Blackstone Mortgage Trust reported a second-quarter 2026 net loss of $81.2 million, or $0.48 per share, as a jump in credit reserves tied to an impaired Chicago office loan offset revenue that beat analyst estimates, according to the commercial mortgage REIT’s earnings release filed with the Securities and Exchange Commission on July 29. Blackstone Mortgage Trust, externally managed by an affiliate of Blackstone, originates and manages senior loans collateralized by commercial real estate across North America, Europe and Australia.
Distributable earnings were $0.31 per share, or $0.48 per share before realized gains and losses. The company declared a dividend of $0.47 per share for the quarter. Total revenue rose to $158.1 million, ahead of the $127.3 million analysts had expected, according to earnings-call commentary detailed by Investing.com’s transcript of the company’s July 30 earnings call.
Book value per share fell 4% quarter over quarter to $19.31, driven by an $0.80-per-share increase in current expected credit loss (CECL) reserves and $0.12 per share of depreciation on real estate the company now owns outright. Total CECL reserves stood at $2.43 per share, split between $1.13 per share in general reserves and $1.30 per share in asset-specific reserves.
Executives said the majority of the quarter’s net reserve increase traced to a single loan: a $345 million office loan in Chicago, originated in 2018 and downgraded in 2022, whose borrower defaulted in June. The company said it reached a restructuring agreement on the loan after the quarter closed. Separately, a Dallas multifamily loan was foreclosed in June and is now held as company-owned real estate. Executives also flagged new watchlist additions during the quarter: a Denver office loan, a Hawaii hotel loan and an Australian multifamily loan in Melbourne. The total watchlist balance fell to $2.0 billion from $2.5 billion the prior quarter.
On the capital-recycling side, the company said it received $1.2 billion in loan repayments during the quarter, with another $1.4 billion collected in July, and redeployed $1.4 billion into new investments. New loan originations totaled $1.1 billion at an average loan-to-value ratio of 61%, concentrated primarily in residential and industrial properties. The company also grew its net-lease acquisitions by $135 million at its share during the quarter, bringing that portfolio to $661 million.
CEO Tim Johnson said the results “reflect continued execution of our goal of accelerating portfolio turnover and reallocating capital into high-conviction investment themes.” On the earnings call, Johnson said the company sees “a path to reducing our exposure to both office loans and to legacy pre-2023 loans by 40% or more by year-end,” and pointed to a pullback by traditional banks from home-builder finance as an opportunity for BXMT to “gain market share amidst a fragmented competitive landscape.”
What it means: BXMT’s quarter illustrates the split reality still facing commercial mortgage REITs: legacy office exposure originated before the 2022 rate-hiking cycle continues to generate credit losses and drive reserve-building, even as new originations skew toward property types — residential, industrial and net lease — that lenders view as more resilient. The falling watchlist balance and management’s stated 40%-reduction target for legacy and office exposure suggest the company expects the credit cycle for its remaining troubled loans to keep working through 2026, similar to the portfolio-repositioning dynamics RealtyWire has covered at other commercial lenders, including Redwood Trust’s expanding mortgage banking platforms and BXP’s $1.2 billion construction loan for its Madison Avenue tower.
