Blackstone Mortgage Trust Reports $327.6M Loss as It Cuts Older Office Loans

Blackstone Mortgage Trust (BXMT) reported a net loss of $327.6 million in income in the third quarter of 2026, a roughly fourfold increase from second-quarter losses.

During a third-quarter earnings call Thursday morning, company leadership largely attributed the results to expected — but not yet realized — losses on troubled office loans made before 2023, citing slowed projects and added pressure from rising interest rates. 

“Last quarter, we outlined a path to accelerate portfolio turnover and reduce our exposure to these legacy, pre-2023 investments,” Tim Johnson, CEO of BXMT, told investors during the call. “Since then, we’ve made significant progress, proactively selling select loans more exposed to higher rates, harvesting repayments and reducing our watch list.”

Johnson said his team believes the impact of recent rises in rates on its legacy loan portfolio, and the “secular challenges in office” causing impairments, 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 still beat analysts’ expectations.

BXMT’s investment portfolio is currently valued at $17 billion, and its share of healthier investments made after 2023 has increased roughly 50 percent over the year, according to Austin Peña, BXMT’s president. 

“Looking ahead, while we are mindful of potential impacts from elevated rates, we believe we are well positioned,” Peña said. “We have significantly repositioned our portfolio, and our investment channels are more diversified than ever.”

The commercial mortgage lender’s diversification push beyond large commercial properties continues, with new investments in long-term leased retail properties, bank loan portfolios and homebuilder financing. BXMT closed roughly $500 million in new investments over the quarter, including $300 million in new loans.

“Our net-lease, homebuilder finance, and bank loan portfolio investments now comprise nearly 10 percent of our portfolio, up from zero at the beginning of last year,” Peña said, adding that the company’s average investment size has declined to $18 million from $130 million just a few years ago. 

Total net revenue for the quarter rose 7 percent year-over-year to $141.9 million. Revenue from owned real estate more than doubled over the same period in 2025, reaching $77.5 million, while income from loans and other investments declined annually by roughly 35 percent, to $64.4 million. 

The loan portfolio is 93 percent performing, according to BXTM’s quarterly report, even though six loans totaling approximately $800 million — largely office — were newly classified as impaired.

“All of these loans were pre-2023 originations, and in many cases sponsors had injected meaningful equity,” Johnson said. “But as we anticipated could be the case, those borrowers are now unwilling to commit additional capital to further support their assets. As a result, we took significant reserves against these loans.”

The company also resolved one troubled loan on a mixed-use office property in the San Francisco Bay Area.

In response to soured loans, the REIT is continuing to proactively shrink its portfolio’s risk-rated and office loans. It has sold nearly $1 billion of loans, half of them covering office, since the end of June, Johnson said, “capitalizing on strong market liquidity even as interest rates moved higher.”

Johnson credited the sales with shrinking BXMT’s watch list of at-risk loans 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.

“We’re very pleased with this outcome, proactively reducing higher-risk-rated and office loans in our portfolio,” Johnson said.

The Thursday call projected BXMT’s confidence that the worst impacts of the recent rise in borrowing rates were behind it, but investors will be closely monitoring whether more problem loans appear in the coming months.

Emily Davis can be reached at edavis@commercialobserver.com.