Blackstone Mortgage Trust reported a net loss of $327.6 million in the third quarter of 2026, roughly four times its second-quarter loss. The company attributed the results to expected but not yet realized losses on troubled office loans made before 2023, citing slowed projects and pressure from rising interest rates.
CEO Tim Johnson said the company has accelerated portfolio turnover and reduced exposure to legacy pre-2023 investments by proactively selling select loans, harvesting repayments, and reducing its watch list. Johnson believes the impact of recent rate rises and secular challenges in office are now largely reflected in the company's third-quarter book value.
The quarter's loss of $1.95 per share and 42 cents of distributable earnings per share beat analysts' expectations. BXMT's investment portfolio is valued at $17 billion. The share of healthier investments made after 2023 has increased roughly 50 percent over the year, according to President Austin Peña.
The company closed roughly $500 million in new investments over the quarter, including $300 million in new loans. It has diversified beyond large commercial properties into long-term leased retail properties, bank loan portfolios, and homebuilder financing. Net-lease, homebuilder finance, and bank loan portfolio investments now comprise nearly 10 percent of the portfolio, up from zero at the beginning of last year. The average investment size has declined to $18 million from $130 million.
Total net revenue for the quarter rose 7 percent year-over-year to $141.9 million. Revenue from owned real estate more than doubled to $77.5 million, while income from loans and other investments declined 35 percent to $64.4 million.
The loan portfolio is 93 percent performing. Six loans totaling approximately $800 million, largely office, were newly classified as impaired. All were pre-2023 originations. Johnson said borrowers have become unwilling to commit additional capital, prompting the company to take significant reserves against these loans.
BXMT has sold nearly $1 billion of loans since the end of June, half covering office. Johnson said the sales shrink the watch list to its lowest level since 2019. The REIT collected $2.3 billion of repayments in the third quarter, its highest level since the fourth quarter of 2021.