悬崖来了！（浑水做空BXMT US）

BlackstoneMortgageTrust,Inc.(BXMT)

HereComestheCliff!

December6,2023

MUDDYWATERSRESEARCH1

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securitiesofaCoveredIssueroraderivativethereto,andthereforewilllikelyrealizesignificantgainsintheeventthatthepricesofeitherequityordebtsecuritiesofaCoveredIssuerdeclineorappreciate.MuddyWaters

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MUDDYWATERSRESEARCH2

MuddyWatersisShortBXMT

Interestrateswapsandmanipulatedriskratings/lossprovisionshaveobscuredseriousdeteriorationinBXMT'sloanbook.Webelievethatstartingin2024,asanestimated$16billionofswapsterminate,thefollowingproblemswillbeevident:

•BXMTwilllikelysignificantlycutitsdividendassoonasH22024.AtpresentSOFR,weexpectBXMTtocutitsquarterlydividendbyatleasthalf.

•WethinklargenumbersofborrowerswillbeunabletorefinanceandrepayBXMT.

•BXMTisatriskofaliquiditycrisis.

•Evenassumingratecuts,BXMT'slossesonits$23.2billionnetbookvalueofloans

couldreach~$2.5billionto~$4.5billion.BXMT'smarketcap,whichiscurrently$4.0

billion,isatriskofbeingcompletelywipedoutbytheselosses.Theselosseswouldbein

additiontoBXMT'sexistinglossprovisions.

1Calculationsdiscussedinfra.

MUDDYWATERSRESEARCH3

Contents

BXMTHasLookedSteady,ButThat'sAbouttoChange

8

OurMethodology

12

ManyBorrowersCan'tCoverInterestExpense

16

WeEstimatethat~$16BillionofSwapsTerminatethrough202422

BorrowersUnabletoRefinanceandRepayBXMT

24

BXMTHasBeenObscuringtheseIssues

29

DividendImpactandBXMT'sOptions

35

Appendix:ExamplesofProblematicLoans

42

MUDDYWATERSRESEARCH4

HowBXMTWorks

•BMXTisaREITthatborrowsmoneyandlendsitonwardtocommercialmortgageborrowers.

•Theloansarefloatingrate(SOFR+spread)interest-only.

•Theloanstypicallyhavethree-yearinitialterms.IfborrowersmeetmainlyNOI/debttests,theymayextendfor1+1years.

•BXMTrequiresthatitsborrowersenterintointerestrateswaps("ratecaps")toprotecttheirabilitytopayinterestinarisingrateenvironment.

•BXMTcapturesaspreadbetweeninterestincomeandinterestexpense.Itsabilitytomakedistributionsdependsonitsabilitytoavoidsignificantdefaults.

N.B.Becausetheseareinterest-onlyloans,thismodelreliesonborrowersbeingabletorefinancetorepaytheloans.

MUDDYWATERSRESEARCH5

ThePerfectMacroStorm

.Inoffice,NOIsaredownbecauseofchangessincethepandemic.

oVacanciesaregoingevenhigherasexistingleasesterminate.

oOpexishigherduetoinflation.

oDecreasedNOIsmakeithardertoservicedebt.

.CREassetvaluesaredownbecauseofsharplyhigherrates.

oManyCREborrowersowemorethantheirpropertiesarecurrentlyworth.

oBecauselenderstypicallyonlylend60%to70%ofaproperty'svalue,"upsidedown"borrowersareunabletorefinanceandpayoffinterest-onlyloans.

.Anticipatedratecutswouldbetoolittle,toolateformanyCREborrowers.

oRateswouldbecuttoaddressmacroweakness–thetypeofweaknesstowhichmuchCREisexposed.

oCREassetvaluechangesgenerallylagratemovements.

UnlessSOFRhits~3.5%inH22024withouttheeconomyslowing,wethinkBXMTwillbehammeredbythemacro.

MUDDYWATERSRESEARCH6

CMBSMarketisReflectingtheStressandAnother

Overhang

$1.2trillionofUSCREmaturities

in2024-2025.Forcedsellers

ofCMBSprovidingapictureof

themarket

•"DelinquentcommercialrealestateloansatUSbankshavehittheirhighestlevelinadecade,ashigherinterestrates,anuncertaineconomyandtheriseofremoteworkingpilepressureonbuildingowners.Thevolumeofpast-due

loansinwhichownersofpropertiesrentedtoothershavemissedmorethanonepaymentjumped30percent,or$4bn,to$17.7bninthethreemonthstotheendofSeptember,accordingtoindustrytracker

BankRegData.Thefigurehadrisenby$10bninayear."

•“Thankstodeteriorationinproperty-levelfinancialperformance,onlyabout25percentofconduitandsingle

asset/singleborrowerCMBSloanswillbeabletorefinanceinthenexttwoyears,GSfound.ForthebroaderCMBSmarket,thatfigureisjust40percent.GShastomakesomeassumptionsaboutwhat

securitiescanrefinance,ofcourse.ThestrategistssettleonanLTVbelow60percent;animpliedmortgageratefromofatleast7percent;andadebtservicecoverageratioabove1.3to1.5dependingonthepropertytype.”

SourceFT"CollidingwithCRE'smaturitywall"December1st2023

MUDDYWATERSRESEARCH7

BXMTHasLookedSteady,ButThat'sAbouttoChange

MUDDYWATERSRESEARCH8

WhyHasn'tBXMTYetShownSignsofDistress?

.Manyborrowershaveonlybeenabletostaycurrentthroughthe

unprecedentedratehikesof2022-2023becauseoftheswaps.

.BXMThasalsobeengivinginvestorsafalsesenseofsecuritythroughunrealistic(andsubjective)RiskRatingsandCECL(CurrentExpectedCreditLoss)

provisioning.

.BXMThasbeen"extendingandpretending"bymodifyingtroubledloansthat

arealreadyotherwiseindefault–extendingmaturitiesandallowingthemtoPIK.

oWebelievethatatleastnineloanstotaling$1.6billion(~6.3%ofBXMT'snetbookvalue)havealreadybeenmodifiedthroughQ32023.

oWeunderstandthatalready~4%to~5%ofinterestincomeisPIK.1

1PerdiscussionswithBXMTInvestorRelations.

MUDDYWATERSRESEARCH9

2024WillBeaTurningPoint

•BXMTwilllikelysignificantlycutitsdividendassoonasH22024becauseweextrapolatethat~70%-75%ofBXMT'sU.S.borrowersarepresentlyunabletocoverinterestexpensefrompropertycashflowsabsentinterestrateswaps.(U.S.borrowersare64%ofnetbookvalue.)

oWeestimate~$16billionnotionalofitsborrowers'interestrateswapsexpireoverthenextyear..1

•Becauseassetvalueshavefallen,astheseinterest-onlyloansbegintomaturenextyear,wethinklargenumbersofborrowerswillbeunabletorefinanceandrepayBXMT.

•BXMTisatriskofaliquiditycrisis.

oBecausemanyofitsloansseeminglyexceedcollateralvalues,BXMT'slenderscould"hyper-amortize"theloansifBXMTdoesn'tpostadditionalcollateral.

oBXMThasunfundedloancommitmentsof$2.7billion,butwithonly$1.5billionofcommittedoridentifiedfinancingsforthosecommitments,makingitreliantonborrowersbeingabletorefinancetheirinterest-only

loans.

•Evenassumingratecuts,BXMT'slossesonits$23.2billionnetbookvalueofloanscouldreach

~$2.5billionto~$4.5billion.BXMT'smarketcap,whichiscurrently$4.0billion,isatriskofbeing

completelywipedoutbytheselosses.TheselossesareinadditiontoBXMT'sexistinglossprovisions.

•BXMThasconcealedtheimpendingproblemsthroughunder-provisioningandunrealisticRiskRatings.

1Calculationsdiscussedinfra.

MUDDYWATERSRESEARCH10

AbsentSwaps,ManyBorrowersCan'tServiceBXMTDebt

•BXMT'sloansareinterest-onlyfloatingrate(e.g.,30-dayLIBOR/SOFR+Spread).

•Ifin2021,theborroweropenedaswapthroughtheinitialmaturityonatypicalthree-yearloan(withtwoone-yearextensionoptions)when30-daySOFR

averaged0.04%,theswapcounterpartyhasbeenpayingthe~530bpsdifferencebetweencurrentSOFR(5.3%)andtheinitialrate.1

•TheweightedaveragespreadonaBXMTloanis~343bps,meaningthat

withoutswaps,thetypicalborrowerwouldbepaying~8.7%now.

•TheaverageborrowerNOI/DebtintheCLO(seeinfra)is~6.5%.

Weestimatethat~$16billionoftheseswapswillterminatein2024.

MUDDYWATERSRESEARCH11

OurMethodology

DelvingintoBXMT'sCLOData

MUDDYWATERSRESEARCH12

OurMethodology/Edge:BXMTGranularLoanDatafromCLOs

•FromBXMT'sthreeCLOs,weobtainedgranularinformationon37of

BXMT's185balancesheetloans,1whichrepresent~$5.0billionofBXMT's$23.2billionbalancesheet.

•BXMTInvestorRelationshasconfirmedthattheCLOloansarerepresentativeoftheU.S.loansonBXMT'sbalancesheet.

•Wethenusedaleadingcommercialrealestatedatabase

tounderstandpropertydetails,includingvacanciesand"shadowvacancies"

(i.e.,rentedbutunoccupiedspaceonthemarketforsublease),and

estimatedcapratesatwhichthepropertiesshouldtrade.

•Ourextrapolationsareprimarilyfromthese37loans,butthrough

identifyingthreenon-CLOloans,wehavealsogottenawindowintonon-

U.S.loans,constructionloans,andotherpartsofthebook.Certainoftheseloansalsoshowindiciaofneedingimpairments.

1CLOservicerreportavailablefrom

MUDDYWATERSRESEARCH13

BXMTCLODataExample

MUDDYWATERSRESEARCH14

BottomCLOTranchesareAlreadyontheWatchlist

TheCLOservicingreportforthethreeCLOsshowatotalof$1.9billion

ofloansthatareonthe"watchlist"at"6A",whichmeans"AnyOther

SituationthatIndicatesanIncreasedLevelofDefaultRiskthat

mayCreatePotentialMaterialLossestoInvestors(Lesserof10%ofUPBor$500,000)"1

1CLOservicerWatchlistreportavailablefrom

MUDDYWATERSRESEARCH15

ManyBorrowersCan'tCoverInterestExpense

Weextrapolatethat~70%to75%ofU.S.borrowersareunabletopayinterestexpensewithouttheswaps.

HowtoDetermineaProperty'sDebtServiceCapacity

•Wedetermineeachproperty'sabilitytoserviceitsinterestexpensebydividingLTMNOI(availableinCLOdata)bytheoutstanding

principalbalance.

oIftheresultisgreaterthanthecombinedrateontheloan,weassumethepropertycanserviceitsinterestexpense.

oWegenerallyexcludecapexneeds,whichiscompanyfavorable.

MUDDYWATERSRESEARCH17

73%ofCLOBorrowersAren'tCoveringInterestExpenseAbsentSwaps

•10ofthe37CLOborrowers(27%bynumber,29%byNBV)areunableto

coverSOFRatpresent("GroupA").Onaverage,theywouldonlybeabletocoverinterestifSOFRwere~0.5%.1

•17ofthe37CLOborrowers(46%bynumber,49%byNBV)areunabletocovertheirspreads.Onaverage,theywouldonlybeabletocover

interestifSOFRwere~3.5%.

1Asshowninfra,thiscalculationexcludestwopropertiesthatpresentlyhavenegativeNOIsduetoconstructionand/orrenovation.

MUDDYWATERSRESEARCH18

GroupA-SeeminglyUnabletoCoverSOFRAbove3.5%

NotoneofthesepropertiescouldcoverinterestevenifSOFRwereonly3.5%.

MUDDYWATERSRESEARCH19

GroupB-SeeminglyUnabletoCoverInterestAbove3.5%SOFR

MUDDYWATERSRESEARCH20

ExtrapolatingtotheEntireLoanBook

•WeunderstandfromBXMTInvestorRelationsthattheCLOsare

representativeofBXMT'sU.S.loanbook,ex-constructionandverylargeloans.

•Itseemsthat~70%-75%oftheU.S.loanbookisunabletoserviceitsdebtabsentrateswaps,basedontheCLOs.

•Wealsoseeindiciaofstressininternationalandconstructionloans,whichwediscussinfra.

MUDDYWATERSRESEARCH21

WeEstimatethat~$16BillionofSwaps

Terminatethrough2024

Estimating2024SwapMaturities

•BXMT'sdisclosed"MaximumMaturities"initsLoanPortfolioDetailstablerefertoyearinwhichallextensionoptionshavebeenexercised.

•Weassumethatborrowersinitiallyenterintoswapsthatonlycovertheirinitialloanterms,i.e.,threeyears.BXMTdoesnotrequireborrowerstoswapawayinterest

exposureforrenewaltermspriortoexercisingthem.

•Therefore,the2024MaximumMaturityamountof$5.1billiondoesnotcapturetheamountofswapsmaturingin2024.

•Wealsoassumethattheextensionsconsistoftwoone-yearoptions,andthatborrowersonlyswapawayextensionperiodrateexposureoneyearatatime.

•2024MaximumMatur