.jpg)
By Michelle Conlin and Matt Tracy
NEW YORK (Reuters) – Shares of commercial real estate finance company Blackstone Mortgage Trust Inc. (NYSE:) shares fell 10% on Wednesday after the company cut its dividend by 24%, facing continued pressure from vacant offices.
It’s the latest sign of deepening troubles in the commercial real estate sector. Analysts expect further weakness for lenders and landlords in the sector as American workers continue to embrace pandemic-era remote work habits.
This shift has left large swaths of office space empty, while high interest rates have left many borrowers struggling to repay their loans on time.
“I think Blackstone (NYSE:) having to cut its dividend will weigh on some people’s minds,” said Stephen Buschbaum, director of research at industry data provider Tribe. “I wouldn’t be surprised to see ripple effects across the industry when the biggest player has to cut its dividend.”
Blackstone Mortgage Trust has set aside an additional $140 million in reserves for expected credit losses, and according to an earnings presentation, 55% of its U.S. office holdings are “on watch list or inactive.”
However, borrowers looking for higher-quality offices continue to make their payments, the company added.
Industry participants remain concerned about the sharp decline in commercial office space with nearly $1 trillion of the $4.7 trillion in commercial mortgages due in 2024, according to the Mortgage Bankers Association.
The impending maturity comes against the backdrop of declining property values and falling rental rates.
Blackstone Mortgage Trust cut its dividend to $0.47 per share in the third quarter, down from $0.62 paid in the second quarter.
The company reported a loss of $61.06 million in the second quarter and announced a $150 million share buyback, it said Wednesday.
Despite the loss, CEO Katie Keenan pointed to “long-term earnings potential” backed by “strong liquidity, accelerating repayments and an emerging investment pipeline,” the presentation showed.
The gloom in the office sector has also affected other companies, including KKR Real Estate Finance Trust, which cut its dividend amid bad loans in February.
