Great, thanks Shellie. Good morning and welcome to Blackstone Mortgage Trust’s third quarter conference call.

I am joined today by Mike Nash, Executive Chairman, Steve Plavin, President and CEO; Tony Marone, Chief Financial Officer; and Doug Armer, Head of Capital Markets. Last night we filed our Form 10-Q and issued a press release with a presentation of our results, which are available on our website.

I’d like to remind everyone that today’s call may include forward-looking statements, which are uncertain and outside of the company’s control. Actual results may differ materially.

For a discussion of some of the risks that could affect results, please see Risk Factors sections of our most recent 10-K and subsequent 10-Qs. We do not undertake any duty to update forward-looking statements.

We will refer to certain non-GAAP measures on this call and for reconciliations, you should refer to the press release and our 10-Q, which are posted on our website and have been filed with the SEC. This audio cast is copyrighted material of Blackstone Mortgage Trust and may not be duplicated without our consent.

So, a quick recap of our results before I turn things over to Steve. We reported GAAP net income per share of $0.69 for the third quarter.

We reported core earnings per share of $0.71, which was up from $0.67 in the second quarter. A few weeks ago, we paid a dividend of $0.62 per share which equates to an attractive annualized yield of 8.3% using the current stock price.

If you have any questions following today's call, please let me know and with that, I’ll turn things over to Steve.

Thanks, Weston. And good morning, everyone.

BXMT delivered excellent results in the third quarter highlighted by increased originations, new financing capacity and 100% credit performance. Core earnings per share of $0.71 boosted by yield maintenance from prepayments in the GE fixed rate loan portfolio provided very strong coverage of our $0.62 dividend.

The market environment for our business continues to improve following a very volatile start to the year. Value-added opportunistic investors, the primary generators of lending opportunities for BXMT wrapped up their activity with new acquisitions and we expect this trend to continue.

We are also seeing more refinance opportunities on properties with sponsors are looking to recapitalize and extend the hold period. The expanding impact of new regulations for banks and CMBS lenders has improved the competitiveness of non-bank portfolio lenders like BXMT.

Banks and CMBS originators are operating less efficiently and at lower volumes which helps to keep the larger transition loans that we pursue out of those markets. Most of our competition comes from private debt funds and other mortgage REITs and we were able to compete very effectively against this group given our access to efficiently price debt, track record and other platform benefits as part of Blackstone Real Estate.

Demand for space and property NOIs improved in the coastal markets where we focused our lending providing a healthy fundamental backdrop and the impact of new supply in most sectors of these markets remains calm, which bodes well for the continuation of the current balance state of the credit cycle. We do not see dangerous signs in the property and capital markets.

Cap ratio remained low as the global pursuit of yields and safety has increased demand for major market US real estates. And the floating rate CMBS markets were the most aggressive large loan prefaces lending took place is barely a factor in the lending landscape.

We originated $957 million of loans in the third quarter and already have another $804 million of loans that closed post-quarter end or are now in closing. Our Q3 originations reflect our focus on major markets where property and sponsor quality is higher and we realized our greatest advantages from our affiliation with Blackstone’s real estate ownership platform.

80% of the new Q3 loan exposure was secured by office properties located in New York and California. Our new loans have an average size of $154 million in all our senior and floating rates.

Our third quarter also had an extraordinary amount of repayments $1.6 billion. The repayment spike was primarily attributable to $865 million of loans to a single sponsor repaid in the corporate recap.

The GE loan portfolio, the source of most of the repayment activity initially included $1.4 billion of primarily fixed rate loans backed by manufactured housing communities. That sector now coveted by Fannie Mae and Freddie Mac.

We like the sector as well, but can’t compete with the agencies to the MAC’s portfolio refinancings. So we expected the MAC loans to roll-off as the yield maintenance prepayment penalties reduced over time.

During the quarter, $969 million of MAC loans repaid including the $865 million loan to the single-sponsor that repaid us with agency financing in conjunction with their recap. These repayments generated $5.1 million of additional income in the quarter, essentially accelerating interest that would have been earned in future periods into the third quarter.

Repayments significantly reduced our fixed rate loan exposure, improving our potential earnings benefit from higher LIBOR. MAC exposure was reduced from 12% to 3% of our portfolio, so most of these repayments are now behind us.

We will recycle that capital for the coming quarters into new floating rate loan originations across the primary property sectors that we target. We added another new lender to our line of credit providers during the quarter and we expect that relationship to grow.

While we expanded capacity, we have not compromised on structure and our new credit continues to be longer-term, match-funded and without capital market’s mark-to-market provision. Now moving through our fourth quarter after the relaunch, BXMT continues to successfully execute on a simple, focused first mortgage strategy.

Our model is designed to generate a predictable and growing dividend through the cycle and we’ve now delivered on that for over three years with current core earnings coverage of 109% for the year-to-date period. We have and we’ll continue to benefit from the unparalleled benefits of Blackstone’s sponsorship which strongly differentiates us in the market.

And for our stockholders, an investments in BXMT’s stock has delivered a total return of more than 40% since our re-IPO outperforming peers in the relevant indices. Even with this performance, our stock is trading at 8.3% dividend yield, a very attractive one in this low rate environment.

I’d like to thank our stockholders for their ongoing support and we look forward to continuing to drive great value for our investors. And with that, I will turn it over to Tony.

Thank you, Steve, and good morning everyone. This quarter, BXMT delivered strong headline results with core earnings of $0.71 per share, a $0.07 increase in book value and loan originations of almost $1 billion.

We originated six new floating rate loans and upsized four loans during the quarter for a total origination volume of $957 million with an average loan size of $154 million for new loans. The loans that we originated this quarter have an average yield of LIBOR plus 4.5%, with an average LTV of 64% in line with our existing portfolio.

Repayments of $1.6 billion during the quarter outpaced loan fundings of $926 million driven by $865 million of repayments received from the four related manufactured housing loans we acquired from GE that Steve highlighted earlier. Absent these loans, our portfolio repayments of $756 million were consistent with our general expectation of typical quarterly transaction volume and below 2Q repayments of $966 million.

As we have noted on pervious calls, although the amount of originations and repayments will generally be in line over the medium-term, the exact amount and timing of originations and repayments will vary somewhat from quarter-to-quarter. These 3Q repayments contributed to three quarter-over-quarter changes in our loan portfolio attributes.

First, the amount of loans collateralized by manufactured housing decreased to 3% from 12%, a trend that as Steve noted, we expect will continue. Second, the fixed rate component of our loan portfolio decreased to 14% from 22% further increasing the correlation of our earnings results increases in floating rate indices, and third, our portfolio weighted average risk rating increased to 2.5 to 2.3 on our 5 point scale following the repayments of several one and two rated loans during the quarter.

This increase was not driven by credit issues in our portfolio or risk rating increases. Overall, our portfolio continues to have no defaulted or impaired loans and we do not have any four or five risk rated loans.

Our overall portfolio LTV of 60% provides a healthy equity cushion against potential future collateral value declines and demonstrates the overall strong credit profile of our loan book. We financed our 3Q originations, primarily using our existing revolving credit facilities which had an all-in cost of LIBOR plus 2.01% at quarter end.

We continue to broaden and strengthen our banking relationships adding a $207 million asset-specific financing with a new counterparty and extending maturities of $1 billion of our existing revolving credit facilities during the quarter. We closed the quarter with a debt-to-equity ratio of only 2.2 times, down from 2.5 times at June 30th as the loan repayments I referred to earlier allowed us to pay down our revolving credit facilities and efficiently manage our balance sheet.

Including cash and revolving credit capacity, we entered the fourth quarter with $760 million of liquidity or approximately $3 billion of potential loan origination capacity. Turning to our operating results.

We generated core earnings of $0.71 per share, up $0.04 from 2Q, driven by prepayments and yield maintenance fees received during the quarter in connection with the $1.6 billion of loan repayment. Although we typically collect some amount of such fees in a given quarter, in 3Q we received $7.1 million of fees related to repayments of fixed rate loans in the GE portfolio that could be considered outside of our typical results.

We would not ordinarily expect to see such a large amount of prepayment fees in a given quarter. These prepayment fees effectively shifted earnings into 3Q that would have otherwise been generated by the repaid loans in the coming quarters by converting future coupon payments into fees collected and recognized upon repayment.

These additional repayments bring us into 4Q with levels of liquidity on our balance sheet somewhat higher than we typically would have and therefore will temper earnings over the coming quarters as we redeploy capital into new loan originations. Accordingly, we maintained our quarterly dividend at $0.62 per share, which is an amount that we believe, is sustainable and supportable for our business.

GAAP net income of $0.69 per share increased less than core earnings, up $0.02 from the second quarter with the incremental prepayment fees received offset by a decline in GAAP net income related to our CT Legacy Portfolio, which recorded some non-recurring mark-to-market income in 2Q and continues to liquidate in the ordinary course. Lastly, our book value increased to $26.61 from $26.54 at 6/30 representing $0.11 of incremental retained earnings during the quarter offset by $0.04 of unrealized foreign currency markdowns recorded through OCI.

To close, I would like to highlight some key thematic differentiators of BXMT that continued to be reflected in our 3Q results in an overall $9 billion senior lending business. We remain highly correlated to increases in US dollar LIBOR with an increase of 100 basis points generating approximately $0.19 of core earnings on an annual basis.

Our core earnings are driven entirely by the income generated by our balance sheet loan portfolio without reliance on the securitization or other transaction in the markets. We generated returns for our stockholders by making fundamentally low risk senior loans and financing them prudently with best-in-class credit facilities, free of capital markets-based margin call provisions and lastly, BXMT is uniquely positioned among mortgage REITs and other specialty finance companies as a component of Blackstone’s real estate platform providing us with expertise and market insights that drive every facet of our business.

Thank you for your support and with that, I will turn to the operator to open the call for questions.

Thanks. Shellie, if you could open it for questions.

Thanks for taking my questions. Just on the lending market, can you comment on what trends you are seeing in loan spreads, the cash coupons looked fairly stable sequentially and just wanted to get your sense of whether do you think we are in a compressing environment in terms of where spreads are?

Or if there is enough lenders pulling back or being a little bit more cautious on their underwritings that we are in basically a stable spread environment.

I think, Jade, we are in a stable spread environment. I think we were sort of in the sweet spot of the lending cycle now and so, there are lot of opportunities go into the market.

There are lenders, there is competition, but we are winning a lot of that competition because we are a lower cost of capital and so we expect our spreads, our returns to stay in the historic range that we established and see since the relaunch. It’s really a good level for our business.

In terms of competition, are you seeing banks compete on these – on transitional loans? I was at a conference yesterday in HSBC, for example, mentioned transitional lending is an area of target for them.

We occasionally see banks from the smaller opportunities, but generally for the larger stuff that we target, the banks aren’t really able to compete. Even though banks that are active in transitional lending tend not to view at the syndicated loan activity, and most of the loans that we like are too large for any one bank to hold.

So they do fall into that syndicate loan bucket and then they begin to get impacted by their – the challenges of the bank market execution, the current regulatory environment. So, I don’t see banks as a big competitive factor for us, again except from the smaller loans that we occasionally have to do.

In terms of the portfolio diversification, can you comment on the UK exposure and what trends you are seeing in those loans, as well as on the condo exposure?

Sure. The UK exposure, I would say is, similar to – so what we discussed on our last call, we have a relatively small percentage of our UK portfolio in London office which is the one area that we think requires the most focus.

In general, all the assets are performing as we expected in the LTV’s , that portfolio are very low. And one of the office asset actually signed a very large lease since we last reported.

The leasing level of that one asset has gone from about 30% to about 70% and it’s changed its profile. So it’s sort of proceeding along the lines of its business plan that we anticipated even prior to Brexit.

So, we are not overly concerned about our UK exposure. It’s really, they are high quality loans with low LTVs with strong sponsors.

We are seeing an improved environment in terms of new opportunities there. The banks have taken a step back.

We hadn’t originated a lot of new loans coming into Brexit. Only about, in the prior nine months, no new loans in the UK and that was primarily a function of the banks being super competitive and us just not be on the – get good risk-adjusted returns.

Now we are seeing the environment improved as it relates to sort of opportunistic chances to deploy our capital. Obviously, we are being cautious given the some of the uncertainties – that was throughout in the economy in the UK.

But we are hopeful to see some higher quality opportunities that maybe we wouldn’t have seen has the market not been disrupted.

And can you also comment on the condo exposure?

Yes, we have – our condo exposure is very light. We don’t have any significant New York City high-end condo.

We haven’t done any condo construction loans. Most of our condo exposure really properties that operate as rentals, but with the sponsor has incorporated into the loan the flexibility to do unit-by-unit sales as a means of repaying our loan.

So, no concerns. So we are really not exposed to the headlines that you might read about in the New York City condo market which is not a participant in the high end of that market.

Thanks for taking my questions.

You are welcome.

Good morning guys. Thanks so much for taking my questions.

Good morning, Jessica.

In terms of the dividend, I know that you touched on this quite a bit during the call, but, how do we think about it if your core earnings continue to more than cover the dividend? Is there any eye towards a dividend increase or how do you think about that?

Hey, Jessica, it’s Doug. I mean, I think, I think the way to think about, and you are right, Tony did touched on it in the call.

I think, when we look at the upcoming quarters, we focus on the amount of liquidity we have in the reinvestments of the capital that’s come back in this past quarter and so, I think the implication for the dividend is, one is stability, and that’s really the way that we think about it.

Okay. And then in terms of – just what kind of market opportunities you are seeing?

Are there any that you are shying away from right now or any new geographies that you like or don’t like? Just as the banks are stepping and there is a little bit more opportunity is, as Steve noted earlier.

I think, Jess, I think in general, we try to avoid the markets in the sectors that are most exposed to new supply that have the least barriers to competition and builders are starting new properties. One of the nice things about the markets that we focus that tend to be supply constrained, that tend to have a very high cost of new development and generally we are lending at very significant discounts to replace the cost.

So we are inflated from a lot of those factors. We’ve been very cautious on hotels, very cautious on suburban real estate, and really focused on core real estate in major markets that have dynamic demand for space and we think that that’s the highest quality assets generally has better sponsors, better real estate and more liquidity through cycle.

So it’s really consistent with the overall real estate philosophy of Blackstone that one that served us very well.

All right. Thank you so much.

Thanks, Jessica.

You are welcome.

Thanks. You guys mentioned that this quarter is off to a strong start in terms of originations.

I guess, how should we think about how the quarter typically plays out at the closer to year end in terms of volumes and how your pipeline looks as far as opportunities beyond the ones that already closed or in the process of closing?

Great question, Doug. It’s usually one or two opportunities that come later in the quarter that need to close by year end that tend to be really extraordinary opportunities.

And so, there is certainly still time left in the quarter for new originations to close this quarter. Our pipeline is very active.

It’s really picked up from early in the year and the trends are positive. So, we feel very good about continuing to build on the pipeline and we certainly have a goal to close more loans through the core than what would - identified thus far and move into Q1 with a very strong forward pipeline.

Great. Thank you.

You are welcome.

Hi, good morning and thanks for taking the question. I would like to switch a little bit and talk a little bit about life after GE.

Obviously, that’s been a great transaction, but the volume of payoffs that you are seeing certainly has been – constraints your portfolio growth despite your strong originations. So, if you could – I am looking at Page 13, trying to get a sense for what’s left in GE and it looks like in terms of that purchase discount of a little over $9 million, it looks like $7.4 million has been accreted to-date which would imply approximately 80% of the portfolio.

So, if we were to think 20% remaining would be in the ballpark there as far as the GE portfolio.

We’ve got that with us?

I am not sure whether we have the – with regard to the accretion and the discount. I mean, another way to look at it, Steve, it’s Doug here, would be to look at the – just the outstanding balance of the GE loans and I think the GE loans have – I want to say about 60% or 65% of the portfolio is repaid.

So we can point you to that detail in the 10-Q.

Okay.

I think that’s probably the right way to look at the continuing impact of the GE portfolio.

Steve, I would say that the GE deal in general has gone as we predicted.

Yes.

Its impact on earnings, again consistent with what our expectations were. I mean, we are obviously unable to predict the precise quarters in which loans would get repaid.

But in general, we knew that the high coupon fixed rate loans are going to get repaid when it became economic for borrowers to do so and that account show on the repayments. And there were loans and borrowers that made sense for GE type of capital didn’t make sense for ours and we expect those to get repaid as well.

We have had some success with the number of the GE sponsors extending maturities, increasing loans and pursuing new loans, which is also something that we hope would occur and had. And so, I do think that going forward, we will be redeploying loans, fixed rate loans in the floating loans, the MFC loans into other property sectors.

And we are very confident that originations over time will keep pace with - ultimately exceed the repayments in our portfolio and we’ll continue to grow our deployment and our earnings.

Steve, I would just add to that.

Yes.

Speaking about it from a sort of business model point of view, I think life after the GE portfolio will look a lot like life during the GE portfolio period, right, because we sized the company, so that we could maintain the deployment that we generated with the GE portfolio in one step on an ongoing basis and our originations for the – previous three years have backed up that ability to deploy that capital. And so, as we continue to originate LIBOR plus 12% to 13% ROIs in the business of our scale with our model, we are going to continue to pay the dividend and grow the dividend the way we had during the ramp up to the GE portfolio and that’s not an accident, that’s the way that we capitalize that transaction and that’s the way that we’ve been managing that portfolio.

Got it, got it. So, I mean, it wouldn’t be unrealistic to think that $10 billion I think was sort of where you peaked out in the portfolio right after GE and we’ve come down obviously with payoffs.

But it seems it would be reasonable with your volume of originations at $1 billion a quarter that you would have in a more stable prepay environment, you should be able to get back to that $10 billion target portfolio level.

Absolutely, I think you put your finger right on it.

Okay, great. And just one follow-up to that.

Your leverage obviously – your leverage looks very conservative. I think, we could argue whether it’s the 2.2 or the 2.7, but even if we were to take the 2.7 I am trying to reconcile that against the 4% assumed leverage that you use and you are projecting your $3 billion of capability, we’ll ever see you push it all the way up to 4.0, but is it possible that over time that 2.7 regardless of whether you doing actual financial or structural leverage.

Is it reasonable to think that that could move higher to 3, 3.5 something in that ballpark over the next year, year-and-a-half?

Hey, it’s Doug again. It is reasonable to think that could move higher very quickly on the difference between asset level leverage on the four times that you are referring to

Yes.

And our balance sheet leverage. It’s really two-fold.

One is, some of that leverage is in the form of structural leverage as opposed to debt-to-equity. So that’s part of the difference between that 2.2 and the 4 times.

And the other is, the fact that we maintain working capital, right, and we manage our cash efficiently. We’ve revolved our debt and so, with the four times leverage is on our deployed capital, when you factor in our working capital, you end up with a three times leverage level on the balance sheet overall.

So that’s the walk from the 2.2 to the 4.0 at the asset level leverage.

Yes, and some of that, Steve…

That’s helpful.

Some of that delivering is temporary and just the impact of the magnitude of repayments that occurred in this quarter and as we redeploy those repayments into new loans, then you will see our deployment increase and our leverage to tick up a bit.

Makes sense. Guys, thanks.

T he comments were very helpful.

Thanks, Steve.

Hi guys. I apologize if this has been asked already or addressed in your market commentary.

But I was wondering if you could talk about the environment for asset acquisitions in the North America and in Europe as well as your willingness to stray outside of your core senior floating mortgage competency?

As it relates to markets, we like the core markets that we are in. That continues to be our focus.

We think the prognosis for those markets continues to be favorable and it’s the better place to be through cycles. So we tend not to want to stray to secondary markets or go down market.

As it relates to North America, the coastal markets continue to be generators of great opportunities for us. Even in the markets where demand for space has slowed and there is still generally positive absorption in the REITs, the REITs reported strong NOIs across the board and across sectors.

We were seeing that in our portfolio. Our underlying assets are performing well in line with the business plans that we underwrote.

And so, I do think we will sort of be pursuing more of the same. We are very, very cautious in terms of anything sort of in secondary tertiary markets which tend not have dynamic sources of demand and don’t fair as well through cycles.

As it relates to the UK, the environment there as I mentioned is more opportunistic, but there is much less deal flow there is in the US. So just less opportunities to lend, less demand for capital like ours.

The opportunities that we are seeing are more interesting than they were before and hopefully we will see more of them as we sort of move past the – as we move past the Brexit referendum. But we’ll see, we have a great team in London and we see a lot of very interesting opportunities.

Our presence there is as strong or stronger than it is in the US. The second part of your question, in terms of sort of straying from the senior mortgages that really have been the sole focus of our business strategy today, we are going to be very, very, very thoughtful in terms of anything else that we do other than what we’ve done so far as our strategy really has worked very well.

The quality of our dividend is great. We are working very hard to get that differentiated in the market by the investors who look at our stock in that of the other REITs, when we compete for capital.

And so, I think, ultimately, we always look at expansion opportunities and abilities to create more value for shareholders. I don’t see us sort of moving up the risk spectrum.

Blackstone sponsors a large private debt fund that really has the mandate for higher risk debt investing. And so, our mandate really is in the senior part of the capital structure.

We’re able to generate high returns from loans with conservative LTVs that are very much senior in their risk profile. We like that profile and I don’t think that that will change in the foreseeable future.

Okay, thank you for the comments.

Sure.

Thank you very much. In terms of earnings cadence and the elevated level of repayments, is 4Q a quarter in which we – we should expect still an elevated level of repayments potentially exceeding originations or if you did about $1 billion of originations, do you think that’s likely to exceed the repayment level?

I think, at this stage of the quarter, it’s still too early to predict. Especially in the fourth quarter, where a lot of things tend to get done with short notices in December.

We are very pleased with the pace of our originations and our forward pipeline. That’s really the part of this that we are able to control.

I do think the repayment trend will abate over time, because we don’t see the same pace of repayments in the BXMT direct origination portfolio that we see in GE and we think about it. Most of the loans that we bank are five years including extensions of ultimate term and our oldest loan is only a little over three years.

So we have aimed our approach the maturity of any of our loans yet. So we are still well short of stabilized repayments in the BXMT portfolio.

And we still have a significant GE exposure. Some aspect of that will play out over time, but, again, we feel good about the – overtime about the balance of originations through all the repayments.

It’s really difficult to call it on any one quarter.

And in terms of the earnings trajectory, do you think it’s reasonable to project perhaps a two quarter timeline to core earnings getting back to exceeding the dividends?

Hey, Jade. It’s Weston here.

We just can’t be a little bit careful since we don’t give guidance to imply any sort of directional movement in earnings, but we are happy to talk about the drivers offline.

Okay. Thanks very much.

Appreciate your time.

Thanks, Jade.