Outstanding      Available(3)  

Wells Fargo

   $ 2,000,000      $ 1,718,874      $ 1,339,942      $ 1,107,733      $ 232,209  

MetLife

     1,000,000        1,106,017        862,454        862,454        —    

Bank of America

     750,000        794,881        617,694        617,694        —    

JP Morgan(7)

     500,000        550,560        420,414        316,219        104,195  

Morgan Stanley(5)

     308,500        344,056        272,221        231,930        40,291  

Citibank(4)

     500,000        508,989        394,677        229,629        165,048  

Société Générale(6)

     420,680        274,351        207,178        207,178        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $     5,479,180      $     5,297,728      $     4,114,580      $     3,572,837      $     541,743  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)  

 

Maximum facility size represents the largest amount of borrowings available under a given facility once sufficient collateral assets have been approved by the lender and pledged by us.

(2)

 

Represents the principal balance of the collateral assets.

(3)

 

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.

(4)

 

As of March 31, 2017, the Citibank maximum facility size was composed of a general $500.0 million facility size denominated in U.S. Dollars plus a general €250.0 million ($266.3 million) facility size that contemplated British Pound Sterling and Euro borrowings. As of December 31, 2016, the maximum facility size was composed of a general $500.0 million facility.

(5)

 

As of March 31, 2017, the Morgan Stanley maximum facility size was composed of a £500.0 million facility size that was translated to $627.5 million. As of December 31, 2016, the maximum facility size was composed of a £250.0 million facility size that was translated to $308.5 million. Borrowings denominated in British Pound Sterling and Euro are contemplated under this facility.

(6)

 

As of March 31, 2017 and December 31, 2016, the Société Générale maximum facility size was composed of a €400.0 million facility size that was translated to $426.1 million and $420.7 million, respectively. Borrowings denominated in U.S. Dollars, British Pound Sterling, and Euro are contemplated under this facility.

(7)

 

As of March 31, 2017 and December 31, 2016, the JP Morgan maximum facility size was composed of a general $500.0 million facility size, under which U.S. Dollars and British Pound Sterling borrowings are contemplated.

The weighted-average outstanding balance of our credit facilities was $3.5 billion for the three months ended March 31, 2017. As of March 31, 2017, we had aggregate borrowings of $4.0 billion outstanding under our credit facilities, with a weighted-average cash

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

coupon of LIBOR plus 1.90% per annum, a weighted-average all-in cost of credit, including associated fees and expenses, of LIBOR plus 2.11% per annum, and a weighted-average advance rate of 78.9%. As of March 31, 2017, outstanding borrowings under these facilities had a weighted-average maturity, excluding extension options and term-out provisions, of 1.5 years.

The weighted-average outstanding balance of our credit facilities was $2.9 billion for the three months ended December 31, 2016. As of December 31, 2016, we had aggregated borrowings of $3.6 billion outstanding under our credit facilities, with a weighted-average cash coupon of LIBOR plus 1.82% per annum, a weighted-average all-in cost of credit, including associated fees and expenses, of LIBOR plus 2.02% per annum, and a weighted-average advance rate of 79.1%. As of December 31, 2016, outstanding borrowings under these facilities had a weighted-average maturity, excluding extension options and term-out provisions, of 1.5 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.

The following tables outline the key terms of our credit facilities as of March 31, 2017:

 

Lender

   Currency   Guarantee(1)   Margin Call(2)    Term/Maturity

Wells Fargo

   $   25%   Collateral marks only    Term matched(3)

MetLife

   $   50%   Collateral marks only    April 22, 2022(4)

Bank of America

   $   50%   Collateral marks only    May 21, 2021(5)

Citibank

   $ / £/ €   25%   Collateral marks only    Term matched(3)

Deutsche Bank

   $   25%   Collateral marks only    Term matched(3)

Morgan Stanley

   £  / €   25%   Collateral marks only    March 1, 2020

Société Générale

   $  /£/ €   25%   Collateral marks only    Term matched(3)

JP Morgan

   $  / £   50%   Collateral marks only    January 7, 2019

 

(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 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.

(4)

 

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

(5)

 

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

 

Currency

   Outstanding
Borrowings
     Potential
Borrowings(1)
    

Index

  

Rate(2)

   Advance
Rate(3)
$      $3,639,921        $4,030,008      1-month USD LIBOR    L+1.88%    78.9%
     €          —          €     38,269      3-month EURIBOR    n/a    77.8%
£      £   253,500        £   269,273      3-month GBP LIBOR    L+2.15%    79.0%
  

 

 

    

 

 

       

 

  

 

     $3,958,064        $4,407,600         L+1.90%    78.9%

 

(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 weighted-average cash coupon based on borrowings outstanding.

(3)

 

Represents weighted-average advance rate based on the outstanding principal balance of the collateral assets pledged.

GE Portfolio Acquisition Facility

During the second quarter of 2015, concurrently with our acquisition of the GE portfolio, we entered into an agreement with Wells Fargo to provide us with secured financing for the acquired portfolio. As of March 31, 2017, this facility provided for $1.4 billion of financing, of which $1.3 billion was outstanding and an additional $171.7 million was available to finance future loan fundings in the GE portfolio. The GE portfolio acquisition facility is non-revolving and consists of a single master repurchase agreement providing for asset-specific borrowings for each collateral asset.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

The asset-specific borrowings under the GE portfolio acquisition facility were advanced at a weighted-average rate of 80% of our purchase price of the collateral assets and are repaid pro rata from collateral asset repayment proceeds. The asset-specific borrowings are currency matched to the collateral assets and accrue interest at a rate equal to the sum of (i) the applicable base rate plus (ii) a margin of 1.75%, which will increase to 1.80% and 1.85% in year four and year five, respectively. As of March 31, 2017, those borrowings were denominated in U.S. Dollars, Canadian Dollars, and British Pounds Sterling. The asset-specific borrowings are term matched to the underlying collateral assets with an outside maturity date of May 20, 2020, which may be extended pursuant to two one-year extension options. We guarantee obligations under the GE portfolio acquisition facility in an amount equal to the greater of (i) 25% of outstanding asset-specific borrowings, and (ii) $250.0 million. We had outstanding asset-specific borrowings of $1.3 billion and $1.5 billion under the GE portfolio acquisition facility as of March 31, 2017 and December 31, 2016, respectively.

Asset-Specific Financings

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

 

     March 31, 2017  

Lender

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

JP Morgan(4)

                

Collateral assets

     1      $ 286,887      $ 285,955        L+3.88     n/a        Jan. 2020  

Financing provided

     1        233,679        233,413        L+1.89   $ 116,839        Jan. 2020  

Citibank(4)

                

Collateral assets

     2        204,617        204,548        L+4.40     n/a        Nov. 2020  

Financing provided

     2        161,163        161,123        L+2.42     40,291        Nov. 2020  

Bank of the Ozarks

                

Collateral assets

     2        169,986        167,510        L+6.51     n/a        June 2020  

Financing provided

     2        128,969        128,045        L+3.83     —          June 2020  

Wells Fargo

                

Collateral assets

     1        62,523        62,302        L+6.05     n/a        Dec. 2019  

Financing provided

     1        43,766        43,609        L+3.14     8,753        Dec. 2019  

Total

                

Collateral assets

     6      $     724,013      $     720,315        L+4.83     n/a     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

Financing provided

     6      $ 567,577      $ 566,190        L+2.58   $ 165,883     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

(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)

 

Other than amounts guaranteed on an asset-by-asset basis, 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.

(4)

 

Borrowings under these asset specific financings are cross collateralized with the related credit facility with the same lender.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

     December 31, 2016  

Lender

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

JP Morgan(4)

                

Collateral assets

     1      $ 284,012      $ 282,818        L+3.88     n/a        Jan. 2020  

Financing provided

     1        233,679        233,626        L+1.89   $ 116,839        Jan. 2020  

Citibank(4)

                

Collateral assets

     2        203,656        203,555        L+4.40     n/a        Nov. 2020  

Financing provided

     2        158,652        158,609        L+2.42     39,663        Nov. 2020  

Deutsche Bank

                

Collateral assets

     1        183,300        180,866        L+5.18     n/a        Aug. 2021  

Financing provided

     1        135,075        133,621        L+3.03     66,410        Aug. 2021  

Bank of the Ozarks

                

Collateral assets

     2        143,164        140,524        L+6.42     n/a        Apr. 2020  

Financing provided

     2        108,435        107,323        L+3.68     —          Apr. 2020  

Wells Fargo

                

Collateral assets

     1        61,951        61,654        L+6.05     n/a        Dec. 2019  

Financing provided

     1        43,366        43,154        L+2.97     8,673        Dec. 2019  

Total

                

Collateral assets

     7      $ 876,083      $ 869,417        L+4.84     n/a     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

Financing provided

     7      $ 679,207      $ 676,333        L+2.60   $ 231,585     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

(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)

 

Other than amounts guaranteed on an asset-by-asset basis, 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.

(4)

 

Borrowings under these asset specific financings are cross collateralized with the related credit facility with the same lender.

The weighted-average outstanding balance of our asset-specific financings was $696.4 million for the three months ended March 31, 2017 and $606.9 million for the three months ended December 31, 2016.

Revolving Credit Agreement

During the second quarter of 2016, we entered into a $125.0 million full recourse secured revolving credit agreement with Barclays that is designed to finance first mortgage originations for up to six months as a bridge to term financing or syndication. Advances 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 initial maturity date of the facility is April 4, 2018 and is subject to two one-year extension options, exercisable at our option.

During the three months ended March 31, 2017, we had no borrowings under the revolving credit agreement and we recorded interest expense of $240,000, including $126,000 of amortization of deferred fees and expenses.

During the three months ended December 31, 2016, the weighted-average outstanding borrowings under the revolving credit agreement were $35.3 million and we recorded interest expense of $506,000, including $128,000 of amortization of deferred fees and expenses. As of December 31, 2016 we had no outstanding borrowings under the agreement.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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 $1.9 billion as of each measurement date plus 75% of the net cash proceeds of future equity issuances subsequent to March 31, 2017; (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, 2017 and December 31, 2016, we were in compliance with these covenants.

7. 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.

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

 

     March 31, 2017

Loan Participations Sold

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

Total loan

   1    $ 426,700      $ 423,575        L+4.48     n/a      Dec. 2019

Senior participation(3)(4)

   1      355,583        354,131        L+2.72   $ 30,120      Dec. 2019
     December 31, 2016

Loan Participations Sold

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

Total loan

   1    $ 419,560      $ 416,233        L+4.48     n/a      Dec. 2019

Senior participation(3)(4)

   1      349,633        348,077        L+2.72   $ 29,616      Dec. 2019

 

(1)  

 

Our floating rate loans and related liabilities were 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)

 

Other than one instance where we entered into a related guarantee agreement for £24.0 million ($30.1 million and $29.6 million as of March 31, 2017 and December 31, 2016, respectively), our loan participations sold are non-recourse to us.

(3)

 

During the three months ended March 31, 2017 and December 31, 2016, we recorded $2.6 million and $2.9 million, respectively, of interest expense related to our loan participations sold, of which $2.5 million and $2.8 million was paid in cash.

(4)

 

The difference between principal balance and book value of loan participations sold is due to deferred financing costs of $1.5 million and $1.6 million as of March 31, 2017 and December 31, 2016, respectively.

8. CONVERTIBLE NOTES, NET

In November 2013, we issued $172.5 million of 5.25% convertible senior notes due on December 1, 2018, or Convertible Notes. The Convertible Notes’ issuance costs are amortized through interest expense over the life of the Convertible Notes using the effective interest method. Including this amortization, our all-in cost of the Convertible Notes is 5.87% per annum.

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 August 31, 2018, 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. The Convertible Notes were not convertible as of March 31, 2017. The conversion rate was initially set to equal 34.8943 shares of class A common stock per $1,000 principal amount of Convertible Notes, which was equivalent to an initial conversion price of

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

$28.66 per share of class A common stock, subject to adjustment upon the occurrence of certain events. As a result of exceeding the cumulative dividend threshold as defined in the Convertible Notes Supplemental Indenture, the conversion rate was adjusted on September 28, 2016 to 35.7236 shares of Class A common stock per $1,000 principal amount of Convertible Notes, which is equivalent to a conversion price of $27.99 per share of class A common stock. We may not redeem the Convertible Notes prior to maturity. The last reported sale price of our Class A common stock of $30.96 on March 31, 2017 was greater than the per share conversion price of the Convertible Notes. We have the intent and ability to settle the Convertible Notes in cash and, as a result, the Convertible Notes did not have any impact on our diluted earnings per share.

Upon issuance of the Convertible Notes, we recorded a $9.1 million discount based on the implied value of the conversion option and an assumed effective interest rate of 6.50%, as well as $4.1 million of initial issuance costs. Including the amortization of this discount and the issuance costs, our total cost of the Convertible Notes is 7.16% per annum. During the three months ended March 31, 2017, we incurred total interest on our Convertible Notes of $3.0 million, of which $2.3 million related to cash coupon and $713,000 related to the amortization of discount and certain issuance costs. During the three months ended March 31, 2016, we incurred total interest on our Convertible Notes of $3.0 million, of which $2.3 million related to cash coupon and $670,000 related to the amortization of discount and certain issuance costs.

As of March 31, 2017, the Convertible Notes were carried on our consolidated balance sheet at $167.5 million, net of an unamortized discount of $4.8 million and deferred financing costs of $180,000. As of December 31, 2016, the Convertible Notes were carried on our consolidated balance sheet at $166.8 million, net of an unamortized discount of $5.5 million and deferred financing costs of $206,000. Accrued interest payable for the Convertible Notes was $3.0 million and $755,000 as of March 31, 2017 and December 31, 2016, 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. For more information on the accounting for designated and non-designated hedges, refer to Note 2.

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. We do not anticipate that any of the counterparties will fail to meet their obligations.

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.

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, 2017

    

December 31, 2016

 

Foreign Currency

Derivatives

 

Number of
Instruments

   Notional
Amount
    

Foreign Currency

Derivatives

   Number of
Instruments
   Notional
Amount
 

Sell GBP Forward

  1    £ 141,900      Sell GBP Forward    2    £ 141,900  

Sell CAD Forward

  1    C$     122,900      Sell CAD Forward    2    C$     122,900  
        Sell EUR Forward    1    44,900  

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

Cash Flow Hedges of Interest Rate Risk

Certain of our financing transactions expose us to 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 associated with our borrowings where there is potential for an index mismatch.

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, 2017

Interest Rate Derivatives

  Number of
Instruments
  Notional
Amount
    Strike   Index   Wtd.-Avg.
Maturity (Years)

Interest Rate Swaps(1)

    4   C$ 108,271     1.0%   CDOR   2.2

Interest Rate Caps

  19   $     633,903     2.0%   USD LIBOR   0.2

Interest Rate Caps

    6   C$ 304,931     2.0%   CDOR   0.2

Interest Rate Caps

    1   £ 15,142     2.0%   GBP LIBOR   0.1

December 31, 2016

Interest Rate Derivatives

  Number of
Instruments
  Notional
Amount
    Strike   Index   Wtd.-Avg.
Maturity (Years)

Interest Rate Swaps(1)

    4   C$ 108,271     1.0%   CDOR   2.4

Interest Rate Caps

  21   $ 802,256     2.0%   USD LIBOR   0.4

Interest Rate Caps

    5   C$ 400,035     2.0%   CDOR   0.4

Interest Rate Caps

    1   £ 15,142     2.0%   GBP LIBOR   0.3

 

  (1)

Two of our interest rate swaps totaling C$91.0 million ($68.3 million and $67.7 million as of March 31, 2017 and December 31, 2016, respectively) do not become effective until June 1, 2017.

 

Amounts reported in accumulated other comprehensive income 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, 2017, we estimate that an additional $470,000 will be reclassified from accumulated other comprehensive income as an increase to interest expense. Additionally, during the three months ended March 31, 2017 and 2016, we did not record any hedge ineffectiveness in our consolidated statements of operations.

Non-designated Hedges

During the three months ended March 31, 2017 and 2016, we recorded gains of $90,000 and losses of $976,000, 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, 2017

 

Non-designated Hedges

   Number of
Instruments
   Notional
Amount
 

Interest Rate Caps

   2    $ 72,960  

Interest Rate Caps

   1    C$ 18,327  

Buy GBP / Sell EUR Forward

   1    12,857  

December 31, 2016

 

Non-designated Hedges

   Number of
Instruments
   Notional
Amount
 

Interest Rate Caps

   3    $ 256,875  

Interest Rate Caps

   2    C$ 37,221  

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, 2017      December 31, 2016      March 31, 2017      December 31, 2016  

Derivatives designated as hedging instruments:

           

Foreign exchange contracts

   $ 1,174      $ 3,268      $ —        $ 210  

Interest rate derivatives

     236        331        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives designated as hedging instruments

   $ 1,410      $ 3,599      $ —        $ 210  
  

 

 

    

 

 

    

 

 

    

 

 

 

Derivatives not designated as hedging instruments:

           

Foreign exchange contracts

   $ 14      $ 487      $ —        $ —    

Interest rate derivatives

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives not designated as hedging instruments

   $ 14      $ 487      $ —        $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Derivatives

   $ 1,424      $ 4,086      $ —        $ 210  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (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
Recognized in
OCI on Derivatives
(Effective Portion)
    Location of
Gain (Loss)
Reclassified from

Accumulated
OCI into Income
(Effective Portion)
     Amount of
Loss Reclassified from
Accumulated OCI into
Income (Effective Portion)
 

Derivatives in Hedging Relationships

   Three Months
Ended
March 31,
       Three Months
Ended
March 31,
 
   2017     2016        2017     2016  

Net Investment

           

Foreign exchange contracts(1)

   $ (4,294   $ (6,470     Interest Expense      $ —       $ —    

Cash Flow Hedges

           

Interest rate derivatives

     (105     (196     Interest Expense        (474     (27
  

 

 

   

 

 

      

 

 

   

 

 

 

Total

   $ (4,399   $ (6,666      $     (474   $     (27
  

 

 

   

 

 

      

 

 

   

 

 

 

 

(1)  

 

During the three months ended March 31, 2017 and 2016, we paid net cash settlements of $1.8 million and received $8.2 million on our foreign currency forward contracts, respectively. Those amounts are included as a component of accumulated other comprehensive loss on our consolidated balance sheets.

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, 2017, we were in a net asset position with each such derivative counterparty.

10. EQUITY

Stock and Stock Equivalents

Authorized Capital

As of March 31, 2017, 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, 2017.

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.

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.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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)

   2017      2016  

Beginning balance

     94,709,290        93,843,847  

Issuance of class A common stock(2)

     270        285  

Issuance of restricted class A common stock, net

     277,815        209,798  

Issuance of deferred stock units

     6,415        7,322  
  

 

 

    

 

 

 

Ending balance

     94,993,790        94,061,252  
  

 

 

    

 

 

 

 

  (1)

Includes deferred stock units held by members of our board of directors of 175,442 and 148,843 as of March 31, 2017 and 2016, respectively.

 
  (2)

Consists of 270 and 285 shares under our dividend reinvestment program during the three months ended March 31, 2017 and 2016, 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 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, 2017 and 2016, we issued 270 shares and 285 shares, respectively, of class A common stock under the dividend reinvestment component of the plan. As of March 31, 2017, a total of 9,998,057 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 May 9, 2014, 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 $200.0 million of our class A common stock. On July 29, 2016, in connection with filing a new universal shelf registration statement on Form S-3, we entered into amendments to each of the ATM Agreements. Sales of class A common stock made pursuant to the 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. We did not sell any shares of our class A common stock under the ATM Agreements during the three months ended March 31, 2017 and 2016. As of March 31, 2017, sales of our class A common stock with an aggregate sales price of $188.6 million remained available for issuance under the 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.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

On March 15, 2017, we declared a dividend of $0.62 per share, or $58.8 million, that was paid on April 17, 2017, to stockholders of record as of March 31, 2017. The following table details our dividend activity ($ in thousands, except per share data):

 

     Three Months Ended March 31,  
     2017      2016  

Dividends declared per share of common stock

   $ 0.62      $ 0.62  

Total dividends declared

   $ 58,787      $ 58,226  

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.

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,  
     2017      2016  

Net income(1)

   $ 51,405      $ 57,047  

Weighted-average shares outstanding, basic and diluted

     94,993,386        94,067,769  
  

 

 

    

 

 

 

Per share amount, basic and diluted

   $ 0.54      $ 0.61  
  

 

 

    

 

 

 

 

(1)  

 

Represents net income attributable to Blackstone Mortgage Trust, Inc.

Other Balance Sheet Items

Accumulated Other Comprehensive Loss

As of March 31, 2017, total accumulated other comprehensive loss was $52.4 million, primarily representing (i) $99.7 million of cumulative unrealized currency translation adjustments on assets and liabilities denominated in foreign currencies and (ii) an offsetting $47.3 million of net realized and unrealized gains related to changes in the fair value of derivative instruments. As of December 31, 2016, total accumulated other comprehensive loss was $56.2 million, primarily representing (i) $107.5 million of cumulative unrealized currency translation adjustments on assets and liabilities denominated in foreign currencies and (ii) an offsetting $51.3 million of net realized and unrealized gains related to changes in the fair value of derivative instruments.

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, 2017 and 2016, we incurred $9.6 million and $9.5 million, respectively, of management fees payable to our Manager. In addition, during the three months ended March 31, 2017 and 2016, we incurred $3.3 million and $4.2 million, respectively, of incentive fees payable to our Manager.

As of March 31, 2017 and December 31, 2016 we had accrued management and incentive fees payable to our Manager of $12.9 million and $12.8 million, respectively.

General and Administrative Expenses

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

 

     Three Months Ended March 31,  
     2017      2016  

Professional services

   $ 1,017      $ 890  

Operating and other costs

     445        869  
  

 

 

    

 

 

 

Subtotal

     1,462        1,759  

Non-cash and CT Legacy Portfolio compensation expenses

     

Management incentive awards plan - CTOPI(1)

     —          170  

Management incentive awards plan - CT Legacy Partners(2)

     —          129  

Restricted class A common stock earned

     5,813        4,593  

Director stock-based compensation

     94        94  
  

 

 

    

 

 

 

Subtotal

     5,907        4,986  
  

 

 

    

 

 

 

Total BXMT expenses

     7,369        6,745  

Other expenses

     59        50  
  

 

 

    

 

 

 

Total general and administrative expenses

   $ 7,428      $ 6,795  
  

 

 

    

 

 

 

 

  (1)

Represents the portion of CTOPI promote revenue recorded under compensation awards. See Note 4 for further discussion.

 
  (2)

Represents the amounts recorded under the CT Legacy Partners management incentive awards during the period. See below for discussion of the CT Legacy Partners management incentive awards plan.

 

CT Legacy Partners Management Incentive Awards Plan

In conjunction with our March 2011 restructuring, we created an employee pool for up to 6.75% of the distributions paid to the common equity holders of our subsidiary, CT Legacy Partners (subject to certain caps and priority distributions). During the three months ended March 31, 2016 we recognized $129,000 of expenses under the CT Legacy Partners incentive plan. Our investment in CT Legacy Partners was substantially realized as of December 31, 2016.

12. INCOME TAXES

We elected to be taxed as a REIT, effective January 1, 2003, 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, 2017 and December 31, 2016, we were in compliance with all REIT requirements.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

During the three months ended March 31, 2017 and 2016, we recorded a current income tax provision of $89,000 and $241,000, 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, 2017 or December 31, 2016.

As a result of our issuance of 25,875,000 shares of class A common stock in May 2013, the availability of our net operating losses, or 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, 2016, we had estimated NOLs of $159.0 million available to be carried forward and utilized in current or future periods. If we are unable to utilize our NOLs, they will expire in 2029.

As of March 31, 2017, tax years 2013 through 2016 remain subject to examination by taxing authorities.

13. STOCK-BASED INCENTIVE PLANS

We do not have any employees as we are externally managed by our Manager. However, as of March 31, 2017, 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 seven benefit plans as of March 31, 2017: (i) our amended and restated 1997 non-employee director stock plan, or 1997 Plan; (ii) our 2007 long-term incentive plan, or 2007 Plan; (iii) our 2011 long-term incentive plan, or 2011 Plan; (iv) our 2013 stock incentive plan, or 2013 Plan; (v) our 2013 manager incentive plan, or 2013 Manager Plan; (vi) our 2016 stock incentive plan, or 2016 Plan; and (vii) our 2016 manager incentive plan, or 2016 Manager Plan. We refer to our 1997 Plan, our 2007 Plan, our 2011 Plan, our 2013 Plan, and our 2013 Manager Plan, collectively, as our Expired Plans and we refer to our 2016 Plan and 2016 Manager Plan, collectively, as our Current Plans.

Our Expired Plans have expired and no new awards may be issued under them. Under our Current Plans, a maximum of 2,400,000 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, 2017, there were 1,471,955 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, 2016

     1,309,995      $ 28.68  

Granted

     280,938        30.54  

Vested

     (111,699      27.77  

Forfeited

     (3,123      27.37  
  

 

 

    

 

 

 

Balance as of March 31, 2017

     1,476,111      $ 29.11  
  

 

 

    

 

 

 

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 1,476,111 shares of restricted class A common stock outstanding as of March 31, 2017 will vest as follows: 636,317 shares will vest in 2017; 537,562 shares will vest in 2018; and 302,232 shares will vest in 2019. As of March 31, 2017, total unrecognized compensation cost relating to nonvested share-based compensation arrangements was $45.7 million based on the March 31, 2017 closing price of our class A common stock of $30.96. This cost is expected to be recognized over a weighted average period of 1.2 years from March 31, 2017.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

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, 2017      December 31, 2016  
     Level 1      Level 2      Level 3      Fair Value      Level 1      Level 2      Level 3      Fair Value  

Assets

                       

Derivatives

   $ —        $ 1,424      $ —        $ 1,424      $ —        $ 4,086      $ —        $ 4,086  

Liabilities

                       

Derivatives

   $ —        $ —        $ —        $ —        $ —        $ 210      $ —        $ 210  

The following table reconciles the beginning and ending balances of assets measured at fair value on a recurring basis using Level 3 inputs ($ in thousands):

 

     Three Months Ended March 31,  
     2017      2016(1)  

January 1,

   $ —        $ 12,561  

Proceeds from investment realizations

     —          (2,406

Adjustments to fair value included in earnings

     

Gain on investments at fair value

     —          66  
  

 

 

    

 

 

 

March 31,

   $ —        $ 10,221  
  

 

 

    

 

 

 

 

  (1)

All assets measured at fair value on a recurring basis using Level 3 inputs were included as a component of other assets in the consolidated Balance Sheets.

 

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. The following table details the carrying amount, face amount, and fair value of the financial instruments described in Note 2 ($ in thousands):

 

     March 31, 2017      December 31, 2016  
     Carrying      Face      Fair      Carrying      Face      Fair  
     Amount      Amount      Value      Amount      Amount      Value  

Financial assets

                 

Cash and cash equivalents

   $ 64,275      $ 64,275      $ 64,275      $ 75,567      $ 75,567      $ 75,567  

Loans receivable, net

     8,721,768        8,759,696        8,765,688        8,692,978        8,727,218        8,733,784  

Financial liabilities

                 

Secured debt agreements, net

     5,760,191        5,776,165        5,776,165        5,716,354        5,731,626        5,731,626  

Loan participations sold, net

     354,131        355,583        355,583        348,077        349,633        349,633  

Convertible notes, net

     167,475        172,500        194,870        166,762        172,500        191,763  

Estimates of fair value for cash and cash equivalents and convertible notes are measured using observable, quoted market prices, or Level 1 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.

 

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Blackstone Mortgage Trust, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

 

15. TRANSACTIONS WITH RELATED PARTIES

We are managed by our Manager pursuant to the Management Agreement, the current term of which expires on December 19, 2017, and will be automatically renewed for a one-year term each anniversary thereafter unless earlier terminated.

As of March 31, 2017 and December 31, 2016, our consolidated balance sheet included $12.9 million and $12.8 million of accrued management and incentive fees payable to our Manager, respectively. During the three months ended March 31, 2017, we paid $12.8 million, of management and incentive fees to our Manager, compared to $14.4 million during the same period of 2016. In addition, during the three months ended March 31, 2017, we reimbursed our Manager for $93,000 of expenses incurred on our behalf compared to $320,000 during the same period of 2016. During the three months ended March 31, 2016, CT Legacy Partners made aggregate preferred distributions of $224,000 to an affiliate of our Manager.

As of March 31, 2017, our Manager held 719,903 shares of unvested restricted class A common stock, which had an aggregate grant date fair value of $20.9 million. The shares vest in installments over three years from the date of issuance. During the three months ended March 31, 2017 and 2016, we recorded non-cash expense related to shares held by our Manager of $2.9 million and $2.1 million, respectively. We did not issue any shares of restricted class A common stock to our Manager during the three months ended March 31, 2017 or 2016, respectively. Refer to Note 13 for further details.

During the three months ended March 31, 2017, we originated two loans whereby each respective borrower engaged an affiliate of our Manager to act as title insurance agent in connection with each transaction. We did not incur any expenses or receive any revenues as a result of this transaction. We did not have any similar transactions during the three months ended March 31, 2016.

During the three months ended March 31, 2017 and 2016, we incurred $88,000 and $90,000, respectively, of expenses for various administrative and capital market data services to third-party service providers that are affiliates of our Manager.

16. COMMITMENTS AND CONTINGENCIES

Unfunded Commitments Under Loans Receivable

As of March 31, 2017, we had unfunded commitments of $1.1 billion related to 58 loans receivable, which amounts will generally be funded to finance lease-related or capital expenditures by our borrowers. These future commitments will expire variously over the next four years.

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, 2017, we were not involved in any material legal proceedings.

Board of Directors’ Compensation

As of March 31, 2017, of the eight members of our board of directors, our five independent directors are entitled to annual compensation of $125,000 each. The other three board members, including our chairman and our chief executive officer, serve as directors without compensation for such service. As of March 31, 2017, the annual compensation for our directors was paid 40% in cash and 60% in the form of deferred stock units. In addition, the member of our board of directors that serves as the chairperson of the audit committee of our board of directors receives additional annual cash compensation of $12,000. Compensation to the board of directors is payable in four equal quarterly installments.

In April 2017, our board of directors approved changes to the compensation of our five independent directors which will be effective as of the beginning of the third quarter of 2017. The other three board members, including our chairman and our chief executive officer, will continue to serve as directors without compensation for such service. These changes will increase the annual compensation of our directors from $125,000 to $175,000 and will be paid $75,000 in cash and $100,000 in the form of deferred stock units. In addition, the chair of our audit committee will receive an increase in the additional annual cash compensation from $12,000 to $20,000, the other members of our audit committee will receive additional annual cash compensation of $10,000, and the chairs of each of our compensation and corporate governance committees will receive additional annual cash compensation of $10,000.

 

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Table of Contents
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 about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results 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, 2016 and elsewhere in this quarterly report on Form 10-Q.

Introduction

Blackstone Mortgage Trust is a real estate finance company that originates and purchases senior loans collateralized by properties in North America and Europe. 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, 2017 we recorded earnings per share of $0.54, declared a dividend of $0.62 per share, and reported $0.61 per share of Core Earnings. In addition, our book value per share as of March 31, 2017 was $26.28. 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.

Earnings Per Share and Dividends Declared

The following table sets forth the calculation of basic and diluted net income per share and dividends per share ($ in thousands, except per share data):

 

     Three Months Ended  
     March 31, 2017      December 31, 2016  

Net income (1)

   $ 51,405      $ 53,375  

Weighted-average shares outstanding, basic and diluted

     94,993,386        94,455,518  
  

 

 

    

 

 

 

Net income per share, basic and diluted

   $ 0.54      $ 0.57  
  

 

 

    

 

 

 

Dividends 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.

 

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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 incentive fees 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.

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

 

     Three Months Ended  
     March 31, 2017      December 31, 2016  

Net income(1)

   $ 51,405      $ 53,375  

CT Legacy Portfolio net income

     —          (502

Non-cash compensation expense

     5,907        4,955  

GE purchase discount accretion adjustment(2)

     (216      (320

Other items

     1,024        742  
  

 

 

    

 

 

 

Core Earnings

   $ 58,120      $ 58,250  
  

 

 

    

 

 

 

Weighted-average shares outstanding, basic and diluted

     94,993,386        94,455,518  
  

 

 

    

 

 

 

Core Earnings per share, basic and diluted

   $ 0.61      $ 0.62  
  

 

 

    

 

 

 

 

  (1)

Represents net income attributable to Blackstone Mortgage Trust.

  (2)

Adjustment in respect of the deferral in Core Earnings of the accretion of a total $9.1 million of purchase discount attributable to a certain pool of GE portfolio loans pending the repayment of those loans.

 

Book Value Per Share

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

 

     March 31, 2017      December 31, 2016  

Stockholders’ equity

   $ 2,495,982      $ 2,493,603  

Shares

     

Class A common stock

     94,818,348        94,540,263  

Deferred stock units

     175,442        169,027  
  

 

 

    

 

 

 

Total outstanding

     94,993,790        94,709,290  
  

 

 

    

 

 

 

Book value per share

   $ 26.28      $ 26.33  
  

 

 

    

 

 

 

II. Loan Portfolio

 

During the quarter ended March 31, 2017, we originated $997.7 million of loans. Loan fundings during the quarter totaled $725.2 million, including $22.9 million of non-consolidated senior interests. Loan repayments during the quarter totaled $780.8 million, including $85.1 million of non-consolidated senior interests. We generated interest income of $118.5 million and incurred interest expense of $46.7 million during the quarter, which resulted in $71.8 million of net interest income during the three months ended March 31, 2017.

 

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Portfolio Overview

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

 

     Three Months Ended      Three Months Ended  
     March 31, 2017      December 31, 2016  

Loan originations(1)

   $ 997,710      $ 825,792  

Loan fundings(2)

   $ 725,230      $ 888,058  

Loan repayments(3)

     (780,813      (476,113
  

 

 

    

 

 

 

Total net (repayments) fundings

   $ (55,583    $ 411,945  
  

 

 

    

 

 

 

 

  (1)

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

 
  (2)

Loan fundings during the three months ended March 31, 2017 and December 31, 2016 include $22.9 million and $36.8 million, respectively, of additional fundings under related non-consolidated senior interests.

 
  (3)

Loan repayments during the three months ended March 31, 2017 and December 31, 2016 include $85.1 million and $44.2 million, respectively, of additional repayments under related non-consolidated senior interests.

 

The following table details overall statistics for our loan portfolio as of March 31, 2017 ($ in thousands):

 

           Total Loan Exposure(1)  
     Balance Sheet
Portfolio
    Total Loan
Portfolio
    Floating Rate
Loans
    Fixed Rate
Loans
 

Number of loans

     103       103       88       15  

Principal balance

   $ 8,759,696     $ 9,733,377     $ 8,847,683     $ 885,694  

Net book value

   $ 8,721,768     $ 9,691,875     $ 8,806,849     $ 885,026  

Unfunded loan commitments(2)

   $ 1,149,842     $ 1,223,322     $ 1,223,322     $ —    

Weighted-average cash coupon(3)

     5.15     4.97     L + 4.06     4.82

Weighted-average all-in yield(3)

     5.57     5.43     L + 4.48     5.69

Weighted-average maximum maturity (years)(4)

     3.3       3.4       3.3       4.2  

Loan to value (LTV)(5)

     61.6     60.9     60.1     69.2

 

(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. Total loan exposure encompasses the entire loan we originated and financed, including $1.0 billion of such non-consolidated senior interests that are not included in our balance sheet portfolio.

(2)

 

Unfunded commitments will primarily be funded to finance property improvements or lease-related expenditures by the borrowers. These future commitments will be funded over the term of each loan, subject in certain cases to an expiration date.

(3)

 

As of March 31, 2017, our floating rate loans were indexed to various benchmark rates, with 85% of floating rate loans by principal balance indexed to USD LIBOR based on total loan exposure. In addition, $217.8 million of our floating rate loans earned interest based on floors that are above the applicable index, with an average floor of 1.22%, as of March 31, 2017. In addition to cash coupon, all-in yield includes the amortization of deferred origination fees, loan origination costs, purchase discounts, and accrual of both extension and exit fees. Cash coupon and all-in yield for the total portfolio assume applicable floating benchmark rates for weighted-average calculation.

(4)

 

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, 2017, based on total loan exposure, 62% of our loans were subject to yield maintenance or other prepayment restrictions and 38% were open to repayment by the borrower without penalty.

(5)

 

Based on LTV as of the dates loans were originated or acquired by us.

 

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The charts below detail the geographic distribution and types of properties securing these loans, as of March 31, 2017:

 

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/collection, 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, 2017  

Risk
Rating

   Number
of Loans
   Net Book
Value
     Total Loan
Exposure(1)
 
1        6    $ 303,849      $ 304,170  
2      47      3,670,002        3,679,119  
3      49      4,727,107        5,729,339  
4        1      20,810        20,749  
5      —        —          —    
  

 

  

 

 

    

 

 

 
   103    $ 8,721,768      $ 9,733,377  
  

 

  

 

 

    

 

 

 

 

  (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 $1.0 billion of such non-consolidated senior interests as of March 31, 2017.

 

The weighted-average risk rating of our total loan exposure was 2.6 and 2.5 as of March 31, 2017 and December 31, 2016, respectively. The increase in weighted-average risk rating was primarily driven by repayments of loans with lower risk ratings, and not rating downgrades in the existing portfolio.

Portfolio Financing

Our portfolio financing arrangements include credit facilities, the GE portfolio acquisition facility, asset-specific financings, a revolving credit agreement, loan participations sold, and non-consolidated senior interests.

 

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The following table details our portfolio financing ($ in thousands):

 

     Portfolio Financing  
     Outstanding Principal Balance  
     March 31, 2017      December 31, 2016  

Credit facilities

   $ 3,958,064      $ 3,572,837  

GE portfolio acquisition facility

     1,250,524        1,479,582  

Asset-specific financings

     567,577        679,207  

Revolving credit agreement

     —          —    

Loan participations sold

     355,583        349,633  

Non-consolidated senior interests

     973,681        1,029,516  
  

 

 

    

 

 

 

Total portfolio financing

   $     7,105,429      $ 7,110,775  
  

 

 

    

 

 

 

Credit Facilities

The following table details our credit facilities ($ in thousands):

 

     March 31, 2017  
     Maximum      Collateral      Credit Borrowings  

Lender

   Facility Size(1)      Assets(2)      Potential(3)      Outstanding      Available(3)  

Wells Fargo

   $ 2,000,000      $ 1,895,248      $ 1,468,184      $ 1,238,872      $ 229,312  

MetLife

     1,000,000        1,104,478        866,114        866,114        —    

Bank of America

     750,000        813,305        641,066        641,066        —    

Citibank(4)

     766,300        509,582        393,933        295,777        98,156  

Deutsche Bank

     500,000        374,119        278,851        278,851        —    

Morgan Stanley(5)

     627,500        329,767        260,623        220,969        39,654  

Société Générale(6)

     426,080        281,623        220,915        214,678        6,237  

JP Morgan(7)

     500,000        359,098        277,914        201,737        76,177  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $     6,569,880      $     5,667,220      $     4,407,600      $     3,958,064      $     449,536  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)  

 

Maximum facility size represents the largest amount of borrowings available under a given facility once sufficient collateral assets have been approved by the lender and pledged by us.

(2)

 

Represents the principal balance of the collateral assets.

(3)

 

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.

(4)

 

As of March 31, 2017, the Citibank maximum facility size was composed of a general $500.0 million facility size denominated in U.S. Dollars plus a general €250.0 million ($266.3 million) facility size that contemplated British Pound Sterling and Euro borrowings.

(5)

 

As of March 31, 2017, the Morgan Stanley maximum facility size was composed of a £500.0 million facility size that was translated to $627.5 million. Borrowings denominated in British Pound Sterling and Euro are contemplated under this facility.

(6)

 

As of March 31, 2017, the Société Générale maximum facility size was composed of a €400.0 million facility size that was translated to $426.1 million. Borrowings denominated in U.S. Dollars, British Pound Sterling, and Euro are contemplated under this facility.

(7)

 

As of March 31, 2017, the JP Morgan maximum facility size was composed of a general $500.0 million facility size, under which U.S. Dollars and British Pound Sterling borrowings are contemplated.

The weighted-average outstanding balance of our credit facilities was $3.5 billion for the three months ended March 31, 2017. As of March 31, 2017, we had aggregate borrowings of $4.0 billion outstanding under our credit facilities, with a weighted-average cash coupon of LIBOR plus 1.90% per annum, a weighted-average all-in cost of credit, including associated fees and expenses, of LIBOR plus 2.11% per annum, and a weighted-average advance rate of 78.9%. As of March 31, 2017, outstanding borrowings under these facilities had a weighted-average maturity, excluding extension options and term-out provisions, of 1.5 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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GE Portfolio Acquisition Facility

During the second quarter of 2015, concurrently with our acquisition of the GE portfolio, we entered into an agreement with Wells Fargo to provide us with secured financing for the acquired portfolio. As of March 31, 2017, this facility provided for $1.4 billion of financing, of which $1.3 billion was outstanding and an additional $171.7 million was available to finance future loan fundings in the GE portfolio. The GE portfolio acquisition facility is non-revolving and consists of a single master repurchase agreement providing for asset-specific borrowings for each collateral asset.

The asset-specific borrowings under the GE portfolio acquisition facility were advanced at a weighted-average rate of 80% of our purchase price of the collateral assets and are repaid pro rata from collateral asset repayment proceeds. The asset-specific borrowings are currency matched to the collateral assets and accrue interest at a rate equal to the sum of (i) the applicable base rate plus (ii) a margin of 1.75%, which will increase to 1.80% and 1.85% in year four and year five, respectively. As of March 31, 2017, those borrowings were denominated in U.S. Dollars, Canadian Dollars, and British Pounds Sterling. The asset-specific borrowings are term matched to the underlying collateral assets with an outside maturity date of May 20, 2020, which may be extended pursuant to two one-year extension options. We guarantee obligations under the GE portfolio acquisition facility in an amount equal to the greater of (i) 25% of outstanding asset-specific borrowings, and (ii) $250.0 million. We had outstanding asset-specific borrowings of $1.3 billion and $1.5 billion under the GE portfolio acquisition facility as of March 31, 2017 and December 31, 2016, respectively.

 

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Asset-Specific Financings

The following table details statistics for our asset-specific financings ($ in thousands):

 

   

March 31, 2017

 
         Principal      Book      Wtd. Avg.            Wtd. Avg.  

Lender

 

Count

   Balance      Value      Yield/Cost(1)     Guarantee(2)      Term(3)  

JP Morgan(4)

               

Collateral assets

  1    $     286,887      $     285,955        L+3.88     n/a        Jan. 2020  

Financing provided

  1      233,679        233,413        L+1.89   $ 116,839        Jan. 2020  

Citibank(4)

               

Collateral assets

  2      204,617        204,548        L+4.40     n/a        Nov. 2020  

Financing provided

  2      161,163        161,123        L+2.42     40,291        Nov. 2020  

Bank of the Ozarks

               

Collateral assets

  2      169,986        167,510        L+6.51     n/a        June 2020  

Financing provided

  2      128,969        128,045        L+3.83     —          June 2020  

Wells Fargo

               

Collateral assets

  1      62,523        62,302        L+6.05     n/a        Dec. 2019  

Financing provided

  1      43,766        43,609        L+3.14     8,753        Dec. 2019  

Total

               

Collateral assets

  6    $     724,013      $     720,315        L+4.83     n/a     
 

 

  

 

 

    

 

 

    

 

 

   

 

 

    

Financing provided

  6    $     567,577      $     566,190        L+2.58   $ 165,883     
 

 

  

 

 

    

 

 

    

 

 

   

 

 

    

 

(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)

 

Other than amounts guaranteed on an asset-by-asset basis, 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.

(4)

 

Borrowings under these asset specific financings are cross collateralized with the related credit facility with the same lender.

Refer to Note 6 to our consolidated financial statements for additional terms and details of our secured debt agreements, including certain financial covenants.

Revolving Credit Agreement

During the second quarter of 2016, we entered into a $125.0 million full recourse secured revolving credit agreement with Barclays that is designed to finance first mortgage originations for up to six months as a bridge to term financing or syndication. Advances 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 initial maturity date of the facility is April 4, 2018 and is subject to two one-year extension options, exercisable at our option.

During the three months ended March 31, 2017, we had no borrowings under the revolving credit agreement and we recorded interest expense of $240,000, including $126,000 of amortization of deferred fees and expenses.

 

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Loan Participations Sold

The following table details statistics for our loan participations sold ($ in thousands):

 

     March 31, 2017  
          Principal      Book      Wtd. Avg.            Wtd. Avg.  

Loan Participations Sold

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

Total loan

   1    $   426,700      $ 423,575        L+4.48     n/a        Dec. 2019  

Senior participation(3)(4)

   1      355,583        354,131        L+2.72   $ 30,120        Dec. 2019  

 

(1)  

 

Our floating rate loans and related liabilities were 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)

 

Other than one instance where we entered into a related guarantee agreement for £24.0 million ($30.1 million as of March 31, 2017), our loan participations sold are non-recourse to us.

(3)

 

During the three months ended March 31, 2017, we recorded $2.6 million of interest expense related to our loan participations sold, of which $2.5 million was paid in cash.

(4)

 

The difference between principal balance and book value of loan participations sold is due to deferred financing costs of $1.5 million as of March 31, 2017.

Refer to Note 7 to our consolidated financial statements for additional details of our loan participations sold.

Non-Consolidated Senior Interests

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. These non-consolidated senior interests provide structural leverage for our net investments which are reflected in the form of mezzanine loans or other subordinate interests on our balance sheet and in our results of operations. The following table details the subordinate interests retained on our balance sheet and the related non-consolidated senior interests as of March 31, 2017 ($ in thousands):

 

     March 31, 2017  
          Principal      Book      Wtd. Avg.            Wtd. Avg.  

Non-Consolidated Senior Interests

   Count    Balance      Value      Yield/Cost(1)     Guarantee      Term  

Total loan

   3    $ 1,187,070        n/a        5.85     n/a        May 2021  

Senior participation

   3      973,681        n/a        4.25     n/a        May 2021  

 

(1)  

 

Our floating rate loans and related liabilities were 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, all-in yield/cost includes the amortization of deferred fees / financing costs.

Floating Rate Portfolio

Generally, our business model is such that rising interest rates will increase our net income, while declining interest rates will decrease net income. As of March 31, 2017, 91% of our loans by total loan exposure earned a floating rate of interest and were financed with liabilities that pay interest at floating rates, which resulted in an amount of net equity that is positively correlated to rising interest rates, subject to the impact of interest rate floors on certain of our floating rate loans. As of March 31, 2017, the remaining 9% of our loans by total loan exposure earned a fixed rate of interest, but are financed with liabilities that pay interest at floating rates, which resulted in a negative correlation to rising interest rates to the extent of our financing. In certain instances where we have financed fixed rate assets with floating rate liabilities, we have purchased interest rate swaps or caps to limit our exposure to increases in interest rates on such liabilities.

 

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Our liabilities are generally currency and index-matched to each collateral asset, resulting in a net exposure to movements in benchmark rates that varies by currency silo based on the relative proportion of floating rate assets and liabilities. The following table details our loan portfolio’s net exposure to interest rates by currency as of March 31, 2017 ($/£/€ /C$ in thousands):

 

     USD      GBP      EUR      CAD  

Floating rate loans(1)

   $ 7,537,464      £ 730,547      47,836      C$ 456,044  

Floating rate debt(1)(2)(3)

     (5,612,114      (571,016      —          (512,395
  

 

 

    

 

 

    

 

 

    

 

 

 

Net floating rate exposure(4)

   $ 1,925,350      £ 159,531      47,836      C$ (56,351
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)  

 

Our floating rate loans and related liabilities are indexed to the various benchmark rates relevant in each case 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.

(2)

 

Includes borrowings under secured debt agreements, loan participations sold, and non-consolidated senior interests.

(3)

 

Liabilities balance includes two interest rate swaps totaling C$17.3 million ($13.0 million as of March 31, 2017) that are used to hedge a portion of our fixed rate debt.

(4)

 

In addition, we have interest rate caps of $706.9 million, £15.1 million, and C$323.3 million to limit our exposure to increases in interest rates.

Convertible Notes

In November 2013, we issued $172.5 million of 5.25% convertible senior notes due on December 1, 2018, or the Convertible Notes. The Convertible Notes issuance costs, including underwriter discounts, are amortized through interest expense over the life of the Convertible Notes using the effective interest method. Including this amortization, our all-in cost of the Convertible Notes is 5.87%.

Refer to Notes 2 and 8 to our consolidated financial statements for additional discussion of our Convertible Notes.

 

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III. Our Results of Operations

 

Operating Results

The following table sets forth information regarding our consolidated results of operations ($ in thousands, except per share data):

 

     Three Months Ended
March 31,
     2017 vs
2016
 
     2017      2016      $  

Income from loans and other investments

        

Interest and related income

   $     118,517      $     123,025      $ (4,508

Less: Interest and related expenses

     46,674        45,381        1,293  
  

 

 

    

 

 

    

 

 

 

Income from loans and other investments, net

     71,843        77,644        (5,801

Other expenses

        

Management and incentive fees

     12,921        13,613        (692

General and administrative expenses

     7,428        6,795        633  
  

 

 

    

 

 

    

 

 

 

Total other expenses

     20,349        20,408        (59

Gain on investments at fair value

     —          66        (66

Income from equity investment in unconsolidated subsidiary

     —          138        (138
  

 

 

    

 

 

    

 

 

 

Income before income taxes

     51,494        57,440        (5,946

Income tax provision

     89        241        (152
  

 

 

    

 

 

    

 

 

 

Net income

     51,405        57,199        (5,794
  

 

 

    

 

 

    

 

 

 

Net income attributable to non-controlling interests

     —          (152      152  
  

 

 

    

 

 

    

 

 

 

Net income attributable to Blackstone Mortgage Trust, Inc.

   $ 51,405      $ 57,047      $ (5,642
  

 

 

    

 

 

    

 

 

 

Net income per share - basic and diluted

   $ 0.54      $ 0.61      $ (0.07

Dividends declared per share

   $ 0.62      $ 0.62      $ 0.00  

Income from loans and other investments, net

Income from loans and other investments, net decreased $5.8 million during the three months ended March 31, 2017 compared to the corresponding period in 2016. The decrease was primarily due to the decrease in the principal balance of our loan portfolio, which decreased by $586.6 million as of March 31, 2017 compared with March 31, 2016.

Other expenses

Other expenses are composed of management and incentive fees payable to our Manager and general and administrative expenses. Other expenses decreased by $59,000 during the three months ended March 31, 2017 compared to the corresponding period in 2016 due to (i) a decrease of $778,000 of incentive fees payable to our Manager, (ii) a decrease of $311,000 of general operating expenses, and (iii) a decrease of $279,000 of compensation expenses associated with our CT Legacy Portfolio incentive plans. These were partially offset by $1.2 million of additional non-cash restricted stock amortization related to shares awarded under our long-term incentive plans.

Gain on investments at fair value

During three months ended March 31, 2016, we recognized $66,000 of net gains on investments held by CT Legacy Partners. Our investment in CT Legacy Partners was substantially realized as of December 31, 2016.

Income from equity investment in unconsolidated subsidiary

During the three months ended March 31, 2016, we recognized $138,000 of promote income from CTOPI. The investment in CTOPI was fully realized as of December 31, 2016.

 

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Net income attributable to non-controlling interests

During the three months ended March 31, 2016, we recognized $152,000 of net income attributable to non-controlling interests. The non-controlling interests represent the portion of CT Legacy Partners net income that is not owned by us. Our investment in CT Legacy Partners was substantially realized as of December 31, 2016.

Dividends per share

During the three months ended March 31, 2017, we declared a dividend of $0.62 per share, or $58.8 million, which was paid on April 17, 2017 to common stockholders of record as of March 31, 2017. During the three months ended March 31, 2016, we declared a dividend of $0.62 per share, or $58.2 million.

IV. Liquidity and Capital Resources

 

Capitalization

We have capitalized our business to date through, among other things, the issuance and sale of shares of our class A common stock, borrowings under secured debt agreements, and the issuance and sale of Convertible Notes. As of March 31, 2017, we had 94,818,348 shares of our class A common stock outstanding representing $2.5 billion of stockholders’ equity, $5.8 billion of outstanding borrowings under secured debt agreements, and $172.5 million of Convertible Notes outstanding.

As of March 31, 2017, our secured debt agreements consisted of credit facilities with an outstanding balance of $4.0 billion, the GE portfolio acquisition facility with an outstanding balance of $1.3 billion, and $567.6 million of asset-specific financings. We also finance our business through the sale of loan participations and non-consolidated senior interests. As of March 31, 2017 we had $355.6 million of loan participations sold and $1.0 billion of non-consolidated senior interests outstanding.

See Notes 6, 7, and 8 to our consolidated financial statements for additional details regarding our secured debt agreements, loan participations sold, and Convertible Notes.

Debt-to-Equity Ratio and Total Leverage Ratio

The following table presents our debt-to-equity ratio and total leverage ratio:

 

     March 31, 2017    December 31, 2016

Debt-to-equity ratio(1)

       2.4x        2.3x

Total leverage ratio(2)

       2.9x        2.9x

 

(1)  

 

Represents (i) total outstanding secured debt agreements and convertible notes, less cash, to (ii) total stockholders’ equity, in each case at period end.

(2)

 

Represents (i) total outstanding secured debt agreements, convertible notes, loan participations sold, and non-consolidated senior interests, less cash, to (ii) total stockholders’ equity, in each case at period end.

Sources of Liquidity

Our primary sources of liquidity include cash and cash equivalents, available borrowings under our credit facilities and revolving credit agreement, and net receivables from servicers related to loan repayments which are set forth in the following table ($ in thousands):

 

     March 31, 2017      December 31, 2016  

Cash and cash equivalents

   $ 64,275      $ 75,567  

Available borrowings under secured debt agreements

     562,752        541,743  

Loan principal payments held by servicer, net(1)

     42,715        670  
  

 

 

    

 

 

 
   $ 669,742      $ 617,980  
  

 

 

    

 

 

 

 

(1)  

 

Represents loan principal payments held by our third-party servicer as of the balance sheet date which were remitted to us during the subsequent remittance cycle, net of the related secured debt balance.

In addition to our current sources of liquidity, we have access to liquidity through public offerings of debt and equity securities. To facilitate such offerings, in July 2016, we filed a shelf registration statement with the Securities and Exchange Commission, or the SEC, that is effective for a term of three years and expires in July 2019. The amount of securities to be issued pursuant to this shelf registration statement was not specified when it was filed and there is no specific dollar limit on the amount of securities we may issue. The securities covered by this registration statement include (i) class A common stock, (ii) preferred stock, (iii) debt securities, (iv) depositary shares representing preferred stock, (v) warrants, (vi) subscription rights, (vii) purchase contracts, and (viii) units consisting

 

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of one or more of such securities or any combination of these securities. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.

We may also access liquidity through a dividend reinvestment plan and direct stock purchase plan, under which 9,998,057 shares of class A common stock were available for issuance as of March 31, 2017, and our at-the-market stock offering program, pursuant to which we may sell, from time to time, up to $188.6 million of additional shares of our class A common stock as of March 31, 2017. Refer to Note 10 to our consolidated financial statements for additional details.

Our existing loan portfolio also provides us with liquidity as loans are repaid or sold, in whole or in part, and the proceeds from such repayments become available for us to reinvest.

Liquidity Needs

In addition to our ongoing loan origination activity, our primary liquidity needs include interest and principal payments under our $5.8 billion of outstanding borrowings under secured debt agreements, our Convertible Notes, our unfunded loan commitments, dividend distributions to our stockholders, and operating expenses.

Contractual Obligations and Commitments

Our contractual obligations and commitments as of March 31, 2017 were as follows ($ in thousands):

 

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

Unfunded loan commitments(1)

   $ 1,149,842      $ 247,100      $ 588,947      $ 313,795      $ —    

Principal payments under secured debt agreements(2)

     5,776,165        2,318,131        3,114,583        343,451        —    

Principal payments on convertible notes

     172,500        —          172,500        —          —    

Interest payments(2)(3)

     271,708        157,621        111,254        2,833        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total(4)

   $ 7,370,215      $ 2,722,852      $ 3,987,284      $ 660,079      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)  

 

The allocation of our unfunded loan commitments is based on the earlier of the commitment expiration date or the loan maturity date.

(2)

 

The allocation of our secured debt agreements for both principal and interest payments is based on the current maturity date of each individual borrowing under the respective agreement.

(3)

 

Represents interest payments on our secured debt agreements and convertible notes. Future interest payment obligations are estimated assuming the amounts outstanding and the interest rates in effect as of March 31, 2017 will remain constant into the future. This is only an estimate as actual amounts borrowed and rates will vary over time.

(4)

 

Total does not include $355.6 million of loan participations sold and $1.0 billion of non-consolidated senior interests as the satisfaction of these liabilities will not require cash outlays from us.

We are also required to settle our foreign currency forward contracts and interest rate swaps with our derivative counterparties upon maturity which, depending on foreign exchange and interest rate movements, may result in cash received from or due to the respective counterparty. The table above does not include these amounts as they are not fixed and determinable. Refer to Note 9 to our consolidated financial statement for details regarding our derivative contracts.

We are required to pay our Manager a base management fee, an incentive fee, and reimbursements for certain expenses pursuant to our Management Agreement. The table above does not include the amounts payable to our Manager under our Management Agreement as they are not fixed and determinable. Refer to Note 11 to our consolidated financial statements for additional terms and details of the fees payable under our Management Agreement.

As a REIT, we generally must distribute substantially all of our net taxable income to shareholders in the form of dividends to comply with the REIT provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. Our taxable income does not necessarily equal our net income as calculated in accordance with GAAP, or our Core Earnings as described above.

 

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Table of Contents

Cash Flows

The following table provides a breakdown of the net change in our cash and cash equivalents ($ in thousands):

 

     Three Months Ended March 31,  
     2017      2016  

Cash flows provided by operating activities

   $ 57,374      $ 65,781  

Cash flows used in investing activities

     (124,452      (146,007

Cash flows provided by financing activities

     55,202        91,749  
  

 

 

    

 

 

 

Net (decrease) increase in cash and cash equivalents

   $ (11,876    $ 11,523  
  

 

 

    

 

 

 

We experienced a net decrease in cash of $11.9 million for the three months ended March 31, 2017, compared to a net increase of $11.5 million for the three months ended March 31, 2016. During the three months ended March 31, 2017, we borrowed a net $117.7 million under our secured debt agreements and received $567.3 million of proceeds from loan principal collections. We used the proceeds from our debt and equity financing activities to fund $702.4 million of new loans during the three months ended March 31, 2017.

Refer to Notes 6 and 7 to our consolidated financial statements for additional discussion of our secured debt obligations and participations sold. Refer to Note 3 to our consolidated financial statements for further discussion of our loan activity.

V. Other Items

 

Income Taxes

We elected to be taxed as a REIT, effective January 1, 2003, 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, 2017 and December 31, 2016, we were in compliance with all REIT requirements.

Refer to Note 12 to our consolidated financial statements for additional discussion of our income taxes.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires our Manager to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Actual results could differ from these estimates. There have been no material changes to our Critical Accounting Policies described in our annual report on Form 10-K filed with the SEC on February 14, 2017.

Refer to Note 2 to our consolidated financial statements for the description of our significant accounting policies.

 

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Table of Contents

VI. Loan Portfolio Details

 

The following table provides details of our loan portfolio, on a loan-by-loan basis, as of March 31, 2017 ($ in millions):

 

   

Loan Type(1)

 

Origination

Date(2)

  Total
Loan(3)
    Principal
Balance(3)
    Net Book
Value
    Cash
Coupon(4)
    All-in
Yield(4)
   

Maximum

Maturity(5)

 

                    Location                     

 

Property

Type

 

Loan Per

SQFT /Unit /Key

  LTV(2)    

Risk

Rating

1

  Senior loan(3)   5/15/2015   $        590.0       $     504.6     $       85.2       L + 4.25%       L + 4.76%     5/15/2020   Miami   Retail   673 / sqft     36%     3

2

  Senior loan(3)   8/6/2015     462.9       462.9       83.5       4.48%       5.81%     10/29/2022   Diversified - EUR   Other   n/a     71%     3

3

  Senior loan   5/22/2014     426.7       426.7       423.6       L + 4.20%     L + 4.48%     12/31/2019   Diversified - UK   Hotel   115,951 / key     59%     3

4

  Senior loan   5/1/2015     320.3       294.5       293.4       L + 3.45%       L + 3.83%     5/1/2020   New York   Office   376 / sqft     68%     3

5

  Senior loan   1/7/2015     315.0       286.9       286.0       L + 3.50%     L + 3.88%     1/9/2020   New York   Office   246 / sqft     53%     2

6

  Senior loan   6/4/2015     260.0       260.0       263.1       L + 4.34%       L + 4.20%     8/12/2020   Diversified - CAN   Hotel   40,153 / key     54%     2

7

  Senior loan   3/31/2017     258.4       241.5       238.9       L + 4.15%       L + 4.54%     4/9/2022   Maui   Hotel   318,182 / key     75%     3

8

  Senior loan(3)   6/30/2015     222.7       219.6       43.5       L + 4.75%       L + 5.18%     7/9/2020   San Francisco   Condo   877 / sqft     66%     3

9

  Senior loan   6/23/2015     223.5       213.8       213.2       L + 3.65%       L + 4.00%     10/1/2020   Washington DC   Office   239 / sqft     72%     2

10

  Senior loan   7/31/2014     215.0       198.3       198.3       L + 3.50%     L + 3.56%     8/9/2019   Chicago   Office   262 / sqft     64%     2

11

  Senior loan   8/19/2016     200.0       187.5       186.9       L + 3.64%       L + 4.10%     9/9/2021   New York   Office   572 / sqft     69%     3

12

  Senior loan   8/3/2016     275.9       185.6       183.4       L + 4.66%       L + 5.19%     8/9/2021   New York   Office   255 / sqft     57%     3

13

  Senior loan   4/15/2016     200.0       183.1       182.0       L + 4.25%       L + 4.86%     5/9/2021   New York   Office   172 / sqft     40%     3

14

  Senior loan   2/25/2014     181.0       181.0       180.5       L + 4.75%     L + 5.07%     3/9/2019   Diversified - US   Hotel   95,113 / key     58%     2

15

  Senior loan   12/22/2016     204.5       171.2       169.4       L + 3.50%       L + 4.07%     1/9/2022   New York   Office   241 / sqft     66%     3

16

  Senior loan   8/17/2016     187.0       169.4       167.9       L + 3.75%       L + 4.13%     9/9/2021   San Francisco   Office   493 / sqft     65%     3

17

  Senior loan   6/3/2016     160.0       160.0       160.0       L + 4.42%       L + 4.42%     6/9/2021   Los Angeles   Office   86 / sqft     41%     3

18

  Senior loan   3/8/2016     181.2       154.3       153.0       L + 3.55%       L + 3.90%     3/9/2021   Orange County   Office   193 / sqft     52%     3

19

  Senior loan   2/17/2017     150.0       140.0       138.6       L + 4.65%       L + 5.04%     3/9/2022   Honolulu   Hotel   224,719 / key     65%     3

20

  Senior loan   10/30/2013     140.0       140.0       139.7       L + 4.38%       L + 4.54%     9/9/2020   San Francisco   Hotel   215,716 / key     66%     2

21

  Senior loan   10/5/2016     145.5       133.7       132.5       L + 4.35%       L + 4.84%     10/9/2021   Diversified - US   Hotel   50,413 / key     61%     2

22

  Senior loan   1/30/2014     133.4       133.4       133.1       L + 4.30%       L + 5.32%   12/1/2017   New York   Hotel   212,341 / key     38%     2

23

  Senior loan   12/9/2014     159.6       133.0       133.0       L + 3.80%       L + 3.80%     12/9/2019   Diversified - US   Office   79 / sqft     65%     2

24

  Senior loan   10/26/2016     123.5       123.5       122.4       L + 4.20%       L + 4.56%     11/9/2021   Oakland   Office   126 / sqft     72%     2

25

  Senior loan   3/4/2014     133.0       112.6       112.6       L + 4.00%       L + 5.90%     3/4/2018   London - UK   Office   641 / sqft     42%     3

26

  Senior loan   2/20/2014     110.0       110.0       109.6       L + 3.95%       L + 4.16%     3/9/2021   Long Island   Office   161 / sqft     74%     2

27

  Senior loan   9/30/2013     105.7       105.7       105.7       L + 3.94%       L + 3.93%     9/30/2020   New York   Multi   131,811 / unit     67%     2

28

  Senior loan   6/23/2015     105.2       105.2       107.3       L + 3.30%       L + 3.91%     7/31/2017   Diversified - US   Other   259,807 / unit     57%     3

29

  Senior loan   10/17/2016     104.2       104.2       103.3       L + 3.95%       L + 4.31%     10/21/2021   Diversified - UK   Other   148 / sqft     73%     3

30

  Senior loan   6/24/2015     107.3       102.8       102.4       L + 4.25%       L + 4.62%     7/9/2020   Honolulu   Hotel   172,557 / key     67%     2

continued…

 

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Table of Contents
   

Loan Type(1)

 

Origination

Date(2)

  Total
Loan(3)
    Principal
Balance(3)
    Net Book
Value
    Cash
Coupon(4)
    All-in
Yield(4)
   

Maximum

Maturity(5)

 

                    Location                     

 

Property

Type

 

Loan Per

SQFT /Unit /Key

  LTV(2)    

Risk

Rating

31

  Senior loan   7/28/2016            116.5            101.8             100.9       L + 3.60%       L + 4.02%     8/9/2021   Atlanta   Office   161 / sqft     70%     3

32

  Senior loan   3/12/2015     101.2       101.1       100.8       L + 3.25%       L + 3.61%     3/11/2020   Orange County   Office   268 / sqft     66%     1

33

  Senior loan   4/27/2016     100.8       100.8       100.3       L + 4.35%       L + 5.02%     5/9/2021   Chicago   Office   134 / sqft     74%     3

34

  Senior loan   2/18/2016     100.4       100.4       99.8       L + 3.75%       L + 4.41%     4/20/2019   London - UK   Office   853 / sqft     44%     3

35

  Senior loan   6/24/2015     100.0       100.0       99.8       L + 3.50%       L + 3.86%     12/1/2019   Virginia   Office   186 / sqft     43%     2

36

  Senior loan   1/22/2016     128.5       96.9       96.1       L + 4.25%       L + 4.76%     2/9/2021   Los Angeles   Retail   253 / sqft     64%     3

37

  Senior loan   2/12/2016     225.0       91.2       88.9       L + 5.75%       L + 7.07%     2/11/2021   Seattle   Office   121 / sqft     48%     3

38

  Senior loan   5/16/2014     100.0       88.2       87.6       L + 3.85%       L + 4.21%     4/9/2022   Miami   Office   190 / sqft     67%     3

39

  Senior loan   3/10/2016     99.2       88.0       87.3       L + 4.10%       L + 4.52%     4/9/2021   Chicago   Multi   582,867 / unit     63%     3

40

  Senior loan   6/23/2015     87.5       87.5       87.5       L + 3.41%       L + 3.83%     7/31/2019   Virginia   Office   141 / sqft     75%     3

41

  Senior loan   2/18/2015     89.9       84.5       84.5       L + 3.75%       L + 3.75%     3/9/2020   Diversified - CA   Office   174 / sqft     71%     2

42

  Senior loan   5/22/2014     98.7       83.1       82.8       L + 3.75%       L + 4.07%     6/15/2021   Orange County   Office   152 / sqft     67%     2

43

  Senior loan   7/11/2014     82.2       82.2       82.1       L + 3.65%       L + 4.03%     8/9/2019   Chicago   Office   159 / sqft     64%     2

44

  Senior loan   10/28/2014     85.0       82.1       81.9       L + 3.75%       L + 4.12%     11/9/2019   New York   Retail   1,534 / sqft     78%     2

45

  Senior loan   6/23/2015     81.4       81.4       81.8       L + 3.65%       L + 3.81%     11/30/2018   Diversified - US   Hotel   68,882 / key     83%     2

46

  Senior loan   7/23/2014     80.0       78.8       78.6       L + 5.00%       L + 5.87%     8/9/2019   Atlanta   Office   157 / sqft     43%     2

47

  Senior loan   5/1/2015     83.5       78.4       78.0       L + 3.95%       L + 4.20%     5/9/2020   Maryland   Hotel   200,905 / key     67%     2

48

  Senior loan   1/31/2017     134.8       78.3       77.0       L + 5.00%       L + 5.47%     2/9/2022   Boston   Other   424 / sqft     60%     3

49

  Senior loan   2/12/2016     100.0       77.0       76.7       L + 4.15%       L + 4.68%     3/9/2021   Long Island   Office   115 / sqft     65%     3

50

  Senior loan   6/23/2015     76.2       76.0       76.1       5.10% (6)      5.39% (6)    8/31/2020   Diversified - FL   MHC   20,734 / unit     69%     1

51

  Senior loan   6/4/2015     78.1       74.8       75.6       5.05% (6)      5.18% (6)    3/28/2019   Diversified - CAN   Retail   39 / sqft     74%     3

52

  Senior loan   3/31/2017     91.2       66.7       65.8       L + 4.30%       L + 4.83%     4/9/2022   New York   Office   327 / sqft     64%     3

53

  Senior loan   11/30/2016     79.0       63.9       63.2       L + 3.95%       L + 4.39%     12/9/2021   Chicago   Retail   1,263 / sqft     54%     3

54

  Senior loan   10/6/2014     67.0       62.8       62.6       L + 4.35%       L + 4.78%     10/9/2019   Long Island   Hotel   102,091 / key     56%     2

55

  Senior loan   11/17/2014     69.6       62.5       62.3       L + 5.50%       L + 6.05%     12/9/2019   Diversified - CAN   Office   53 / sqft     53%     2

56

  Senior loan   3/11/2014     65.0       62.1       62.0       L + 4.50%       L + 5.00%     4/9/2019   New York   Multi   698,177 / unit     65%     3

57

  Senior loan   6/29/2016     75.4       62.0       61.4       L + 3.65%       L + 4.08%     7/9/2021   Fort Lauderdale   Office   239 / sqft     64%     3

58

  Senior loan   1/13/2014     60.0       60.0       59.1       L + 3.45%       L + 4.89%     6/9/2020   New York   Office   284 / sqft     53%     2

59

  Senior loan   2/27/2015     73.7       58.2       58.0       L + 3.55%       L + 4.00%     2/26/2020   Chicago   Office   122 / sqft     64%     2

60

  Senior loan   9/1/2016     57.9       57.9       57.5       L + 4.35%       L + 4.99%     9/1/2021   Atlanta   Multi   257,283 / unit     72%     3

continued…

 

48


Table of Contents
   

Loan Type(1)

 

Origination

Date(2)

  Total
Loan(3)
    Principal
Balance(3)
    Net Book
Value
    Cash
Coupon(4)
    All-in
Yield(4)
   

Maximum

Maturity(5)

 

                    Location                     

 

Property

Type

 

Loan Per

SQFT /Unit /Key

  LTV(2)    

Risk

Rating

61

  Senior loan   6/4/2015            53.4            53.4             53.3       L + 3.25%       L + 3.42%     7/6/2017   Norwich - UK   Retail   149 / sqft     55%     1

62

  Senior loan   5/20/2015     52.9       52.9       53.1       L + 3.50%       L + 3.75%     12/31/2018   Chicago   Office   135 / sqft     67%     3

63

  Senior loan   9/26/2014     51.0       51.0       51.0       L + 4.00%       L + 4.00%     10/9/2019   Dallas   Office   115 / sqft     70%     2

64

  Senior loan   9/9/2014     56.0       50.4       50.3       L + 4.00%       L + 4.31%     9/9/2019   Ft. Lauderdale   Office   145 / sqft     71%     2

65

  Senior loan   11/23/2016     55.4       50.0       49.5       L + 3.50%       L + 3.80%     12/9/2022   New York   Multi   208,333 / unit     65%     3

66

  Senior loan   4/1/2014     50.0       50.0       50.0       L + 4.20%       L + 4.73%     4/9/2019   Honolulu   Hotel   161,290 / key     69%     2

67

  Senior loan   5/20/2015     58.0       49.1       49.0       5.23% (6)      5.51% (6)    6/30/2019   Charlotte   Office   97 / sqft     71%     3

68

  Senior loan   12/27/2016     57.2       48.5       47.9       L + 4.65%       L + 5.08%     1/9/2022   New York   Multi   1,212,857 / unit     64%     3

69

  Senior loan   9/22/2016     46.0       45.5       45.2       L + 4.25%       L + 4.90%     10/9/2019   New York   Office   456 / sqft     51%     3

70

  Senior loan   11/28/2013     59.0       45.3       45.2       L + 4.38%       L + 5.43%     1/20/2019   London - UK   Office   556 / sqft     58%     3

71

  Senior loan   11/19/2015     50.0       44.6       44.5       L + 4.00%       L + 4.32%     10/9/2018   New York   Office   1,145 / sqft     57%     3

72

  Senior loan   3/26/2014     43.3       42.9       42.8       L + 4.30%       L + 4.70%     4/9/2019   East Bay   Office   123 / sqft     71%     2

73

  Senior loan   2/9/2017     43.6       41.6       41.1       L + 4.50%       L + 4.98%     2/9/2022   London   Office   644 / sqft     69%     3

74

  Senior loan   6/11/2015     40.0       40.0       40.2       5.13% (6)      5.36% (6)    9/30/2020   Diversified - US   MHC   22,855 / unit     79%     2

75

  Senior loan   6/26/2015     42.1       38.2       38.1       L + 3.75%       L + 4.36%     7/9/2020   San Diego   Office   174 / sqft     73%     2

76

  Senior loan   8/25/2015     43.8       37.3       37.2       L + 4.50%       L + 5.13%     9/9/2018   Los Angeles   Office   166 / sqft     46%     3

77

  Senior loan   5/20/2015     38.2       35.6       35.6       4.67% (6)      5.23% (6)    1/31/2019   Los Angeles   Office   166 / sqft     59%     2

78

  Senior loan   6/11/2015     35.4       35.4       35.5       4.90% (6)      5.12% (6)    7/31/2019   Tampa   MHC   30,889 / unit     80%     3

79

  Senior loan   6/12/2014     35.0       35.0       35.0       L + 4.00%       L + 4.61%     6/30/2018   Los Angeles   Office   40 / sqft     44%     3

80

  Senior loan   6/11/2015     34.3       34.3       34.4       5.34%       5.58%     5/31/2020   Diversified - US   MHC   20,965 / unit     65%     2

81

  Senior loan   10/22/2015     32.6       32.6       32.5       L + 4.50%       L + 5.03%     10/22/2018   London - UK   Office   2,395 / sqft     64%     3

82

  Senior loan   5/20/2015     36.5       32.0       32.0       L + 3.60%       L + 3.77%     7/11/2019   Los Angeles   Office   388 / sqft     46%     1

83

  Senior loan   12/30/2013     30.9       30.5       30.4       L + 4.50%       L + 4.75%     1/9/2019   Phoenix   Office   95 / sqft     60%     2

84

  Senior loan   4/4/2014     30.7       30.0       30.0       L + 4.25%       L + 4.57%     4/9/2019   San Francisco   Office   285 / sqft     65%     2

85

  Senior loan   4/17/2015     28.8       28.8       28.6       L + 4.50%       L + 4.95%     4/20/2020   Hague - NL   Hotel   93,988 / key     71%     3

86

  Senior loan   5/28/2015     31.7       27.2       27.3       L + 4.35%       L + 5.20%     12/31/2017   San Jose   Office   72 / sqft     48%     3

87

  Senior loan   6/4/2015     26.1       26.1       26.0       5.97%       6.88%     7/1/2017   Edmonton - CAN   MHC   29,966 / unit     49%     1

88

  Senior loan   2/28/2014     26.0       26.0       25.9       L + 4.00%       L + 4.26%     3/9/2019   Phoenix   Other   130,653 / unit     69%     2

89

  Senior loan   6/11/2015     26.0       26.0       25.9       5.24%(6)       5.73%(6)     11/30/2020   West Palm Beach   MHC   53,608 / unit     75%     2

90

  Senior loan   6/11/2015     24.5       24.5       24.4       5.35%(6)       5.85%(6)     11/30/2020   Ft. Lauderdale   MHC   49,696 / unit     70%     2

continued…

 

49


Table of Contents
   

Loan Type(1)

 

Origination

Date(2)

  Total
Loan(3)
    Principal
Balance(3)
    Net Book
Value
    Cash
Coupon(4)
    All-in
Yield(4)
   

Maximum

Maturity(5)

 

                    Location                     

 

Property

Type

 

Loan Per

SQFT /Unit /Key

  LTV(2)    

Risk

Rating

91

  Senior loan   6/18/2014             22.2            22.2             22.1       L + 4.00%       L + 4.43%     7/20/2019   Diversified - NL   Office   58 / sqft     69%     2

92

  Senior loan   5/28/2015     48.9       21.9       21.8       L + 4.00%       L + 5.63%     6/30/2018   Los Angeles   Office   25 / sqft     53%     3

93

  Senior loan   5/20/2015     21.0       21.0       21.1       L + 4.25%       L + 4.71%     9/30/2018   Phoenix   Multi   68,554 / unit     73%     2

94

  Senior loan   1/26/2017     288.0       21.0       17.6       L + 5.50%       L + 6.06%     2/9/2022   Boston   Office   56 / sqft     42%     2

95

  Senior loan   5/28/2015     20.7       20.7       20.8       L + 3.95%       L + 4.51%     3/31/2019   Pittsburgh   Hotel   93,043 / key     71%     4

96

  Senior loan   6/4/2015     20.1       20.1       19.9       4.50%       4.92%     12/23/2021   Montreal - CAN   Office   55 / sqft     45%     2

97

  Senior loan   6/11/2015     18.1       18.1       18.0       4.95% (6)      5.51% (6)    11/30/2020   Ft. Lauderdale   MHC   26,430 / unit     51%     2

98

  Senior loan   6/4/2015     17.2       17.2       17.2