Blackstone Mortgage Trust Faces Criticism and a Wager

Since his critical remarks on December 6th, the stock price of Blackstone Mortgage Trust has dropped approximately 5%, while other real-estate investment trusts have seen a corresponding increase due to lower interest rates.

In response to Block's assertion that the trust would cut its dividend in half as borrowers struggle to refinance at higher rates, the reaction from long-term investors has been mixed. Blackstone Mortgage Trust issued a "fact sheet" stating that most borrowers have successfully replaced maturing loans, albeit with additional injections of equity capital. This led supporters of the trust to refute Block's short thesis on social media platforms.

However, on Wednesday, Block decided to challenge those who doubted his claims. He engaged in a Twitter exchange with Ariel Cohen, a residential real-estate broker with Douglas Elliman in Manhattan, responding to a tweet from Cohen by offering to donate $100,000 to a charity chosen by Cohen if he could sell one of the commercial properties in Blackstone Trust's portfolio within the next six months for a value equivalent to Blackstone's mortgage on the property.

Cohen replied, appreciating the offer but noting that the properties in question were performing loans that would likely be paid off by or before their maturity dates. He added that Blackstone Mortgage Trust did not have any intention of liquidating these assets.

The wager between Block and Cohen raises questions about the stability of Blackstone Mortgage Trust and highlights concerns regarding its ability to maintain its dividend payouts amidst challenging market conditions. Investors and analysts will be watching closely to see how this situation unfolds in the coming months.

The Debate Over Blackstone Mortgage

The ongoing debate surrounding Blackstone Mortgage has garnered attention from investors and analysts alike. While Blackstone Mortgage declined to comment on the matter, some notable figures have expressed their opinions.

One of the supporters of Blackstone Mortgage is Cohen, who enthusiastically stated that he is open to debating the merits of the company. In fact, Blackstone Mortgage is one of his favorite stocks. On the other hand, Block, another prominent figure, did not comment on the Twitter exchange but firmly stands by his research. Block also mentioned that additional reports on the mortgage REIT will be published soon.

Due to the impact of the Covid pandemic, along with rising interest rates, shares of the Blackstone mortgage REIT have decreased by a third over the past two years. However, the REIT has managed to maintain its dividend payments at an annual level of $2.48 per share. Despite the stock's drop, its yield has increased to over 11%.

Fortunately, the commercial real estate market seems to be showing signs of improvement. With the 10-year treasury yield decreasing from 5% to below 3.9% in recent months, there is hope for a recovery.

The Blackstone Mortgage debate is set to continue into 2024. According to Block's report, a significant portion of the loans in the REIT's portfolio will mature next year and could potentially be costly to replace for some investors. However, those who are optimistic about the REIT are betting that interest rates will have further eased by then.

The popularity of Blackstone Mortgage as a stock has resulted in substantial betting interest. As of December 15th, more than 16% of the free-trading float had been sold short.

Nevertheless, there are alternative approaches to this situation.

Cohen proposed an intriguing idea on Twitter, suggesting a mutually acceptable and bilateral wager structure involving a $100,000 donation to each of their preferred charities. This proposition has gained considerable attention, and Cohen emphasized his strong interest in such a wager.