Quiver Quantitative - Carson Block, the renowned short seller and head of Muddy Waters (NYSE:WAT), has publicly declared a short position against Blackstone Mortgage Trust (NYSE:BXMT), citing a potential liquidity crisis due to unfavorable economic conditions impacting commercial real estate. Block's announcement at the Sohn Investment Conference in London highlighted the risks faced by the trust, which specializes in loans secured by commercial properties. He raised concerns about borrowers' ability to refinance and repay the trust, suggesting the need for increased collateral and predicting a significant dividend cut.
Blackstone (NYSE:BX) Mortgage Trust's exposure to the commercial real estate market, which is currently under duress from high borrowing costs and shifting demand, especially in office spaces, places it in a precarious position. With a net book value of loans at $23.2 billion, Block estimates potential losses ranging between $2.5 billion and $4.5 billion. This scenario could lead to the complete erosion of the trust’s equity. The trust's stock has already felt the impact, dropping by approximately 4.2% in New York trading following Block’s comments.
Blackstone (BX) Mortgage Trust operates separately from Blackstone Real Estate Income Trust (BREIT), another Blackstone entity that has faced its challenges, including limiting withdrawals for 13 consecutive months. The commercial real estate sector, in general, is bracing for over $650 billion in property debt maturing in 2024, increasing the pressure on firms like Blackstone. Block's report also reveals that the trust has been modifying troubled loans by extending maturities and allowing payment in kind, a strategy that may only provide temporary relief.
Block, known for his high-profile short positions against companies like Sino-Forest Corp and various European real estate firms, brings significant attention to the potential vulnerabilities within Blackstone Mortgage Trust. His track record in identifying and capitalizing on overstated assets or other corporate missteps adds weight to his current position against the REIT, prompting market participants to closely watch the unfolding situation.
This article was originally published on Quiver Quantitative