Carson Block shorts Blackstone mortgage REIT

Block said the trust is facing a possible liquidity crisis and may default on its loans. — Bloomberg

NEW YORK: Carson Block says he’s short Blackstone Mortgage Trust, saying the publicly traded real estate investment trust is exposed to a perfect storm of economic conditions hitting commercial real estate and may face a liquidity crisis.

The Blackstone Mortgage Trust makes loans collateralised by commercial real estate. Block, who heads short-selling firm Muddy Waters, said the trust is facing a possible liquidity crisis and may default on its loans, and he expects it will have to cut its dividend by at least half.

“There’s been a lot of extending and pretending when things have been backed by paper profits,” Block said in an interview, speaking on the sidelines of the Sohn investment conference in London on Wednesday. “It’ll be the second half of next year that we’ll really start to see losses.”

Block predicted the trust’s borrowers will be unable to refinance and repay the trust and will need to post more collateral.

A spokesperson for the Blackstone Mortgage Trust said in an emailed statement that the trust’s liquidity is at “record levels,” it continues to reduce its leverage, and has taken steps that leave it “well positioned to navigate this environment.” — Bloomberg

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