Blackstone’s massive mortgage REIT is in the crosshairs of one of the world’s best-known short sellers.
Carson Block, the founder of Muddy Waters and known for his reports on Chinese companies, told the Sohn Conference in London Wednesday that the Blackstone Mortgage Trust — a REIT with a $22 billion portfolio of loans — was in danger of a “liquidity crisis” next year.
The simple reality, he said, is that interest rates have risen too fast for too many of the loan recipients. While these sponsors are shielded currently by interest-rate swaps, the reality, he said, is that a bulk of the portfolio is about to lose this protection.
“This is not a story of ‘these are bad people who did a bad thing.’ They’re just incredibly unlucky,” he said.
Without the ability for these borrowers to refinance, Block predicts the REIT will have to cut its dividend severely next year and absorb major losses on some of its loans, many of which went to developers of office properties across the country — a space of real estate already in distress.
Blackstone, he said, is “slyly” nodding to the fact that there might need to be a dividend cut in the REIT’s third-quarter update, but believes the massive alternatives firm has been “obscuring” how bad it really is.
“They have a lot of downside they need to own up to,” he said.
Blackstone called the report “self-interested and misleading” in a statement.
“We will respond in greater detail — however the steps we have taken on both sides of our balance sheet, including proactive asset management, a conservative liquidity posture, and a patient approach to new investments, leave us well positioned to navigate this environment,” the statement said.
The REIT, trading under the ticker BXMT, fell by more than 4% by midday Wednesday.
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