Blackstone Mortgage Trust (BXMT.N) witnesses a 9% decline in shares after Muddy Waters, a short-selling hedge fund, discloses its short position in Blackstone’s (BX.N) real estate investment trust (REIT). Carson Block, CEO of Muddy Waters, raises concerns about the REIT’s vulnerability to issues such as oversupply, under-funded loan commitments, and expiring leases, impacting its net operating income.
Speaking at the Sohn Conference in London, Block suggests that Blackstone’s REIT is at risk of a liquidity crisis, emphasizing challenges related to refinancing loans in the face of ongoing property sector difficulties. The short seller highlights the reliance of Blackstone’s Mortgage Trust on interest-only loans, which require borrowers to refinance to repay the loans. According to Muddy Waters, the REIT is likely to slash its dividend significantly in the second half of the upcoming year.
In response to Muddy Waters’ assertions, Blackstone issues a statement dismissing the report as “self-interested and misleading,” emphasizing its conservative liquidity posture. The company labels the short seller’s perspective as an attempt to negatively impact the share price of BXMT. Blackstone also points to proactive asset management, a conservative liquidity stance, and a patient approach to new investments as measures that position the company well to navigate the current environment.
Also Read: Blackstone Bold Move: Closing Struggling Fund Amid Evolving Financial Landscape”
Muddy Waters predicts potential losses on the book value of loans for Blackstone’s Mortgage Trust, ranging from $2.5 billion to $4.5 billion, constituting a significant portion of the REIT’s nearly $4 billion market cap. The short seller attributes these potential losses to challenges in the property sector, leading to reduced income for servicing debt. Despite rate cuts, Muddy Waters expresses skepticism about Blackstone’s ability to modify loans effectively to weather economic challenges, citing a large number of loans terminating next year.
Shares of Blackstone’s Mortgage Trust continue to face downward pressure, experiencing a nearly 7% decrease. Blackstone responds by indicating that it will provide a more detailed response but asserts its strong position, citing record levels of liquidity on the REIT and highlighting its third-quarter results, where it covered its dividend by 126%. The clash between Muddy Waters and Blackstone underscores the challenges and uncertainties facing the real estate investment trust amid broader economic dynamics and market sentiments.