Key Takeaways
- Blackstone Mortgage Trust CEO Tim Johnson bought 90,000 shares on Nov. 4, worth $1.04 million, six days after the company cut its quarterly dividend 36%.
- At the Nov. 9 close, the stock was 46% below its 52-week high after a third quarter with a $327 million net loss, about $800 million of impaired loans, and a 12% drop in book value.
- Johnson paid about two-thirds of the company’s $17.06 book value per share, and management says the office problems behind its losses are largely reflected in that figure.
- The numbers back the buy at his price if book value holds, and the fourth-quarter report will show whether it has.
On its Oct. 29 earnings call, Blackstone Mortgage Trust (BXMT) CEO Tim Johnson said the stock’s discount to book value offered “an attractive entry point.” Six days later, he bought about $1 million of it himself. At the Nov. 9 close of $11.18, the shares sat 46% below their 52-week high and just under his purchase price.
Johnson’s Form 4, filed Nov. 5, shows he bought 90,000 shares on Nov. 4 at an average price of $11.50, or $1.04 million in all. Director Henry N. Nassau bought 10,000 shares the same day at an average $11.43.
Office loans sank the third quarter
The trouble started with new impairments in the second-quarter report on July 30. Then rates climbed. On the call, Johnson said the 10-year Treasury yield was up 80 basis points this year, and in early October it briefly hit its highest level since 2002. That is why he called rates “the headline in our world.”
On Oct. 29, the company reported a third-quarter net loss of $327 million after impairing about $800 million of loans, mostly legacy office plus one hotel loan. Book value fell 12% from the second quarter to $17.06 a share, and the board cut the quarterly dividend to $0.30 from $0.47. Management expects to cover the new dividend in the fourth quarter and through 2027.
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Johnson’s bet is a real one
Johnson’s 90,000 shares raised his stake 17%, to 617,900 shares. Nassau’s purchase raised his stake 4%, to 233,490 shares. The company is buying too, with $36 million of stock repurchased in the third quarter and $110 million left under its authorization.
Buys like Johnson’s are easy to track as they’re filed, and this one stands out because he made it right after the dividend cut. At $11.50, he also locked in a 10.4% yield on the new $1.20-a-year dividend.
Do the numbers back him at $11.50?
Johnson paid about two-thirds of the $17.06 a share the company reported at Sept. 30. On the call, he also said that “the secular change challenges in office that have caused the majority of BXMT’s impairments” are substantially reflected in book value.
Analysts expect normalized EPS of $1.20 this year and $1.27 in 2027. They expect it to dip to $1.13 in 2028, though only three analysts estimate that far out:
The 2027 estimate tops the new $1.20-a-year dividend by about 6%. That fits management’s promise to cover it, but it leaves little room to spare, and the 2028 estimate falls short of it.
Nine analysts cover the stock, and their average target has fallen to $15.21 from $20.43 a year ago. Since mid-October, JPMorgan cut its target to $14 from $18, Keefe, Bruyette & Woods to $12 from $13, and UBS, which still rates the stock Buy, to $14 from $21:
Even after those cuts, the average target is 36% above the Nov. 9 close. The lowest target, $12, is just above what Johnson paid.
A bet that book value holds
The risk is the $5.7 billion of older loans made before 2023 that are still rated 3 or better, about a third of the portfolio. With 3.9x debt to equity, if rates keep rising and more borrowers walk away, book value falls again, and the discount Johnson bought into gets smaller.
Still, the numbers back the buy at his price: the watchlist is at its lowest since 2019, next year’s estimate covers the reduced dividend, and the company is buying back its own stock alongside him. One insider’s buy is a signal and only that, though. The fourth-quarter report, due early next year, will show whether book value has finally stopped falling.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
