NewYork (Business Emerge), July 25: Blackstone Mortgage Trust (BXMT), a prominent player in commercial real estate finance, saw its shares plummet by 10% on Wednesday following a significant 24% reduction in its dividend. This move reflects the ongoing challenges the firm faces due to high office vacancies.
The commercial real estate sector continues to experience substantial difficulties as remote work trends persist. This shift has led to an increase in empty office spaces, while rising interest rates are putting financial strain on borrowers, making it tough for them to meet loan obligations.
Stephen Buschbom, research director at Trepp, noted, “The decision by Blackstone to lower dividends will likely cause concern among investors. It’s reasonable to expect that this may trigger broader industry impacts, especially given the stature of Blackstone in the market.”
In response to these challenges, Blackstone Mortgage Trust has allocated an additional $140 million to cover anticipated credit losses. Currently, 55% of its U.S. office space holdings are either “watch-listed or impaired,” as indicated in their earnings report.
Despite these hurdles, the firm reported that borrowers of higher-quality office properties are maintaining their payments. Industry experts are apprehensive about the potential downturn in commercial office space, with nearly $1 trillion of the $4.7 trillion in commercial mortgages set to mature in 2024. This scenario unfolds amidst falling property values and reduced rental incomes.
In the third quarter, Blackstone Mortgage Trust reduced its dividend to $0.47 per share from $0.62 in the previous quarter. The company also reported a $61.06 million loss for the second quarter and authorized $150 million in stock repurchases.
Nonetheless, CEO Katie Keenan highlighted the company’s “long-term earnings potential,” citing its “robust liquidity, growing repayments, and a promising investment pipeline” as positive factors for future growth.