Brad Thomas
Founder & Lead Analyst of Wide Moat Research
Blackstone Mortgage Trust's troubled-loan burden has now translated into a 35% dividend cut, confirming the earlier warning about its uncovered payout. Its quarterly dividend falls from $0.47 to $0.30; distributable EPS before realized gains and losses was $0.42 in Q3. Higher-for-longer rates make working through troubled loans slow and costly for leveraged mortgage REITs. x.comÂ
Blackstone Mortgage Trust's dividend looks unsustainable as legacy office loans weigh on earnings. Another cut looks increasingly likely: it added $134 million in credit-loss reserves, posted an $81 million quarterly net loss, and distributable EPS does not cover the payout. The yield exceeds 17%, but that is no bargain if the dividend fails; staying away. x.comÂ
Blackstone is now selling data-center loans as opaque CMBS, a self-reinforcing leverage dynamic reminiscent of the 1990s manufactured-home crisis. Per another investor, seven data centers have been packaged into one CMBS, fully occupied by four confidential investment-grade tenants and three small network carriers. Buyers may not scrutinize these securities closely, since the institutions creating them also manage the pensions. x.com x.comÂ
Bank OZK's apparent credit improvement partly reflects loans moving into foreclosures that may not sell at full market value. Problem assets fell about 14%, but foreclosed assets rose 43% to $420 million; the annualized net charge-off rate eased from 0.69% to 0.53%. Management expects losses to stay elevated into part of 2027 but anticipates improvement that year. Fed rate increases should instead drive losses dramatically higher. This is the calm before the storm, not a turnaround. x.com x.comÂ
Starwood Property Trust's acquisition of Fundamental looks disastrous in retrospect, as Starwood pays out NAV while not earning its dividend. General pressure on rates and spreads adds to the damage after the stock was clobbered. The open question is when it becomes a buy, and whether it falls to Covid-era levels below $10 soon. x.comÂ
Starwood Property Trust looks like a buy because most of its loans are floating rate and its servicing unit alone is immensely valuable and countercyclical. x.com x.comÂ
Arbor Realty Trust's upsized $325M convertible notes offering is a material financing with bearish dilution risk. That makes the stock more useful as a risk or short-watch name than as a long. x.comÂ
REITs stay in the penalty box because a reaccelerating labor market rules out Fed cuts this year. Job openings jumped to 7.618M against a 7.295M forecast and a prior 6.887M, and with core inflation still hot, Warsh can't cut into that. Rate-sensitive sectors such as REITs, small caps and anything long-duration stay under pressure, while shorter-duration, cash-flow-positive value keeps working. x.com x.comÂ
Blue Owl Capital's pristine financial model rests on assumptions that just broke. Its $2.92 billion revenue, 45% net margins and rising distributable earnings require every loan to keep performing. Yet Blue Owl suspended its Oracle data center project, gated investor redemptions because assets cannot be sold fast enough, and Jamie Dimon warned private credit players will blow up. With Brent at $119, no rate cuts through 2027 and memory shortages delaying builds, restructuring is the next crack. … Show more
Regional banks are next in line as commercial real estate cracks, because they hold a massive share of CRE loans that go bad as property values crater. Private credit cracked first: Apollo, Ares, Barings, Morgan Stanley and Cliffwater capped redemptions, and Apollo's co-president said some private-market marks are wrong. Now buildings sell for up to 90% off; a Chicago office bought for $68.1M fetched $4M. As loans mature and refinancing bites, every forced sale resets prices for everyone. x.com … Show more
