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BLACKSTONE MORTGAGE TRUST, INC. - Quarter Report: 2021 June (Form 10-Q)

Form 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 June 30, 2021
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
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, 24th Floor
New York, New York 10154
(Address of principal executive offices)(Zip Code)
(212)
655-0220
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
symbol(s)
 
Name of each exchange
on which registered
Class A common stock, par value $0.01 per share
 
BXMT
 
New York Stock Exchange
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 every Interactive Data File required to be submitted 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 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     ☐    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 shares of class A common stock, par value $0.01 per share, outstanding as of July 21, 2021 was 147,016,298.
 
 
 

Table of Contents
TABLE OF CONTENTS
 
PART I.
    
ITEM 1.
       3  
 
Consolidated Financial Statements (Unaudited):
  
       3  
    Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020    4  
    Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2021 and 2020    5  
    Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2021 and 2020 and June 30,
2021 and 2020
   6  
       8  
    Notes to Consolidated Financial Statements    10  
ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
   49  
ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    77  
ITEM 4.
       80  
PART II.
    
ITEM 1.
       81  
ITEM 1A.
       81  
ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS    81  
ITEM 3.
       81  
ITEM 4.
       81  
ITEM 5.
       81  
ITEM 6.
       83  
     84  

Table of Contents
TABLE OF CONTENTS
 
Website Disclosure
We use our website (www.blackstonemortgagetrust.com) as a channel of distribution of company information. The information we post through this channel may be deemed material. Accordingly, investors should monitor this channel, in addition to following our press releases, Securities and Exchange Commission, or SEC, filings and public conference calls, and webcasts. In addition, you may automatically receive email alerts and other information about Blackstone Mortgage Trust when you enroll your email address by visiting the “Contact Us &
E-mail
Alerts” section of our website at http://ir.blackstonemortgagetrust.com. The contents of our website and any alerts are not, however, a part of this report.

Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Blackstone Mortgage Trust, Inc.
Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)
 
    
June 30,
   
December 31,
 
    
2021
   
2020
 
Assets
                
Cash and cash equivalents
   $ 289,552     $ 289,970  
Loans receivable
     17,436,843       16,572,715  
Current expected credit loss reserve
     (128,945     (173,549
    
 
 
   
 
 
 
Loans receivable, net
     17,307,898       16,399,166  
Other assets
     304,297       269,819  
    
 
 
   
 
 
 
Total Assets
   $ 17,901,747     $ 16,958,955  
    
 
 
   
 
 
 
     
Liabilities and Equity
                
Secured debt, net
   $ 8,709,818     $ 7,880,536  
Securitized debt obligations, net
     2,833,778       2,922,499  
Asset-specific debt, net
     292,122       391,269  
Term loans, net
     1,332,130       1,041,704  
Convertible notes, net
     618,111       616,389  
Other liabilities
     158,833       202,327  
    
 
 
   
 
 
 
Total Liabilities
     13,944,792       13,054,724  
    
 
 
   
 
 
 
     
Commitments and contingencies
  
 
—  
 
 
 
—  
 
     
Equity
                
Class A common stock, $0.01 par value, 400,000,000 shares authorized, 147,015,818 and 146,780,031 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively
     1,470       1,468  
Additional
paid-in
capital
     4,719,203       4,702,713  
Accumulated other comprehensive income
     10,743       11,170  
Accumulated deficit
     (800,455     (829,284
    
 
 
   
 
 
 
Total Blackstone Mortgage Trust, Inc. stockholders’ equity
     3,930,961       3,886,067  
Non-controlling
interests
     25,994       18,164  
    
 
 
   
 
 
 
Total Equity
     3,956,955       3,904,231  
    
 
 
   
 
 
 
Total Liabilities and Equity
   $ 17,901,747     $ 16,958,955  
    
 
 
   
 
 
 
 
Note: The consolidated balance sheets as of June 30, 2021 and December 31, 2020 include assets of consolidated variable interest entities, or VIEs, that can only be used to settle obligations of each respective VIE, and liabilities of consolidated VIEs for which creditors do not have recourse to Blackstone Mortgage Trust, Inc. As of June 30, 2021 and December 31, 2020, assets of the consolidated VIEs totaled $3.5 billion and $3.6 billion, respectively, and liabilities of the consolidated VIEs totaled $2.8 billion and $2.9 billion, respectively. Refer to Note 16 for additional discussion of the VIEs.
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
   
Six Months Ended
 
    
June 30,
   
June 30,
 
    
2021
   
2020
   
2021
   
2020
 
Income from loans and other investments
                                
Interest and related income
   $ 196,303     $ 191,982     $ 383,827     $ 396,857  
Less: Interest and related expenses
     82,352       84,853       160,723       189,092  
    
 
 
   
 
 
   
 
 
   
 
 
 
Income from loans and other investments, net
     113,951       107,129       223,104       207,765  
Other expenses
                                
Management and incentive fees
     21,545       20,496       40,752       39,773  
General and administrative expenses
     10,669       11,286       21,267       23,078  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total other expenses
     32,214       31,782       62,019       62,851  
Decrease (increase) in current expected credit loss reserve
     50,906       (56,819     52,199       (179,521
    
 
 
   
 
 
   
 
 
   
 
 
 
Income (loss) before income taxes
     132,643       18,528       213,284       (34,607
Income tax provision
     175       23       276       173  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss)
     132,468       18,505       213,008       (34,780
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income attributable to
non-controlling
interests
     (873     (961     (1,511     (1,028
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss) attributable to Blackstone Mortgage Trust, Inc.
   $ 131,595     $ 17,544     $ 211,497     $ (35,808
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss) per share of common stock basic and diluted
   $ 0.89     $ 0.13     $ 1.44     $ (0.26
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted-average shares of common stock outstanding, basic and diluted
     147,342,822       138,299,418       147,339,895       136,959,341  
    
 
 
   
 
 
   
 
 
   
 
 
 
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
   
Six Months Ended
 
    
June 30,
   
June 30,
 
    
2021
   
2020
   
2021
   
2020
 
Net income (loss)
   $ 132,468     $ 18,505     $ 213,008     $ (34,780
Other comprehensive income
                                
Unrealized gain (loss) on foreign currency translation
     15,553       21,342       (19,404     (48,166
Realized and unrealized (loss) gain on derivative financial instruments
     (16,094     (30,665     18,977       73,325  
    
 
 
   
 
 
   
 
 
   
 
 
 
Other comprehensive (loss) income
     (541     (9,323     (427     25,159  
    
 
 
   
 
 
   
 
 
   
 
 
 
Comprehensive income (loss)
     131,927       9,182       212,581       (9,621
Comprehensive income attributable to
non-controlling
interests
     (873     (961     (1,511     (1,028
    
 
 
   
 
 
   
 
 
   
 
 
 
Comprehensive income (loss) attributable to Blackstone Mortgage Trust, Inc.
   $ 131,054     $ 8,221     $ 211,070     $ (10,649
    
 
 
   
 
 
   
 
 
   
 
 
 
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
   
Additional
   
Accumulated Other
                         
   
Common
   
Paid-In
   
Comprehensive
   
Accumulated
   
Stockholders’
   
Non-controlling
   
Total
 
   
Stock
   
Capital
   
Income (Loss)
   
Deficit
   
Equity
   
Interests
   
Equity
 
Balance at December 31, 2020
  $ 1,468     $ 4,702,713     $ 11,170     $ (829,284   $ 3,886,067     $ 18,164     $ 3,904,231  
Shares of class A common stock issued, net
    2       —         —         —         2       —         2  
Restricted class A common stock earned
    —         7,958       —         —         7,958       —         7,958  
Dividends reinvested
    —         190       —         (176     14       —         14  
Deferred directors’ compensation
    —         125       —         —         125       —         125  
Other comprehensive income
    —         —         114       —         114       —         114  
Net income
    —         —         —         79,902       79,902       638       80,540  
Dividends declared on common stock, $0.62 per share
    —         —         —         (91,159     (91,159     —         (91,159
Contributions from
non-controlling
interests
    —         —         —         —         —         13,448       13,448  
Distributions to
non-controlling
interests
    —         —         —         —         —         (11,180     (11,180
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at March 31, 2021
  $ 1,470     $ 4,710,986     $ 11,284     $ (840,717   $ 3,883,023     $ 21,070     $ 3,904,093  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Restricted class A common stock earned
    —         7,895       —         —         7,895       —         7,895  
Dividends reinvested
    —         197       —         (183     14       —         14  
Deferred directors’ compensation
    —         125       —         —         125       —         125  
Other comprehensive loss
    —         —         (541     —         (541     —         (541
Net income
    —         —         —         131,595       131,595       873       132,468  
Dividends declared on common stock, $0.62 per share
    —         —         —         (91,150     (91,150     —         (91,150
Contributions from
non-controlling
interests
    —         —         —         —         —         14,745       14,745  
Distributions to
non-controlling
interests
    —         —         —         —         —         (10,694     (10,694
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at June 30, 2021
  $ 1,470     $ 4,719,203     $ 10,743     $ (800,455   $ 3,930,961     $ 25,994     $ 3,956,955  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
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
   
Additional
   
Accumulated Other
                         
   
Common
   
Paid-In
   
Comprehensive
   
Accumulated
   
Stockholders’
   
Non-controlling
   
Total
 
   
Stock
   
Capital
   
(Loss) Income
   
Deficit
   
Equity
   
Interests
   
Equity
 
Balance at December 31, 2019
  $ 1,350     $ 4,370,014     $ (16,233   $ (592,548   $ 3,762,583     $ 22,098     $ 3,784,681  
Adoption of ASU
2016-13,
see Note 2
    —         —         —         (17,565     (17,565     (85     (17,650
Shares of class A common stock issued, net
    4       —         —         —         4       —         4  
Restricted class A common stock earned
    —         8,550       —         —         8,550       —         8,550  
Dividends reinvested
    —         162       —         (150     12       —         12  
Deferred directors’ compensation
    —         125       —         —         125       —         125  
Other comprehensive income
    —         —         34,481       —         34,481       —         34,481  
Net loss
    —         —         —         (53,350     (53,350     67       (53,283
Dividends declared on common stock, $0.62 per share
    —         —         —         (83,920     (83,920     —         (83,920
Contributions from
non-controlling
interests
    —         —         —         —         —         8,108       8,108  
Distributions to
non-controlling
interests
    —         —         —         —         —         (6,681     (6,681
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at March 31, 2020
  $ 1,354     $ 4,378,851     $ 18,248     $ (747,533   $ 3,650,920     $ 23,507     $ 3,674,427  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Shares of class A common stock issued, net
    108       297,491       —         —         297,599       —         297,599  
Restricted class A common stock earned
    —         8,527       —         —         8,527       —         8,527  
Dividends reinvested
    —         165       —         (152     13       —         13  
Deferred directors’ compensation
    —         125       —         —         125       —         125  
Other comprehensive loss
    —         —         (9,323     —         (9,323     —         (9,323
Net income
    —         —         —         17,544       17,544       961       18,505  
Dividends declared on common stock, $0.62 per share
    —         —         —         (90,642     (90,642     —         (90,642
Distributions to
non-controlling
interests
    —         —         —         —         —         (3,447     (3,447
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at June 30, 2020
  $ 1,462     $ 4,685,159     $ 8,925     $ (820,783   $ 3,874,763     $ 21,021     $ 3,895,784  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
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)
 
           
Six Months Ended

June 30,
 
           
2021
   
2020
 
Cash flows from operating activities
                         
Net income (loss)
            $ 213,008     $ (34,780
Adjustments to reconcile net income (loss) to net cash provided by operating activities
                         
Satisfaction of management and incentive fees in stock
              —         19,277  
Non-cash
compensation expense
              16,105       17,329  
Amortization of deferred fees on loans and debt securities
              (28,674     (28,325
Amortization of deferred financing costs and premiums/discount on debt obligations
              19,277       18,699  
(Decrease) increase in current expected credit loss reserve
              (52,199     179,521  
Unrealized gain on assets denominated in foreign currencies, net
              (7,065     (953
Unrealized loss on derivative financial instruments, net
              635       648  
Realized loss on derivative financial instruments, net
              3,119       353  
Changes in assets and liabilities, net
                         
Other assets
              (4,261     7,778  
Other liabilities
              5,428       (3,839
             
 
 
   
 
 
 
Net cash provided by operating activities
              165,373       175,708  
             
 
 
   
 
 
 
Cash flows from investing activities
                         
Origination and fundings of loans receivable
              (3,636,063     (1,240,642
Principal collections and sales proceeds from loans receivable and debt securities
              2,670,773       928,348  
Origination and exit fees received on loans receivable
              41,262       11,969  
Receipts under derivative financial instruments
              23,194       85,465  
Payments under derivative financial instruments
              (72,478     (28,488
Collateral deposited under derivative agreements
              (81,430     (191,540
Return of collateral deposited under derivative agreements
              129,770       200,160  
             
 
 
   
 
 
 
Net cash used in investing activities
              (924,972     (234,728
             
 
 
   
 
 
 
 
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)
 
                         
           
Six Months Ended

June 30,
 
           
2021
   
2020
 
Cash flows from financing activities
                         
Borrowings under secured debt
            $ 4,230,404     $ 2,152,438  
Repayments under secured debt
              (3,332,395     (2,403,349
Proceeds from issuance of securitized debt obligations
              803,750       1,243,125  
Repayment of securitized debt obligations
              (888,763     (179,759
Borrowings under asset-specific debt
              77,975       47,604  
Repayments under asset-specific debt
              (178,073     (82,754
Net proceeds from issuance of term loans
              298,500       315,438  
Repayments of term loans
              (6,625     (3,744
Payment of deferred financing costs
              (22,811     (27,906
Contributions from
non-controlling
interests
              28,193       8,108  
Distributions to
non-controlling
interests
              (21,874     (10,128
Net proceeds from issuance of class A common stock
              —         278,322  
Dividends paid on class A common stock
              (182,163     (167,623
             
 
 
   
 
 
 
Net cash provided by financing activities
              806,118       1,169,772  
             
 
 
   
 
 
 
Net increase in cash, cash equivalents, and restricted cash
              46,519       1,110,752  
Cash, cash equivalents, and restricted cash at beginning of period
              289,970       150,090  
Effects of currency translation on cash, cash equivalents, and restricted cash
              3,063       (1,006
             
 
 
   
 
 
 
Cash, cash equivalents , and restricted cash at end of period
            $ 339,552     $ 1,259,836  
             
 
 
   
 
 
 
Supplemental disclosure of cash flows information
                         
Payments of interest
            $ (140,601   $ (173,040
             
 
 
   
 
 
 
Receipts (payments) of income taxes
            $ 141     $ (148
             
 
 
   
 
 
 
Supplemental disclosure of
non-cash
investing and financing activities
                         
Dividends declared, not paid
            $ (91,150   $ (90,642
             
 
 
   
 
 
 
Satisfaction of management and incentive fees in stock
            $ —       $ 19,277  
             
 
 
   
 
 
 
Loan principal payments held by servicer, net
            $ 27,612     $ 81,261  
             
 
 
   
 
 
 
See accompanying notes to consolidated financial statements.
 
9

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 senior loans collateralized by commercial real estate in North America, Europe, and Australia. Our portfolio is composed primarily of loans secured by high-quality, institutional assets in major markets, sponsored by experienced, well-capitalized real estate investment owners and operators. These senior loans are capitalized by accessing a variety of financing options, including borrowing under our credit facilities, issuing CLOs or single-asset securitizations, and syndicating senior loan participations, depending on our view of the most prudent financing option available for each of our investments. We are not in the business of buying or trading securities, and the only securities we own are the retained interests from our securitization financing transactions, which we have not financed. We are externally managed by BXMT Advisors L.L.C., or our Manager, a subsidiary of The Blackstone Group Inc., or Blackstone, and are a real estate investment trust, or REIT, traded on the New York Stock Exchange, or NYSE, under the symbol “BXMT.” Our principal executive offices are located at 345 Park Avenue, 24th Floor, New York, New York 10154. We were incorporated in Maryland in 1998, when we reorganized from a California common law business trust into a Maryland corporation.
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. We believe we have 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 our 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, 2020 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.
Certain reclassifications have been made in the presentation of the prior period statements of cash flows and loans receivable in Note 3 to conform to the current period presentation.
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.
 
 
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Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
In the third quarter of 2018, we contributed a loan to a single asset securitization vehicle, or the 2018 Single Asset Securitization, which is a VIE, and invested in the related subordinate position. We are not the primary beneficiary of the VIE because we do not have the power to direct the activities that most significantly affect the VIE’s economic performance and, therefore, do not consolidate the 2018 Single Asset Securitization on our balance sheet. We have classified the subordinate position we own as a
held-to-maturity
debt security that is included in other assets on our consolidated balance sheets. Refer to Note 16 for additional discussion of our VIEs.
In April 2017, we entered into a joint venture, or our Multifamily Joint Venture, with Walker & Dunlop Inc. to originate, hold, and finance multifamily bridge loans. Pursuant to the terms of the agreements governing the joint venture, Walker & Dunlop contributed 15% of the venture’s equity capital and we contributed 85%. We consolidate the Multifamily Joint Venture as we have a controlling financial interest. The
non-controlling
interests included on our consolidated balance sheets represent the equity interests in our Multifamily Joint Venture that are owned by Walker & Dunlop. A portion of our Multifamily Joint Venture’s consolidated equity and results of operations are allocated to these
non-controlling
interests based on Walker & Dunlop’s pro rata ownership of our Multifamily Joint Venture.
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. As of June 30, 2021, the novel coronavirus, or
COVID-19,
pandemic is ongoing. During 2020, the
COVID-19
pandemic created disruption in global supply chains, increased rates of unemployment and adversely impacted many industries, including industries related to the collateral underlying certain of our loans. In 2021, the global economy has, with certain setbacks, begun reopening and wider distribution of vaccines will likely encourage greater economic activity. Nonetheless, the recovery could remain uneven, particularly given uncertainty with respect to the distribution and acceptance of the vaccines and their effectiveness with respect to new variants of the virus. We believe the estimates and assumptions underlying our consolidated financial statements are reasonable and supportable based on the information available as of June 30, 2021, however uncertainty over the ultimate impact
COVID-19
will have on the global economy generally, and our business in particular, makes any estimates and assumptions as of June 30, 2021 inherently less certain than they would be absent the current and potential impacts of
COVID-19.
Actual results may ultimately differ from those estimates.
Revenue Recognition
Interest income from our loans receivable portfolio and debt securities 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 and recorded over the term of the loan or debt security as an 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. Interest received is then recorded as a reduction in the outstanding principal balance 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, Cash Equivalents, and Restricted Cash
Cash and cash equivalents represent cash held in banks 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.
Restricted cash represents cash collateral held within our 2021 FL4 collateralized loan obligation. See Note 6 for further discussion of the 2021 FL4 collateralized loan obligation.
 
11

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
The following table provides a reconciliation of cash, cash equivalents, and restricted cash on our consolidated balance sheets to the total amount shown on our consolidated statements of cash flows ($ in thousands):
 
    
June 30, 2021
    
June 30, 2020
 
Cash and cash equivalents
   $ 289,552      $ 1,259,836  
2021 FL4 CLO restricted cash
     50,000        —    
    
 
 
    
 
 
 
Total cash, cash equivalents, and restricted cash shown in our consolidated statements of cash flows
   $ 339,552      $ 1,259,836  
    
 
 
    
 
 
 
Through our subsidiaries, we have oversight of certain servicing accounts held with third-party servicers, or Servicing Accounts, which relate to borrower escrows and other cash balances aggregating $386.3 million and $384.6 million as of June 30, 2021 and December 31, 2020, respectively. This cash is maintained in segregated bank accounts, and these amounts are not included in the assets and liabilities presented in our consolidated balance sheets. Cash in these Servicing Accounts will be transferred by the respective third-party servicer to the borrower or us under the terms of the applicable loan agreement upon occurrence of certain future events. We do not generate any revenue or incur any expenses as a result of these Servicing Accounts.
Loans Receivable
We originate and purchase commercial real estate debt and related instruments generally to be held as long-term investments at amortized cost.
Debt Securities
Held-to-Maturity
We classify our debt securities as
held-to-maturity,
as we have the intent and ability to hold these securities until maturity. We include our debt securities in other assets on our consolidated balance sheets at amortized cost.
Current Expected Credit Losses Reserve
The current expected credit loss, or CECL, reserve required under Accounting Standard Update, or ASU,
2016-13
“Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments (Topic 326),” or ASU
2016-13,
reflects our current estimate of potential credit losses related to our loans and debt securities included in our consolidated balance sheets. The initial CECL reserve recorded on January 1, 2020 is reflected as a direct charge to retained earnings on our consolidated statements of changes in equity; however subsequent changes to the CECL reserve are recognized through net income on our consolidated statements of operations. While ASU
2016-13
does not require any particular method for determining the CECL reserve, it does specify the reserve should be based on relevant information about past events, including historical loss experience, current portfolio and market conditions, and reasonable and supportable forecasts for the duration of each respective loan. In addition, other than a few narrow exceptions, ASU
2016-13
requires that all financial instruments subject to the CECL model have some amount of loss reserve to reflect the GAAP principal underlying the CECL model that all loans, debt securities, and similar assets have some inherent risk of loss, regardless of credit quality, subordinate capital, or other mitigating factors.    
We estimate our CECL reserve primarily using the Weighted Average Remaining Maturity, or WARM, method which has been identified as an acceptable loss-rate method for estimating CECL reserves in the Financial Accounting Standards Board Staff Q&A Topic 326, No. 1. The WARM method requires us to reference historic loan loss data across a comparable data set and apply such loss rate to each of our loans over their expected remaining term, taking into consideration expected economic conditions over the relevant timeframe. We apply the WARM method for the majority of our loan portfolio, which loans share similar risk characteristics. In certain instances, for loans with unique risk characteristics, we may instead use a probability-weighted model that considers the likelihood of default and expected loss given default for each such individual loan.    
Application of the WARM method to estimate a CECL reserve requires judgment, including (i) the appropriate historical loan loss reference data, (ii) the expected timing and amount of future loan fundings and repayments, and (iii) the current credit quality of our portfolio and our expectations of performance, and (iv) market conditions over the relevant time period. To estimate the historic loan losses relevant to our portfolio, we have augmented our
 
12

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
historical loan performance, which includes zero realized loan losses since the launch of our senior loan origination business in 2013, with market loan loss data licensed from Trepp LLC. This database includes commercial mortgage-backed securities, or CMBS, issued since January 1, 1999 through May 31, 2021. Within this database, we focused our historical loss reference calculations on the most relevant subset of available CMBS data, which we determined based on loan metrics that are most comparable to our loan portfolio including asset type, geography, and origination
loan-to-value,
or LTV. We believe this CMBS data, which includes month-over-month loan and property performance, is the most relevant, available, and comparable dataset to our portfolio.    
Our loans typically include commitments to fund incremental proceeds to our borrowers over the life of the loan, which future funding commitments are also subject to the CECL model. The CECL reserve related to future loan fundings is recorded as a component of Other Liabilities on our consolidated balance sheets. This CECL reserve is estimated using the same process outlined above for our outstanding loan balances, and changes in this component of the CECL reserve will similarly impact our consolidated net income. For both the funded and unfunded portions of our loans, we consider our internal risk rating of each loan as the primary credit quality indicator underlying our assessment.    
The CECL reserve is measured on a collective basis wherever similar risk characteristics exist within a pool of similar assets. We have identified the following pools and measure the reserve for credit losses using the following methods:    
 
   
U.S. Loans
: WARM method that incorporates a subset of historical loss data, expected weighted-average remaining maturity of our loan pool, and an economic view.
 
   
Non-U.S.
Loans
: WARM method that incorporates a subset of historical loss data, expected weighted average remaining maturity of our loan pool, and an economic view.
 
   
Unique Loans
: a probability of default and loss given default model, assessed on an individual basis.
 
   
Impaired Loans
:
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. Determining that a loan is impaired requires significant judgment from management and is based on several factors including (i) the underlying collateral performance, (ii) discussions with the borrower, (iii) borrower events of default, and (iv) other facts that impact the borrower’s ability to pay the contractual amounts due under the terms of the loan. If a loan is determined to be impaired, we record the impairment as a component of our CECL reserve by applying the practical expedient for collateral dependent loans. The CECL reserve is assessed on an individual basis for these loans 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, discount rates, leasing, creditworthiness of major tenants, occupancy rates, availability and cost of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed relevant by our Manager. Actual losses, if any, could ultimately differ from these estimates. We only expect to realize the impairment losses if and when such amounts are deemed nonrecoverable upon a realization event. This is generally at the time a loan is repaid, or in the case of foreclosure, when the underlying asset is sold, but
non-recoverability
may also be concluded if, in our determination, it is nearly certain that all amounts due will not be collected.
 
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Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
We adopted ASU
2016-13
using the modified-retrospective method for all financial assets measured at amortized cost. Prior to our adoption, we had no loan loss provisions on our consolidated balance sheets. We recorded a cumulative-effective adjustment to the opening retained earnings in our consolidated statement of equity as of January 1, 2020. The following table details the impact of this adoption ($ in thousands):    
 
    
Impact of ASU 2016-13

Adoption
 
Assets:
        
Loans
        
U.S. Loans
   $ 8,955  
Non-U.S.
Loans
     3,631  
Unique Loans
     1,356  
    
 
 
 
CECL reserve on loans
   $ 13,942  
    
 
 
 
CECL reserve on
held-to-maturity
debt securities
     445  
Liabilities:
        
CECL reserve on unfunded loan commitments
     3,263  
    
 
 
 
Total impact of ASU
2016-13
adoption on retained earnings
   $ 17,650  
    
 
 
 
Contractual Term and Unfunded Loan Commitments    
Expected credit losses are estimated over the contractual term of each loan, adjusted for expected prepayments. As part of our quarterly review of our loan portfolio, we assess the expected repayment date of each loan, which is used to determine the contractual term for purposes of computing our CECL reserve.
Additionally, the expected credit losses over the contractual period of our loans are subject to the obligation to extend credit through our unfunded loan commitments. The CECL reserve for unfunded loan commitments is adjusted quarterly, as we consider the expected timing of future funding obligations over the estimated life of the loan. The considerations in estimating our CECL reserve for unfunded loan commitments are similar to those used for the related outstanding loan receivables.
Credit Quality Indicator
Our risk rating is our primary credit quality indicator in assessing our current expected credit loss reserve. Our Manager performs a quarterly risk review of our portfolio of loans, and assigns each loan a risk rating based on a variety of factors, including, without limitation, 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 “l” through “5,” from less risk to greater risk, relative to our loan portfolio in the aggregate, 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.
 
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Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
Estimation of Economic Conditions
In addition to the WARM method computations and probability-weighted models described above, our CECL reserve is also adjusted to reflect our estimation of the current and future economic conditions that impact the performance of the commercial real estate assets securing our loans. These estimations include unemployment rates, interest rates, and other macroeconomic factors impacting the likelihood and magnitude of potential credit losses for our loans during their anticipated term. In addition to the CMBS data we have licensed from Trepp LLC, we have also licensed certain macroeconomic financial forecasts to inform our view of the potential future impact that broader economic conditions may have on our loan portfolio’s performance. These estimations require significant judgments about future events that, while based on the information available to us as of the balance sheet date, are ultimately indeterminate and the actual economic condition impacting our portfolio could vary significantly from the estimates we made as of June 30, 2021.
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 and the changes in fair value of the instrument are included in net income prospectively. Effective April 1, 2020, our net investment hedges are assessed using a method based on changes in spot exchange rates. Gains and losses, representing hedge components excluded from the assessment of effectiveness, are recognized in interest income on our consolidated statements of operations over the contractual term of our net investment hedges on a systematic and rational basis, as documented at hedge inception in accordance with our accounting policy election. All other changes in the fair value of our derivative instruments that qualify as hedges are reported as a component of accumulated other comprehensive income (loss) on our consolidated financial statements. Deferred gains and losses are reclassified out of accumulated other comprehensive income (loss) and into net income in the same period or periods during which the hedged transaction affects earnings, and are presented in the same line item as the earnings effect of the hedged item. For cash flow hedges, this is typically when the periodic swap settlements are made, while for net investment hedges, this occurs when the hedged item is sold or substantially liquidated. To the extent a derivative does not qualify for hedge accounting and is deemed a
non-designated
hedge, the changes in its fair value are included in net income concurrently.    
Secured Debt and Asset-Specific Debt
We record investments financed with secured debt or asset-specific debt as separate assets and the related borrowings under any secured debt or asset-specific debt are recorded as separate liabilities on our consolidated balance sheets. Interest income earned on the investments and interest expense incurred on the secured debt or asset-specific debt 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.    
 
15

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
Term Loans
We record our term loans as liabilities on our consolidated balance sheets. Where applicable, any issue discount or transaction expenses are deferred and amortized through the maturity date of the term loans as additional
non-cash
interest expense.    
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 respective issuance dates based on our nonconvertible debt borrowing rate. The equity component of each series of our convertible notes is reflected within additional
paid-in
capital on our consolidated balance sheet, and the resulting issue discount is amortized over the period during which such 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 such convertible notes will increase in subsequent periods through the maturity date as the notes accrete to their par value over the same period.
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 of the FASB, 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.
 
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Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
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, as of
quarter-end,
either (i) on a recurring basis 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 15. 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 require significant judgments, which include assumptions regarding capitalization rates, discount rates, leasing, creditworthiness of major tenants, occupancy rates, availability and cost of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed relevant by our Manager.    
During the three months ended June 30, 2020, we recorded an aggregate $69.7 million CECL reserve specifically related to two of our loans receivable, which was unchanged as of June 30, 2021. These two loans have an aggregate outstanding principal balance of $338.7 million, net of cost-recovery proceeds, as of June 30, 2021. The CECL reserve was recorded based on our Manager’s estimation of the fair value of the loan’s underlying collateral as of June 30, 2021. These loans receivable are therefore measured at fair value on a nonrecurring basis using significant unobservable inputs, and are classified as Level 3 assets in the fair value hierarchy. The significant unobservable inputs used to estimate the fair value of these loans receivable include the exit capitalization rate assumption used to forecast the future sale price of the underlying real estate collateral, which ranged from 4.25% to 4.80%.    
We are also required by GAAP to disclose fair value information about financial instruments, which 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, credit worthiness of major tenants, occupancy rates, availability and cost of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed relevant by our Manager.
 
   
Debt securities
held-to-maturity:
The fair value of these instruments was estimated by utilizing third-party pricing service providers assuming the securities are not sold prior to maturity. In determining the value of a particular investment, pricing service providers may use broker-dealer quotations, reported trades, or valuation estimates from their internal pricing models to determine the reported price.
 
   
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, net: The fair value of these instruments was estimated based on the rate at which a similar credit facility would currently be priced.
 
   
Securitized debt obligations, net: The fair value of these instruments was estimated by utilizing third-party pricing service providers. In determining the value of a particular investment, pricing service providers may use broker-dealer quotations, reported trades, or valuation estimates from their internal pricing models to determine the reported price.
 
   
Asset-specific debt, net: The fair value of these instruments was estimated based on the rate at which a similar agreement would currently be priced.
 
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Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
   
Term loans, net: The fair value of these instruments was estimated by utilizing third-party pricing service providers. In determining the value of a particular investment, pricing service providers may use broker-dealer quotations, reported trades, or valuation estimates from their internal pricing models to determine the reported price.
 
   
Convertible notes, net: Each series of the convertible notes is 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 13 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 14 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 11 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 (loss).
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.
Recent Accounting Pronouncements
In March 2020, the FASB issued ASU
2020-04
“Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” or ASU
2020-04.
ASU
2020-04
provides optional expedients and exceptions to GAAP requirements for modifications on debt instruments, leases, derivatives, and other contracts, related to the expected market transition from LIBOR, and certain other floating rate benchmark indices, or
 
18

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Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
collectively, IBORs, to alternative reference rates. ASU
2020-04
generally considers contract modifications related to reference rate reform to be an event that does not require contract remeasurement at the modification date nor a reassessment of a previous accounting determination. In January 2021, the FASB issued ASU
2021-01
“Reference Rate Reform (Topic 848): Scope,” or ASU
2021-01.
ASU
2021-01
clarifies that the practical expedients in ASU
2020-04
apply to derivatives impacted by changes in the interest rate used for margining, discounting, or contract price alignment.
The guidance in ASU
2020-04
is optional and may be elected over time, through December 31, 2022, as reference rate reform activities occur. Once ASU
2020-04
is elected, the guidance must be applied prospectively for all eligible contract modifications. In the first quarter of 2020, we have elected to apply the hedge accounting expedients, related to probability and the assessments of effectiveness, for future IBOR-indexed cash flows, to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with our past presentation. We continue to evaluate the impact of ASU
2020-04
and may apply other elections, as applicable, as the expected market transition from IBORs to alternative reference rates continues to develop.    
In August 2020, the FASB issued ASU
2020-06
“Debt—Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” or ASU
2020-06.
ASU
2020-06
simplifies the accounting for convertible debt by eliminating the beneficial conversion and cash conversion accounting models. ASU
2020-06
also updates the earnings per share calculation and requires entities to assume share settlement when the convertible debt can be settled in cash or shares. ASU
2020-06
is effective for fiscal years beginning after December 15, 2021 and is to be adopted through a cumulative-effect adjustment to the opening balance of retained earnings either at the date of adoption or in the first comparative period presented. Upon adoption of ASU
2020-06,
convertible debt proceeds, unless issued with a substantial premium or an embedded conversion feature, will no longer be allocated between debt and equity components. This will reduce the issue discount and result in less
non-cash
interest expense in our consolidated financial statements. Additionally, ASU
2020-06
will result in the reporting of a diluted earnings per share, if the effect is dilutive, in our consolidated financial statements, regardless of our settlement intent. We expect to adopt ASU
2020-06
using the modified retrospective method of transition, which we expect will result in an aggregate decrease to our additional
paid-in
capital of $2.4 million and an aggregate decrease to our accumulated deficit of $2.0 million, as of January 1, 2022.
Reference Rate Reform
LIBOR and certain other floating rate benchmark indices to which our floating rate loans and other loan agreements are tied, including, without limitation, the Euro Interbank Offered Rate, or EURIBOR, the Stockholm Interbank Offered Rate, or STIBOR, the Canadian Dollar Offered Rate, or CDOR, and the Australian Bank Bill Swap Reference Rate, or BBSY, or collectively, IBORs, are the subject of recent national, international and regulatory guidance and proposals for reform. On March 5, 2021, the Financial Conduct Authority of the U.K., or FCA, which has statutory powers to require panel banks to contribute to LIBOR where necessary, announced it would cease publication of certain IBORs, including
one-week
and
two-month
USD LIBOR and all tenors of GBP LIBOR, immediately after December 31, 2021 and cease the publication of the remaining tenors of USD LIBOR immediately after June 30, 2023. Additionally, the Federal Reserve Board, Federal Deposit Insurance Corporation, Office of the Comptroller of Currency, and other interagency regulatory bodies have advised U.S. banks to stop entering into new USD LIBOR based contracts by December 31, 2021.
The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, has identified the Secured Overnight Financing Rate, or SOFR, a new index calculated using short-term repurchase agreements backed by Treasury securities, as its preferred alternative rate for USD LIBOR. In the U.K., the Bank of England’s working group on Sterling risk free rates set March 31, 2021 as the target date under which GBP LIBOR may no longer be used as the reference rate for new loan products with maturities after December 31, 2021. Market participants have started to transition to the Sterling Overnight Index Average, or SONIA, in line with guidance from the U.K. regulators. As of June 30, 2021, the floating benchmark rate for the financing provided on the 2020 FL3 and 2020 FL2 CLOs is the
30-day
average compounded SOFR, plus a credit spread adjustment of 0.11%. As of June 30, 2021, the
30-day
average compounded SOFR was 0.03% and
one-month
USD LIBOR was 0.10%. Additionally, as of June 30, 2021, the floating benchmark rate on one of our credit facilities is the daily compounded SONIA. As of June 30, 2021, SONIA was 0.05% and three-month GBP LIBOR was 0.08
%.
 
19

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Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
At this time, it is not possible to predict how markets will respond to SOFR, SONIA, or other alternative reference rates as the transition away from USD LIBOR and GBP LIBOR proceeds. Despite the LIBOR transition in other markets, benchmark rate methodologies in Europe, Canada, and Australia have been reformed and rates such as EURIBOR, STIBOR, CDOR, and BBSY may persist as International Organization of Securities Commissions, or IOSCO, compliant reference rates moving forward. However, multi-rate environments may persist in these markets as regulators and working groups have suggested market participants adopt alternative reference rates.
Refer to “Part I. Item 1A. Risk Factors—Risks Related to Our Lending and Investment Activities—The expected discontinuation of currently used financial reference rates and use of alternative replacement reference rates may adversely affect net interest income related to our loans and investments or otherwise adversely affect our results of operations, cash flows and the market value of our investments.” of our Annual Report on Form
10-K
filed with the SEC on February 10, 2021.
 
20

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):
 
    
June 30, 2021
   
December 31, 2020
 
Number of loans
     124       120  
Principal balance
   $ 17,529,542     $ 16,652,824  
Net book value
   $ 17,307,898     $ 16,399,166  
Unfunded loan commitments
(1)
   $ 3,353,259     $ 3,160,084  
Weighted-average spread
(2)
     + 3.19     + 3.18
Weighted-average
all-in
yield
(2)
     + 3.52     + 3.53
Weighted-average maximum maturity (years)
(3)
     3.1       3.1  
                                
                
(1)  
 
Unfunded commitments will primarily be funded to finance our borrowers’ construction or development of real estate-related assets, capital improvements of existing assets, or lease-related expenditures. These commitments will generally be funded over the term of each loan, subject in certain cases to an expiration date.
(2)  
 
The weighted-average spread and
all-in
yield are expressed as a spread over the relevant floating benchmark rates, which include USD LIBOR, GBP LIBOR, EURIBOR, STIBOR, BBSY, and CDOR, as applicable to each loan. As of June 30, 2021, 99.5% of our loans by principal balance earned a floating rate of interest, primarily indexed to USD LIBOR. The other 0.5% of our loans earned a fixed rate of interest. We reflect our fixed rate loans as a spread over the relevant floating benchmark rates, as of June 30, 2021 and December 31, 2020, for purposes of the weighted-averages. As of December 31, 2020, 99.4% of our loans by total loan exposure earned a floating rate of interest, primarily indexed to USD LIBOR. In addition to spread,
all-in
yield includes the amortization of deferred origination and extension fees, loan origination costs and purchase discounts, as well as the accrual of exit fees. Excludes loans accounted for under the cost-recovery method.
(3)  
 
Maximum maturity assumes all extension options are exercised by the borrower, however our loans may be repaid prior to such date. As of June 30, 2021, 35% of our loans by principal balance were subject to yield maintenance or other prepayment restrictions and 65% were open to repayment by the borrower without penalty. As of December 31, 2020, 31% of our loans by principal balance were subject to yield maintenance or other prepayment restrictions and 69% were open to repayment by the borrower without penalty.
The following table details the index rate floors for our loans receivable portfolio as of June 30, 2021 ($ in thousands):
 
 
  
Loans Receivable Principal Balance
 
Index rate floors
  
USD
 
  
Non-USD
(1)
 
  
Total
 
Fixed rate
  
$
—  
 
  
$
80,748
 
  
$
80,748
 
0.00% or no floor
(2)
  
 
2,525,760
 
  
 
4,769,140
 
  
 
7,294,900
 
0.01% to 0.24% floor
  
 
1,720,348
 
  
 
110,492
 
  
 
1,830,840
 
0.25% to 0.99% floor
  
 
1,031,763
 
  
 
262,548
 
  
 
1,294,311
 
1.00% or more floor
  
 
6,406,031
 
  
 
622,712
 
  
 
7,028,743
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Total
(3)(4)
  
$
11,683,902
 
  
$
5,845,640
 
  
$
17,529,542
 
 
  
 
 
 
  
 
 
 
  
 
 
 
                                
  
  
  
(1)  
  
Includes Euro, British Pound Sterling, Swedish Krona, Australian Dollar, and Canadian Dollar Currencies.
(2)  
  
Includes $338.7 million of loans accounted for under the cost-recovery method.
(3)  
  
Excludes investment exposure to the $79.2 million subordinate position we own in the $623.1 million 2018 Single Asset Securitization. Refer to Notes 4 and 16 to our consolidated financial statements for further discussion of the 2018 Single Asset Securitization.
(4)  
  
As of June 30, 2021, the weighted-average index rate floor of our loan portfolio was 0.67%. Excluding 0.0% index rate floors, the weighted-average index rate floor was 1.12%.
 
21

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
Activity relating to our loans receivable portfolio was as follows ($ in thousands):    
 
 
  
Principal
Balance
 
  
Deferred Fees /
Other Items
(1)
 
  
Net Book
Value
 
Loans receivable, as of December 31, 2020
  
$
16,652,824
 
  
$
(80,109
  
$
16,572,715
 
Loan fundings
  
 
3,636,063
 
  
 
  
 
  
 
3,636,063
 
Loan repayments and sales
 
 
(2,678,348
  
 
  
 
  
 
(2,678,348
Unrealized (loss) gain on foreign currency translation
  
 
(80,997
  
 
308
 
  
 
(80,689
Deferred fees and other items
  
 
  
 
  
 
(41,262
  
 
(41,262
Amortization of fees and other items
  
 
  
 
  
 
28,364
 
  
 
28,364
 
Loans receivable, as of June 30, 2021
  
$
17,529,542
 
  
$
(92,699
  
$
17,436,843
 
    
 
 
    
 
 
    
 
 
 
CECL reserve
  
 
 
 
  
 
 
 
  
 
(128,945
                      
 
 
 
Loans receivable, net, as of June 30, 2021
  
 
 
 
  
 
 
 
  
$
17,307,898
 
 
  
     
  
     
  
 
 
 
                                
  
     
  
     
  
     
(1)  
  
Other items primarily consist of purchase and sale discounts or premiums, exit fees, and deferred origination expenses.
The tables below detail the property type and geographic distribution of the properties securing the loans in our portfolio
($ in thousands):
 
     
                  
     
                  
     
                  
     
                  
 
June 30, 2021
 
Property Type
  
Number of
Loans
 
  
Net Book
Value
 
  
Total Loan
Exposure
(1)(2)
 
  
Percentage of
Portfolio
 
                                                                                                     
Office
  
 
58
 
  
$
9,183,532
 
  
$
9,799,741
 
  
 
  53%
 
Hospitality
  
 
15
 
  
 
2,497,689
 
  
 
2,593,256
 
  
 
  14
   
 
Multifamily
  
 
34
 
  
 
2,458,186
 
  
 
2,542,024
 
  
 
  14
   
 
Industrial
  
 
5
 
  
 
989,199
 
  
 
996,475
 
  
 
    5
   
 
Life Sciences
  
 
3
 
  
 
559,794
 
  
 
566,806
 
  
 
    3
   
 
Retail
  
 
4
 
  
 
538,439
 
  
 
551,221
 
  
 
    3
   
 
Self-Storage
  
 
1
 
  
 
285,505
 
  
 
285,523
 
  
 
    2
   
 
Condominium
  
 
2
 
  
 
226,698
 
  
 
265,484
 
  
 
    1
   
 
Other
  
 
2
 
  
 
697,801
 
  
 
928,243
 
  
 
    5
   
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total loans receivable
  
 
124
 
  
$
17,436,843
 
  
$
18,528,773
 
  
 
100%
 
    
 
 
    
 
 
    
 
 
    
 
 
 
CECL reserve
  
 
 
 
  
 
(128,945
  
 
 
 
  
 
 
 
             
 
 
                   
Loans receivable, net
  
 
 
 
  
$
17,307,898
 
  
 
 
 
  
 
 
 
             
 
 
                   
     
                  
     
                  
     
                  
     
                  
 
                                                                                                     
 
     
                  
     
                  
     
                  
     
                  
 
Geographic Location
  
Number of
Loans
 
  
Net Book
Value
 
  
Total Loan
Exposure
(1)(2)
 
  
Percentage of
Portfolio
 
United States
  
     
  
     
  
     
  
     
Northeast
  
 
25
 
  
$
4,428,506
 
  
$
4,452,355
 
  
 
  25%
 
West
  
 
25
 
  
 
2,788,728
 
  
 
3,373,399
 
  
 
  18
   
 
Southeast
  
 
27
 
  
 
2,656,280
 
  
 
2,825,388
 
  
 
  15
   
 
Midwest
  
 
8
 
  
 
964,681
 
  
 
967,089
 
  
 
    5
   
 
Southwest
  
 
12
 
  
 
772,307
 
  
 
775,897
 
  
 
  4
  
 
Northwest
  
 
1
 
  
 
15,412
 
  
 
15,413
 
  
 
    
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Subtotal
  
 
98
 
  
 
11,625,914
 
  
 
12,409,541
 
  
 
  67
   
 
International
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
United Kingdom
  
 
12
 
  
 
1,669,873
 
  
 
1,919,945
 
  
 
  11
   
 
Spain
  
 
3
 
  
 
1,314,315
 
  
 
1,320,266
 
  
 
    7
   
 
Ireland
  
 
1
 
  
 
1,289,458
 
  
 
1,295,372
 
  
 
    7
    
 
Australia
  
 
2
 
  
 
242,987
 
  
 
243,797
 
  
 
    1
   
 
Canada
  
 
2
 
  
 
68,430
 
  
 
68,486
 
  
 
    
 
Other Europe
  
 
6
 
  
 
1,225,866
 
  
 
1,271,366
 
  
 
    7
   
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Subtotal
  
 
26
 
  
 
5,810,929
 
  
 
6,119,232
 
  
 
   33
   
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total loans receivable
  
 
124
 
  
$
17,436,843
 
  
$
18,528,773
 
  
 
100%
 
    
 
 
    
 
 
    
 
 
    
 
 
 
CECL reserve
  
 
 
 
  
 
(128,945
  
 
 
 
  
 
 
 
             
 
 
                   
Loans receivable, net
  
 
 
 
  
$
17,307,898
 
  
 
 
 
  
 
 
 
             
 
 
                   
   
                  
 
                  
 
                  
 
                  
                                
(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 $999.2 million of such
non-consolidated
senior interests as of June 30, 2021.
(2)  
  
Excludes investment exposure to the $623.1 million 2018 Single Asset Securitization. See Note 4 for details of the subordinate position we own in the 2018 Single Asset Securitization.
 
22

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
December 31, 2020
 
Property Type
  
Number of
Loans
    
Net Book
Value
    
Total Loan
Exposure
(1)(2)
    
Percentage of
Portfolio
 
Office
       58        $9,834,509        $10,303,895          58%  
Hospitality
       14        2,295,255        2,369,454          14     
Multifamily
       31        1,788,149        1,862,667          11     
Industrial
         6        673,912        675,344            4     
Retail
         4        538,702        551,243            3     
Self-Storage
         2        301,566        301,491            2     
Condominium
         2        245,492        264,162            2     
Life Sciences
         1        146,290        147,763            1     
Other
         2        748,840        978,602            5     
    
 
 
    
 
 
    
 
 
    
 
 
 
Total loans receivable
     120        $16,572,715        $17,454,621        100%  
    
 
 
    
 
 
    
 
 
    
 
 
 
CECL reserve
              (173,549)                    
             
 
 
                   
Loans receivable, net
              $16,399,166                    
             
 
 
                   
 
Geographic Location
  
Number of
Loans
    
Net Book
Value
    
Total Loan
Exposure
(1)(2)
    
Percentage of
Portfolio
 
United States
                                   
Northeast
       24        $4,050,732        $4,069,712          23%  
West
       27        2,942,126        3,413,089          20     
Southeast
       25        2,624,701        2,707,080          16     
Midwest
         8        973,702        976,693            6     
Southwest
       9        597,100        598,813            3     
Northwest
       1        15,404        15,413        —       
    
 
 
    
 
 
    
 
 
    
 
 
 
Subtotal
       94        11,203,765        11,780,800          68     
International
                                   
United Kingdom
       13        1,816,901        2,066,390          12     
Ireland
         1        1,309,443        1,317,846            8     
Spain
         2        1,247,162        1,252,080            7     
Australia
         2        259,126        259,788            1     
Canada
         3        82,185        82,262        —       
Other Europe
         5        654,133        695,455            4     
    
 
 
    
 
 
    
 
 
    
 
 
 
Subtotal
       26        5,368,950        5,673,821          32     
    
 
 
    
 
 
    
 
 
    
 
 
 
Total loans receivable
     120        $16,572,715        $17,454,621        100%  
    
 
 
    
 
 
    
 
 
    
 
 
 
CECL reserve
              (173,549)                    
             
 
 
                   
Loans receivable, net
              $16,399,166                    
             
 
 
                   
                                
(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 $801.8 million of such
non-consolidated
senior interests as of December 31, 2020.
(2)  
  
Excludes investment exposure to the $735.5 million 2018 Single Asset Securitization. See Note 4 for details of the subordinate position we own in the 2018 Single Asset Securitization.
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
r
atings are defined in Note 2.    
 
23

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):
 
   
June 30, 2021
     
December 31, 2020
Risk Rating
 
Number of Loans
 
Net Book Value
 
Total Loan Exposure
(1)(2)
     
Number of Loans
 
Net Book Value
 
Total Loan Exposure
(1)(2)
      1
      8   $876,895   $877,690           8   $777,163   $778,283
      2
    19   3,820,471   3,848,997            17   2,513,848   2,528,835
      3
    86   10,064,659   11,116,911         79   9,911,914   10,763,496
      4
      9   2,337,583   2,346,439         14   3,032,593   3,045,309
      5
      2   337,235   338,736           2   337,197   338,698
   
 
 
 
 
 
     
 
 
 
 
 
Total loans receivable
  124   $17,436,843   $18,528,773       120   $16,572,715   $17,454,621
   
 
 
 
 
 
     
 
 
 
 
 
CECL reserve
      (128,945)               (173,549)    
       
 
             
 
   
Loans receivable, net
      $17,307,898               $16,399,166    
       
 
             
 
   
 
(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 $999.2 million and $801.8 million of such
non-consolidated
senior interests as of June 30, 2021 and December 31, 2020, respectively.
(2)
Excludes investment exposure to the 2018 Single Asset Securitization of $623.1 million and $735.5 million as of June 30, 2021 and December 31, 2020, respectively. See Note 4 for details of the subordinate position we own in the 2018 Single Asset Securitization.
The weighted-average risk rating of our total loan exposure was 2.9 and 3.0 as of June 30, 2021 and December 31, 2020, respectively. The decrease in risk rating reflects the ongoing market recovery from
COVID-19
and the resulting improvement in the performance of the collateral assets underlying our portfolio, which resulted in several risk rating upgrades in our portfolio during the quarter ended June 30, 2021.
 
24

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
Current Expected Credit Loss Reserve
The CECL reserve required under GAAP reflects our current estimate of potential credit losses related to the loans and debt securities included in our consolidated balance sheets. Refer to Note 2 for further discussion of our CECL reserve. The following table presents the activity in our loans receivable CECL reserve by investment pool for the three and six months ended June 30, 2021 and 2020 ($ in thousands):
 
    
U.S. Loans
   
Non-U.S. Loans
   
Unique Loans
   
Impaired Loans
    
Total
 
Loans Receivable, Net
                                         
CECL reserve as of December 31, 2020
   $ 42,995     $ 27,734     $ 33,159     $ 69,661      $ 173,549  
Increase (decrease) in CECL reserve
     1,539       (3,134     146       —          (1,449
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
CECL reserve as of March 31, 2021
   $ 44,534     $ 24,600     $ 33,305     $ 69,661      $ 172,100  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
Decrease in CECL reserve
     (26,861     (15,771     (523     —          (43,155
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
CECL reserve as of June 30, 2021
   $ 17,673     $ 8,829     $ 32,782     $ 69,661      $ 128,945  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
CECL reserve as of December 31, 2019
   $ —       $ —       $ —       $ —        $ —    
Initial CECL reserve on January 1, 2020
     8,955       3,631       1,356       —          13,942  
Increase in CECL reserve
     55,906       18,194       24,652       —          98,752  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
CECL reserve as of March 31, 2020
   $ 64,861     $ 21,825     $ 26,008     $ —        $ 112,694  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
(Decrease) increase in CECL reserve
     (3,457     (2,080     1,232       69,661        65,356  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
CECL reserve as of June 30, 2020
   $ 61,404     $ 19,745     $ 27,240     $ 69,661      $ 178,050  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
Our initial CECL reserve of $13.9 million against our loans receivable portfolio, recorded on January 1, 2020, is reflected as a direct charge to retained earnings on our consolidated statements of changes in equity; however subsequent changes to the CECL reserve are recognized through net income on our consolidated statements of operations. During the three and six months ended June 30, 2021, we recorded a decrease of $43.2 million and $44.6 million, respectively, in the CECL reserve against our loans receivable portfolio, bringing our total reserve to $128.9 million as of June 30, 2021. The decrease in the CECL reserve during the three and six months ended June 30, 2021 reflects the ongoing market recovery from
COVID-19
and the resulting improvement in the performance of the collateral assets underlying our portfolio. During the three and six months ended June 30, 2020, we recorded an increase of $65.4 million and $164.1 million, respectively, in the CECL reserve against our loans receivable portfolio, bringing our total reserve to $178.1 million as of June 30, 2020. This CECL reserve reflects the macroeconomic impact of the
COVID-19
pandemic on commercial real estate markets generally, as well as certain loans assessed for impairment in our portfolio. See Note 2 for further discussion of
COVID-19.
During 2020, we entered into loan modifications related to a multifamily asset in New York City, which are classified as troubled debt restructurings under GAAP. These modifications included, among other changes, a reduction in the loan’s contractual interest payments and an extension of the loan’s maturity date. During the three months ended June 30, 2020, we recorded a $14.8 million
CECL reserve on this loan, which was unchanged as of June 30, 2021. This loan has an outstanding principal balance of $52.4 million, net of cost-recovery proceeds, as of June 30, 2021. The CECL reserve was recorded based on our Manager’s estimation of the fair value of the loan’s underlying collateral as of June 30, 2021.
During 2020, we entered into a loan modification related to a hospitality asset in New York City, which is classified as a troubled debt restructuring under GAAP. This modification included, among other changes, a reduction in the loan’s contractual interest payments and an extension of the loan’s maturity date. During the three months ended June 30, 2020, we recorded a $54.9 million CECL reserve on this loan, which was unchanged as of June 30, 2021. This loan has an outstanding principal balance of $286.3 million, net of cost-recovery proceeds, as of June 30, 2021. The CECL reserve was recorded based on our Manager’s estimation of the fair value of the loan’s underlying collateral as of June 30, 2021.
As of July 1, 2020, the income accrual was suspended on the two loans detailed above, which had an aggregate outstanding principal balance of $338.7 million, as of June 30, 2021. No income was recorded on these loans subsequent to July 1, 2020.
 
25

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
Our primary credit quality indicator is our risk ratings, which are further discussed above. The following tables present the net book value of our loan portfolio as of June 30, 2021 and December 31, 2020, respectively, by year of origination, investment pool, and risk rating ($ in thousands):
 
    
Net Book Value of Loans Receivable by Year of Origination
(1)(2)
 
                    
  
As of June 30, 2021
 
Risk Rating
  
2021
    
2020
    
2019
    
2018
    
2017
    
Prior
    
Total
 
U.S. loans
                                                              
1
   $ —        $ —        $ 683,911      $ —        $ 65,932      $ —        $ 749,843  
2
     493,446        —          181,927        1,167,271        391,388        80,427        2,314,459  
3
     1,879,638        863,419        2,168,732        1,730,283        629,933        268,839        7,540,844  
4
     —          —          96,461        540,224        63,372        51,906        751,963  
5
     —          —          —          —          —          —          —    
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total U.S. loans
   $ 2,373,084      $ 863,419      $ 3,131,031      $ 3,437,778      $ 1,150,625      $ 401,172      $ 11,357,109  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Non-U.S.
loans
                                                              
1
   $ —        $ —        $ 34,935      $ —        $ 92,117      $ —        $ 127,052  
2
     —          102,423        1,289,458        —          —          114,131        1,506,012  
3
     744,823        —          1,054,402        466,265        —          —          2,265,490  
4
     —          —          352,604        —          —          —          352,604  
5
     —          —          —          —          —          —          —    
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
Non-U.S.
loans
   $ 744,823      $ 102,423      $ 2,731,399      $ 466,265      $ 92,117      $ 114,131      $ 4,251,158  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Unique loans
                                                              
1
   $ —        $ —        $ —        $ —        $ —        $ —        $ —    
2
     —          —          —          —          —          —          —    
3
     —          —          —          197,701        —          60,624        258,325  
4
     —          —          329,415        903,601        —          —          1,233,016  
5
     —          —          —          —          —          —          —    
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total unique loans
   $ —        $ —        $ 329,415      $ 1,101,302      $ —        $ 60,624      $ 1,491,341  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Impaired loans
                                                              
1
   $ —        $ —        $ —        $ —        $ —        $ —        $ —    
2
     —          —          —          —          —          —          —    
3
     —          —          —          —          —          —          —    
4
     —          —          —          —          —          —          —    
5
     —          —          —          284,808        —          52,427        337,235  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total impaired loans
   $ —        $ —        $ —        $ 284,808      $ —        $ 52,427      $ 337,235  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total loans receivable
                                                              
1
   $ —        $ —        $ 718,846      $ —        $ 158,049      $ —        $ 876,895  
2
     493,446        102,423        1,471,385        1,167,271        391,388        194,558        3,820,471  
3
     2,624,461        863,419        3,223,134        2,394,249        629,933        329,463        10,064,659  
4
     —          —          778,480        1,443,825        63,372        51,906        2,337,583  
5
     —          —          —          284,808        —          52,427        337,235  
Total loans receivable
   $ 3,117,907      $ 965,842      $ 6,191,845      $ 5,290,153      $ 1,242,742      $ 628,354      $ 17,436,843  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
CECL reserve
                                                           (128,945
                                                          
 
 
 
Loans receivable, net
                                                         $ 17,307,898  
                                                          
 
 
 
 
(1)
Date loan was originated or acquired by us. Origination dates are subsequently updated to reflect material loan modifications.
(2)
Excludes the $77.6 million net book value of our
held-to-maturity
debt securities which represents our subordinate position we own in the 2018 Single Asset Securitization, and is included in other assets on our consolidated balance sheets. See Note 4 for details of the subordinate position we own in the 2018 Single Asset Securitization.
 
26

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
    
Net Book Value of Loans Receivable by Year of Origination
(1)(2)
 
                    
  
As of December 31, 2020
 
Risk Rating
  
2020
    
2019
    
2018
    
2017
    
2016
    
Prior
    
Total
 
U.S. loans
                                                              
1
   $ —        $ 231,796      $ 253,674      $ 43,906      $ 17,009      $ —        $ 546,385  
2
     —          282,017        1,172,168        757,138        79,848        222,677        2,513,848  
3
     781,595        2,391,297        1,672,897        1,134,288        227,466        220,644        6,428,187  
4
     65,978        170,541        1,055,142        63,293        105,380        —          1,460,334  
5
     —          —          —          —          —          —          —    
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total U.S. loans
   $ 847,573      $ 3,075,651      $ 4,153,881      $ 1,998,625      $ 429,703      $ 443,321      $ 10,948,754  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Non-U.S.
loans
                                                              
1
   $ —        $ —        $ 136,021      $ 94,757      $ —        $ —        $ 230,778  
2
     —          —          —          —          —          —          —    
3
     105,300        2,526,225        479,512        —          113,653        —          3,224,690  
4
     —          256,494        —          —          —          —          256,494  
5
     —          —          —          —          —          —          —    
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
Non-U.S.
loans
   $ 105,300      $ 2,782,719      $ 615,533      $ 94,757      $ 113,653      $ —        $ 3,711,962  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Unique loans
                                                              
1
   $ —        $ —        $ —        $ —        $ —        $ —        $ —    
2
     —          —          —          —          —          —          —    
3
     —          —          198,433        —          —          60,604        259,037  
4
     —          325,097        990,668        —          —          —          1,315,765  
5
     —          —          —          —          —          —          —    
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total unique loans
   $ —        $ 325,097      $ 1,189,101      $ —        $ —        $ 60,604      $ 1,574,802  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Impaired loans
                                                              
1
   $ —        $ —        $ —        $ —        $ —        $ —        $ —    
2
     —          —          —          —          —          —          —    
3
     —          —          —          —          —          —          —    
4
     —          —          —          —          —          —          —    
5
     —          —          284,809        —          —          52,388        337,197  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total impaired loans
   $ —        $ —        $ 284,809      $ —        $ —        $ 52,388      $ 337,197  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total loans receivable
                                                              
1
   $ —        $ 231,796      $ 389,695      $ 138,663      $ 17,009      $ —        $ 777,163  
2
     —          282,017        1,172,168        757,138        79,848        222,677        2,513,848  
3
     886,895        4,917,522        2,350,842        1,134,288        341,119        281,248        9,911,914  
4
     65,978        752,132        2,045,810        63,293        105,380        —          3,032,593  
5
     —          —          284,809        —          —          52,388        337,197  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total loans receivable
   $ 952,873      $ 6,183,467      $ 6,243,324      $ 2,093,382      $ 543,356      $ 556,313      $ 16,572,715  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
CECL reserve
                                                           (173,549
                                                          
 
 
 
Loans receivable, net
                                                         $ 16,399,166  
                                                          
 
 
 
 
(1)
Date loan was originated or acquired by us. Origination dates are subsequently updated to reflect material loan modifications.
(2)
Excludes the $75.7 million net book value of our
held-to-maturity
debt securities which represents our subordinate position we own in the 2018 Single Asset Securitization, and is included in other assets on our consolidated balance sheets. See Note 4 for details of the subordinate position we own in the 2018 Single Asset Securitization.
 
27

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
Multifamily Joint Venture
As discussed in Note 2, we entered into a Multifamily Joint Venture in April 2017. As of June 30, 2021 and December 31, 2020, our Multifamily Joint Venture held $520.5 million and $484.8 million of loans, respectively, which are included in the loan disclosures above. Refer to Note 2 for additional discussion of our Multifamily Joint Venture.
4. OTHER ASSETS AND LIABILITIES
Other Assets
The following table details the components of our other assets ($ in thousands):
 
    
  June 30, 2021  
    
  December 31, 2020  
 
Debt securities
held-to-maturity
(1)
   $ 77,754      $ 77,445  
CECL reserve
     (122      (1,723
    
 
 
    
 
 
 
Debt securities
held-to-maturity,
net
     77,632        75,722  
Loan portfolio payments held by servicer
(2)
     80,540        73,224  
Accrued interest receivable
     72,485        66,757  
2021 FL4 CLO restricted cash
(3)
     50,000        —    
Derivative assets
     19,860        522  
Collateral deposited under derivative agreements
     2,710        51,050  
Prepaid expenses
     411        973  
Prepaid taxes
     —          376  
Other
     659        1,195  
    
 
 
    
 
 
 
Total
   $ 304,297      $ 269,819  
    
 
 
    
 
 
 
 
                    
 
  (1)
Represents the subordinate position we own in the 2018 Single Asset Securitization, which held aggregate loan assets of $623.1 million and $735.5 million as of June 30, 2021 and December 31, 2020, respectively, with a yield to full maturity of L+10.0% and a maximum maturity date of June 9, 2025, assuming all extension options are exercised by the borrower. Refer to Note 16 for additional discussion.
 
  (2)
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.
 
  (3)
Represents $50.0 million of restricted cash held by our 2021 FL4 collateralized loan obligation that can be used to acquire and finance additional assets for up to six months from the date of closing.
 
Current Expected Credit Loss Reserve
The CECL reserve required under GAAP reflects our current estimate of potential credit losses related to the loans and debt securities included in our consolidated balance sheets. Refer to Note 2 for further discussion of our CECL reserve. The following table presents the activity in our debt securities CECL reserve by investment pool for the three and six months ended June 30, 2021 and 2020 ($ in thousands):​​​​​​​
 
    
U.S. Loans
   
Non-U.S. Loans
    
Unique Loans
    
Impaired Loans
    
Total
 
Debt Securities
Held-To-Maturity
                                           
CECL reserve as of December 31, 2020
   $ 1,723     $ —        $ —        $ —        $ 1,723  
Decrease in CECL reserve
     (834     —          —          —          (834
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
 
CECL reserve as of March 31, 2021
   $ 889     $ —        $ —        $ —        $ 889  
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
 
Decrease in CECL reserve
     (767     —          —          —          (767
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
 
CECL reserve as of June 30, 2021
   $ 122     $ —        $ —        $ —        $ 122  
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
 
CECL reserve as of December 31, 2019
   $ —       $ —        $ —        $ —        $ —    
Initial CECL reserve on January 1, 2020
     445       —          —          —          445  
Increase in CECL reserve
     4,677       —          —          —          4,677  
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
 
CECL reserve as of March 31, 2020
   $ 5,122     $ —        $ —        $ —        $ 5,122  
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
 
Decrease in CECL reserve
     (1,003     —          —          —          (1,003
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
 
CECL reserve as of June 30, 2020
   $ 4,119     $ —        $ —        $ —        $ 4,119  
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
 
 
28

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
Our initial CECL reserve of $445,000 against our debt securities
held-to-maturity,
recorded on January 1, 2020, is reflected as a direct charge to retained earnings on our consolidated statements of changes in equity; however subsequent changes to the CECL reserve are recognized through net income on our consolidated statements of operations. During the three and six months ended June 30, 2021, we recorded a decrease of $767,000 and $1.6 million, respectively, in the CECL reserve against our debt securities
held-to-maturity,
bringing our total reserve to $122,000 as of June 30, 2021. The decrease in the CECL reserve during the three and six months ended June 30, 2021 reflects the ongoing market recovery from
COVID-19
and the resulting improvement in the performance of the collateral assets underlying our portfolio. During the three and six months ended June 30, 2020, we recorded a decrease of $1.0 million and an increase of $3.7 million, respectively, in the CECL reserve against our debt securities
held-to-maturity,
bringing our total reserve to $4.1 million as of June 30, 2020. This CECL reserve reflects the macroeconomic impact of the
COVID-19
pandemic on commercial real estate markets generally and is not specific to any loan losses or impairments in our portfolio. See Note 2 for further discussion of
COVID-19.
Other Liabilities
The following table details the components of our other liabilities ($ in thousands):
 
    
  June 30, 2021  
    
  December 31, 2020  
 
Accrued dividends payable
   $ 91,150      $ 91,004  
Accrued management and incentive fees payable
     21,545        19,158  
Accrued interest payable
     20,627        20,548  
Derivative liabilities
     13,749        58,915  
Accounts payable and other liabilities
     7,725        2,671  
Current expected credit loss reserve for unfunded loan commitments
(1)
     4,037        10,031  
    
 
 
    
 
 
 
Total
   $ 158,833      $ 202,327  
    
 
 
    
 
 
 
 
                    
 
  (1)
Represents the CECL reserve related to our unfunded loan commitments. See Note 2 for further discussion of the CECL reserve.
 
Current Expected Credit Loss Reserve for Unfunded Loan Commitments
As of June 30, 2021, we had unfunded commitments of $3.4 billion related to 86 loans receivable. The expected credit losses over the contractual period of our loans are subject to the obligation to extend credit through our unfunded loan commitments. See Note 2 for further discussion of the CECL reserve related to our unfunded loan commitments, and Note 17 for further discussion of our unfunded loan commitments. The following table presents the activity in the CECL reserve related to our unfunded loan commitments by investment pool for the three and six months ended June 30, 2021 and 2020 ($ in thousands):​​​​​​​
 
    
U.S. Loans
   
Non-U.S. Loans
   
Unique Loans
   
Impaired Loans
    
Total
 
Unfunded Loan Commitments
                                         
CECL reserve as of December 31, 2020
   $ 6,953     $ 2,994     $ 84     $ —        $ 10,031  
Increase (decrease) in CECL reserve
     216       778       (4     —          990  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
CECL reserve as of March 31, 2021
   $ 7,169     $ 3,772     $ 80     $ —        $ 11,021  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
Decrease in CECL reserve
     (4,315     (2,632     (37     —          (6,984
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
CECL reserve as of June 30, 2021
   $ 2,854     $ 1,140     $ 43     $ —        $ 4,037  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
CECL reserve as of December 31, 2019
   $ —       $ —       $ —       $ —        $ —    
Initial CECL reserve on January 1, 2020
     2,801       453       9       —          3,263  
Increase in CECL reserve
     16,992       2,219       62       —          19,273  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
CECL reserve as of March 31, 2020
   $ 19,793     $ 2,672     $ 71     $ —        $ 22,536  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
(Decrease) increase in CECL reserve
     (6,957     (594     17       —          (7,534
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
CECL reserve as of June 30, 2020
   $ 12,836     $ 2,078     $ 88     $ —        $ 15,002  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
 
29

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
Our initial CECL reserve of $3.3 million against our unfunded loan commitments, recorded on January 1, 2020, is reflected as a direct charge to retained earnings on our consolidated statements of changes in equity; however subsequent changes to the CECL reserve are recognized through net income on our consolidated statements of operations. During the three and six months ended June 30, 2021, we recorded a decrease of $7.0 million and $6.0 million, respectively, in the CECL reserve against our unfunded loan commitments, bringing our total reserve to $4.0 million as of June 30, 2021. The decrease in the CECL reserve during the three and six months ended June 30, 2021 reflects the ongoing market recovery from
COVID-19
and the resulting improvement in the performance of the collateral assets underlying our portfolio. During the three and six months ended June 30, 2020, we recorded a decrease of $7.5 million and an increase of $11.7 million, respectively, in the CECL reserve against our unfunded loan commitments, bringing our total reserve to $15.0 million as of June 30, 2020. This CECL reserve reflects the macroeconomic impact of the
COVID-19
pandemic on commercial real estate markets generally and is not specific to any loan losses or impairments. See Note 2 for further discussion of
COVID-19.
5. SECURED DEBT, NET
Our secured debt includes our secured credit facilities and acquisition facility. During the three months ended June 30, 2021, we obtained approval for $2.1 billion of new borrowings against $2.6 billion of collateral assets from six credit facility lenders. Additionally, during the three months ended June 30, 2021, we entered into a new $1.8 billion secured credit facility with a European bank and increased the size of one our existing secured credit facilities by $500.0 million. The following table details our secured debt ($ in thousands):
 
    
Secured Debt
 
    
Borrowings Outstanding
 
    
  June 30, 2021  
    
  December 31, 2020  
 
Secured credit facilities
   $ 8,729,281      $ 7,896,863  
Acquisition facility
     —          —    
    
 
 
    
 
 
 
Total secured debt
   $ 8,729,281      $ 7,896,863  
    
 
 
    
 
 
 
Deferred financing costs
(1)
     (19,463      (16,327
    
 
 
    
 
 
 
Net book value of secured debt
   $ 8,709,818      $ 7,880,536  
    
 
 
    
 
 
 
 
                    
 
  (1)
Costs incurred in connection with our secured debt are recorded on our consolidated balance sheet when incurred and recognized as a component of interest expense over the life of each related facility.
 
Secured Credit Facilities
Our secured credit facilities are bilateral agreements we use to finance diversified pools of senior loan collateral with sufficient flexibility to accommodate our investment and asset management strategy. The facilities are uniformly structured to provide currency, index, and term-matched financing without capital markets based
mark-to-market
provisions.
The following table details our secured credit facilities as of June 30, 2021 ($ in thousands):
June 30, 2021
                
Wtd Avg.
                  
Wtd Avg.
      
Recourse Limitation
Currency
  
Lenders
(1)
  
Borrowings
    
Maturity
(2)
      
Loan Count
  
Collateral
(3)
    
Maturity
(4)
      
Wtd. Avg.
  
Range
USD
   12    $ 4,589,729      8/1/2024          88    $ 7,437,101      9/20/2024        29%    25% - 100%
EUR
     6      2,457,542      7/18/2024  
 
       9      3,258,275      6/27/2024  
 
   49%    25% - 100%
GBP
     6      986,145      7/8/2024  
 
     11      1,630,785      9/30/2024  
 
   27%    25% - 50%
Others
(5)
     4      695,865      5/5/2025  
 
       5      895,872      4/13/2025  
 
   27%    25% - 100%
    
 
  
 
 
    
 
      
 
  
 
 
    
 
      
 
  
 
Total
   12    $ 8,729,281      8/16/2024        113    $ 13,222,033      9/14/2024        34%   
25% - 100%
    
 
  
 
 
    
 
      
 
  
 
 
    
 
      
 
  
 
 
(1)
Represents the number of lenders with fundings advanced in each respective currency, as well as the total number of facility lenders.
 
(2)
Based on the earlier of (i) the maximum maturity date of each secured credit facility, or (ii) the maximum maturity date of the collateral loans.
 
(3)
Represents the principal balance of the collateral assets.
 
(4)
Maximum maturity assumes all extension options are exercised by the borrower, however our loans may be repaid prior to such date.
 
(5)
Includes Swedish Krona, Australian Dollar, and Canadian Dollar currencies.
 
 
30

Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
The availability of funding under our secured credit facilities is based on the amount of approved collateral, which collateral is proposed by us in our discretion and approved by the respective counterparty in its discretion, resulting in a mutually agreed collateral portfolio construction. Certain structural elements of our secured credit facilities, including the limitation on recourse to us and facility economics are influenced by the specific collateral portfolio construction of each facility, and therefore vary within and among the facilities.
The following tables detail the
all-in
cost of our secured credit facilities as of June 30, 2021 and December 31, 2020 ($ in thousands):
 
    
Six Months Ended

June 30, 2021
    
June 30, 2021
 
All-in
Cost
(1)(2)
  
New Financings
(3)
    
Total

Borrowings
    
Wtd. Avg.

All-in Cost
(1)(2)(4)
        
Collateral
(5)
    
Wtd. Avg.

All-in Yield
(2)(6)
   
 
  
Net Interest
Margin
(7)
 
+ 1.49% or less
   $ 562,480      $ 2,017,600        + 1.42  
 
   $ 2,520,834        + 2.88          + 1.46
+ 1.50% to + 1.74%
     901,070        2,836,242        + 1.67  
 
     3,981,023        + 3.32  
 
     + 1.65
+ 1.75% to + 1.99%
     404,035        1,701,316        + 1.84          2,755,559        + 3.41  
 
     + 1.57
+ 2.00% or more
     672,999        2,174,123        + 2.21  
 
     3,964,617        + 3.88  
 
     + 1.67
    
 
 
    
 
 
    
 
 
        
 
 
    
 
 
        
 
 
 
Total
   $ 2,540,584      $ 8,729,281        + 1.78        $ 13,222,033        + 3.42          + 1.64
    
 
 
    
 
 
    
 
 
        
 
 
    
 
 
        
 
 
 
 
    
Year Ended
December 31, 2020
    
December 31, 2020
 
All-in
Cost
(1)(2)
  
New Financings
(3)
    
Total

Borrowings
    
Wtd. Avg. 

All-in Cost
(1)(2)(4)
        
Collateral
(5)
    
Wtd. Avg. 

All-in Yield
(2)(6)
        
Net Interest

Margin
(7)
 
+ 1.49% or less
   $ —        $ 1,377,406        + 1.45        $ 1,851,104        + 2.82          + 1.37
+ 1.50% to + 1.74%
     340,997        2,600,520        + 1.65  
 
     4,173,632        + 3.18  
 
     + 1.53
+ 1.75% to + 1.99%
     35,088        1,639,137        + 1.87  
 
     2,459,716        + 3.54  
 
     + 1.67
+ 2.00% or more
     522,431        2,279,800        + 2.24  
 
     3,556,455        + 3.87  
 
     + 1.63
    
 
 
    
 
 
    
 
 
        
 
 
    
 
 
        
 
 
 
Total
   $ 898,516      $ 7,896,863        + 1.83        $ 12,040,907        + 3.40          + 1.57
    
 
 
    
 
 
    
 
 
        
 
 
    
 
 
        
 
 
 
 
(1)
In addition to spread, the cost includes the associated deferred fees and expenses related to the respective borrowings.
 
(2)
The
all-in
cost and
all-in
yield are expressed over the relevant floating benchmark rates, which include USD LIBOR, GBP LIBOR, SONIA, EURIBOR, STIBOR, BBSY, and CDOR, as applicable.
 
(3)
Represents borrowings outstanding as of June 30, 2021 and December 31, 2020, respectively, for new financings during the six months ended June 30, 2021 and year ended December 31, 2020, respectively, based on the date collateral was initially pledged to each credit facility.
 
(4)
Represents the weighted-average
all-in
cost as of June 30, 2021 and is not necessarily indicative of the spread applicable to recent or future borrowings.
 
(5)
Represents the principal balance of the collateral assets.
 
(6)
In addition to cash coupon,
all-in
yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees.
 
(7)
Represents the difference between the weighted-average
all-in
yield and weighted-average
all-in
cost.
 
31

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
Our secured credit facilities generally permit us to increase or decrease the amount advanced against the pledged collateral in our discretion within certain maximum/minimum amount and frequency limitations. As of June 30, 2021, there was an aggregate $1.1 billion available to be drawn in our discretion under our credit facilities.
Acquisition Facility
We have a $250.0 million full recourse secured credit facility that is designed to finance eligible first mortgage originations for up to nine months as a bridge to term financing without obtaining discretionary lender approval. The cost of borrowing under the facility is variable, dependent on the type of loan collateral, and its maturity date is April 4, 2023.
During the six months ended June 30, 2021, we had no borrowings under the acquisition facility and we recorded interest expense of $618,000, including $178,000 of amortization of deferred fees and expenses.
During the six months ended December 31, 2020, we had no borrowings under the acquisition facility and we recorded interest expense of $635,000, including $188,000 of amortization of deferred fees and expenses.
Financial Covenants
We are subject to the following financial covenants related to our secured debt: (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 $3.0 billion as of each measurement date plus 75% of the net cash proceeds of future equity issuances subsequent to June 30, 2021; (iii) cash liquidity shall not be less than the greater of (x) $10.0 million or (y) no more than 5% of our recourse indebtedness; and (iv) our indebtedness shall not exceed 83.33% of our total assets. As of June 30, 2021 and December 31, 2020, we were in compliance with these covenants.
 
32

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
6. SECURITIZED DEBT OBLIGATIONS, NET
We have financed certain pools of our loans through collateralized loan obligations, which include the 2021 FL4 CLO, 2020 FL3 CLO, 2020 FL2 CLO, and 2017 FL1 CLO or collectively, the CLOs. We have also financed one of our loans through a single asset securitization vehicle, or the 2017 Single Asset Securitization. The CLOs and the 2017 Single Asset Securitization are consolidated in our financial statements and have issued securitized debt obligations that are
non-recourse
to us. Refer to Note 16 for further discussion of our CLOs and 2017 Single Asset Securitization.
The following tables detail our securitized debt obligations ($ in thousands):
 
    
June 30, 2021
 
Securitized Debt Obligations
  
Count
    
Principal
Balance
    
Book Value
    
Wtd. Avg.
Yield/Cost
(1)
(2)
   
Term
(3)
 
2021 FL4 Collateralized Loan Obligation
                                           
Collateral assets
     30      $ 1,000,000      $ 1,000,000        + 3.42     May 2024  
Financing provided
     1        803,750        796,383        + 1.62     May 2038  
2020 FL3 Collateralized Loan Obligation
                                           
Collateral assets
     21        1,000,000        1,000,000        + 3.04     April 2024  
Financing provided
(2)
     1        808,750        802,467        + 2.10     November 2037  
2020 FL2 Collateralized Loan Obligation
                                           
Collateral assets
     25        1,500,000        1,500,000        + 3.13     March 2024  
Financing provided
(2)
     1        1,243,125        1,234,928        + 1.44     February 2038  
Total
                                           
Collateral assets
     76      $ 3,500,000      $ 3,500,000        + 3.19        
    
 
 
    
 
 
    
 
 
    
 
 
         
Financing provided
(4)
     3      $ 2,855,625      $ 2,833,778        + 1.68        
    
 
 
    
 
 
    
 
 
    
 
 
         
                        
(1)  
 
In addition to cash coupon,
all-in
yield includes the amortization of deferred origination and extension fees, loan origination costs, purchase discounts, and accrual of exit fees.
(2)
 
The weighted-average
all-in
yield and cost are expressed as a spread over the relevant floating benchmark rates, which include USD LIBOR and SOFR, as applicable to each securitized debt obligation. As of June 30, 2021, the floating benchmark rate for the financing provided on the 2020 FL3 and 2020 FL2 CLOs is the
30-day
average compounded SOFR, plus a credit spread adjustment of 0.11%. As of June 30, 2021, the
30-day
average compounded SOFR was 0.03% and
one-month
USD LIBOR was 0.10%.
(3)
 
Loan term represents weighted-average final maturity, assuming all extension options are exercised by the borrower. Repayments of securitized debt obligations are tied to timing of the related collateral loan asset repayments. The term of these obligations represents the rated final distribution date of the securitizations.
(4)
 
During the three and six months ended June 30, 2021, we recorded $12.4 million and $24.5 million, respectively, of interest expense related to our securitized debt obligations.
 
 
33

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
    
December 31, 2020
Securitized Debt Obligations
  
Count
    
Principal
Balance
    
Book Value
    
Wtd. Avg.
Yield/Cost
(1)
(2)
   
Term
(3)
2020 FL3 Collateralized Loan Obligation
                                       
Collateral assets
     25      $ 1,000,000      $ 1,000,000        + 3.09   February 2024
Financing provided
     1        808,750        800,993        + 2.08   November 2037
2020 FL2 Collateralized Loan Obligation
                                       
Collateral assets
     31        1,500,000        1,500,000        + 3.17   January 2024
Financing provided
     1        1,243,125        1,233,464        + 1.44   February 2038
2017 FL1 Collateralized Loan Obligation
                                       
Collateral assets
     15        666,334        666,334        + 3.39   January 2023
Financing provided
     1        483,834        483,113        + 1.83   June 2035
2017 Single Asset Securitization
                                       
Collateral assets
(4)
     1        619,194        618,766        + 3.57   June 2023
Financing provided
     1        404,929        404,929        + 1.63   June 2033
Total
                                       
Collateral assets
     72      $ 3,785,528      $ 3,785,100        + 3.25    
    
 
 
    
 
 
    
 
 
    
 
 
     
Financing provided
(5)
     4      $ 2,940,638      $ 2,922,499        + 1.70    
    
 
 
    
 
 
    
 
 
    
 
 
     
                        
(1)  
 
In addition to cash coupon,
all-in
yield includes the amortization of deferred origination and extension fees, loan origination costs, purchase discounts, and accrual of exit fees.
(2)
 
The weighted-average
all-in
yield and cost are expressed as a spread over USD LIBOR.
(3)
 
Loan term represents weighted-average final maturity, assuming all extension options are exercised by the borrower. Repayments of securitized debt obligations are tied to timing of the related collateral loan asset repayments. The term of these obligations represents the rated final distribution date of the securitizations.
(4)
 
The collateral assets for the 2017 Single Asset Securitization include the total loan amount, of which we securitized $500.0 million.
(5)
 
During the three and six months ended June 30, 2020, we recorded $10.7 million and $22.7 million, respectively, of interest expense related to our securitized debt obligations.
 
 
34

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
7. ASSET-SPECIFIC DEBT, NET
The following tables detail our asset-specific debt ($ in thousands):
 
    
June 30, 2021
 
Asset-Specific Debt
  
Count
  
Principal
Balance
    
Book Value
    
Wtd. Avg.
Yield/Cost
(1)
   
Wtd. Avg.
Term
(2)
 
Collateral assets
   3    $ 397,302      $ 384,837        + 4.34     Dec. 2024  
Financing provided
   3    $ 299,601      $ 292,122        + 3.15     Dec. 2024  
 
    
December 31, 2020
 
Asset-Specific Debt
  
Count
  
  Principal  
Balance
    
Book Value
    
Wtd. Avg.
Yield/Cost
(1)
   
Wtd. Avg.
Term
(2)
 
Collateral assets
   4    $ 512,794      $ 499,085        + 4.65     Oct. 2023  
Financing provided
   4    $ 399,699      $ 391,269        + 3.48     Oct. 2023  
                        
 
(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)  
 
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 debt is term-matched to the corresponding collateral loans.
8. TERM LOANS, NET
During the six months ended June 30, 2021, we (i) increased our borrowings under our
B-2
senior term loan facility by $100.0 million and decreased the interest rate by 2.50% to USD LIBOR plus 2.75%, and (ii) we increased our borrowings under our
B-1
senior term loan facility by $200.0 million.
As of June 30, 2021, the following senior term loan facilities, or Term Loans, were outstanding ($ in thousands):
 
Term Loans
  
Face Value
    
Interest Rate
(1)
   
All-in Cost
(1)(2)
   
Maturity
 
B-1
Term Loan
   $ 934,634        + 2.25     + 2.53     April 23, 2026  
B-2
Term Loan
   $ 421,506        + 2.75     + 3.42     April 23, 2026  
                        
 
(1)  
 
The
B-2
Term Loan includes a LIBOR floor of 0.50%.
(2)  
 
Includes issue discount and transaction expenses that are amortized through interest expense over the life of the Term Loans.
The Term Loans are partially amortizing, with an amount equal to 1.0% per annum of the aggregate principal balance due in quarterly installments. The issue discount and transaction expenses on the
B-1
Term Loan were $3.1 million and $12.3 million, respectively, which will be amortized into interest expense over the life of the
B-1
Term Loan. The issue discount and transaction expenses of the
B-2
Term Loan were $9.6 million and
$5.3 million, respectively, which will be amortized into interest expense over the life of the
B-2
Term Loan.
The following table details the net book value of our Term Loans on our consolidated balance sheets ($ in thousands):
 
    
June 30, 2021
    
December 31, 2020
 
Face value
   $ 1,356,140      $ 1,062,766  
Unamortized discount
     (10,286      (9,807
Deferred financing costs
     (13,724      (11,255
    
 
 
    
 
 
 
Net book value
   $ 1,332,130      $ 1,041,704  
    
 
 
    
 
 
 
The guarantee under our Term Loans contains the financial covenant that our indebtedness shall not exceed 83.33% of our total assets. As of June 30, 2021 and December 31, 2020, we were in compliance with this covenant. Refer to Note 2 for additional discussion of our accounting policies for the Term Loans.
 
35

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
9. CONVERTIBLE NOTES, NET
As of June 30, 2021, the following convertible senior notes, or Convertible Notes, were outstanding ($ in thousands):
 
Convertible Notes
Issuance
  
Face Value
    
Interest Rate
   
All-in Cost
(1)
   
Conversion Rate
(2)
    
Maturity
 
May 2017
   $ 402,500        4.38     4.85     28.0324        May 5, 2022  
March 2018
   $ 220,000        4.75     5.33     27.6052        March 15, 2023  
                        
 
(1)  
 
Includes issuance costs that are amortized through interest expense over the life of the Convertible Notes using the effective interest method.
(2)
 
Represents the shares of class A common stock per $1,000 principal amount of Convertible Notes, which is equivalent to a conversion price of $35.67 and $36.23 per share of class A common stock, respectively, for the May 2017 and March 2018 convertible notes. The cumulative dividend threshold as defined in the respective May 2017 and March 2018 convertible notes supplemental indentures have not been exceeded as of June 30, 2021.
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 January 31, 2022 and December 14, 2022 for the May 2017 and March 2018 convertible notes, respectively, 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. We may not redeem the Convertible Notes prior to maturity. The last reported sale price of our class A common stock of $31.89 on June 30, 2021 was less than the per share conversion price of the May 2017 and March 2018 convertible notes. We have the intent and ability to settle each series of the Convertible Notes in cash and, as a result, the potential conversion of the Convertible Notes did not have any impact on our diluted earnings per share.
Upon our issuance of the May 2017 convertible notes, we recorded a $979,000 discount based on the implied value of the conversion option and an assumed effective interest rate of 4.57%, as well as $8.4 million of issue discount and issuance costs. Including the amortization of the discount and issuance costs, our total cost of the May 2017 convertible notes issuance is 4.91% per annum.
Upon our issuance of the March 2018 convertible notes, we recorded a $1.5 million discount based on the implied value of the conversion option and an assumed effective interest rate of 5.25%, as well as $5.2 million of issue discount and issuance costs. Including the amortization of the discount and issuance costs, our total cost of the March 2018 convertible notes issuance is 5.49% per annum.
The following table details the net book value of our Convertible Notes on our consolidated balance sheets ($ in thousands):
 
    
June 30, 2021
    
December 31, 2020
 
Face value
   $ 622,500      $ 622,500  
Unamortized discount
     (4,113      (5,715
Deferred financing costs
     (276      (396
    
 
 
    
 
 
 
Net book value
   $ 618,111      $ 616,389  
    
 
 
    
 
 
 
The following table details our interest expense related to the Convertible Notes ($ in thousands):
 
    
Three Months Ended
    
Six Months Ended
 
    
June 30,
    
June 30,
 
    
2021
    
2020
    
2021
    
2020
 
Cash coupon
   $ 7,015      $ 7,015      $ 14,030      $ 14,030  
Discount and issuance cost amortization
     869        828        1,722        1,639  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total interest expense
   $ 7,884      $ 7,843      $ 15,752      $ 15,669  
    
 
 
    
 
 
    
 
 
    
 
 
 
Accrued interest payable for the Convertible Notes was $6.0 million as of both June 30, 2021 and December 31, 2020. Refer to Note 2 for additional discussion of our accounting policies for the Convertible Notes.
 
36

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
10. 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. Refer to Note 2 for additional discussion of the accounting for designated and
non-designated
hedges.
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.
Cash Flow Hedges of Interest Rate Risk
Certain of our transactions expose us to interest rate risks, which include a fixed versus floating rate mismatch between our assets and liabilities. We use derivative financial instruments, which includes interest rate caps, and may also include interest rate swaps, options, floors, and other interest rate derivative contracts, to hedge interest rate risk.
The following tables detail our outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (notional amount in thousands):
 
June 30, 2021
 
Interest Rate Derivatives
  
Number of
Instruments
         
Notional
Amount
    
Strike
   
Index
    
Wtd.-Avg.

Maturity (Years)
 
Interest Rate Caps
   2                C$     38,293        1.0     CDOR        0.3    
 
December 31, 2020
 
Interest Rate Derivatives
  
Number of
Instruments
         
Notional
Amount
    
Strike
   
Index
    
Wtd.-Avg.

Maturity (Years)
 
Interest Rate Caps
   2                C$     38,293        1.0     CDOR        0.8    
Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on our floating rate debt. During the twelve months following June 30, 2021, we estimate that an additional $7,000 will be reclassified from accumulated other comprehensive income (loss) as an increase to interest expense.
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.
 
37

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
Designated Hedges of Foreign Currency Risk
The following table details our outstanding foreign exchange derivatives that were designated as net investment hedges of foreign currency risk (notional amount in thousands):
 
June 30, 2021
    
December 31, 2020
 
Foreign Currency Derivatives
  
Number of
Instruments
  
Notional
Amount
    
Foreign Currency Derivatives
  
Number of
Instruments
    
Notional
Amount
 
Buy USD / Sell SEK Forward
   1    kr 999,500     
Buy USD / Sell EUR Forward
     8      754,722  
Buy USD / Sell EUR Forward  
   10    679,142     
Buy USD / Sell GBP Forward
     4      £ 372,487  
Buy USD / Sell GBP Forward
   2    £ 542,701     
Buy USD / Sell AUD Forward
     1      A$ 92,800  
Buy USD / Sell AUD Forward
   1    A$ 89,500     
Buy USD / Sell CAD Forward
     1      C$     26,200  
Buy USD / Sell CAD Forward
   1    C$   21,000                         
Non-designated
Hedges of Foreign Currency Risk
The following table details our outstanding foreign exchange derivatives that were
non-designated
hedges of foreign currency risk (notional amount in thousands):
 
June 30, 2021
          
December 31, 2020
 
Non-designated
Hedges
  
Number of
Instruments
  
Notional
Amount
          
Non-designated
Hedges
  
Number of
Instruments
    
Notional
Amount
 
Buy EUR / Sell USD Forward
   1    169,634             
Buy EUR / Sell GBP Forward
     2      £ 146,207  
Buy USD / Sell EUR Forward
   1    169,634             
Buy USD / Sell EUR Forward
     1          8,410  
Buy GBP / Sell EUR Forward
   2    £ 153,527                                 
Buy EUR / Sell GBP Forward
   1    £ 146,207                                 
Buy GBP / Sell USD Forward
   1    £ 63,600                                 
Buy USD / Sell GBP Forward
   1    £   63,600                                 
Financial Statement Impact of Hedges of Foreign Currency Risk
The following table presents the effect of our derivative financial instruments on our consolidated statements of operations ($ in thousands):
 
          
Increase (Decrease) to Net Interest Income

Recognized

from Foreign Exchange Contracts
 
Foreign Exchange Contracts
  
Location of Income
   
Three Months
Ended
    
Three Months
Ended
    
Six Months
Ended
    
Six Months
Ended
 
in Hedging Relationships
  
(Expense) Recognized
   
June 30, 2021
    
June 30, 2020
    
June 30, 2021
    
June 30, 2020
 
Designated Hedges
     Interest Income
(1)
 
  $ 1,703      $ 509      $ 3,752      $ 509  
Non-Designated
Hedges
     Interest Income
(1)
 
    (99      5        (374      5  
Non-Designated
Hedges
     Interest Expense
(2)
 
    2,197        (361      (7,131      (1,515
            
 
 
    
 
 
    
 
 
    
 
 
 
Total
           $ 3,801      $ 153      $ (3,753    $ (1,001
            
 
 
    
 
 
    
 
 
    
 
 
 
                        
(1)  
  
Represents the forward points earned on our foreign currency forward contracts, which reflect the interest rate differentials between the applicable base rate for our foreign currency investments and USD LIBOR. These forward contracts effectively convert the rate exposure to USD LIBOR, resulting in additional interest income earned in U.S. dollar terms.
(2)
  
Represents the spot rate movement in our
non-designated
hedges, which are
marked-to-market
and recognized in interest expense.
 
 
38

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
Valuation and Other Comprehensive Income
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
 
    
June 30, 2021
    
December 31, 2020
    
June 30, 2021
    
December 31, 2020
 
Derivatives designated as hedging instruments:
                                   
Foreign exchange contracts
   $ 16,973      $ 521      $ 3,700      $ 55,758  
Interest rate derivatives
     —          1        —          —    
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 16,973      $ 522      $ 3,700      $ 55,758  
    
 
 
    
 
 
    
 
 
    
 
 
 
Derivatives not designated as hedging instruments:
                                   
Foreign exchange contracts
   $ 2,887      $ —        $ 10,049      $ 3,157  
Interest rate derivatives
     —          —          —          —    
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 2,887      $ —        $ 10,049      $ 3,157  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total Derivatives
   $ 19,860      $ 522      $ 13,749      $ 58,915  
    
 
 
    
 
 
    
 
 
    
 
 
 
                        
 
  (1)
Included in other assets in our consolidated balance sheets.
  (2)
Included in other liabilities in our consolidated balance sheets.
The following table presents the effect of our derivative financial instruments on our consolidated statements of operations ($ in thousands):
 
    
Amount of (Loss)

Gain Recognized in OCI on
Derivatives
   
Location of Gain
(Loss)
   
Amount of Loss

Reclassified from
Accumulated OCI into Income
 
    
Three Months
   
Six Months
   
Reclassified from
   
Three Months
   
Six Months
 
Derivatives in
  
Ended
   
Ended
   
Accumulated
   
Ended
   
Ended
 
Hedging Relationships
  
June 30, 2021
   
June 30, 2021
   
OCI into Income
   
June 30, 2021
   
June 30, 2021
 
Net Investment Hedges
                                        
Foreign exchange contracts
(1)
   $ (16,096   $ 18,974       Interest Expense     $ —       $ —    
Cash Flow Hedges
                                        
Interest rate
derivatives
     —         (1     Interest Expense
(2)
 
    (2     (4
    
 
 
   
 
 
           
 
 
   
 
 
 
Total
   $ (16,096   $ 18,973             $ (2   $ (4
    
 
 
   
 
 
           
 
 
   
 
 
 
                        
(1)  
  
During the three and six months ended June 30, 2021, we paid net cash settlements of $83,000 and $49.3 million, respectively, on our foreign currency forward contracts. Those amounts are included as a component of accumulated other comprehensive income (loss) on our consolidated balance sheets.
(2)
  
During the three months ended June 30, 2021, we recorded total interest and related expenses of $82.4 million, which included interest expense of $2,000 related to our cash flow hedges. During the six months ended June 30, 2021, we recorded total interest and related expenses of $160.7 million, which included interest expense of $4,000.
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 June 30, 2021, we were in a net asset position with one of our derivative counterparties and in a net liability position with our other derivative counterparty and posted collateral of $2.7 million under these derivative contracts. As of December 31, 2020, we were in a net liability position with each such derivative counterparty and posted collateral of $51.1 million under these derivative contracts.
 
39

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
11. EQUITY
Stock and Stock Equivalents
Authorized Capital
As of June 30, 2021, we had the authority to issue up to 500,000,000 shares of stock, consisting of 400,000,000 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 June 30, 2021 and December 31, 2020.
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 14 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.
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:
 
    
Six Months Ended June 30,
 
Common Stock Outstanding
(1)
  
2021
    
2020
 
Beginning balance
     147,086,722        135,263,728  
Issuance of class A common stock
(2)
     949        10,841,667  
Issuance of restricted class A common stock, net
(3)
     234,838        351,333  
Issuance of deferred stock units
     21,374        21,077  
    
 
 
    
 
 
 
Ending balance
     147,343,883        146,477,805  
    
 
 
    
 
 
 
                        
(1)  
  
Includes 328,065 and 281,143 deferred stock units held by members of our board of directors as of June 30, 2021 and 2020, respectively.
(2)
  
Includes 949 and 971 shares issued under our dividend reinvestment program during the six months ended June 30, 2021 and 2020, respectively.
(3)
  
The amounts are net of 28,971 and 249 shares of restricted class A common stock forfeited under our stock-based incentive plans during the six months ended June 30, 2021 and 2020, respectively. See Note 14 for further discussion of our stock-based incentive plans.
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 and six months ended June 30, 2021, we issued 434 shares and 949 shares, respectively, of class A common stock under the dividend reinvestment component of the plan compared to 646 shares and 971 shares, respectively, for the same periods in 2020. As of June 30, 2021, a total of 9,991,025 shares of class A common stock remained available for issuance under the dividend reinvestment and direct stock purchase plan.
 
40

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
At the Market Stock Offering Program
On November 14, 2018, we entered into six equity distribution agreements, or ATM Agreements, pursuant to which we may sell, from time to time, up to an aggregate sales price of $500.0 million of our class A common stock. On July 26, 2019, we amended our existing ATM Agreements and entered into one additional ATM Agreement. Sales of class A common stock made pursuant to our 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 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. During the six months ended June 30, 2021 and 2020, we did not sell any shares of our class A common stock under ATM Agreements. As of June 30, 2021, sales of our class A common stock with an aggregate sales price of $363.8 million remained available for issuance under our 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.
On June 15, 2021, we declared a dividend of $0.62 per share, or $91.1 million in aggregate, that was paid on July 15, 2021, to stockholders of record as of June 30, 2021. The following table details our dividend activity ($ in thousands, except per share data):
 
                                                                                                             
    
Three Months Ended June 30,
    
Six Months Ended June 30,
 
    
2021
    
2020
    
2021
    
2020
 
Dividends declared per share of common stock
  
$
0.62
 
  
$
0.62
 
  
$
1.24
 
  
$
1.24
 
Total dividends declared
  
$
91,150
 
  
$
90,642
 
  
$
182,309
 
  
$
174,562
 
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 (loss) 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 (loss) 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 June 30,
    
Six Months Ended June 30,
 
    
2021
    
2020
    
2021
    
2020
 
Net income (loss)
(1)
   $ 131,595      $ 17,544      $ 211,497      $ (35,808
Weighted-average shares outstanding, basic and diluted
     147,342,822        138,299,418        147,339,895        136,959,341  
    
 
 
    
 
 
    
 
 
    
 
 
 
Per share amount, basic and diluted
   $ 0.89      $ 0.13      $ 1.44      $ (0.26
    
 
 
    
 
 
    
 
 
    
 
 
 
                        
(1)
  
  Represents net income (loss) attributable to Blackstone Mortgage Trust.
Other Balance Sheet Items
Accumulated Other Comprehensive Income
As of June 30, 2021, total accumulated other comprehensive income was $10.7 million, primarily representing $23.7 million of net realized and unrealized gains related to changes in the fair value of derivative instruments, offset by $13.0 million of cumulative unrealized currency translation adjustments on assets and liabilities denominated in foreign currencies. As of December 31, 2020, total accumulated other comprehensive income was $11.2 million, primarily representing (i) $6.4 million of cumulative unrealized currency translation adjustments on assets and liabilities denominated in foreign currencies, and (ii) $4.8 million of net realized and unrealized gains related to changes in the fair value of derivative instruments.
 
41

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
Non-Controlling
Interests
The
non-controlling
interests included on our consolidated balance sheets represent the equity interests in our Multifamily Joint Venture that are not owned by us. A portion of our Multifamily Joint Venture’s consolidated equity and results of operations are allocated to these
non-controlling
interests based on their pro rata ownership of our Multifamily Joint Venture. As of June 30, 2021, our Multifamily Joint Venture’s total equity was $173.3 million, of which $147.3 million was owned by us, and $26.0 million was allocated to
non-controlling
interests. As of December 31, 2020, our Multifamily Joint Venture’s total equity was $121.1 million, of which $102.9 million was owned by us, and $18.2 million was allocated to
non-controlling
interests.
12. 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 GAAP net income (loss), including realized gains and losses not otherwise recognized in current period GAAP net income (loss), and excluding
(i) non-cash
equity compensation expense, (ii) depreciation and amortization, (iii) unrealized gains (losses), (iv) certain
non-cash
items, and (v) incentive management fees.
During the three and six months ended June 30, 2021, we incurred $15.6 million and $31.1 million, respectively, of management fees payable to our Manager, compared to $14.8 million and $29.2 million during the same period in 2020. In addition, during the three and six months ended June 30, 2021, we incurred $6.0 million and $9.6 million, respectively, of incentive fees payable to our Manager, compared to $5.7 million and $10.5 million during the same period in 2020.
As of June 30, 2021 and December 31, 2020 we had accrued management and incentive fees payable to our Manager of $21.5 million and $19.2 million, respectively. During the three months ended June 30, 2020, we issued 840,696 shares of class A common stock to our Manager in satisfaction of our aggregate $19.3 million of management and incentive fees accrued in the first quarter of 2020.
 
42

Table of Contents
Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
General and Administrative Expenses
General and administrative expenses consisted of the following ($ in thousands):
 
    
Three Months Ended June 30,
    
Six Months Ended June 30,
 
    
2021
    
2020
    
2021
    
2020
 
Professional services
(1)
   $ 2,043      $ 1,752      $ 3,861      $ 3,414  
Operating and other costs
(1)
     606        882        1,301        2,335  
    
 
 
    
 
 
    
 
 
    
 
 
 
Subtotal
     2,649        2,634        5,162        5,749  
Non-cash
compensation expenses
                                   
Restricted class A common stock earned
     7,895        8,527        15,855        17,079  
Director stock-based compensation
     125        125        250        250  
    
 
 
    
 
 
    
 
 
    
 
 
 
Subtotal
     8,020        8,652        16,105        17,329  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total general and administrative expenses
   $ 10,669      $ 11,286      $ 21,267      $ 23,078  
    
 
 
    
 
 
    
 
 
    
 
 
 
                        
                                   
(1)  
 
During the three and six months ended June 30, 2021, we recognized an aggregate $197,000 and $433,000, respectively, of expenses related to our Multifamily Joint Venture. During the three and six months ended June 30, 2020, we recognized an aggregate $200,000 and $576,000, respectively, of expenses related to our Multifamily Joint Venture.
13. INCOME TAXES
We have elected to be taxed as a REIT 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 June 30, 2021 and December 31, 2020, we were in compliance with all REIT requirements.
Securitization transactions could result in the creation of taxable mortgage pools for federal income tax purposes. As a REIT, so long as we own 100% of the equity interests in a taxable mortgage pool, we generally would not be adversely affected by the characterization of the securitization as a taxable mortgage pool. Certain categories of stockholders, however, such as foreign stockholders eligible for treaty or other benefits, stockholders with net operating losses, and certain
tax-exempt
stockholders that are subject to unrelated business income tax, or UBTI, could be subject to increased taxes on a portion of their dividend income from us that is attributable to the taxable mortgage pool. We have not made UBTI distributions to our common stockholders and do not intend to make such UBTI distributions in the future.
During the three and six months ended June 30, 2021, we recorded a current income tax provision of $175,000 and $276,000, respectively, primarily related to activities of our taxable REIT subsidiaries and various state and local taxes. During the three and six months ended June 30, 2020, we recorded a current income tax provision of $23,000 and $173,000, respectively. We did not have any deferred tax assets or liabilities as of June 30, 2021 or December 31, 2020.
We have net operating losses, or NOLs, generated by our predecessor business that may be carried forward and utilized in current or future periods. As a result of our issuance of 25,875,000 shares of class A common stock in May 2013, the availability of our 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, 2020, we had estimated NOLs of $159.0 million that will expire in 2029, unless they are utilized by us prior to expiration.
As of June 30, 2021, tax years 2017 through 2020 remain subject to examination by taxing authorities.
 
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Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
14. STOCK-BASED INCENTIVE PLANS
We are externally managed by our Manager and do not currently have any employees. However, as of June 30, 2021, our Manager, certain individuals employed by an affiliate of our Manager, and certain members of our board of directors were compensated, in part, through our issuance of stock-based instruments.
We had stock-based incentive awards outstanding under nine benefit plans as of June 30, 2021. Seven of such benefit plans have expired and no new awards may be issued under them. Under our two current benefit plans, a maximum of 5,000,000 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 June 30, 2021, there were 2,006,886 shares available under our current benefit 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, 2020
     1,627,890      $ 33.14  
Granted
     263,809        26.16  
Vested
     (437,917      33.74  
Forfeited
     (28,971      31.42  
    
 
 
    
 
 
 
Balance as of June 30, 2021
     1,424,811      $ 31.69  
    
 
 
    
 
 
 
These shares generally vest in installments over a three-year period, pursuant to the terms of the respective award agreements and the terms of our current benefit plans. The 1,424,811 shares of restricted class A common stock outstanding as of June 30, 2021 will vest as follows: 520,285 shares will vest in 2021; 626,746 shares will vest in 2022; and 277,780 shares will vest in 2023. As of June 30, 2021, total unrecognized compensation cost relating to unvested share-based compensation arrangements was $41.6 million based on the grant date fair value of shares granted. This cost is expected to be recognized over a weighted-average period of 1.1 years from June 30, 2021.
15. FAIR VALUES
Assets and Liabilities Measured at Fair Value
The following table summarizes our assets and liabilities measured at fair value on a recurring basis ($ in thousands):
 
    
June 30, 2021
    
December 31, 2020
 
    
Level 1
    
Level 2
    
Level 3
    
Total
    
Level 1
    
Level 2
    
Level 3
    
Total
 
Assets
                                                                       
Derivatives
   $   —        $ 19,860      $   —        $ 19,860      $   —        $ 522      $   —        $ 522  
Liabilities
                                                                       
Derivatives
   $ —        $ 13,749      $ —        $ 13,749      $ —        $ 58,915      $ —        $ 58,915  
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 at fair value in the statement of financial position, for which it is practicable to estimate that value.
 
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Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
The following table details the book value, face amount, and fair value of the financial instruments described in Note 2 ($ in thousands):
 
    
June 30, 2021
    
December 31, 2020
 
    
Book
    
Face
    
Fair
    
Book
    
Face
    
Fair
 
    
Value
    
Amount
    
Value
    
Value
    
Amount
    
Value
 
Financial assets
                                                     
Cash and cash equivalents
   $ 289,552      $ 289,552      $ 289,552      $ 289,970      $ 289,970      $ 289,970  
Loans receivable, net
     17,307,898        17,529,542        17,342,841        16,399,166        16,652,824        16,447,192  
Debt securities
held-to-maturity
(1)
     77,632        79,200        78,835        75,722        79,200        70,127  
Financial liabilities
                                                     
Secured debt, net
     8,709,818        8,729,281        8,729,281        7,880,536        7,896,863        7,896,863  
Securitized debt obligations, net
     2,833,778        2,855,625        2,055,287        2,922,499        2,940,638        2,923,489  
Asset-specific debt, net
     292,122        299,601        299,601        391,269        399,699        399,699  
Term loans, net
     1,332,130        1,356,140        1,347,533        1,041,704        1,062,766        1,053,060  
Convertible notes, net
     618,111        622,500        637,303        616,389        622,500        621,568  
 
(1)   Included in other assets on our consolidated balance sheets.
Estimates of fair value for cash and cash equivalents and convertible notes are measured using observable, quoted market prices, or Level 1 inputs. Estimates of fair value for debt securities held to maturity, securitized debt obligations, and the term loans are measured using observable, quoted market prices, in inactive markets, or Level 2 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.
16. VARIABLE INTEREST ENTITIES
Consolidated Variable Interest Entities
We have financed a portion of our loans through the CLOs and the 2017 Single Asset Securitization, all of which are VIEs. During the six months ended June 30, 2021, the 2017 Single Asset Securitization was liquidated upon full repayment of its collateral assets and all senior securities outstanding. Previously, the 2017 Single Asset Securitization was consolidated by us. We are the primary beneficiary of, and therefore consolidate, the CLOs on our balance sheet as we (i) control the relevant interests of the CLOs that give us power to direct the activities that most significantly affect the CLOs, and (ii) have the right to receive benefits and obligation to absorb losses of the CLOs through the subordinate interests we own.
The following table details the assets and liabilities of our consolidated CLOs and 2017 Single Asset Securitization VIEs ($ in thousands):
 
    
June 30, 2021
    
December 31, 2020
 
Assets:
                 
Loans receivable
   $ 3,369,835      $ 3,520,130  
Current expected credit loss reserve
     (4,009      (13,454
    
 
 
    
 
 
 
Loans receivable, net
     3,365,826        3,506,676  
Other assets
     137,639        81,274  
    
 
 
    
 
 
 
Total assets
   $ 3,503,465      $ 3,587,950  
    
 
 
    
 
 
 
Liabilities:
                 
Securitized debt obligations, net
   $ 2,833,778      $ 2,922,499  
Other liabilities
     1,598        2,104  
    
 
 
    
 
 
 
Total liabilities
   $ 2,835,376      $ 2,924,603  
    
 
 
    
 
 
 
 
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Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
Assets held by these VIEs are restricted and can be used only to settle obligations of the VIEs, including the subordinate interests owned by us. The liabilities of these VIEs are
non-recourse
to us and can only be satisfied from the assets of the VIEs. The consolidation of these VIEs results in an increase in our gross assets, liabilities, interest income and interest expense, however it does not affect our stockholders’ equity or net income (loss).
Non-Consolidated
Variable Interest Entities
In the third quarter of 2018, we contributed a $517.5 million loan to the $1.0 billion 2018 Single Asset Securitization, which is a VIE, and invested in the related $99.0 million subordinate position. We are not the primary beneficiary of the VIE because we do not have the power to direct the activities that most significantly affect the VIE’s economic performance and, therefore, do not consolidate the 2018 Single Asset Securitization on our balance sheet. We have classified the subordinate position we own as a
held-to-maturity
debt security that is included in other assets on our consolidated balance sheets. Our maximum exposure to loss from the 2018 Single Asset Securitization is limited to our book value of $77.6 million as of June 30, 2021.
We are not obligated to provide, have not provided, and do not intend to provide financial support to these consolidated and
non-consolidated
VIEs.
17. TRANSACTIONS WITH RELATED PARTIES
We are managed by our Manager pursuant to the Management Agreement, the current term of which expires on December 19, 2021, and will be automatically renewed for a
one-year
term upon such date and each anniversary thereafter unless earlier terminated.
As of June 30, 2021 and December 31, 2020, our consolidated balance sheets included $21.5 million and $19.2 million of accrued management and incentive fees payable to our Manager, respectively. During the three and six months ended June 30, 2021, we paid aggregate management and incentive fees of $19.2 million and $38.4 million, respectively, to our Manager, compared to $19.3 million and $39.4 million during the same periods of 2020. During the three months ended June 30, 2020, we issued 840,696 shares of class A common stock to our Manager in satisfaction of our aggregate $19.3 million of management and incentive fees accrued in the first quarter of 2020. The per share price with respect to such issuance was calculated based on the volume-weighted average price on the NYSE of our class A common stock over the five trading days following our April 29, 2020 first quarter 2020 earnings conference call. In addition, during the three and six months ended June 30, 2021, we reimbursed our Manager for expenses incurred on our behalf of $145,000 and $185,000, respectively, compared to $205,000 and $423,000 during the same periods of 2020.
As of June 30, 2021, our Manager held 699,961 shares of unvested restricted class A common stock, which had an aggregate grant date fair value of $22.3 million, and vest in installments over three years from the date of issuance. During the three and six months ended June 30, 2021, we recorded
non-cash
expenses related to shares held by our Manager of $4.1 million and $8.1 million, respectively, compared to $4.2 million and $8.5 million during the same period of 2020. Refer to Note 14 for further details on our restricted class A common stock.
An affiliate of our Manager is the special servicer of the CLOs. This affiliate did not earn any special servicing fees related to the CLOs during the six months ended June 30, 2021 or 2020.
During each of the six month periods ended June 30, 2021 and 2020, we originated two loans whereby the respective borrowers engaged an affiliate of our Manager to act as title insurance agent in connection with these transactions. We did not incur any expenses or receive any revenues as a result of these transactions.
During the three and six months ended June 30, 2021, we incurred $92,000 and $192,000, respectively, of expenses for various administrative, compliance, and capital market data services to third-party service providers that are affiliates of our Manager, compared to $138,000 and $271,000 during the same periods of 2020.
In the third and fourth quarter of 2019, we acquired an aggregate €250.0 million of a total €1.6 billion senior loan to a borrower that is partially owned by a Blackstone-advised investment vehicle. We will forgo all
non-economic
rights under the loan, including voting rights, so long as the Blackstone-advised investment vehicle controls the borrower. The senior loan terms were negotiated by third parties without our involvement and our 16% interest in the senior loan was made on such market terms. In the second quarter of 2021, we acquired an additional €100.0 million interest in the senior loan from an unaffiliated lender, bringing our total interest to 22% of the aggregate senior loan.
 
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Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
In the second quarter of 2021, we acquired an aggregate €50.0 million of a total €491.0 million senior loan to a borrower that is majority owned by a Blackstone-advised investment vehicle. We will forgo all
non-economic
rights under the loan, including voting rights, so long as the Blackstone-advised investment vehicle controls the borrower. The senior loan terms were negotiated by the original lenders prior to our acquisition of the loan without our involvement.
In the second quarter of 2021 and 2020, certain Blackstone-advised investment vehicles acquired an aggregate $20.0 million participation, or 5%, of the initial aggregate
B-2
Term Loan as a part of a broad syndication lead-arranged by JP Morgan. Blackstone Securities Partners L.P., an affiliate of our Manager, was engaged as a book-runner for the transaction and received aggregate fees of $350,000 in such capacity. Both of these transactions were on terms equivalent to those of unaffiliated parties.
In the first quarter of 2021 and second quarter and fourth quarter of 2019, certain Blackstone-advised investment vehicles acquired an aggregate $65.5 million participation, or 7%, of the initial aggregate
B-1
Term Loan as a part of a broad syndication lead-arranged by JP Morgan. Blackstone Securities Partners L.P., an affiliate of our Manager, was engaged as a book-runner for the transactions and received aggregate fees of $950,000 in such capacity. Both of these transactions were on terms equivalent to those of unaffiliated parties.
In the first quarter of 2021, we acquired an SEK 5.0 billion interest in a total SEK 10.2 billion senior loan to a borrower that is wholly owned by a Blackstone-advised investment vehicle. We will forgo all
non-economic
rights under the loan, including voting rights, so long as we are an affiliate of the borrower. The senior loan terms were negotiated by a third party without our involvement and our 49% interest in the senior loan was made on such market terms.
In the first quarter of 2020, we acquired a $140.0 million interest in a total $421.5 million senior loan to a borrower that is partially owned by a Blackstone-advised investment vehicle. We will forgo all
non-economic
rights under the loan, including voting rights, so long as we are an affiliate of the borrower. The senior loan terms were negotiated by third parties without our involvement and our 33% interest in the senior loan was made on such market terms.
18. COMMITMENTS AND CONTINGENCIES
Impact of
COVID-19
As further discussed in Note 2, the full extent of the impact of
COVID-19
on the global economy generally, and our business in particular, is uncertain. As of June 30, 2021, no contingencies have been recorded on our consolidated balance sheet as a result of
COVID-19,
however as the global pandemic continues and if the economic implications worsen, it may have long-term impacts on our financial condition, results of operations, and cash flows. Refer to Note 2 for further discussion of
COVID-19.
Unfunded Commitments Under Loans Receivable
As of June 30, 2021, we had unfunded commitments of $3.4 billion related to 86 loans receivable. We generally finance the funding of our loan commitments on terms consistent with our overall credit facilities, with an average advance rate of 74.4% for such financed loans, resulting in identified financing for $2.4 billion of our aggregate unfunded loan commitments as of June 30, 2021. Some of our lenders, including substantially all of our financing of construction loans, are contractually obligated to fund their ratable portion of these loan commitments over time, while other lenders have some degree of discretion over future loan funding obligations. We expect to fund our loan commitments over the tenor of these loans, which have a weighted-average future funding period of 3.1 years. Our future loan fundings comprise funding for capital expenditures and construction, leasing costs, and interest and carry costs, and will vary depending on the progress of capital projects, leasing, and cash flows at the assets underlying our loans. Therefore, the exact timing and amounts of such future loan fundings are uncertain and will depend on the current and future performance of the underlying collateral assets.
 
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Blackstone Mortgage Trust, Inc.
Notes to Consolidated Financial Statements (continued)
(Unaudited)
 
Principal Debt Repayments
Our contractual principal debt repayments as of June 30, 2021 were as follows ($ in thousands):
 
    
Secured
    
Asset-Specific
    
Term
    
Convertible
        
Year
  
Debt
(1)
    
Debt
(1)
    
Loans
(2)
    
Notes
(3)
    
Total
(4)
 
2021 (remainder of the year)
   $ 136,307      $ —        $ 6,869      $ —        $ 143,176  
2022
     600,849        —          13,738        402,500        1,017,087  
2023
     1,969,885        146,165        13,738        220,000        2,349,788  
2024
     3,475,914        —          13,738        —          3,489,652  
2025
     721,213        153,436        13,738        —          888,387  
2026
     1,825,113        —          1,294,319        —          3,119,432  
Thereafter
     —          —          —          —          —     
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total obligation
   $ 8,729,281      $ 299,601      $ 1,356,140      $ 622,500      $ 11,007,522  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
                        
                                            
  (1)
The allocation of repayments under our secured debt and asset-specific debt is based on the earlier of (i) the maturity date of each agreement, or (ii) the maximum maturity date of the collateral loans, assuming all extension options are exercised by the borrower.
 
  (2)
The Term Loans are partially amortizing, with an amount equal to 1.0% per annum of the principal balance due in quarterly installments. Refer to Note 8 for further details on our term loans.
 
  (3)
Reflects the outstanding principal balance of Convertible Notes, excluding any potential conversion premium. Refer to Note 9 for further details on our Convertible Notes.
 
  (4)
Total does not include $2.9 billion of consolidated securitized debt obligations, $999.2 million of
non-consolidated
senior interests, and $543.9 million of
non-consolidated
securitized debt obligations, as the satisfaction of these liabilities will not require cash outlays from us.
 
Board of Directors’ Compensation
As of June 30, 2021, of the eight members of our board of directors, our five independent directors are entitled to annual compensation of $175,000 each, $75,000 of which will be paid in the form of cash and $100,000 in the form of deferred stock units. The other three board members, including our chairman and our chief executive officer, are not compensated by us for their service as directors. In addition, (i) the chair of our audit committee receives additional annual cash compensation of $20,000, (ii) the other members of our audit committee receive additional annual cash compensation of $10,000, and (iii) the chairs of each of our compensation and corporate governance committees receive additional annual cash compensation of $10,000.
In April 2021, our board of directors approved changes to the compensation of our six independent directors which will be effective July 1, 2021. The three board members who have not been affirmatively determined to be independent, 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 $175,000 to $210,000, of which $95,000 will be paid in cash and $115,000 will be paid in the form of deferred stock units or, beginning in 2022, at their election, shares of restricted common stock. In addition, (i) the annual cash compensation for the chair of our compensation committee will increase from $10,000 to $15,000 and (ii) the members of our investment risk management committee will receive additional annual cash compensation of $7,500.
Litigation
From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of June 30, 2021, we were not involved in any material legal proceedings.
 
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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 within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect our current views with respect to, among other things, our business, operations and financial performance. You can identify these forward-looking statements by the use of words such as “intend,” “goal,” “estimate,” “expect,” “project,” “projections,” “plans,” “seeks,” “anticipates,” “should,” “could,” “may,” “designed to,” “foreseeable future,” “believe,” “scheduled,” and similar expressions. Such forward-looking statements are subject to various risks, uncertainties and assumptions. Our actual results or outcomes 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, 2020 and elsewhere in this quarterly report on Form
10-Q.
Introduction
Blackstone Mortgage Trust is a real estate finance company that originates senior loans collateralized by commercial real estate in North America, Europe, and Australia. Our investment objective is to preserve and protect shareholder capital while producing attractive risk-adjusted returns primarily through dividends generated from current income from our loan portfolio. We are externally managed by BXMT Advisors L.L.C., or our Manager, a subsidiary of The Blackstone Group Inc., 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 benefit from the deep knowledge, experience and information advantages of our Manager, which is a part of Blackstone’s real estate platform. Blackstone Real Estate is one of the largest owners and operators of real estate in the world, with a proven track record of successfully navigating market cycles and emerging stronger through periods of volatility. The market-leading real estate expertise derived from the strength of the Blackstone platform deeply informs our credit and underwriting process, and we believe gives us the tools to expertly manage the assets in our portfolio and work with our borrowers throughout periods of economic stress and uncertainty.
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.
Recent Developments
COVID-19
As of June 30, 2021, the novel coronavirus, or
COVID-19,
pandemic is ongoing. During 2020, the
COVID-19
pandemic created disruption in global supply chains, increased rates of unemployment and adversely impacted many industries, including industries related to the collateral underlying certain of our loans. In 2021, the global economy has, with certain setbacks, begun reopening and wider distribution of vaccines will likely encourage greater economic activity. Nonetheless, the recovery could remain uneven, particularly given uncertainty with respect to the distribution and acceptance of the vaccines and their effectiveness with respect to new variants of the virus.
The outbreak of
COVID-19
and its impact on the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our financial condition, results of operations, liquidity, and ability to pay distributions. Countries around the world continue to grapple with the economic impacts of the
COVID-19
pandemic. Although a recovery is partially underway, it continues to be gradual, uneven and characterized by meaningful dispersion across sectors and regions, and could be hindered by persistent or resurgent infection rates. The most recent round of U.S. fiscal stimulus could provide meaningful support, along with continued accommodative monetary policy and wider distribution of vaccines. Issues with respect to the distribution and acceptance of vaccines or the spread of new variants of the virus could adversely impact the recovery. Overall, there remains significant uncertainty regarding the timing and duration of the economic recovery, which precludes any prediction as to the ultimate adverse impact of
COVID-19
on economic and market conditions. For additional discussion with respect to the potential impact of the
COVID-19
pandemic on our liquidity and capital resources, see “Liquidity and Capital Resources” below.
 
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Reference Rate Reform
LIBOR and certain other floating rate benchmark indices to which our floating rate loans and other loan agreements are tied, including, without limitation, the Euro Interbank Offered Rate, or EURIBOR, the Stockholm Interbank Offered Rate, or STIBOR, the Canadian Dollar Offered Rate, or CDOR, and the Australian Bank Bill Swap Reference Rate, or BBSY, or collectively, IBORs, are the subject of recent national, international and regulatory guidance and proposals for reform. On March 5, 2021, the Financial Conduct Authority of the U.K., or FCA, which has statutory powers to require panel banks to contribute to LIBOR where necessary, announced it would cease publication of certain IBORs, including
one-week
and
two-month
USD LIBOR and all tenors of GBP LIBOR, immediately after December 31, 2021 and cease the publication of the remaining tenors of USD LIBOR immediately after June 30, 2023. Additionally, the Federal Reserve Board, Federal Deposit Insurance Corporation, Office of the Comptroller of Currency, and other interagency regulatory bodies have advised U.S. banks to stop entering into new USD LIBOR based contracts by December 31, 2021.
The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, has identified the Secured Overnight Financing Rate, or SOFR, a new index calculated using short-term repurchase agreements backed by Treasury securities, as its preferred alternative rate for USD LIBOR. In the U.K., the Bank of England’s working group on Sterling risk free rates set March 31, 2021 as the target date under which GBP LIBOR may no longer be used as the reference rate for new loan products with maturities after December 31, 2021. Market participants have started to transition to the Sterling Overnight Index Average, or SONIA, in line with guidance from the U.K. regulators. As of June 30, 2021, the floating benchmark rate for the financing provided on the 2020 FL3 and 2020 FL2 CLOs is the
30-day
average compounded SOFR, plus a credit spread adjustment. Additionally, as of June 30, 2021, the floating benchmark rate on one of our credit facilities is the daily compounded SONIA.
At this time, it is not possible to predict how markets will respond to SOFR, SONIA, or other alternative reference rates as the transition away from USD LIBOR and GBP LIBOR proceeds. Despite the LIBOR transition in other markets, benchmark rate methodologies in Europe, Canada, and Australia have been reformed and rates such as EURIBOR, STIBOR, CDOR, and BBSY may persist as International Organization of Securities Commissions, or IOSCO, compliant reference rates moving forward. However, multi-rate environments may persist in these markets as regulators and working groups have suggested market participants adopt alternative reference rates.
Refer to “Part I. Item 1A. Risk Factors—Risks Related to Our Lending and Investment Activities—The expected discontinuation of currently used financial reference rates and use of alternative replacement reference rates may adversely affect net interest income related to our loans and investments or otherwise adversely affect our results of operations, cash flows and the market value of our investments.” of our Annual Report on Form
10-K
filed with the SEC on February 10, 2021.
 
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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, Distributable Earnings, and book value per share. For the three months ended June 30, 2021 we recorded earnings per share of $0.89, declared a dividend of $0.62 per share, and reported $0.61 per share of Distributable Earnings. In addition, our book value as of June 30, 2021 was $26.68 per share, which is net of a $0.90 cumulative CECL reserve.
As further described below, Distributable Earnings is a measure that is not prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, which helps us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations. In addition, Distributable Earnings is a performance metric we consider when declaring our dividends.
Earnings Per Share and Dividends Declared
The following table sets forth the calculation of basic and diluted net income per share and dividends declared per share ($ in thousands, except per share data):
 
    
Three Months Ended
 
    
June 30, 2021
    
March 31, 2021
 
Net income
(1)
   $ 131,595      $ 79,902  
Weighted-average shares outstanding, basic and diluted
         147,342,822            147,336,936  
  
 
 
    
 
 
 
Net income per share, basic and diluted
   $ 0.89      $ 0.54  
  
 
 
    
 
 
 
Dividends declared per share
   $ 0.62      $ 0.62  
  
 
 
    
 
 
 
                        
     
  (1)
Represents net income attributable to Blackstone Mortgage Trust.
Distributable Earnings
Distributable Earnings is a
non-GAAP
measure, which we define as GAAP net income (loss), including realized gains and losses not otherwise recognized in current period GAAP net income (loss), and excluding
(i) non-cash
equity compensation expense, (ii) depreciation and amortization, (iii) unrealized gains (losses), and (iv) certain
non-cash
items. Distributable 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. Distributable Earnings mirrors the terms of our management agreement between our Manager and us, or our Management Agreement, for purposes of calculating our incentive fee expense.
During the six months ended June 30, 2021, we recorded a $52.2 million decrease in the CECL reserve, which has been excluded from Distributable Earnings consistent with other unrealized gains (losses) pursuant to our existing policy for reporting Distributable Earnings. We expect to only recognize such potential credit losses in Distributable Earnings if and when such amounts are deemed nonrecoverable upon a realization event. This is generally at the time a loan is repaid, or in the case of foreclosure, when the underlying asset is sold, but
non-recoverability
may also be concluded if, in our determination, it is nearly certain that all amounts due will not be collected. The realized loss amount reflected in Distributable Earnings will equal the difference between the cash received, or expected to be received, and the book value of the asset, and is reflective of our economic experience as it relates to the ultimate realization of the loan.
We believe that Distributable Earnings provides meaningful information to consider in addition to our net income (loss) and cash flow from operating activities determined in accordance with GAAP. We believe Distributable Earnings is a useful financial metric for existing and potential future holders of our class A common stock as historically, over time, Distributable Earnings has been a strong indicator of our dividends per share. As a REIT, we generally must distribute annually at least 90% of our net taxable income, subject to certain adjustments, and therefore we believe our dividends are one of the principal reasons stockholders may invest in our class A common stock. Refer to Note 13 to our consolidated financial statements for further discussion of our distribution requirements as a REIT. Further, Distributable Earnings 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, and is a performance metric we consider when declaring our dividends.
 
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Distributable Earnings does not represent net income (loss) or cash generated from operating activities and should not be considered as an alternative to GAAP net income (loss), 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 Distributable Earnings may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures, and accordingly, our reported Distributable Earnings may not be comparable to the Distributable Earnings reported by other companies.
The following table provides a reconciliation of Distributable Earnings to GAAP net income ($ in thousands, except per share data):
 
    
Three Months Ended
 
    
June 30, 2021
    
March 31, 2021
 
Net income
(1)
   $ 131,595      $ 79,902  
Decrease in current expected credit loss reserve
     (50,906      (1,293
Non-cash
compensation expense
     8,020        8,085  
Realized hedging and foreign currency income, net
(2)
     744        172  
Other items
     194        130  
Adjustments attributable to
non-controlling
interests, net
     248        (47
  
 
 
    
 
 
 
Distributable Earnings
   $ 89,895      $ 86,949  
  
 
 
    
 
 
 
Weighted-average shares outstanding, basic and diluted
         147,342,822            147,336,936  
  
 
 
    
 
 
 
Distributable Earnings per share, basic and diluted
   $ 0.61      $ 0.59  
  
 
 
    
 
 
 
                        
     
  (1)
Represents net income attributable to Blackstone Mortgage Trust.
 
  (2)
Represents realized gains on the repatriation of unhedged foreign currency. These amounts are not included in GAAP net income, but rather as a component of Other Comprehensive Income in our consolidated financial statements.
 
Book Value Per Share
The following table calculates our book value per share ($ in thousands, except per share data):
 
    
June 30, 2021
    
March 31, 2021
 
Stockholders’ equity
   $ 3,930,961      $ 3,883,023  
Shares
     
Class A common stock
         147,015,818            147,031,082  
Deferred stock units
     328,065        318,128  
  
 
 
    
 
 
 
Total outstanding
     147,343,883        147,349,210  
  
 
 
    
 
 
 
Book value per share
   $ 26.68      $ 26.35  
  
 
 
    
 
 
 
 
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II. Loan Portfolio
 
During the quarter ended June 30, 2021, we originated or acquired $2.2 billion of loans. Loan fundings during the quarter totaled $2.3 billion, including $109.0 million of
non-consolidated
senior interests. Loan repayments and sales during the quarter totaled $2.0 billion, including $73.3 million of loans held by our
non-consolidated
securitized debt obligations, and our
non-consolidated
senior interests. We generated interest income of $196.3 million and incurred interest expense of $82.4 million during the quarter, which resulted in $114.0 million of net interest income during the three months ended June 30, 2021.
Portfolio Overview
The following table details our loan origination activity ($ in thousands):
 
    
Three Months Ended
    
Six Months Ended
 
    
June 30, 2021
    
June 30, 2021
 
Loan originations
(1)
   $ 2,164,982      $ 3,900,111  
Loan fundings
(2)
   $ 2,339,993      $ 3,831,675  
Loan repayments and sales
(3)
     (1,953,529      (2,792,192
  
 
 
    
 
 
 
Total net (repayments) fundings
   $ 386,464      $ 1,039,483  
  
 
 
    
 
 
 
                    
     
  (1)
Includes new loan originations and additional commitments made under existing loans.
 
  (2)
Loan fundings during the three and six months ended June 30, 2021 include $109.0 million and $195.6 million, respectively, of additional fundings under related
non-consolidated
senior interests.
 
  (3)
Loan repayments and sales during the three and six months ended June 30, 2021 include $73.3 million and $113.8 million, respectively, of additional repayments or reduction of loan exposure of loans held by our
non-consolidated
securitized debt obligations, and our
non-consolidated
senior interests.
 
 
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The following table details overall statistics for our investment portfolio as of June 30, 2021 ($ in thousands):
 
          
Total Investment Exposure
 
    
Balance Sheet

Portfolio
(1)
   
Loan

Exposure
(1)(2)
   
Other

Investments
(3)
          
Total Investment
Portfolio
 
Number of investments
     124       124       1    
 
     125  
Principal balance
   $   17,529,542     $   18,528,773     $   623,076    
 
   $   19,151,849  
Net book value
   $ 17,307,898     $ 17,307,898     $ 77,632    
 
   $ 17,385,530  
Unfunded loan commitments
(4)
   $ 3,353,259     $ 3,960,523     $ —      
 
   $ 3,960,523  
Weighted-average spread
(5)
     + 3.19     + 3.25     + 2.75  
 
     + 3.23
Weighted-average
all-in
yield
(5)
     + 3.52     + 3.58     + 3.14  
 
     + 3.56
Weighted-average maximum maturity (years)
(6)
     3.1       3.1       3.9    
 
     3.2  
Origination loan to value (LTV)
(7)
     65.5     65.5     42.6  
 
     64.8
                        
           
(1)  
 
Excludes investment exposure to the $79.2 million subordinate position we own in the $623.1 million 2018 Single Asset Securitization. Refer to Notes 4 and 16 to our consolidated financial statements for further discussion of the 2018 Single Asset Securitization.
(2)  
 
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 $999.2 million of such
non-consolidated
senior interests that are not included in our balance sheet portfolio.
(3)  
 
Includes investment exposure to the $623.1 million 2018 Single Asset Securitization. We do not consolidate the 2018 Single Asset Securitization on our consolidated financial statements, and instead reflect our $79.2 million subordinate position as a component of other assets on our consolidated balance sheet. Refer to Notes 4 and 16 to our consolidated financial statements for further discussion of the 2018 Single Asset Securitization.
(4) 
 
Unfunded commitments will primarily be funded to finance our borrowers’ construction or development of real estate-related assets, capital improvements of existing assets, or lease-related expenditures. These commitments will generally be funded over the term of each loan, subject in certain cases to an expiration date.
(5)  
 
The weighted-average spread and
all-in
yield are expressed as a spread over the relevant floating benchmark rates, which include USD LIBOR, GBP LIBOR, EURIBOR, STIBOR, BBSY, and CDOR, as applicable to each investment. As of June 30, 2021, 98% of our investments by total investment exposure earned a floating rate of interest, primarily indexed to USD LIBOR. The other 2% of our investments earned a fixed rate of interest, which we reflect as a spread over the relevant floating benchmark rates, as of June 30, 2021, for purposes of the weighted-averages. In addition to spread,
all-in
yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees. Excludes loans accounted for under the cost-recovery method.
(6)  
 
Maximum maturity assumes all extension options are exercised by the borrower, however our loans and other investments may be repaid prior to such date. As of June 30, 2021, 36% of our loans and other investments by total investment exposure were subject to yield maintenance or other prepayment restrictions and 64% were open to repayment by the borrower without penalty.
(7)  
 
Based on LTV as of the dates loans and other investments were originated or acquired by us.
 
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The following table details the index rate floors for our loan exposure as of June 30, 2021 ($ in thousands):
 
    
Loan Exposure Principal Balance
 
Index rate floors
  
USD
    
Non-USD
(1)
    
Total
 
Fixed rate
   $ —        $ 354,340      $ 354,340  
0.00% or no floor
(2)
     2,525,760        4,769,140        7,294,900  
0.01% to 0.24% floor
     1,720,348        110,492        1,830,840  
0.25% to 0.99% floor
     1,031,763        262,548        1,294,311  
1.00% or more floor
     7,131,670        622,712        7,754,382  
  
 
 
    
 
 
    
 
 
 
Total
(3)(4)(5)
   $     12,409,541      $     6,119,232      $     18,528,773  
  
 
 
    
 
 
    
 
 
 
                                
        
(1)  
  
Includes Euro, British Pound Sterling, Swedish Krona, Australian Dollar, and Canadian Dollar Currencies.
(2)  
  
Includes $338.7 million of loans accounted for under the cost-recovery method.
(3)  
  
Excludes investment exposure to the $79.2 million subordinate position we own in the $623.1 million 2018 Single Asset Securitization. Refer to Notes 4 and 16 to our consolidated financial statements for further discussion of the 2018 Single Asset Securitization.
(4)  
  
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 $999.2 million of such
non-consolidated
senior interests that are not included in our balance sheet portfolio.
(5)  
  
As of June 30, 2021, the weighted-average index rate floor of our loan portfolio was 0.70%. Excluding 0.0% index rate floors, the weighted-average index rate floor was 1.15%.
The following table details the floating benchmark rates for our investment portfolio as of June 30, 2021 ($/€/£/kr/A$/C$ in thousands):
 
Investment
Count
     
Currency
     
Total Investment
Portfolio
       
Floating Rate Index
(1)
     
Cash Coupon
(2)
     
All-in
Yield
(2)
99     $     $ 13,032,617       USD LIBOR     L + 3.17%     L + 3.50%
9         2,756,069       EURIBOR     E + 2.96%     E + 3.33%
12     £     £ 1,413,645       GBP LIBOR     L + 3.98%     L + 4.29%
1     kr     kr  4,990,212       STIBOR     STIBOR + 3.20%     S + 3.41%
2     A$     A$ 325,150       BBSY     BBSY + 4.03%     BBSY + 4.47%
2     C$     C$ 84,909       CDOR     CDOR + 3.79%     CDOR + 4.18%
 
       
 
 
         
 
   
 
125         $ 19,151,849           INDEX + 3.23%     INDEX + 3.56%
 
       
 
 
         
 
   
 
 
(1)
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. We earn forward points on our forward contracts that reflect the interest rate differentials between the applicable base rate for our foreign currency investments and USD LIBOR. These forward contracts effectively convert the foreign currency rate exposure for such investments to USD LIBOR.
(2)
The cash coupon and
all-in
yield of our fixed rate loans are reflected as a spread over USD LIBOR for purposes of the weighted-averages. In addition to cash coupon,
all-in
yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees. Excludes loans accounted for under the cost-recovery method.
 
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The charts below detail the geographic distribution and types of properties securing our investment portfolio, as of June 30, 2021:
 
Refer to section VI of this Item 2 for details of our loan portfolio, on a
loan-by-loan
basis.
Portfolio Management
During the three months ended June 30, 2021, we collected 100.0% of the contractual interest payments that were due under our loans, with virtually no interest deferrals, including with respect to loans collateralized by hospitality assets, which we believe demonstrates the overall strength of our loan portfolio and the commitment and financial wherewithal of our borrowers generally, which are primarily affiliated with large real estate private equity funds and other strong, well-capitalized, experienced sponsors.
We maintain a robust asset management relationship with our borrowers and have utilized these relationships to address the potential impacts of the
COVID-19
pandemic on our loans secured by properties experiencing cash flow pressure, most significantly hospitality assets. We are generally encouraged by our borrowers’ response to the
COVID-19
pandemic’s impacts on their properties. With limited exceptions, we believe our loan sponsors are committed to supporting assets collateralizing our loans through additional equity investments, and that we will benefit from our long-standing core business model of originating senior loans collateralized by large assets in major markets with experienced, well-capitalized institutional sponsors. Our investment portfolio’s low origination weighted-average LTV of 64.8% as of June 30, 2021 reflects significant equity value that our sponsors are motivated to protect through periods of cyclical disruption. While we believe the principal amounts of our loans are generally adequately protected by underlying collateral value, there is a risk that we will not realize the entire principal value of certain investments.
Our Manager’s portfolio monitoring and asset management operations benefit from the deep knowledge, experience, and information advantages derived from its position as part of Blackstone’s real estate platform. Blackstone Real Estate is one of the largest owners and operators of real estate in the world, with a proven track record of successfully navigating market cycles and emerging stronger through periods of volatility. The market-leading real estate expertise derived from the strength of the Blackstone platform deeply informs our credit and underwriting process, and gives us the tools to expertly asset manage our portfolio and work with our borrowers throughout periods of economic stress and uncertainty.
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 weighted-average risk rating of our total loan exposure was 2.9 and 3.0 as of June 30, 2021 and December 31, 2020, respectively. The decrease in risk rating reflects the ongoing recovery from
COVID-19
and the improvement of our portfolio’s credit.
 
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The following table allocates the principal balance and total loan exposure balances based on our internal risk ratings ($ in thousands):
 
    
June 30, 2021
 
Risk
Rating
  
Number
of Loans
    
Net Book
Value
    
Total Loan
Exposure
(1)(2)
 
1          8      $ 876,895      $ 877,690  
2        19        3,820,471        3,848,997  
3        86        10,064,659        11,116,911  
4          9        2,337,583        2,346,439  
5          2        337,235        338,736  
  
 
 
    
 
 
    
 
 
 
Loans receivable
     124      $ 17,436,843      $ 18,528,773  
  
 
 
    
 
 
    
 
 
 
CECL reserve
        (128,945   
     
 
 
    
Loans receivable, net
      $ 17,307,898     
     
 
 
    
                        
        
  (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 $999.2 million of such
non-consolidated
senior interests as of June 30, 2021.
 
  (2)
Excludes investment exposure to the $623.1 million 2018 Single Asset Securitization. Refer to Notes 4 and 16 to our consolidated financial statements for details of the subordinate position we own in the 2018 Single Asset Securitization.
 
Current Expected Credit Loss Reserve
The CECL reserve required by GAAP reflects our current estimate of potential credit losses related to our loans and debt securities included in our consolidated balance sheets. Other than a few narrow exceptions, GAAP requires that all financial instruments subject to the CECL model have some amount of loss reserve to reflect the GAAP principal underlying the CECL model that all loans, debt securities, and similar assets have some inherent risk of loss, regardless of credit quality, subordinate capital, or other mitigating factors.
During the six months ended June 30, 2021, we recorded an aggregate $52.2 million decrease in the CECL reserve related to loans receivable, debt securities, and unfunded loan commitments, bringing our total reserve to $133.1 million as of June 30, 2021. This CECL reserve reflects the macroeconomic impact of the
COVID-19
pandemic on commercial real estate markets generally, as well as certain loans assessed for impairment in our portfolio. The decrease in the CECL reserve during the six months ended June 30, 2021 reflects the ongoing market recovery from
COVID-19
and the resulting improvement in the performance of the collateral assets underlying our portfolio. Further, this reserve is not reflective of what we expect our CECL reserve would be absent the current and potential future impacts of the
COVID-19
pandemic. See Notes 2 and 3 to our consolidated financial statements for further discussion of our CECL reserve.
During 2020, we entered into loan modifications related to a multifamily asset in New York City, which are classified as troubled debt restructurings under GAAP. During the three months ended June 30, 2020, we recorded a $14.8 million CECL reserve on this loan, which was unchanged as of June 30, 2021. This loan has an outstanding principal balance of $52.4 million, net of cost-recovery proceeds, as of June 30, 2021. The CECL reserve was recorded based on our estimation of the fair value of the loan’s underlying collateral as of June 30, 2021.
During 2020, we entered into a loan modification related to a hospitality asset in New York City, which is classified as a troubled debt restructuring under GAAP. During the three months ended June 30, 2020, we recorded a $54.9 million CECL reserve on this loan, which was unchanged as of June 30, 2021. This loan has an outstanding principal balance of $286.3 million, net of cost-recovery proceeds, as of June 30, 2021. The CECL reserve was recorded based on our estimation of the fair value of the loan’s underlying collateral as of June 30, 2021.
As of July 1, 2020, the income accrual was suspended on the two loans detailed above, which had an aggregate outstanding principal balance of $338.7 million, as of June 30, 2021. No income was recorded on these loans during the three months ended June 30, 2021.
 
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Multifamily Joint Venture
As of June 30, 2021, our Multifamily Joint Venture held $520.5 million of loans, which are included in the loan disclosures above. Refer to Note 2 to our consolidated financial statements for additional discussion of our Multifamily Joint Venture.
Portfolio Financing
Our portfolio financing consists of secured debt, securitizations, and asset-specific financings. The following table details our portfolio financing ($ in thousands):
 
    
Portfolio Financing
 
    
Outstanding Principal Balance
 
    
June 30, 2021
    
December 31, 2020
 
Secured debt
   $ 8,729,281      $ 7,896,863  
Securitizations
(1)
     3,399,501        3,596,980  
Asset-specific financings
(2)
     1,298,832        1,201,495  
  
 
 
    
 
 
 
Total portfolio financing
   $ 13,427,614      $ 12,695,338  
  
 
 
    
 
 
 
                    
     
  (1)
Includes our consolidated securitized debt obligations of $2.9 billion and our
non-consolidated
securitized debt obligations of $543.9 million, as of June 30, 2021. Includes our consolidated securitized debt obligations of $2.9 billion and our
non-consolidated
securitized debt obligations of $656.3 million, as of December 31, 2020. The
non-consolidated
securitized debt obligation represents the senior
non-consolidated
investment exposure to the 2018 Single Asset Securitization. We own the related subordinate position, which is classified as a
held-to-maturity
debt security on our balance sheet. Refer to Notes 4 and 16 to our consolidated financial statements for details of the 2018 Single Asset Securitization.
 
  (2)
Includes our consolidated asset-specific debt of $299.6 million and our
non-consolidated
senior interests of $999.2 million, as of June 30, 2021. Includes our consolidated asset-specific debt of $399.7 million and our
non-consolidated
senior interests of $801.8 million, as of December 31, 2020. The
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.
 
Secured Debt
The following table details our outstanding secured debt ($ in thousands):
 
    
Secured Debt
 
    
Borrowings Outstanding
 
    
June 30, 2021
    
December 31, 2020
 
Secured credit facilities
   $ 8,729,281      $ 7,896,863  
Acquisition facility
     —          —    
  
 
 
    
 
 
 
Total secured debt
   $ 8,729,281      $ 7,896,863  
  
 
 
    
 
 
 
 
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Secured Credit Facilities
The following table details the
all-in
cost of our secured credit facilities as of June 30, 2021 ($ in thousands):
 
    
Six Months Ended
                                            
    
June 30, 2021
    
June 30, 2021
 
           
Total
    
Wtd. Avg.
               
Wtd. Avg.
        
Net Interest
 
All-in
Cost
(1)(2)
  
New Financings
(3)
    
Borrowings
    
All-in Cost
(1)(2)(4)
        
Collateral
(5)
    
All-in Yield
(2)(6)
        
Margin
(7)
 
+ 1.49% or less
   $ 562,480      $ 2,017,600        + 1.42  
 
   $ 2,520,834        + 2.88  
 
     + 1.46
+ 1.50% to + 1.74%
     901,070        2,836,242        + 1.67  
 
     3,981,023        + 3.32  
 
     + 1.65
+ 1.75% to + 1.99%
     404,035        1,701,316        + 1.84  
 
     2,755,559        + 3.41  
 
     + 1.57
+ 2.00% or more
     672,999        2,174,123        + 2.21  
 
     3,964,617        + 3.88  
 
     + 1.67
  
 
 
    
 
 
    
 
 
        
 
 
    
 
 
        
 
 
 
Total
   $ 2,540,584      $ 8,729,281        + 1.78        $ 13,222,033        + 3.42          + 1.64
  
 
 
    
 
 
    
 
 
        
 
 
    
 
 
        
 
 
 
 
(1)
In addition to spread, the cost includes the associated deferred fees and expenses related to the respective borrowings.
(2)
The
all-in
cost and
all-in
yield are expressed over the relevant floating benchmark rates, which include USD LIBOR, GBP LIBOR, SONIA, EURIBOR, STIBOR, BBSY, and CDOR, as applicable.
(3)
Represents borrowings outstanding as of June 30, 2021, for new financings during the six months ended June 30, 2021, based on the date collateral was initially pledged to each credit facility.
(4)
Represents the weighted-average
all-in
cost as of June 30, 2021 and is not necessarily indicative of the spread applicable to recent or future borrowings.
(5)
Represents the principal balance of the collateral assets.
(6)
In addition to cash coupon,
all-in
yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees.
(7)
Represents the difference between the weighted-average
all-in
yield and weighted average all in cost.
Acquisition Facility
We have a $250.0 million full recourse secured credit facility that is designed to finance eligible first mortgage originations for up to nine months as a bridge to term financing without obtaining discretionary lender approval. The maturity date of the facility is April 4, 2023.
Securitizations
The following table details our outstanding securitizations ($ in thousands):
 
    
Securitizations Outstanding
 
    
June 30, 2021
    
December 31, 2020
 
Securitized debt obligations
   $ 2,855,625      $ 2,940,638  
Non-consolidated
securitized debt obligation
(1)
     543,876        656,342  
  
 
 
    
 
 
 
Total securitizations
   $ 3,399,501      $ 3,596,980  
  
 
 
    
 
 
 
                        
 
(1)  
 
These
non-consolidated
securitized debt obligations represent the senior
non-consolidated
investment exposure to the 2018 Single Asset Securitization. We own the related subordinate position, which is classified as a
held-to-maturity
debt security on our balance sheet. Refer to Notes 4 and 16 to our consolidated financial statements for details of the 2018 Single Asset Securitization.
 
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Securitized Debt Obligations
We have financed certain pools of our loans through collateralized loan obligations, which include the 2021 FL4 CLO, 2020 FL3 CLO, and 2020 FL2 CLO, or collectively, the CLOs. The following table details our securitized debt obligations ($ in thousands):
 
    
June 30, 2021
 
Securitized Debt Obligations
  
Count
    
Principal

Balance
    
Book Value
    
Wtd. Avg.

Yield/Cost
(1)
(2)
   
Term
(3)
 
2021 FL4 Collateralized Loan Obligation
             
Collateral assets
     30      $ 1,000,000      $ 1,000,000        + 3.42     May 2024  
Financing provided
     1        803,750        796,383        + 1.62     May 2038  
2020 FL3 Collateralized Loan Obligation
             
Collateral assets
     21        1,000,000        1,000,000        + 3.04     April 2024  
Financing provided
     1        808,750        802,467        + 2.10     November 2037  
2020 FL2 Collateralized Loan Obligation
             
Collateral assets
     25        1,500,000        1,500,000        + 3.13     March 2024  
Financing provided
     1        1,243,125        1,234,928        + 1.44     February 2038  
Total
             
Collateral assets
     76      $ 3,500,000      $ 3,500,000        + 3.19  
  
 
 
    
 
 
    
 
 
    
 
 
   
Financing provided
(4)
     3      $ 2,855,625      $ 2,833,778        + 1.68  
  
 
 
    
 
 
    
 
 
    
 
 
   
                        
(1)  
 
In addition to cash coupon,
all-in
yield includes the amortization of deferred origination and extension fees, loan origination costs, purchase discounts, and accrual of exit fees.
(2)
 
The weighted-average
all-in
yield and cost are expressed as a spread over the relevant floating benchmark rates, which include USD LIBOR and SOFR, as applicable to each securitized debt obligation. As of June 30, 2021, the floating benchmark rate for the financing provided on the 2020 FL3 and 2020 FL2 CLOs is the
30-day
average compounded SOFR, plus a credit spread adjustment of 0.11%. As of June 30, 2021, the
30-day
average compounded SOFR was 0.03% and
one-month
USD LIBOR was 0.10%.
(3)
 
Loan term represents weighted-average final maturity, assuming all extension options are exercised by the borrower. Repayments of securitized debt obligations are tied to timing of the related collateral loan asset repayments. The term of these obligations represents the rated final distribution date of the securitizations.
(4)
 
During the three and six months ended June 30, 2021, we recorded $12.4 million and $24.5 million, respectively, of interest expense related to our securitized debt obligations.
Refer to Notes 6 and 16 to our consolidated financial statements for additional details of our securitized debt obligations.
 
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Non-Consolidated
Securitized Debt Obligation
In the third quarter of 2018, we contributed a senior loan to the 2018 Single Asset Securitization, and invested in the related subordinate position. We do not consolidate the 2018 Single Asset Securitization on our balance sheet. The
non-consolidated
securitized debt obligation provides structural leverage for our net investment which is reflected as a
held-to-maturity
debt security and is included in other assets on our consolidated balance sheets. The following table details our
non-consolidated
securitized debt obligations ($ in thousands):
 
    
June 30, 2021
 
Non-Consolidated
Securitized Debt Obligation
  
Count
  
Principal
Balance
    
Book
Value
    
Wtd. Avg.
Yield/Cost
(1)
   
Wtd. Avg.
Term
(2)
 
Collateral assets
   1    $ 623,076        n / a        + 3.14     June 2025  
Financing provided
   1    $ 543,876        n / a        + 2.49     June 2035  
                        
(1)  
 
In addition to cash coupon,
all-in
yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts.
(2)
 
Loan term represents weighted-average final maturity, assuming all extension options are exercised by the borrower. Repayments of
non-consolidated
securitized debt obligations are tied to timing of the related collateral loan asset repayments. The term of these obligations represents the rated final distribution date of the securitizations.
Asset-Specific Financings
The following table details our outstanding asset-specific financings ($ in thousands):
 
    
Asset-Specific Financings
 
    
Outstanding Principal Balance
 
    
June 30, 2021
    
December 31, 2020
 
Asset-specific debt
   $ 299,601      $ 399,699  
Non-consolidated
senior interests
(1)
     999,231        801,796  
  
 
 
    
 
 
 
Total asset-specific financings
   $ 1,298,832      $ 1,201,495  
  
 
 
    
 
 
 
                        
     
(1)  
 
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.
Asset-Specific Debt
The following table details our asset-specific debt ($ in thousands):
 
    
June 30, 2021
 
Asset-Specific Debt
  
Count
  
Principal
Balance
    
Book
Value
    
Wtd. Avg.
Yield/Cost
(1)
   
Wtd. Avg.
Term
(2)
 
Collateral assets
   3    $ 397,302      $ 384,837        + 4.34     Dec. 2024  
Financing provided
   3    $ 299,601      $ 292,122        + 3.15     Dec. 2024  
                        
(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)
 
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 is term-matched to the corresponding collateral loans.
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.
 
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The following table details the subordinate interests retained on our balance sheet and the related
non-consolidated
senior interests ($ in thousands):
 
    
June 30, 2021
 
Non-Consolidated
Senior Interests
  
Count
  
Principal

Balance
    
Book

Value
    
Wtd. Avg.
Yield/Cost
(1)
   
Wtd. Avg.

Term
 
Total loan
   5    $ 1,249,805        n / a        + 4.57     Aug. 2024  
Senior participation
   5    $ 999,231        n / a        + 3.27     Aug. 2024  
                    
             
  (1)
The weighted-average spread and
all-in
yield are expressed as a spread over the relevant floating benchmark rates, which include USD LIBOR and GBP LIBOR, as applicable to each investment. As of June 30, 2021, 73% of our investments by total investment exposure earned a floating rate of interest indexed to USD LIBOR. The other 27% of our investments earned a fixed rate of interest, which we reflect as a spread over GBP LIBOR, as of June 30, 2021, for purposes of the weighted-averages. In addition to spread,
all-in
yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees.
 
Corporate Financing
The following table details our outstanding corporate financing ($ in thousands):
 
    
Corporate Financing
 
    
Outstanding Principal Balance
 
    
June 30, 2021
    
December 31, 2020
 
Term loans
   $ 1,356,140      $ 1,062,766  
Convertible notes
     622,500        622,500  
  
 
 
    
 
 
 
Total corporate financing
   $ 1,978,640      $ 1,685,266  
  
 
 
    
 
 
 
Term Loans
As of June 30, 2021, the following senior term loan facilities, or Term Loans, were outstanding ($ in thousands):
 
Term Loans
  
Face Value
    
Interest Rate
(1)
   
All-in Cost
(1)(2)
   
Maturity
 
B-1
Term Loan
   $ 934,634        + 2.25     + 2.53     April 23, 2026  
B-2
Term Loan
   $ 421,506        + 2.75     + 3.42     April 23, 2026  
                        
         
(1)  
 
The
B-2
Term Loan borrowing is subject to a LIBOR floor of 0.50%.
(2)
 
Includes issue discount and transaction expenses that are amortized through interest expense over the life of the Term Loans.
Refer to Notes 2 and 8 to our consolidated financial statements for additional discussion of our Term Loans.
 
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Convertible Notes
As of June 30, 2021, the following convertible senior notes, or Convertible Notes, were outstanding ($ in thousands):
 
Convertible Notes Issuance
  
Face Value
    
Interest Rate
   
All-in Cost
(1)
   
Maturity
 
May 2017
   $ 402,500        4.38     4.85     May 5, 2022  
March 2018
   $ 220,000        4.75     5.33     March 15, 2023  
                        
         
(1)  
 
Includes issuance costs that are amortized through interest expense over the life of the Convertible Notes using the effective interest method.
Refer to Notes 2 and 9 to our consolidated financial statements for additional discussion of our Convertible Notes.
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 June 30, 2021, 98% of our investments by total investment 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 investments. As of June 30, 2021, the remaining 2% of our investments by total investment 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 caps to limit our exposure to increases in interest rates on such liabilities.
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 investment portfolio’s net exposure to interest rates by currency as of June 30, 2021 ($/€/£/kr/A$/C$ in thousands):
 
   
USD
   
EUR
   
GBP
   
SEK
   
AUD
   
CAD
 
Floating rate loans
(1)(2)
  $     13,032,617         2,747,743     £     1,179,080     kr     4,990,212     A$     325,150     C$     60,064  
Floating rate debt
(1)(3)(4)(5)
    (9,353,111     (2,072,476     (712,996     (3,992,169     (236,187     (64,347
 
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net floating rate exposure
(6)
  $ 3,679,506     675,267     £ 466,084     kr 998,043     A$ 88,963     C$ (4,283
 
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net floating rate exposure in USD
(6)(7)
  $ 3,679,506     $ 800,732     $ 644,641     $ 116,718     $ 66,704     $ (3,455
 
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
                        
 
(1)  
 
Our floating rate investments 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 investment exposure to the 2018 Single Asset Securitization. Refer to Notes 4 and 16 to our consolidated financial statements for details of the subordinate position we own in the 2018 Single Asset Securitization.
(3)
 
Includes borrowings under secured debt, securitizations, asset-specific financings, and term loans.
(4)
 
As of June 30, 2021, £392.4 million and £320.6 million of outstanding borrowings were indexed to GBP LIBOR and SONIA, respectively. As of June 30, 2021, three-month GBP LIBOR was 0.08% and SONIA was 0.05%.
(5)
 
As of June 30, 2021, $7.8 billion and $1.5 billion of outstanding borrowings were indexed to USD LIBOR and SOFR, respectively. As of June 30, 2021, the floating benchmark rate for the financing provided on the 2020 FL3 and 2020 FL2 CLOs is the
30-day
average compounded SOFR, plus a credit spread adjustment of 0.11%. As of June 30, 2021, the
30-day
average compounded SOFR was 0.03% and
one-month
USD LIBOR was 0.10%.
(6)
 
In addition, we have two interest rate caps of C$38.3 million ($30.9 million as of June 30, 2021) to limit our exposure to increases in interest rates.
(7)
 
Represents the U.S. Dollar equivalent as of June 30, 2021.
 
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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
    
Change
 
    
June 30,
2021
    
March 31,
2021
    
$
 
Income from loans and other investments
        
Interest and related income
   $ 196,303      $ 187,524      $ 8,779  
Less: Interest and related expenses
     82,352        78,372        3,980  
  
 
 
    
 
 
    
 
 
 
Income from loans and other investments, net
     113,951        109,152        4,799  
Other expenses
        
Management and incentive fees
     21,545        19,207        2,338  
General and administrative expenses
     10,669        10,597        72  
  
 
 
    
 
 
    
 
 
 
Total other expenses
     32,214        29,804        2,410  
Decrease in current expected credit loss reserve
     50,906        1,293        49,613  
  
 
 
    
 
 
    
 
 
 
Income before income taxes
     132,643        80,641        52,002  
Income tax provision
     175        101        74  
  
 
 
    
 
 
    
 
 
 
Net income
     132,468        80,540        51,928  
  
 
 
    
 
 
    
 
 
 
Net income attributable to
non-controlling
interests
     (873      (638      (235
  
 
 
    
 
 
    
 
 
 
Net income attributable to
        
Blackstone Mortgage Trust, Inc.
   $ 131,595      $ 79,902      $ 51,693  
  
 
 
    
 
 
    
 
 
 
Net income per share - basic and diluted
   $ 0.89      $ 0.54      $ 0.35  
Dividends declared per share
   $ 0.62      $ 0.62      $ —    
Income from loans and other investments, net
Income from loans and other investments, net increased $4.8 million during the three months ended June 30, 2021 as compared to the three months ended March 31, 2021. The increase was primarily due to (i) an increase in the weighted-average principal balance of our loan portfolio by $761.5 million during the three months ended June 30, 2021, as compared to the three months ended March 31, 2021 and (ii) one additional day of net interest income accrued during the three months ended June 30, 2021, as compared to the three months ended March 31, 2021. This was offset by an increase in the
weighted-average
principal balance of our outstanding financing arrangements by $788.8 million during the three months ended June 30, 2021, as compared to the three months ended March 31, 2021.
Other expenses
Other expenses include management and incentive fees payable to our Manager and general and administrative expenses. Other expenses increased by $2.4 million during the three months ended June 30, 2021 compared to the three months ended March 31, 2021 primarily due to a $2.4 million increase of incentive fees payable to our Manager, resulting from an increase in Distributable Earnings.
Changes in current expected credit loss reserve
During the three months ended June 30, 2021, we recorded a $50.9 million decrease in the current expected credit loss reserve, as compared to a $1.3 million decrease during the three months ended March 31, 2021. This CECL reserve reflects the macroeconomic impact of the
COVID-19
pandemic on commercial real estate markets generally, as well as certain loans assessed for impairment in our portfolio. The decrease in the CECL reserve during the three months ended June 30, 2021 reflects the ongoing market recovery from
COVID-19
and the resulting improvement in the performance of the collateral assets underlying our portfolio. This reserve is not reflective of what we expect our CECL reserve would be absent the current and potential future impacts of the
COVID-19
pandemic. See Notes 2 and 3 to our consolidated financial statements for further discussion of our CECL reserve.
 
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Net income attributable to
non-controlling
interests
During the three months ended June 30, 2021 and March 31, 2021, we recorded $873,000 and $638,000, respectively, of net income attributable to
non-controlling
interests related to our Multifamily Joint Venture.
Dividends per share
During the three months ended June 30, 2021, we declared a dividend of $0.62 per share, or $91.1 million in aggregate, which was paid on July 15, 2021 to common stockholders of record as of June 30, 2021. During the three months ended March 31, 2021, we declared a dividend of $0.62 per share, or $91.2 million in aggregate.
The following table sets forth information regarding our consolidated results of operations for the six months ended June 30, 2021 and 2020 ($ in thousands, except per share data):
 
    
Six Months Ended
   
Change
 
    
June 30,

2021
   
June 30,

2020
   
$
 
Income from loans and other investments
      
Interest and related income
   $ 383,827     $ 396,857     $ (13,030
Less: Interest and related expenses
     160,723       189,092       (28,369
  
 
 
   
 
 
   
 
 
 
Income from loans and other investments, net
     223,104       207,765       15,339  
Other expenses
      
Management and incentive fees
     40,752       39,773       979  
General and administrative expenses
     21,267       23,078       (1,811
  
 
 
   
 
 
   
 
 
 
Total other expenses
     62,019       62,851       (832
Decrease (increase) in current expected credit loss reserve
     52,199       (179,521     231,720  
  
 
 
   
 
 
   
 
 
 
Income (loss) before income taxes
     213,284       (34,607     247,891  
Income tax provision
     276       173       103  
  
 
 
   
 
 
   
 
 
 
Net income (loss)
     213,008       (34,780     247,788  
  
 
 
   
 
 
   
 
 
 
Net income attributable to
non-controlling
interests
     (1,511     (1,028     (483
  
 
 
   
 
 
   
 
 
 
Net income (loss) attributable to Blackstone Mortgage Trust, Inc.
   $ 211,497     $ (35,808   $ 247,305  
  
 
 
   
 
 
   
 
 
 
Net income (loss) per share - basic and diluted
   $ 1.44     $ (0.26   $ 1.70  
Dividends declared per share
   $ 1.24     $ 1.24     $ —    
Income from loans and other investments, net
Income from loans and other investments, net increased $15.9 million during the six months ended June 30, 2021 as compared to the corresponding period in 2020. The increase was primarily due to (i) the impact of declining LIBOR and other floating rate indices, which had a larger impact on interest expense than interest income as a result of certain of our loans earning interest based on floors that were above the applicable floating rate index during the period, and (ii) an increase in the weighted-average principal balance of our loan portfolio by $760.8 million for the six months ended June 30, 2021, as compared to the corresponding period in 2020. This was offset by an increase in the weighted-average principal balance of our outstanding financing arrangements by $521.5 million for the six months ended June 30, 2021, as compared to the corresponding period in 2020.
 
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Other expenses
Other expenses include management and incentive fees payable to our Manager and general and administrative expenses. Other expenses decreased by $832,000 during the six months ended June 30, 2021 compared to the corresponding period in 2020 due to a decrease of (i) $1.2 million in
non-cash
restricted stock amortization, due to a decrease in the weighted-average grant date share price of the awards, (ii) $927,000 of incentive fees payable to our Manager, and (iii) $587,000 of general operating expenses. This was offset by an increase of $1.9 million of management fees payable to our Manager, primarily as a result of net proceeds received from the sale of shares of our class A common stock during 2020.
Changes in current expected credit loss reserve
During the six months ended June 30, 2021, we recorded a $52.2 million decrease in the current expected credit loss reserve as compared to a $179.5 million increase during the six months ended June 30, 2020. This CECL reserve reflects the macroeconomic impact of the
COVID-19
pandemic on commercial real estate markets generally, as well as certain loans assessed for impairment in our portfolio. The decrease in the CECL reserve during the six months ended June 30, 2021 reflects the ongoing market recovery from
COVID-19
and the resulting improvement in the performance of the collateral assets underlying our portfolio. This reserve is not reflective of what we expect our CECL reserve would be absent the current and potential future impacts of the
COVID-19
pandemic. See Notes 2 and 3 to our consolidated financial statements for further discussion of our CECL reserve.
Net income attributable to
non-controlling
interests
During the six months ended June 30, 2021 and 2020, we recorded $1.5 million and $1.0 million, respectively, of net income attributable to
non-controlling
interests related to our Multifamily Joint Venture.
Dividends per share
During the six months ended June 30, 2021, we declared aggregate dividends of $1.24, or $182.3 million. During the six months ended June 30, 2020, we declared aggregate dividends of $1.24 per share, or $174.6 million.
IV. Liquidity and Capital Resources
 
Capitalization
We have capitalized our business to date primarily through the issuance and sale of shares of our class A common stock, borrowings under secured debt, borrowings under term loans, and the issuance and sale of convertible notes. As of June 30, 2021, our capitalization structure included $2.0 billion of corporate debt and $13.4 billion of asset-level financing. No portion of our corporate debt matures before 2022 and our asset-specific financing is generally term-matched or matures in 2022 or later. Our $13.4 billion of asset-level financing includes $8.7 billion of secured debt, $3.4 billion of securitizations, which are inherently
non-recourse,
non-mark
to market, and term-matched to the financed assets, and $1.3 billion of asset-specific financings.
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 generally determined on a commercially reasonable basis.
See Notes 5, 6, 7, 8, and 9 to our consolidated financial statements for additional details regarding our secured debt, securitized debt obligations, asset-specific debt, Term Loans, and Convertible Notes, respectively.
 
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Debt-to-Equity
Ratio and Total Leverage Ratio
The following table presents our
debt-to-equity
ratio and total leverage ratio:
 
    
June 30, 2021
  
December 31, 2020
Debt-to-equity
ratio
(1)
   2.7x    2.5x
Total leverage ratio
(2)
   3.8x    3.6x
                        
 
(1)  
 
Represents (i) total outstanding secured debt, asset-specific debt, term loans, and convertible notes, less cash, to (ii) total equity, in each case at period end.
(2)
 
Represents (i) total outstanding secured debt, securitizations, asset-specific financings, term loans, and convertible notes, less cash, to (ii) total equity, in each case at period end.
Sources of Liquidity
Our primary sources of liquidity include cash and cash equivalents, available borrowings under our secured debt facilities, and net receivables from servicers related to loan repayments, which are set forth in the following table ($ in thousands):
 
    
June 30, 2021
    
December 31, 2020
 
Cash and cash equivalents
   $ 289,552      $ 289,970  
Available borrowings under secured debt facilities
     1,068,649        829,165  
Loan principal payments held by servicer, net
(1)
     27,612        19,460  
  
 
 
    
 
 
 
   $ 1,385,813      $ 1,138,595  
  
 
 
    
 
 
 
                        
 
(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.
During the six months ended June 30, 2021, we generated cash flow from operating activities of $165.4 million, received repayments of $2.8 billion, and received $298.5 million of aggregate, net proceeds from borrowings under term loans. Furthermore, we are able to generate incremental liquidity through the replenishment provisions of our 2021 FL4, 2020 FL3, and 2020 FL2 CLOs, which allow us to replace a repaid loan in the CLO by increasing the principal amount of existing CLO collateral assets to maintain the aggregate amount of collateral assets in the CLO, and the related financing outstanding.
We have access to liquidity through public offerings of debt and equity securities. To facilitate such offerings, in July 2019, we filed a shelf registration statement with the SEC that is effective for a term of three years and expires at the end of July 2022. 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 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 9,991,025 shares of class A common stock were available for issuance as of June 30, 2021, and our
at-the-market
stock offering program, pursuant to which we may sell, from time to time, up to $363.8 million of additional shares of our class A common stock as of June 30, 2021. Refer to Note 11 to our consolidated financial statements for additional details.
Liquidity Needs
In addition to our loan origination activity and general operating expenses, our primary liquidity needs include interest and principal payments under our $8.7 billion of outstanding borrowings under secured debt facilities, our asset-specific debt facilities, our Term Loans, and our Convertible Notes.
As of June 30, 2021, we had unfunded commitments of $3.4 billion related to 86 loans receivable. We generally finance the funding of our loan commitments on terms consistent with our overall credit facilities, with an average advance rate of 74.4% for such financed loans, resulting in identified financing for $2.4 billion of our aggregate unfunded loan commitments as of June 30, 2021. Some of our lenders, including substantially all of our financing of
 
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construction loans, are contractually obligated to fund their ratable portion of these loan commitments over time, while other lenders have some degree of discretion over future loan funding obligations. We expect to fund our loan commitments over the tenor of these loans, which have a weighted-average future funding period of 3.1 years. Our future loan fundings comprise funding for capital expenditures and construction, leasing costs, and interest and carry costs, and will vary depending on the progress of capital projects, leasing, and cash flows at the assets underlying our loans. Therefore, the exact timing and amounts of such future loan fundings are uncertain and will depend on the current and future performance of the underlying collateral assets.
Contractual Obligations and Commitments
Our contractual obligations and commitments as of June 30, 2021 were as follows ($ in thousands):
 
           
Payment Timing
 
    
Total
    
Less Than
    
1 to 3
    
3 to 5
    
More Than
 
    
Obligation
    
1 Year
(1)
    
Years
    
Years
    
5 Years
 
Unfunded loan commitments
(2)
   $ 3,353,259      $ 153,985      $ 1,666,386      $ 1,525,438      $ 7,450  
Principal repayments under secured debt
(3)
     8,729,281        392,148        3,465,422        4,380,293        491,418  
Principal repayments under asset-specific debt
(3)
     299,601        —          146,165        153,436        —    
Principal repayments of term loans
(4)
     1,356,140        13,738        27,477        1,314,925        —    
Principal repayments of convertible notes
(5)
     622,500        402,500        220,000        —          —    
Interest payments
(3)(6)
     722,833        233,663        325,750        159,561        3,859  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
(7)
   $ 15,083,614      $ 1,196,034      $ 5,851,200      $ 7,533,653      $ 502,727  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
                        
              
(1)  
 
Represents our known, estimated short-term cash requirements related to our contractual obligations and commitments. Refer to the sources of liquidity section above for our sources of funds to satisfy our short-term cash requirements.
(2)
 
The allocation of our unfunded loan commitments is based on the earlier of the commitment expiration date or the final loan maturity date, however we may be obligated to fund these commitments earlier than such date
.
(3)
 
The allocation of repayments under our secured debt and asset-specific debt for both principal and interest payments is based on the earlier of (i) the maturity date of each agreement, or (ii) the maximum maturity date of the collateral loans, assuming all extension options are exercised by the borrower.
(4)
 
The Term Loans are partially amortizing, with an amount equal to 1.0% per annum of the principal balance due in quarterly installments. Refer to Note 8 to our consolidated financial statements for further details on our term loans.
(5)
 
Reflects the outstanding principal balance of convertible notes, excluding any potential conversion premium. Refer to Note 9 to our consolidated financial statements for further details on our convertible notes.
(6)
 
Represents interest payments on our secured debt, asset-specific debt, convertible notes, and Term Loans. Future interest payment obligations are estimated assuming the interest rates in effect as of June 30, 2021 will remain constant into the future. This is only an estimate as actual amounts borrowed and interest rates will vary over time.
(7)
 
Total does not include $2.9 billion of consolidated securitized debt obligations, $999.2 million of
non-consolidated
senior interests, and $543.9 million of
non-consolidated
securitized debt obligations, as the satisfaction of these liabilities will not require cash outlays from us.
We are also required to settle our foreign exchange derivatives with our derivative counterparties upon maturity which, depending on exchange 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 10 to our consolidated financial statements 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 12 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 stockholders in the form of dividends to comply with the REIT provisions of the Internal Revenue Code. Our taxable income does not necessarily equal our net income as calculated in accordance with GAAP, or our Distributable Earnings as described above.
 
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Cash Flows
The following table provides a breakdown of the net change in our cash and cash equivalents ($ in thousands):
 
    
Six Months Ended June 30,
 
    
2021
    
2020
 
Cash flows provided by operating activities
   $         165,373      $ 175,708  
Cash flows used in investing activities
     (924,972      (234,728
Cash flows provided by financing activities
     806,118        1,169,772  
  
 
 
    
 
 
 
Net increase in cash and cash equivalents
   $ 46,519      $     1,110,752  
  
 
 
    
 
 
 
We experienced a net increase in cash and cash equivalents of $46.5 million for the six months ended June 30, 2021, compared to a net increase of $1.1 billion for the six months ended June 30, 2020. During the six months ended June 30, 2021, we funded $3.6 billion of new loans, and we received (i) $2.7 billion from loan principal collections, (ii) a net $898.0 million under our secured debt, and (iii) $298.5 million of net proceeds from term loan borrowings.
Refer to Note 3 to our consolidated financial statements for further discussion of our loan activity. Refer to Notes 5 and 8 to our consolidated financial statements for further discussion of our secured debt and term loans.
V. Other Items
 
Income Taxes
We have elected to be taxed as a REIT 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 June 30, 2021 and December 31, 2020, we were in compliance with all REIT requirements.
Refer to Note 13 to our consolidated financial statements for additional discussion of our income taxes.
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. 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 10, 2021.
Refer to Note 2 to our consolidated financial statements for the description of our significant accounting policies.
Critical Accounting Estimates
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.
Current Expected Credit Losses
The current expected credit loss, or CECL, reserve required under Accounting Standard Update, or ASU,
2016-13
“Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments (Topic 326),” or ASU
2016-13,
reflects our current estimate of potential credit losses related to our loans and debt securities included
 
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in our consolidated balance sheets. We estimate our CECL reserve primarily using the Weighted Average Remaining Maturity, or WARM method, which has been identified as an acceptable loss-rate method for estimating CECL reserves in the Financial Accounting Standards Board Staff Q&A Topic 326, No. 1. Estimating the CECL reserve requires judgment, including the following assumptions:
 
   
Historical loan loss reference data
: To estimate the historic loan losses relevant to our portfolio, we have augmented our historical loan performance, which includes zero realized loan losses since the launch of our senior loan origination business in 2013, with market loan loss data licensed from Trepp LLC. This database includes commercial mortgage-backed securities, or CMBS, issued since January 1, 1999 through May 31, 2021. Within this database, we focused our historical loss reference calculations on the most relevant subset of available CMBS data, which we determined based on loan metrics that are most comparable to our loan portfolio including asset type, geography, and origination
loan-to-value,
or LTV. We believe this CMBS data, which includes month-over-month loan and property performance, is the most relevant, available, and comparable dataset to our portfolio.
 
   
Expected timing and amount of future loan fundings and repayments:
Expected credit losses are estimated over the contractual term of each loan, adjusted for expected prepayments. As part of our quarterly review of our loan portfolio, we assess the expected repayment date of each loan, which is used to determine the contractual term for purposes of computing our CECL reserve. Additionally, the expected credit losses over the contractual period of our loans are subject to the obligation to extend credit through our unfunded loan commitments. The CECL reserve for unfunded loan commitments is adjusted quarterly, as we consider the expected timing of future funding obligations over the estimated life of the loan. The considerations in estimating our CECL reserve for unfunded loan commitments are similar to those used for the related outstanding loan receivables.
 
   
Current credit quality of our portfolio:
Our risk rating is our primary credit quality indicator in assessing our current expected credit loss reserve. Our Manager performs a quarterly risk review of our portfolio of loans, and assigns each loan a risk rating based on a variety of factors, including, without limitation, 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.
 
   
Expectations of performance and market conditions:
Our CECL reserve is adjusted to reflect our estimation of the current and future economic conditions that impact the performance of the commercial real estate assets securing our loans. These estimations include unemployment rates, interest rates, and other macroeconomic factors impacting the likelihood and magnitude of potential credit losses for our loans during their anticipated term. In addition to the CMBS data we have licensed from Trepp LLC, we have also licensed certain macroeconomic financial forecasts to inform our view of the potential future impact that broader economic conditions may have on our loan portfolio’s performance. These estimations require significant judgments about future events that, while based on the information available to us as of the balance sheet date, are ultimately indeterminate and the actual economic condition impacting our portfolio could vary significantly from the estimates we made as of June 30, 2021.
 
   
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. Determining that a loan is impaired requires significant judgment from management and is based on several factors including (i) the underlying collateral performance, (ii) discussions with the borrower, (iii) borrower events of default, and (iv) other facts that impact the borrower’s ability to pay the contractual amounts due under the terms of the loan. If a loan is determined to be impaired, we record the impairment as a component of our CECL reserve by applying the practical expedient for collateral dependent loans. The CECL reserve is assessed on an individual basis for these loans 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, discount rates, leasing, creditworthiness of major tenants, occupancy rates, availability and cost of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed relevant by our Manager. Actual losses, if any, could ultimately differ from these estimates. We only expect to realize the impairment losses if and when such amounts are deemed nonrecoverable upon a realization event. This is generally at the time a loan is repaid, or in the case of foreclosure, when the underlying asset is sold, but
non-recoverability
may also be concluded if, in our determination, it is nearly certain that all amounts due will not be collected.
 
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These assumptions vary from quarter to quarter as our loan portfolio changes and market and economic conditions evolve. The sensitivity of each assumption and its impact on the CECL reserve may change over time and from period to period. During the six months ended June 30, 2021, we recorded an aggregate $52.2 million decrease in the CECL reserve related to loans receivable, debt securities, and unfunded loan commitments, bringing our total reserve to $133.1 million as of June 30, 2021. This CECL reserve reflects the macroeconomic impact of the
COVID-19
pandemic on commercial real estate markets generally, as well as certain loans assessed for impairment in our portfolio. The decrease in the CECL reserve during the six months ended June 30, 2021 reflects the ongoing market recovery from
COVID-19
and the resulting improvement in the performance of the collateral assets underlying our portfolio. Further, this reserve is not reflective of what we expect our CECL reserve would be absent the current and potential future impacts of the
COVID-19
pandemic. See Notes 2 and 3 to our consolidated financial statements for further discussion of our CECL reserve.
 
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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 June 30, 2021 ($ in millions):
 
   
Loan Type
(1)
 
Origination
Date
(2)
 
Total
Loan
(3)(4)
   
Principal
Balance
(4)
   
Net Book
Value
   
Spread
(5)
   
All-in

Yield
(5)
   
Maximum
Maturity
(6)
 
                Location                
 
Property
Type
 
Loan Per
SQFT / Unit / Key
 
Origination
LTV
(2)
   
Risk
Rating
1
 
Senior loan
 
8/14/2019
 
$
1,333.6
 
 
$
1,295.4
 
 
$
1,289.5
 
 
 
+ 2.53
 
 
+ 2.99
 
12/23/2024
 
Dublin - IE
 
Office
 
$471 / sqft
 
 
74
 
2
2
 
Senior loan
 
3/22/2018
 
 
905.4
 
 
 
905.4
 
 
 
903.6
 
 
 
+ 3.25
 
 
+ 3.42
 
3/15/2023
 
Diversified - Spain
 
Mixed-Use
 
n / a
 
 
71
 
4
3
 
Senior loan
 
11/25/2019
 
 
724.2
 
 
 
668.6
 
 
 
670.1
 
 
 
+ 2.30
 
 
+ 2.59
 
12/9/2024
 
New York
 
Office
 
$958 / sqft
 
 
65
 
3
4
 
Senior loan
 
3/30/2021
 
 
583.6
 
 
 
583.6
 
 
 
577.9
 
 
 
+ 3.20
 
 
+ 3.41
 
5/15/2026
 
Diversified - SE
 
Industrial
 
$107 / sqft
 
 
76
 
3
5
 
Senior loan
(4)
 
8/7/2019
 
 
745.8
 
 
 
389.6
 
 
 
76.6
 
 
 
+ 3.12
 
 
+ 3.60
 
9/9/2025
 
Los Angeles
 
Office
 
$263 / sqft
 
 
59
 
3
6
 
Senior loan
 
8/22/2018
 
 
362.5
 
 
 
362.5
 
 
 
362.3
 
 
 
+ 3.15
 
 
+ 3.49
 
8/9/2023
 
Maui
 
Hospitality
 
$471,391 / key
 
 
61
 
3
7
 
Senior loan
 
9/23/2019
 
 
415.0
 
 
 
355.6
 
 
 
352.6
 
 
 
+ 3.00
 
 
+ 3.22
 
11/15/2024
 
Diversified - Spain
 
Hospitality
 
$194,433 / key
 
 
62
 
4
8
 
Senior loan
 
10/23/2018
 
 
352.4
 
 
 
348.7
 
 
 
348.7
 
 
 
+ 3.40
 
 
+ 3.53
 
1/24/2022
 
New York
 
Mixed-Use
 
$591 / sqft
 
 
65
 
3
9
 
Senior loan
 
4/11/2018
 
 
355.0
 
 
 
344.5
 
 
 
343.8
 
 
 
+ 2.85
 
 
+ 3.10
 
5/1/2023
 
New York
 
Office
 
$437 / sqft
 
 
71
 
2
10
 
Senior loan
(4)
 
8/6/2015
 
 
334.3
 
 
 
334.3
 
 
 
60.6
 
 
 
5.75
 
 
5.85
 
10/29/2022
 
Diversified - EUR
 
Other
 
n / a
 
 
71
 
3
11
 
Senior loan
 
1/11/2019
 
 
332.1
 
 
 
332.1
 
 
 
329.4
 
 
 
+ 4.35
 
 
+ 4.70
 
1/11/2026
 
Diversified - UK
 
Other
 
$328 / sqft
 
 
74
 
4
12
 
Senior loan
 
3/16/2021
 
 
490.8
 
 
 
307.3
 
 
 
303.2
 
 
 
+ 3.85
 
 
+ 4.15
 
4/9/2026
 
Boston
 
Life Sciences
 
$759 / sqft
 
 
66
 
2
13
 
Senior loan
 
2/27/2020
 
 
300.0
 
 
 
293.5
 
 
 
291.8
 
 
 
+ 2.70
 
 
+ 3.04
 
3/9/2025
 
New York
 
Mixed-Use
 
$921 / sqft
 
 
59
 
3
14
 
Senior loan
 
11/30/2018
 
 
286.3
 
 
 
286.3
 
 
 
284.8
 
 
 
n/m
(7)
 
 
 
n/m
(7)
 
 
8/9/2025
 
New York
 
Hospitality
 
$306,870 / key
 
 
73
 
5
15
 
Senior loan
 
9/30/2019
 
 
305.5
 
 
 
286.0
 
 
 
286.4
 
 
 
+ 3.66
 
 
+ 3.75
 
9/9/2024
 
Chicago
 
Office
 
$248 / sqft
 
 
58
 
1
16
 
Senior loan
 
10/23/2018
 
 
290.4
 
 
 
268.8
 
 
 
267.9
 
 
 
+ 2.80
 
 
+ 3.04
 
11/9/2024
 
Atlanta
 
Office
 
$250 / sqft
 
 
64
 
2
17
 
Senior loan
 
4/26/2021
 
 
263.5
 
 
 
263.5
 
 
 
261.6
 
 
 
+ 2.45
 
 
+ 2.63
 
5/9/2026
 
Diversified - US
 
Multi
 
$156,393 / unit
 
 
75
 
3
18
 
Senior loan
 
12/11/2018
 
 
310.0
 
 
 
262.1
 
 
 
261.5
 
 
 
+ 2.55
 
 
+ 2.96
 
12/9/2023
 
Chicago
 
Office
 
$221 / sqft
 
 
78
 
3
19
 
Senior loan
 
11/30/2018
 
 
263.9
 
 
 
248.9
 
 
 
248.2
 
 
 
+ 2.80
 
 
+ 3.34
 
12/9/2024
 
San Francisco
 
Hospitality
 
$365,544 / key
 
 
73
 
4
20
 
Senior loan
(4)
 
11/22/2019
 
 
470.0
 
 
 
223.8
 
 
 
44.3
 
 
 
+ 3.70
 
 
+ 4.14
 
12/9/2025
 
Los Angeles
 
Office
 
$224 / sqft
 
 
69
 
3
21
 
Senior loan
 
7/20/2017
 
 
250.0
 
 
 
222.6
 
 
 
221.3
 
 
 
+ 3.70
 
 
+ 4.16
 
8/9/2023
 
San Francisco
 
Office
 
$369 / sqft
 
 
58
 
2
22
 
Senior loan
 
12/12/2019
 
 
260.5
 
 
 
217.7
 
 
 
217.3
 
 
 
+ 2.40
 
 
+ 2.69
 
12/9/2024
 
New York
 
Office
 
$103 / sqft
 
 
42
 
1
23
 
Senior loan
 
10/1/2019
 
 
354.1
 
 
 
214.6
 
 
 
211.4
 
 
 
+ 3.75
 
 
+ 4.26
 
10/9/2025
 
Atlanta
 
Mixed-Use
 
$365 / sqft
 
 
70
 
3
24
 
Senior loan
 
4/23/2021
 
 
219.0
 
 
 
209.0
 
 
 
208.5
 
 
 
+ 3.65
 
 
+ 3.77
 
5/8/2024
 
Washington DC
 
Office
 
$234 / sqft
 
 
57
 
3
25
 
Senior loan
 
6/27/2019
 
 
227.4
 
 
 
206.1
 
 
 
205.2
 
 
 
+ 2.80
 
 
+ 3.16
 
8/15/2026
 
Berlin - DEU
 
Office
 
$442 / sqft
 
 
62
 
3
26
 
Senior loan
 
11/5/2019
 
 
219.2
 
 
 
205.9
 
 
 
205.0
 
 
 
+ 3.85
 
 
+ 4.45
 
2/21/2025
 
Diversified - IT
 
Office
 
$407 / sqft
 
 
66
 
3
27
 
Senior loan
 
9/25/2019
 
 
203.5
 
 
 
203.5
 
 
 
202.3
 
 
 
+ 4.35
 
 
+ 4.93
 
9/26/2023
 
London - UK
 
Office
 
$928 / sqft
 
 
72
 
3
28
 
Senior loan
 
8/31/2017
 
 
203.0
 
 
 
201.3
 
 
 
201.1
 
 
 
+ 2.50
 
 
+ 2.85
 
9/9/2023
 
Orange County
 
Office
 
$234 / sqft
 
 
64
 
3
29
 
Senior loan
 
11/23/2018
 
 
202.4
 
 
 
199.0
 
 
 
197.7
 
 
 
+ 2.62
 
 
+ 2.87
 
2/15/2024
 
Diversified - UK
 
Office
 
$1,206 / sqft
 
 
50
 
3
30
 
Senior loan
 
12/22/2016
 
 
204.5
 
 
 
192.0
 
 
 
191.8
 
 
 
+ 2.90
 
 
+ 3.13
 
12/9/2022
 
New York
 
Office
 
$270 / sqft
 
 
64
 
3
 
continued…
 
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Table of Contents
   
Loan Type
(1)
 
Origination
Date
(2)
 
Total
Loan
(3)(4)
   
Principal
Balance
(4)
   
Net Book
Value
   
Spread
(5)
   
All-in

Yield
(5)
   
Maximum
Maturity
(6)
 
                Location                
 
Property
Type
 
Loan Per
SQFT / Unit / Key
 
Origination
LTV
(2)
   
Risk
Rating
31
  Senior loan 
(4)
  3/23/2020     348.6       191.6       37.3       + 3.75     + 4.40   1/9/2025   Nashville  
Mixed-Use
  $298 / sqft     78   3
32
  Senior loan   6/4/2018     187.8       187.8       187.3       + 3.50     + 3.76   6/9/2024   New York   Hospitality   $309,308 / key     52   4
33
  Senior loan   4/9/2018     1,486.5       185.0       173.5       + 8.50     + 10.64   6/9/2025   New York   Office   $525 / sqft     48   2
34
  Senior loan   2/18/2021     184.0       184.0       182.4       + 3.20 %     + 3.54   3/9/2026   Durham   Multi   $314 / sqft     72   3
35
  Senior loan   11/16/2018     211.9       182.7       182.1       + 4.10     + 4.73   12/9/2023   Fort Lauderdale  
Mixed-Use
  $514 / sqft     59   3
36
  Senior loan   9/14/2018     179.3       179.3       178.6       + 3.50     + 4.04   9/14/2023   Canberra - AU  
Mixed-Use
  $466 / sqft     68   3
37
  Senior loan   4/3/2018     178.6       177.5       177.1       + 2.75     + 2.99   4/9/2024   Dallas  
Mixed-Use
  $502 / sqft     64   3
38
  Senior loan   9/26/2019     175.0       175.0       175.0       + 3.10     + 3.54   1/9/2023   New York   Office   $256 / sqft     65   3
39
  Senior loan   12/21/2017     197.5       170.3       170.1       + 2.65     + 2.87   1/9/2023   Atlanta   Office   $127 / sqft     51   2
40
  Senior loan   4/25/2019     210.0       166.2       165.7       + 3.50     + 3.75   9/1/2025   Los Angeles   Office   $747 / sqft     73   1
41
  Senior loan   9/5/2019     198.4       161.5       160.4       + 2.75     + 3.24   9/9/2024   New York   Life Sciences   $1,007 / sqft     62   3
42
  Senior loan   8/23/2017     165.0       157.7       157.5       + 3.25     + 3.48   10/9/2022   Los Angeles   Office   $320 / sqft     74   3
43
  Senior loan   9/4/2018     172.7       157.3       157.2       + 3.00     + 3.39   9/9/2023   Las Vegas   Hospitality   $190,423 / key     70   3
44
  Senior loan   12/20/2019     155.4       155.4       154.3       + 3.10     + 3.32   12/18/2026   London - UK   Office   $773 / sqft     75   3
45
  Senior loan   6/28/2019     226.4       154.3       152.1       + 3.70     + 4.01   6/27/2024   London - UK   Office   $503 / sqft     71   3
46
  Senior loan   5/27/2021     205.4       153.7       152.1       + 2.70     + 2.99   6/9/2026   Atlanta   Office   $130 / sqft     66   3
47
  Senior loan   1/17/2020     203.0       135.5       134.5       + 2.75     + 3.07   2/9/2025   New York  
Mixed-Use
  $112 / sqft     43   3
48
  Senior loan   11/14/2017     133.0       133.0       132.8       + 2.75     + 2.86   6/9/2023   Los Angeles   Hospitality   $532,000 / key     56   3
49
  Senior loan   12/14/2018     135.6       127.5       127.6       + 2.90     + 3.25   1/9/2024   Diversified - US   Industrial   $51 / sqft     57   2
50
  Senior loan   4/30/2018     177.2       125.6       124.8       + 3.25     + 3.51   4/30/2023   London - UK   Office   $565 / sqft     60   3
51
  Senior loan   11/27/2019     146.3       123.8       123.0       + 2.75     + 3.13   12/9/2024   Minneapolis   Office   $124 / sqft     64   3
52
  Senior loan   11/30/2018     151.1       123.0       122.4       + 2.55     + 2.82   12/9/2024   Washington DC   Office   $345 / sqft     60   2
53
  Senior loan   3/10/2020     140.0       118.4       118.3       + 2.50     + 2.67   1/9/2025   New York  
Mixed-Use
  $77 / sqft     53   3
54
  Senior loan   6/28/2019     125.0       117.2       116.9       + 2.75     + 2.91   2/1/2024   Los Angeles   Office   $591 / sqft     48   3
55
  Senior loan   4/6/2021     122.7       116.3       115.3       + 3.20     + 3.52   4/9/2026   Los Angeles   Office   $490 / sqft     65   3
56
  Senior loan   7/15/2019     144.6       116.2       115.6       + 2.90     + 3.25   8/9/2024   Houston   Office   $210 / sqft     58   3
57
  Senior loan   10/17/2016     114.1       114.1       114.1       + 3.95     + 3.96   10/21/2021   Diversified - UK  
Self-Storage
  $157 / sqft     73   2
58
  Senior loan   12/21/2018     123.1       112.3       112.1       + 2.60     + 2.99   1/9/2024   Chicago   Office   $220 / key     72   3
59
  Senior loan   3/29/2021     141.2       110.5       108.8       + 3.90     + 4.55   3/29/2026   Diversified - UK   Multi   $48,440 / unit     61   3
60
  Senior loan 
(4)
  9/22/2017     111.7       110.3       27.5       + 5.25     + 5.49   10/9/2022   San Francisco   Multi   $547,745 / unit     46   3
 
continued…
 
73

Table of Contents
   
Loan Type
(1)
 
Origination
Date
(2)
 
Total
Loan
(3)(4)
   
Principal
Balance
(4)
   
Net Book
Value
   
Spread
(5)
   
All-in

Yield
(5)
   
Maximum
Maturity
(6)
 
                Location                
 
Property
Type
 
Loan Per
SQFT / Unit / Key
 
Origination
LTV
(2)
   
Risk
Rating
61
 
Senior loan
 
5/20/2021
 
 
148.2
 
 
 
106.4
 
 
 
105.0
 
 
 
    + 3.60
 
 
    + 4.00
 
6/9/2026
 
San Jose
 
Office
 
$273 / sqft
 
 
65
 
3
62
 
Senior loan
 
10/16/2018
 
 
113.7
 
 
 
104.8
 
 
 
104.7
 
 
 
+ 3.25
 
 
+ 3.57
 
11/9/2023
 
San Francisco
 
Hospitality
 
$228,299 / key
 
 
72
 
4
63
 
Senior loan
 
3/13/2018
 
 
123.0
 
 
 
103.6
 
 
 
103.3
 
 
 
+ 3.00
 
 
+ 3.27
 
4/9/2025
 
Honolulu
 
Hospitality
 
$160,580 / key
 
 
50
 
3
64
 
Senior loan
 
3/25/2020
 
 
126.4
 
 
 
103.2
 
 
 
102.4
 
 
 
+ 2.40
 
 
+ 2.78
 
3/31/2025
 
Diversified - NL
 
Multi
 
$125,958 / unit
 
 
65
 
2
65
 
Senior loan
 
12/10/2018
 
 
122.8
 
 
 
99.3
 
 
 
98.5
 
 
 
+ 2.95
 
 
+ 3.34
 
12/3/2024
 
London - UK
 
Office
 
$475 / sqft
 
 
72
 
3
66
 
Senior loan
 
6/18/2021
 
 
98.5
 
 
 
98.5
 
 
 
97.6
 
 
 
+ 2.60
 
 
+ 2.83
 
7/9/2026
 
New York
 
Industrial
 
$52 / sqft
 
 
55
 
2
67
 
Senior loan
 
5/13/2021
 
 
199.1
 
 
 
97.9
 
 
 
96.2
 
 
 
+ 3.55
 
 
+ 3.96
 
6/9/2026
 
Boston
 
Life Sciences
 
$497 / sqft
 
 
64
 
3
68
 
Senior loan
 
12/23/2019
 
 
109.7
 
 
 
97.5
 
 
 
97.0
 
 
 
+ 2.70
 
 
+ 3.03
 
1/9/2025
 
Miami
 
Multi
 
$337,355 / unit
 
 
68
 
2
69
 
Senior loan
 
3/28/2019
 
 
98.4
 
 
 
96.5
 
 
 
96.5
 
 
 
+ 3.25
 
 
+ 3.40
 
1/9/2024
 
New York
 
Hospitality
 
$249,435 / key
 
 
63
 
4
70
 
Senior loan
 
8/18/2017
 
 
92.2
 
 
 
92.2
 
 
 
92.1
 
 
 
+ 4.10
 
 
+ 4.41
 
8/18/2022
 
Brussels - BE
 
Office
 
$143 / sqft
 
 
59
 
1
71
 
Senior loan
 
6/14/2021
 
 
100.0
 
 
 
92.0
 
 
 
91.4
 
 
 
+ 3.70
 
 
+ 4.04
 
7/9/2024
 
Miami
 
Office
 
$194 / sqft
 
 
65
 
3
72
 
Senior loan
 
3/31/2017
 
 
96.9
 
 
 
90.6
 
 
 
90.8
 
 
 
+ 4.30
 
 
+ 4.24
 
4/9/2023
 
New York
 
Office
 
$444 / sqft
 
 
64
 
3
73
 
Senior loan
 
6/1/2021
 
 
95.0
 
 
 
89.9
 
 
 
89.4
 
 
 
+ 2.85
 
 
+ 3.05
 
6/9/2026
 
Miami
 
Multi
 
$223,198 / unit
 
 
61
 
3
74
 
Senior loan
 
6/25/2021
 
 
85.4
 
 
 
85.4
 
 
 
84.7
 
 
 
+ 2.75
 
 
+ 3.10
 
7/1/2026
 
St. Louis
 
Multi
 
$80,339 / unit
 
 
70
 
3
75
 
Senior loan
 
11/22/2019
 
 
85.0
 
 
 
85.0
 
 
 
84.9
 
 
 
+ 2.99
 
 
+ 3.27
 
12/1/2024
 
San Jose
 
Multi
 
$317,164 / unit
 
 
62
 
2
76
 
Senior loan
 
2/1/2021
 
 
82.5
 
 
 
82.5
 
 
 
82.4
 
 
 
+ 4.05
 
 
+ 4.18
 
8/1/2022
 
Washington DC
 
Multi
 
$214,844 / unit
 
 
67
 
3
77
 
Senior loan
 
2/20/2019
 
 
140.4
 
 
 
81.2
 
 
 
80.1
 
 
 
+ 3.25
 
 
+ 3.89
 
2/19/2024
 
London - UK
 
Office
 
$398 / sqft
 
 
61
 
3
78
 
Senior loan
 
6/29/2016
 
 
83.4
 
 
 
80.4
 
 
 
80.4
 
 
 
+ 2.80
 
 
+ 3.04
 
7/9/2021
 
Miami
 
Office
 
$310 / sqft
 
 
64
 
2
79
 
Senior loan
 
6/18/2019
 
 
75.0
 
 
 
75.0
 
 
 
74.7
 
 
 
+ 2.75
 
 
+ 3.15
 
7/9/2024
 
Napa Valley
 
Hospitality
 
$785,340 / key
 
 
74
 
3
80
 
Senior loan
 
6/27/2019
 
 
84.0
 
 
 
74.9
 
 
 
74.7
 
 
 
+ 2.50
 
 
+ 2.77
 
7/9/2024
 
West Palm Beach
 
Office
 
$257 / sqft
 
 
70
 
3
81
 
Senior loan
 
4/1/2021
 
 
102.1
 
 
 
72.6
 
 
 
71.7
 
 
 
+ 3.30
 
 
+ 3.71
 
4/9/2026
 
San Jose
 
Office
 
$484 / sqft
 
 
67
 
3
82
 
Senior loan
 
3/21/2018
 
 
74.3
 
 
 
69.4
 
 
 
69.3
 
 
 
+ 3.10
 
 
+ 3.33
 
3/21/2024
 
Jacksonville
 
Office
 
$91 / sqft
 
 
72
 
2
83
 
Senior loan
 
1/30/2020
 
 
104.4
 
 
 
66.7
 
 
 
66.1
 
 
 
+ 2.85
 
 
+ 3.22
 
2/9/2026
 
Honolulu
 
Hospitality
 
$214,341 / key
 
 
63
 
3
84
 
Senior loan
 
8/22/2019
 
 
74.3
 
 
 
65.0
 
 
 
64.7
 
 
 
+ 2.55
 
 
+ 2.93
 
9/9/2024
 
Los Angeles
 
Office
 
$389 / sqft
 
 
63
 
3
85
 
Senior loan
 
10/5/2018
 
 
64.5
 
 
 
64.5
 
 
 
64.4
 
 
 
+ 5.50
 
 
+ 5.65
 
10/5/2021
 
Sydney - AU
 
Office
 
$685 / sqft
 
 
78
 
3
86
 
Senior loan
 
6/29/2017
 
 
63.4
 
 
 
63.4
 
 
 
63.4
 
 
 
+ 3.40
 
 
+ 3.65
 
7/9/2023
 
New York
 
Multi
 
$184,768 / unit
 
 
69
 
4
87
 
Senior loan
 
10/31/2018
 
 
62.7
 
 
 
62.7
 
 
 
62.7
 
 
 
+ 5.00
 
 
+ 5.00
 
11/9/2023
 
New York
 
Multi
 
$325,807 / unit
 
 
61
 
2
88
 
Senior loan
 
3/31/2021
 
 
62.0
 
 
 
62.0
 
 
 
61.9
 
 
 
+ 3.73
 
 
+ 3.86
 
4/1/2024
 
Boston
 
Multi
 
$316,327 / unit
 
 
75
 
2
89
 
Senior loan
 
6/28/2021
 
 
59.3
 
 
 
59.3
 
 
 
58.1
 
 
 
+ 3.60
 
 
+ 4.86
 
2/15/2023
 
Diversified - Spain
 
Hospitality
 
$126,078 / key
 
 
56
 
3
90
 
Senior loan
 
6/30/2021
 
 
64.6
 
 
 
57.2
 
 
 
56.7
 
 
 
+ 2.90
 
 
+ 3.19
 
7/9/2026
 
Nashville
 
Office
 
$235 / sqft
 
 
71
 
3
 
continued…
 
74

Table of Contents
   
Loan Type
(1)
 
Origination
Date
(2)
 
Total
Loan
(3)(4)
   
Principal
Balance
(4)
   
Net Book
Value
   
Spread
(5)
   
All-in

Yield
(5)
   
Maximum
Maturity
(6)
 
                Location                
 
Property
Type
 
Loan Per
SQFT / Unit / Key
 
Origination
LTV
(2)
   
Risk
Rating
91
  Senior loan   4/15/2021     66.3       56.7       56.2       + 3.00     + 3.30   5/9/2026   Austin   Office   $275 / sqft     73   3
92
  Senior loan   8/14/2019     70.3       56.2       55.8       + 2.45     + 2.87   9/9/2024   Los Angeles   Office   $643 / sqft     57   3
93
  Senior loan   6/26/2019     71.6       55.8       55.4       + 3.35     + 3.66   6/20/2024   London - UK   Office   $630 / sqft     61   3
94
  Senior loan   12/10/2020     61.2       54.3       53.9       + 3.25     + 3.54   1/9/2026   Fort Lauderdale   Office   $187 / sqft     68   3
95
  Senior loan   3/11/2014     52.4       52.4       52.4       n/m
(7)
 
    n/m
(7)
 
  7/9/2021   New York   Multi   $589,065 / unit     65   5
96
  Senior loan   11/30/2016     60.5       52.0       51.9       + 3.10     + 3.22   12/9/2023   Chicago   Retail   $1,014 / sqft     54   4
97
  Senior loan   2/17/2021     53.0       50.9       50.6       + 3.55     + 3.75   3/9/2026   Miami   Multi   $290,985 / unit     64   3
98
  Senior loan   2/20/2019     54.0       46.8       46.7       + 3.50     + 3.92   3/9/2024   Calgary - CAN   Office   $129 / sqft     52   3
99
  Senior loan   11/3/2017     45.0       44.2       44.2       + 3.00     + 3.26   11/1/2022   Los Angeles   Office   $206 / sqft     50   1
100
  Senior loan   2/21/2020     43.8       43.8       43.7       + 2.95     + 3.27   3/1/2025   Atlanta   Multi   $137,304 / unit     68   3
101
  Senior loan   6/26/2015     41.2       41.2       41.2       + 5.50     + 5.70   8/9/2021   San Diego   Office   $188 / sqft     73   3
102
  Senior loan   6/9/2021     36.0       36.0       35.9       + 3.25     + 3.40   7/1/2024   Washington DC   Multi   $230,769 / unit     65   3
103
  Senior loan   2/26/2021     37.0       36.0       35.7       + 3.50     + 3.85   3/9/2026   Austin   Multi   $195,637 / unit     64   3
104
  Senior loan   12/27/2016     36.0       36.0       35.9       + 3.10     + 3.26   7/9/2023   New York   Multi   $617,619 / unit     64   3
105
  Senior loan   12/13/2019     37.9       35.2       34.9       + 3.55     + 4.49   6/12/2024   Diversified - FR   Industrial   $25 / sqft     55   1
106
  Senior loan   11/19/2020     34.7       34.7       34.4       + 3.50     + 3.85   12/9/2025   Scottsdale   Multi   $204,246 / unit     59   3
107
  Senior loan   10/31/2019     33.9       33.6       33.6       + 3.25     + 3.34   11/1/2024   Raleigh   Multi   $165,425 / unit     52   3
108
  Senior loan   5/12/2021     36.1       33.2       33.0       + 2.85     + 3.19   6/9/2026   San Bernardino   Multi   $155,096 / unit     66   3
109
  Senior loan   5/4/2021     33.9       32.0       31.9       + 3.25     + 3.35   6/1/2026   San Antonio   Multi   $82,421 / unit     69   3
110
  Senior loan   2/3/2021     110.5       31.8       30.8       + 3.20     + 3.58   2/9/2026   Austin   Office   $132 / sqft     58   2
111
  Senior loan   10/31/2019     31.5       31.5       31.5       + 3.25     + 3.33   11/1/2024   Atlanta   Multi   $165,789 / unit     60   3
112
  Senior loan   10/31/2019     30.2       30.2       30.2       + 3.25     + 3.33   11/1/2024   Austin   Multi   $159,788 / unit     52   3
113
  Senior loan   11/19/2020     37.8       28.3       28.0       + 3.50     + 3.90   12/9/2025   Chicago   Multi   $161,685 / unit     53   3
114
  Senior loan   11/19/2020     28.2       28.1       27.9       + 3.50     + 3.85   12/9/2025   Charlotte   Multi   $178,019 / unit     61   3
115
  Senior loan   11/19/2020     33.7       27.7       27.4       + 3.50     + 3.88   12/9/2025   Virginia Beach   Multi   $160,839 / unit     61   3
116
  Senior loan   6/29/2021     39.5       27.6       27.5       + 3.45     + 3.63   7/1/2025   Memphis   Multi   $75,000 / unit     54   3
117
  Senior loan   10/31/2019     27.2       27.2       27.2       + 3.25     + 3.32   11/1/2024   Austin   Multi   $135,323 / unit     53   3
118
  Senior loan   10/31/2018     25.9       25.9       26.0       + 5.00     + 4.97   11/9/2023   New York   Condo   $569,155 / unit     64   3
119
  Senior loan   12/23/2019     26.2       22.0       21.9       + 2.85     + 3.23   1/9/2025   Miami   Office   $370 / sqft     68   3
120
  Senior loan   3/8/2017     21.7       21.7       21.8       4.79 %
(8)
 
    5.12 %
(8)
 
  12/23/2021   Montreal - CAN   Office   $59 / sqft     45   1
 
continued…
 
75

Table of Contents
   
Loan Type
(1)
 
Origination
Date
(2)
 
Total
Loan
(3)(4)
   
Principal
Balance
(4)
   
Net Book
Value
   
Spread
(5)
   
All-in

Yield
(5)
   
Maximum
Maturity
(6)
 
                Location                
 
Property
Type
 
Loan Per
SQFT / Unit / Key
 
Origination
LTV
(2)
   
Risk
Rating
121
  Senior loan   12/15/2017     20.1       20.1       20.0       + 4.88     + 5.24   12/9/2021   Diversified - US   Hospitality   $303,882 / key     50   3
122
  Senior loan   2/28/2019     15.3       14.7       14.7       + 3.25     + 3.29   3/1/2024   San Antonio   Multi   $64,023 / unit     75   3
123
  Senior loan   6/21/2019     14.8       14.5       14.5       + 3.30     + 3.41   7/1/2022   Portland   Multi   $130,180 / unit     66   1
124
  Senior loan   6/25/2021     11.7       11.7       11.6       + 2.75     + 3.10   7/1/2026   St. Louis   Multi   $21,273 / unit     63   3
    CECL reserve                     (128.9                                            
           
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
             
 
 
   
 
    Loans receivable, net   $ 22,489.3     $ 18,528.8     $ 17,308.0       + 3.25     + 3.58   3.1 yrs                 66   2.9
       
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
             
 
 
   
 
 
(1)
Senior loans include senior mortgages and similar credit quality loans, including related contiguous subordinate loans and pari passu participations in senior mortgage loans.
(2)
Date loan was originated or acquired by us, and the LTV as of such date. Origination dates are subsequently updated to reflect material loan modifications.
(3)
Total loan amount reflects outstanding principal balance as well as any related unfunded loan commitment.
(4)
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. As of June 30, 2021, five loans in our portfolio have been financed with an aggregate $999.2 million of
non-consolidated
senior interest, which are included in the table above. Portfolio excludes our $79.2 million subordinate position in the $623.1 million 2018 Single Asset Securitization. Refer to Notes 4 and 16 to our consolidated financial statements for details of the 2018 Single Asset Securitization.
(5)
The weighted-average spread and
 
all-in
 
yield are expressed as a spread over the relevant floating benchmark rates, which include USD LIBOR, GBP LIBOR, EURIBOR, STIBOR, BBSY, and CDOR, as applicable to each loan. As of June 30, 2021, 98% of our loans by total loan exposure earned a floating rate of interest, primarily indexed to USD LIBOR. The other 2% of our loans earned a fixed rate of interest, which we reflect as a spread over the relevant floating benchmark rates, as of June 30, 2021, for purposes of the weighted-averages.
In addition to spread,
all-in
yield includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees. Excludes loans accounted for under the cost-recovery method.
(6)
Maximum maturity assumes all extension options are exercised, however our loans may be repaid prior to such date.
(7)
Loans are accounted for under the cost-recovery method.
(8)
Loan consists of one or more floating and fixed rate tranches. Coupon and
all-in
yield assume applicable floating benchmark rates for weighted-average calculation.
 
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ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Investment Portfolio Net Interest Income
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 June 30, 2021, 98% of our investments by total investment 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 June 30, 2021, the remaining 2% of our investments by total investment 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 caps to limit our exposure to increases in interest rates on such liabilities.
LIBOR and certain other floating rate benchmark indices to which our floating rate loans and other loan agreements are tied, including, without limitation, the Euro Interbank Offered Rate, or EURIBOR, the Stockholm Interbank Offered Rate, or STIBOR, the Canadian Dollar Offered Rate, or CDOR, and the Australian Bank Bill Swap Reference Rate, or BBSY, or collectively, IBORs, are the subject of recent national, international and regulatory guidance and proposals for reform. On March 5, 2021, the Financial Conduct Authority of the U.K., or FCA, which has statutory powers to require panel banks to contribute to LIBOR where necessary, announced it would cease publication of certain IBORs, including
one-week
and
two-month
USD LIBOR and all tenors of GBP LIBOR, immediately after December 31, 2021 and cease the publication of the remaining tenors of USD LIBOR immediately after June 30, 2023. Additionally, the Federal Reserve Board, Federal Deposit Insurance Corporation, Office of the Comptroller of Currency, and other interagency regulatory bodies have advised U.S. banks to stop entering into new USD LIBOR based contracts by December 31, 2021.
The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, has identified the Secured Overnight Financing Rate, or SOFR, a new index calculated using short-term repurchase agreements backed by Treasury securities, as its preferred alternative rate for USD LIBOR. In the U.K., the Bank of England’s working group on Sterling risk free rates set March 31, 2021 as the target date under which GBP LIBOR may no longer be used as the reference rate for new loan products with maturities after December 31, 2021. Market participants have started to transition to the Sterling Overnight Index Average, or SONIA, in line with guidance from the U.K. regulators. As of June 30, 2021, the floating benchmark rate for the financing provided on the 2020 FL3 and 2020 FL2 CLOs is the
30-day
average compounded SOFR, plus a credit spread adjustment. Additionally, as of June 30, 2021, the floating benchmark rate on one of our credit facilities is the daily compounded SONIA.
At this time, it is not possible to predict how markets will respond to SOFR, SONIA, or other alternative reference rates as the transition away from USD LIBOR and GBP LIBOR proceeds. Despite the LIBOR transition in other markets, benchmark rate methodologies in Europe, Canada, and Australia have been reformed and rates such as EURIBOR, STIBOR, CDOR, and BBSY may persist as International Organization of Securities Commissions, or IOSCO, compliant reference rates moving forward. However, multi-rate environments may persist in these markets as regulators and working groups have suggested market participants adopt alternative reference rates.
Refer to “Part I. Item 1A. Risk Factors—Risks Related to Our Lending and Investment Activities—The expected discontinuation of currently used financial reference rates and use of alternative replacement reference rates may adversely affect net interest income related to our loans and investments or otherwise adversely affect our results of operations, cash flows and the market value of our investments.” of our Annual Report on Form
10-K
filed with the SEC on February 10, 2021.
 
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The following table projects the impact on our interest income and expense, net of incentive fees, for the twelve-month period following June 30, 2021, assuming an immediate increase or decrease of both 25 and 50 basis points in the applicable interest rate benchmark by currency ($ in thousands):
 
                 
Interest Rate Sensitivity as of June 30, 2021
 
    
Assets (Liabilities)

  Sensitive to Changes in  

Interest Rates
(1)(2)(3)
          
Increase in Rates
   
Decrease in Rates
(4)
 
Currency
        
      25 Basis      
Points
   
      50 Basis      
Points
   
    25 Basis      
Points
   
      50 Basis      
Points
 
USD
   $ 13,032,617       Income      $ 11,592     $ 24,343     $ (3,527   $ (3,527
     (9,353,111     Expense        (17,041     (34,284     7,528       7,528  
  
 
 
      
 
 
   
 
 
   
 
 
   
 
 
 
   $ 3,679,506       Net interest      $ (5,449   $ (9,941   $ 4,001     $ 4,001  
  
 
 
      
 
 
   
 
 
   
 
 
   
 
 
 
EUR
   $ 3,258,274       Income      $ —       $ —       $ —       $ —    
     (2,457,542     Expense        —         —         —         —    
  
 
 
      
 
 
   
 
 
   
 
 
   
 
 
 
   $ 800,732       Net interest      $ —       $ —       $ —       $ —    
  
 
 
      
 
 
   
 
 
   
 
 
   
 
 
 
GBP
   $ 1,630,785       Income      $ 2,103     $ 4,338     $ (577   $ (577
     (986,145     Expense        (1,972     (3,945     503       503  
  
 
 
      
 
 
   
 
 
   
 
 
   
 
 
 
   $ 644,640       Net interest      $ 131     $ 393     $ (74   $ (74
  
 
 
      
 
 
   
 
 
   
 
 
   
 
 
 
SEK
   $ 583,589       Income      $ 906     $ 2,073     $ —       $ —    
     (466,871     Expense        (725     (1,658     —         —    
  
 
 
      
 
 
   
 
 
   
 
 
   
 
 
 
   $ 116,718       Net interest      $ 181     $ 415     $ —       $ —    
  
 
 
      
 
 
   
 
 
   
 
 
   
 
 
 
AUD
   $ 243,797       Income      $ —       $ —       $ —       $ —    
     (177,093     Expense        (354     (708     106       106  
  
 
 
      
 
 
   
 
 
   
 
 
   
 
 
 
   $ 66,704       Net interest      $ (354   $ (708   $ 106     $ 106  
  
 
 
      
 
 
   
 
 
   
 
 
   
 
 
 
CAD
   $ 48,446       Income      $ 3     $ 6     $ (3   $ (5
     (51,901     Expense        (104     (208     104       172  
  
 
 
      
 
 
   
 
 
   
 
 
   
 
 
 
   $ (3,455     Net interest      $ (101   $ (202   $ 101     $ 167  
  
 
 
      
 
 
   
 
 
   
 
 
   
 
 
 
       Total net interest      $ (5,592   $ (10,043   $ 4,134     $ 4,200  
       
 
 
   
 
 
   
 
 
   
 
 
 
 
(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. Increases (decreases) in interest income and expense are presented net of incentive fees. Refer to Note 12 to our consolidated financial statements for additional details of our incentive fee calculation.
(2)
Includes investment exposure to the 2018 Single Asset Securitization. Refer to Notes 4 and 16 to our consolidated financial statements for details of the subordinate position we own in the 2018 Single Asset Securitization.
(3)
Includes amounts outstanding under secured debt, securitizations, asset-specific financings, and term loans.
(4)
Decrease in rates assumes the applicable benchmark rate for each currency does not decrease below 0%.
Investment Portfolio Value
As of June 30, 2021, 2% of our investments by total investment exposure earned a fixed rate of interest and as such, the values of such investments are sensitive to changes in interest rates. We generally hold all of our investments to maturity and so do not expect to realize gains or losses on our fixed rate investment portfolio as a result of movements in market interest rates.
Risk of
Non-Performance
In addition to the risks related to fluctuations in cash flows and asset values associated with movements in interest rates, there is also the risk of
non-performance
on floating rate assets. In the case of a significant increase in interest rates, the additional debt service payments due from our borrowers may strain the operating cash flows of the collateral real estate assets and, potentially, contribute to
non-performance
or, in severe cases, default. This risk is partially mitigated by various facts we consider during our underwriting process, which in certain cases include a requirement for our borrower to purchase an interest rate cap contract.
 
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Credit Risks
Our loans and investments are also subject to credit risk. The performance and value of our loans and investments depend upon the sponsors’ ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. To monitor this risk, our Manager’s asset management team reviews our investment portfolios and in certain instances is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary.
In addition, we are exposed to the risks generally associated with the commercial real estate market, including variances in occupancy rates, capitalization rates, absorption rates, and other macroeconomic factors beyond our control. We seek to manage these risks through our underwriting and asset management processes.
The
COVID-19
pandemic significantly impacted the commercial real estate markets, causing reduced occupancy, requests from tenants for rent deferral or abatement, and delays in construction and development projects currently planned or underway. While the economy has improved significantly, negative conditions from
COVID-19
could continue to persist and impair our borrowers’ ability to pay principal and interest due to us under our loan agreements. We maintain a robust asset management relationship with our borrowers and have utilized these relationships to address the potential impacts of the
COVID-19
pandemic on our loans secured by properties experiencing cash flow pressure, most significantly hospitality assets.
We are generally encouraged by our borrowers’ response to the
COVID-19
pandemic’s impacts on their properties. With limited exceptions, we believe our loan sponsors are committed to supporting assets collateralizing our loans through additional equity investments, and that we will benefit from our long-standing core business model of originating senior loans collateralized by large assets in major markets with experienced, well-capitalized institutional sponsors. Our investment portfolio’s low origination weighted-average LTV of 64.8% as of June 30, 2021, reflects significant equity value that our sponsors are motivated to protect through periods of cyclical disruption. While we believe the principal amounts of our loans are generally adequately protected by underlying collateral value, there is a risk that we will not realize the entire principal value of certain investments.
Our Manager’s portfolio monitoring and asset management operations benefit from the deep knowledge, experience, and information advantages derived from its position as part of Blackstone’s real estate platform. Blackstone Real Estate is one of the largest owners and operators of real estate in the world, with a proven track record of successfully navigating market cycles and emerging stronger through periods of volatility. The market-leading real estate expertise derived from the strength of the Blackstone platform deeply informs our credit and underwriting process, and we believe gives us the tools to expertly manage our asset portfolio and work with our borrowers throughout periods of economic stress and uncertainty.
Capital Market Risks
We are exposed to risks related to the equity capital markets, and our related ability to raise capital through the issuance of our class A common stock or other equity instruments. We are also exposed to risks related to the debt capital markets, and our related ability to finance our business through borrowings under credit facilities or other debt instruments. As a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore requires us to utilize debt or equity capital to finance our business. We seek to mitigate these risks by monitoring the debt and equity capital markets to inform our decisions on the amount, timing, and terms of capital we raise.
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 generally determined on a commercially reasonable basis.
Counterparty Risk
The nature of our business requires us to hold our cash and cash equivalents and obtain financing from various financial institutions. This exposes us to the risk that these financial institutions may not fulfill their obligations to us under these various contractual arrangements. We mitigate this exposure by depositing our cash and cash equivalents and entering into financing agreements with high credit-quality institutions.
 
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The nature of our loans and investments also exposes us to the risk that our counterparties do not make required interest and principal payments on scheduled due dates. We seek to manage this risk through a comprehensive credit analysis prior to making an investment and active monitoring of the asset portfolios that serve as our collateral.
Currency Risk
Our loans and investments that are denominated in a foreign currency are also subject to risks related to fluctuations in currency rates. We generally mitigate this exposure by matching the currency of our foreign currency assets to the currency of the borrowings that finance those assets. As a result, we substantially reduce our exposure to changes in portfolio value related to changes in foreign currency rates.
The following table outlines our assets and liabilities that are denominated in a foreign currency (€/£/A$/C$/kr in thousands):
 
    
June 30, 2021
 
Foreign currency assets
(1)(2)
       2,766,527     £     1,464,525     A$     330,228     C$     88,060     kr     5,024,712  
Foreign currency liabilities
(1)
     (2,073,333     (913,108     (236,932     (64,389     (4,002,792
Foreign currency contracts - notional
     (679,142     (542,701     (89,500     (21,000     (999,500
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net exposure to exchange rate fluctuations
   14,052     £ 8,716     A$ 3,796     C$ 2,671     kr 22,420  
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net exposure to exchange rate fluctuations in USD
(3)
   $ 16,663     $ 12,056     $ 2,846     $ 2,154     $         2,622  
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
____________
          
(1)  
 
Balances include
non-consolidated
senior interests of £197.8 million.
(2)  
 
British Pound Sterling balance includes a loan tranche denominated in Euro, with an outstanding principal balance of €8.3 million as of June 30, 2021, that is hedged to British Pound Sterling exposure through a foreign currency forward contract. Refer to Note 10 to our consolidated financial statements for additional discussion of our foreign currency derivatives.
(3)
 
Represents the U.S. Dollar equivalent as of June 30, 2021.
Substantially all of our net asset exposure to the Euro, the British Pound Sterling, the Australian Dollar, the Canadian Dollar, and the Swedish Krona has been hedged with foreign currency forward contracts.
 
ITEM 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule
13a-15(e)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this quarterly report on Form
10-Q
was made under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by SEC rules and forms and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in our “internal control over financial reporting” (as defined in Rule
13a-15(f)
of the Exchange Act) that occurred during the period covered by this quarterly report on Form
10-Q
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
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PART II. OTHER INFORMATION
 
ITEM 1.
LEGAL PROCEEDINGS
From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of June 30, 2021, we were not involved in any material legal proceedings.
 
ITEM 1A.
RISK FACTORS
There have been no material changes to the risk factors previously disclosed under Part I, Item 1A of our Annual Report on Form
10-K
for the year ended December 31, 2020.
 
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
 
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
None.
 
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
 
ITEM 5.
OTHER INFORMATION
See below for descriptions of agreements filed as exhibits to this quarterly report on Form
10-Q
in regard to our term loan and certain secured debt. The following descriptions do not purport to be complete and are qualified entirely by reference to the complete terms of the relevant agreements, which are filed as E
xhibit 10.1, Exhibit 10.2 and Exhibit 10.4 to this quarterly report on Form
 
10-Q
 
and are incorporated herein by referenc
e.
Fifth Amendment to Term Loan Credit Agreement
On June 21, 2021, we entered into the Fifth Amendment to the Term Loan Credit Agreement, or the Fifth Amendment to the Term Loan Credit Agreement, that was originally entered into on April 23, 2019 with JP Morgan Chase Bank, N.A. (as amended as of November 29, 2019, May 20, 2020, June 11, 2020 and February 19, 2021), in order to, among other things, (i) refinance all $322.6 million aggregate principal amount of our existing
B-2
term loans by replacing them with new term loans, collectively known as our
B-2
Term Loan, and (ii) increase the aggregate principal amount of term loans by $100.0 million. The
B-2
Term Loan bears interest at a rate of USD LIBOR plus 2.75%, representing a decrease from the prior interest rate of USD LIBOR plus 4.75%, and have a USD LIBOR floor of 0.50%, representing a decrease from the prior USD LIBOR floor of 1.00%.
Certain Blackstone-advised investment vehicles acquired participations in our
B-2
Term Loan and an affiliate of our Manager has served as a book-runner for our
B-2
Term Loan transactions. See Note 17 to our consolidated financial statements for additional details.
M
aster Repurchase Agreement with Banco Santander, S.A
.
On May 14, 2021, Parlex 8 USD IE Issuer Designated Activity Company, Parlex 8 GBP IE Issuer Designated Activity Company, Parlex 8 EUR IE Issuer Designated Activity Company, Parlex 8 Finco, LLC, Parlex 8 GBP Finco, LLC and Parlex 8 EUR Finco, LLC, all wholly-owned subsidiaries of the Company, or the Sellers, entered into a securitized Master Repurchase Agreement with Banco Santander, S.A, or the Master Repurchase Agreement. The Master Repurchase Agreement provides for advances of up to €1.5 billion in the aggregate, which we expect to use to finance the acquisition and origination of eligible loans.
 
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Fifth Amended and Restated Master Repurchase Agreement with Citibank, N.A.
On April 16, 2021, Parlex 2 Finance, LLC, Parlex 2A Finco, LLC, Parlex 2 UK Finco, LLC, Parlex 2 Eur Finco, LLC, Parlex 2 AU Finco, LLC, Parlex 2 CAD Finco, LLC, all wholly-owned subsidiaries of the Company, entered into the Fifth Amended and Restated Master Repurchase Agreement, or the Fifth Amended and Restated Master Repurchase Agreement, with Citibank, N.A. which amends restates, and replaces in its entirety the Fourth Amended and Restated Master Repurchase Agreement, dated as of February 15, 2019 (as amended as of June 7, 2019, July 16, 2019, February 19, 2020 and September 30, 2020), in order to, among other things, increase the maximum facility size from $1.5 billion to $2.0 billion.
 
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ITEM 6.
EXHIBITS
 
  10.1
   Fifth Amendment to Term Loan Credit Agreement, dated as of June 21, 2021, by and among Blackstone Mortgage Trust, Inc., the subsidiary guarantors party thereto, each lender party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent
   
  10.2
   Master Repurchase Agreement, dated as of May 14, 2021 by and among Parlex 8 USD IE Issuer Designated Activity Company, Parlex 8 GBP IE Issuer Designated Activity Company, Parlex 8 EUR IE Issuer Designated Activity Company, Banco Santander, S.A., Parlex 8 Finco, LLC, Parlex 8 GBP Finco, LLC and Parlex 8 EUR Finco, LLC
   
  10.3
   Guaranty, dated as of May 14, 2021, made by Blackstone Mortgage Trust, Inc. for the benefit of Parlex 8 USD IE Issuer Designated Activity Company, Parlex 8 GBP IE Issuer Designated Activity Company and Parlex 8 EUR IE Issuer Designated Activity Company
   
  10.4
   Fifth Amended and Restated Master Repurchase Agreement, dated as of April 16, 2021, among Parlex 2 Finance, LLC, Parlex 2A Finco, LLC, Parlex 2 UK Finco, LLC, Parlex 2 Eur Finco, LLC, Parlex 2 AU Finco, LLC, Parlex 2 CAD Finco, LLC and Citibank, N.A.
   
  10.5
   Sixth Amendment to Limited Guaranty, dated as of April 16, 2021, by and between Blackstone Mortgage Trust, Inc. and Citibank, N.A.
   
  31.1
   Certification of Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
  31.2
   Certification of Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
  32.1 +
   Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
  32.2 +
   Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
101.INS
   XBRL Instance Document – the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document
   
101.SCH
   Inline XBRL Taxonomy Extension Schema Document
   
101.CAL
   Inline XBRL Taxonomy Extension Calculation Linkbase Document
   
101.LAB
   Inline XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE
   Inline XBRL Taxonomy Extension Presentation Linkbase Document
   
101.DEF
   Inline XBRL Taxonomy Extension Definition Linkbase Document
   
104
   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
   
                        
    
+
This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
 
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
         
BLACKSTONE MORTGAGE TRUST, INC.
     
July 28, 2021
       
/s/ Katharine A. Keenan
Date
       
Katharine A. Keenan
         
Chief Executive Officer
         
(Principal Executive Officer)
     
July 28, 2021
       
/s/ Anthony F. Marone, Jr.
Date
       
Anthony F. Marone, Jr.
         
Chief Financial Officer
         
(Principal Financial Officer and
         
Principal Accounting Officer)
 
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