Blackstone Mortgage Trust Inc

NYSE:BXMT

Earnings Call Transcript 2020-Q1

[Operator]

Good day, and welcome everyone to the Blackstone Mortgage Trust First Quarter 2020 Investor Call. My name is Tommy, and I'm your event manager. During the presentation, your lines will remain on listen-only. [Operator Instructions] I would like to advice all parties the conference is being recorded for replay purposes.

And now I'd like to hand over to your host, Weston Tucker, Head of Investor Relations. Please go ahead, sir.

[Weston Tucker, Head of Investor Relations]

Great. Thank you and good morning, everyone, and welcome to Blackstone Mortgage Trust's first quarter conference call. I'm joined remotely today by Mike Nash, Executive Chairman; Steve Plavin, Chief Executive Officer; Jonathan Pollack, Global Head of Real Estate Debt Strategies; Katie Keenan, President; Tony Marone, Chief Financial Officer; and Doug Armer, Executive Vice President, Capital Markets.

Last night, we filed our 10-Q and issued a press release with the presentation of our results, which are available on our website and have been filed with the SEC.

I'd like to remind everyone that today's call may include forward-looking statements, which are uncertain and outside of the Company's control. Actual results may differ materially. For a discussion of some of the risks that could affect results, please see the Risk Factors section of our most recent 10-K and 10-Q reports. We do not undertake any duty to update forward-looking statements.

We will also refer to certain non-GAAP measures on this call. And for reconciliations, you should refer to the press release and our 10-Q. This audiocast is copyrighted material of Blackstone Mortgage Trust and may not be duplicated without our consent.

So a quick recap of our results. We reported a GAAP net loss per share of $0.39 for the first quarter, while core earnings were positive $0.64 per share. Two weeks ago, we paid a dividend of $0.62 per share with respect to the first quarter.

If you have any questions following today's call, please let me know.

And with that, I'll now turn things over to Steve.

[Stephen Plavin, Chief Executive Officer]

Thanks, Weston, and good morning, everyone. We appreciate you joining the call and it would have been very challenging circumstances for many. We hope that you and your families are safe and healthy. At Blackstone, we've been working remotely since March 16, but with the demands of the current market, not to mention our heavy zoom usage, we feel very connected as a team and with our important clients and counterparties as well. And we have a lot to update you about.

Our Q1 was essentially a pre-COVID quarter with continued strong performance. Although, we did revise our CECL reserve at quarter end, it will affect the current market conditions. Tony will take you through the details of the quarter and the reserve methodology, which as a reminder, it's an accounting adjustment and not specific to any loans in our portfolio.

I want to focus my remarks and where BXMT is today amid the pandemic and how our disciplined business model positions us for the staying power required in a time like this. Coming into this period of volatility, the overall real estate industry was well situated with balance fundamentals, responsible industry-wide leverage, diverse equity and debt participation and liquid capital markets.

BXMT has always been run conservatively with a focus on downside protection in our assets and the strength of our balance sheet. We are a pure-play senior whole loan originator with a disciplined approach centered on top quality assets, markets and borrowers. We have never purchased mezzanine loans or securities. Our borrowers are among the best capitalized and most skilled operators in the business. They have significant equity in the assets that we finance.

The weighted average origination LTV of our portfolio is 63% and our borrowers have never missed an interest payment. Our balance sheet strength begins with our best-in-class bank relationships in financing vehicles. We set up these vehicles in light of lessons learned in the GFC with no capital markets mark-to-market, and we've not had a margin call in the history of our company.

Our balance sheet is further fortified by our liquidity. We reported current cash and undrawn revolver capacity of $821 million versus $667 million we had at year-end in both cases, net of the quarterly dividend. On top of that, there are $1.6 billion of unencumbered assets.

These key features of our business model, disciplined investment process, clarity of mission, long-term relationships with our counterparties and stability of our capital structure are the pillars upon which Blackstone Real Estate’s 28-year track record was built and how we have successfully managed through the many market cycles over that period of time.

These pillars and that experience are crucial today as COVID-19 has created significant challenges to real estate performance in all property sectors. Let's talk about some of those challenges. On the assets side, our whole loan portfolio is now $18 billion in size and every one of our loans is paid interest through April. But because of the impact of COVID-19, we are actively engaged in discussions with our hotel borrowers and others with high exposure properties about their plans to protect their assets and what we can do to be supportive.

In general, our sponsors are planning to invest additional equity to help carry their assets through a period of disrupted operations and we are discussing ways we can support them, including allowing flexibility and tapping reserves and in some cases, temporary deferrals of interest. The significant equity our barrowers have in these investments provides strong motivation for them to protect their assets and powerful support for our loans.

Blackstone’s scale and track record as a borrower and reputation for fair dealing help BXMT maintain great relationships with its lenders and best in market terms. Our $9 billion of bilateral bank credit facilities limit margin call to credit events and are generally term matched to the maturity of the underlying loans. The average look-through origination LTV is 51% and the loans within each facility are cross-collateralized.

But the COVID-19 environment creates – affects operating conditions across most property sectors, and it is incumbent upon us to position BXMT to thrive even in a potentially more protracted recovery. So we engaged our largest bank lenders with plans to reduce the leverage in their facilities, particularly as it relates to hotels and other more exposed properties, in order to reduce the possibility of margin calls and create even greater stability within our capital structure.

As of today, we have modifications closed or agreed in principle with our seven largest lenders. In any financial crisis, maintaining liquidity is a top priority for all businesses. We are highly focused on building even more liquidity to achieve the staying power that maybe required in the uncertain periods ahead.

In this environment, we expect fewer loan prepayments and more selective capital markets activity. However, these traditional sources of liquidity are still likely to contribute meaningfully over time. We can also look to our unencumbered assets as a potential liquidity source. We could also retain more of our quarterly cash flow.

Our biggest use of liquidity is the equity component of loan advances. Our share of funding on previously originated loans for CapEx, carry, leasing and construction. Net of financing, we expect to fund $1.5 billion over the next four years on our existing portfolio. The pace of CapEx and leasing has slowed in the current environment, which will delay the timing of these advances.

All-in-all, we are constructing a liquidity plan to address our working capital needs that is less reliant on our greatest source. Repayments from an $18 billion loan portfolio that we expect to perform well despite the challenges of the current market environment. As for new business, loan demand in the current market is ground to a near halt. Buyers and sellers, lenders and borrowers are generally on the sidelines waiting for the volatility to abate and [indiscernible] to narrow.

Our fund sponsored clients have considerable drypowder, not only to defend their existing assets, but also to deploy to new more opportunistic investments once transaction flows resume. When that does happen, we believe it will produce an attractive lending environment, characterized by less competition, lower leverage and wider lending margins. With our great sponsor relationships and differentiated access to high quality deal flow, we are very well positioned for this inevitable pickup and transaction activity.

I'd like to close by noting the strong commitment and track record Blackstone brings to BXMT. Blackstone and its employees own 12% of BXMT. There is great alignment with shareholders. In addition, Blackstone has agreed to take its first quarter management fees, which totaled $19 million in stock rather than cash, further validation of its commitment to BXMT.

Blackstone Real Estate has a great track record of successfully managing investor capital through market cycles. Our philosophy at BXMT is deeply informed by this experience and we believe that we will emerge from the current market conditions to better position than ever before.

And with that, I'll turn the call over to Tony.

[Anthony Marone]

Thank you, Steve, and good morning, everyone. I will start by echoing Steve's comments on the current environment. Our thoughts are with all those who have been impacted by the COVID-19 pandemic, including those who maybe facing health challenges, those whose lives and jobs have been upended by the social distancing initiatives and all of our medical professionals and other frontline workers who are fighting this disease and keeping the core of our country running.

Steve covered a lot of ground on our current position and outlook, so I will focus on our 1Q results, which underpins the themes Steve highlighted around the strength of our portfolio, the strength of our balance sheet, and our strong liquidity position in addition to our great quarterly results.

Starting with earnings. Our results were significantly impacted by the current expected credit loss or CECL reserve we recorded in the first quarter. As a reminder, the CECL accounting standard was effective for BXMT and similar-sized public companies on January 1 of 2020. This new accounting standard requires lenders to record an estimated life of loan loss reserve against all loans in their portfolio. And with few exceptions, this reserve cannot be zero.

To determine our CECL reserve, we have augmented our track record of no realized losses across the $44 billion of loans we have originated since our senior lending business launched in 2013 with securitized loan data we licensed from Trepp LLC. Although securitized loans are not perfectly comparable to the high-quality loans we make at BXMT, we've tailored our approach to focus on Trepp's loss data for loans that are most similar to our business model, which is focused on large senior loans to well capitalized institutional owners of quality assets located in the major markets.

Our adoption of these new CECL accounting rules resulted in an initial reserve of $18 million or $0.13 per share on January 1, which was recorded on our balance sheet as a reduction to stockholder's equity. Much has changed since the beginning of the year, and while the data we referenced for determining our CECL reserve is largely consistent at 3/31 the environment in which we must consider that data certainly is not.

Accordingly, during the quarter, we increased our CECL reserve by $123 million or $0.90 per share to reflect the macroeconomic impact of the COVID-19 pandemic on commercial real estate markets and the general uncertainty around potential future outcomes as the world manages through and ultimately recovers from this crisis.

To develop this estimate, we referenced the losses incurred by commercial real estate loans following the global financial crisis and use that data among other things to further inform our current reserve levels. Although our 3/31 reserve is large compared to where we started the quarter, we believe it is important to recognize the unprecedented and uncertain nature of this pandemic and believe we fully reflected that dynamic in the reserve we recorded as of March 31.

To be perfectly clear, we have not incurred any losses in our portfolio, we have not impaired any loans, and the CECL reserve is not what we believe is reflective of the typical risk of loss for our portfolio absent the economic stress resulting from COVID-19. To that end, assuming continued strong credit performance in our loan portfolio, we would expect our CECL reserve to decline over the medium to long-term as market stabilize, although our reserve may increase or decrease in any one particular quarter.

This CECL reserve drove the net loss we reported for the quarter of $53 million or $0.39 per share as well as the decline in our book value to $26.92 per share from $27.82 per share at 12/31. We reported core earnings for the quarter of $87 million or $0.64 per share, which excludes our $0.90 per share incremental CECL reserve consistent with how other unrealized gains and losses are treated under our existing policies for calculating core earnings and the terms our management agreement with Blackstone.

This quarter, although we saw global interest rates decline in response to the crisis, we continue to generate incremental earnings from LIBOR and other interest rate floors embedded in our loans with $11.4 billion of loans, almost two thirds of our portfolio benefiting from active floors as of quarter end. Overall, our portfolio increased $18 billion of senior loans with $1.3 billion of originations during the quarter and $1 billion of funding is under these and other loans.

These new originations have low LTVs in line with our portfolio average of 63% and follow our longstanding business model of lending against quality assets owned by experienced, well capitalized real estate sponsors. Importantly, we also continue to receive regular repayments of our loans with $567 million of loan repayments during the quarter and $178 million received in April.

In terms of credit, we downgraded the risk rating of $3.1 billion of loans in our portfolio to a four on our five point scale reflective of the greater risk for loans collateralized by hospitality and select other asset classes that were particularly impacted by COVID-19. Although, we believe these loans have a greater risk profile and warranty downgrade on our rating scale, we have not impaired any of our loans as we believe that even considering the impact of the current crisis, there remains meaningful real estate value subordinate to our senior loan positions.

Finally, we have no loans on non-accrual status at quarter end as we collected 100% of the interest that was due in April, our borrowers continued to support their investments in the assets securing our loans. We also had an active quarter on the right hand side of the balance sheet, highlighted by our issuance of a $1.5 billion CLO secured by participations in 34 of our loans and priced at LIBOR plus 1.13%.

The $1.2 billion of proceeds generated by the CLO allowed us to repay existing credit facility advances and increase the amount of structurally non-recourse non-mark-to-market debt to 35% of our total financing outstanding, including our securitizations, our term loan and convertible notes, and our senior loan syndications.

In addition to our CLO, we closed $1.1 billion of incremental financings for our loans, all of which priced at pre-COVID-19 levels. Consistent with the rest of our portfolio, these new loans benefit for the provisions of our credit facilities that limit margin calls to credit marks determined on a commercially reasonable basis only. We did not receive any margin calls during the quarter and as Steve noted, we have modifications completed or agreed in principle with our seven largest lenders regarding plans to reduce leverage in their facilities to further insulate us from future potential credit marks as well.

We closed the quarter with a debt-to-equity ratio of only 2.8x down from 3.0x as of year end and reported current liquidity of $821 million. As Steve noted, we are currently focused on strengthening our balance sheet liquidity to bolster our positioning through the impact of the COVID-19 pandemic and maximize shareholder value over the medium to long-term.

With the credit quality of our portfolio, our healthy balance sheet and liquidity position and the significant advantages we enjoy as part of the Blackstone Real Estate franchise, we believe we are well positioned to accomplish these goals. Thank you for your support.

And with that, I will ask the operator to open the call to questions.

[Weston Tucker, Head of Investor Relations]

And if I could just remind everyone before the operator opens up to Q&A. The analysts could please limit their questions to one question and one follow-up, just to make sure we get through the queue. That would be appreciated.

[Operator]

Thank you so much everyone. Your question-and-answer session will now begin. [Operator Instructions] And the first question is coming from the line of Rick Shane. Please go ahead. You’re live in the call now.

[Richard Shane, JPMorgan Chase & Co.]

Hey guys. Thanks for taking my questions this morning. I'd just like to talk a little bit about modifications generally on the loans. You guys cited one transaction this quarter. I'm curious what type, and again, I realize we don't want to talk to you specifically about an individual loan, but generally speaking, what type of additional capital might you expect borrowers to contribute? And are there ways, not only I realize you're giving up some spread in those transactions, but are there places where you pick up additional economics?

[Katharine Keenan, President]

Hey Rick. This is Katie. I think that when we talk about mods, we are really starting from a position where we have low leverage loans and very well capitalized sponsors. The vast majority of our loans are to sponsors with over a $1 billion of AUM and that’s the perspective that they're bringing. They have long-term views on the value of their assets and they have reiterated to us, including all of our hotel sponsors that they have the strong intention and ability to support their assets through this period.

So our conversations with them about mods are really focused on how the assets can be best positioned to work through the period of disruption. We're not talking about any type of interest relief on the small number of loans where we're talking about some interest deferral, which really is just a handful in our portfolio at this stage.

It's really a timing difference. So we expect to get paid all of our interest over time. And those conversations are paired with meaningful additional equity investments. The details as we point out sort of vary from loan to loan, but in general, we're looking at ensuring that the assets are well positioned to carry through the period of disruption.

[Richard Shane, JPMorgan Chase & Co.]

Got it. Great. That's very helpful. And then just one bookkeeping question for me. When you talk about the reserve with CECL, you cited number of $140.4 million and we see how that builds. But when we look at the balance sheet allocation, it's $112.7 million. Where's the rest of that allocated just so we can sort of follow it over time?

[Anthony Marone]

Sure. This is Tony and I'll apologize for the way SASB wrote the CECL accounting rule, they may get a little bit harder to find, but it's all in the 10-Q. So the portion you're seeing right on the balance sheet is the portion that's allocable to the funded amount of our loans. The CECL accounting rules also require a reserve for the future funding component of the loans and that component sits in other liabilities. So if you look at our 10-Q, I believe it's Note 4, other assets and other liabilities, you'll see some further disclosure about the CECL reserve and that'll give you the other balance sheet components in that note.

[Richard Shane, JPMorgan Chase & Co.]

Perfect. Thank you so much.

[Operator]

Next question is coming from Steve Delaney. Please go ahead. You're live in the call.

[Steven Delaney, JMP Securities LLC]

Good morning, everyone. Steve in your comments, you sounded like the both sides of the market from a transactional standpoint where kind of frozen and a wait and see. I'm just curious if, I don’t know you're working on asset management, but do you expect to review, consider any new loan requests over the next two or three quarters or is it just the door's not open right now?

[Stephen Plavin, Chief Executive Officer]

Thanks for your question, Steve. No, I think the door is always open for good opportunities for us. And we have great market access and great relationships. And I do think that our borrower base is particularly well positioned to be early movers and opportunistic investing that will inevitably occur through this crisis period. Right now the market is pretty frozen. Usually when you enter a period of high volatility, you typically see buyers and sellers and the lenders and the barrowers, everybody moves to the sidelines and sort of waits for things to settle out.

And I think buyer expectations tend to be high and so it's very hard for deals to be made. I do think that we've seen a little bit more liquidity in the market and we've seen the other CMBS deal this week, so we've seen a little bit of a [indiscernible] unlocking the capital markets a little bit more. And the debt markets have been falling even more significantly than that. So maybe that – maybe that will indicate there'll be – that we'll start seeing some transaction volume, but we wouldn't expect to see anything for a quarter or two based upon our present outlook.

[Steven Delaney, JMP Securities LLC]

Got it. That's helpful. And then on the repayment side that little over 500 in the first quarter and kind of the same run rate, would you think if we were just a model out something in the $0.5 billion, $600 million a quarter over the balance of the year that that is – that would be a reasonable expectation for repayments? It sounds like they're going to – you would expect them to slowdown versus the percentage repayment that we saw in 2019.

[Stephen Plavin, Chief Executive Officer]

Yes. I think that's correct as an observation. The repayments that we had in the first quarter where we're definitely concentrated in January and February sort of before we begin to feel the impact on markets of COVID-19. So we do expect repayments to be at a slower pace than the historic levels and the levels that we would have expected absent the current market conditions.

Very difficult to predict the repayments and a lot of that will depend upon liquidity in the market. And again, those same factors that we talked about in terms of creating the new business will – a lot of those same factors would generates the repayment volume in our portfolio as well. We do expect to see some repayments. And so there will be some liquidity coming through that channel, but I think slower than the historic pace, very hard to peg a number. We'll just have to take it quarter-by-quarter.

[Steven Delaney, JMP Securities LLC]

Got it. Well, thank you for the comments and everyone stay well.

[Stephen Plavin, Chief Executive Officer]

Thank you, Steve.

[Operator]

The next question is coming from Doug Harter. Please go ahead. You’re live in the call.

[Douglas Harter, Credit Suisse AG]

Thank you. I guess as we're thinking about the liquidity position, any sense as you can give us as to the deleveraging that will take place in your conversation with your seven largest lenders?

[Douglas Armer]

Sure, Doug. Hey, it's Doug here. The first thing that I would tell you is that the agreements reflect a balance of priorities and optimizing liquidity and enhancing stability are twin goals for us. So the answer in terms of the impact on liquidity is not as much as you might think. There's an array of ways to delever cash payments is one, but pledging additional collateral and changing waterfall structures are others. And we'll use all the tools in the toolkit over time to achieve the deleveraging that we need.

Each agreement is different and the specifics are obviously confidential, but we believe we've addressed the potential for credit marks, especially on our hospitality assets as Steve mentioned, and develop the further flexibility that we need during the heavily COVID-19 impacted period. And I'll just go back to the beginning.

The starting point for us just in terms of context for these agreements, which is that they're in the context of our pure-play senior loan portfolio, BX relationships with both our borrowers and the banks, and it's a very healthy context and we're happy to address the concerns of our banks in that context. We feel that the agreements reflect the alignment of interests that we have with them in terms of managing through this COVID-19 impacted period.

[Douglas Harter, Credit Suisse AG]

Thanks Doug. And just kind of following up on that, when you say kind of changing waterfalls, does that sort of change kind of how the cash flow kind of as loan repayments or interest payments receive kind of comes back to you, and I guess just how did that kind of factor into kind of your quarterly cash flow just to make sure to kind of understood your comments?

[Douglas Armer]

Yes. In terms of deleveraging, I would think about that more with regard to principal payments than interest payments, but there are a whole array of options in terms of achieving that deleveraging, and that is one of them, but we've got a bunch of tools in the toolkit. I think our cash flow going forward is going to continue to reflect the fact that we've got a very large scale portfolio of performing first mortgage loans that are generally speaking current pay loans.

[Douglas Harter, Credit Suisse AG]

All right. Thank you, Doug.

[Operator]

The next question is coming from Arren Cyganovich. Please proceed. You’re live in the call.

[Arren Cyganovich, Citigroup Inc.]

Thanks. I was hoping if you could talk a little bit about the decision to move the hospitality assets to category four in your risk rating. I believe it’s listed as high risk potential for loss. And I get that completely. I understand it. The bulk of those have LTVs that are kind of 70% and below kind of more like 65%, it would take a pretty dramatic decline in those hotel asset values to really get into your loans. Maybe you could just talk a little bit about. Is there actual potential for loss there? Is it just because we have no idea what the values of these are going to be in 18 months? And what are some of the sponsors doing to help alleviate the risk there?

[Katharine Keenan, President]

Yes, it’s Katie. So to your point, we continue to feel very good about the quality of our portfolio, the assets and our sponsors. And we are starting from a very low leverage point on these assets. But we're mindful and cognizant that this is a very challenging environment and as a result, we thought it was prudent to downgrade these loans based on the operational impact of COVID-19 particularly on our hospitality assets, which are right now experiencing disruption and cash flows.

So it's really a reflection of our prudence and sort of uncertainty about exactly what's going to – what the overall timing is going to be of the recovery of these assets. But the loans continue to perform. They have strong well capitalized sponsors. They started at low leverage points. So to your point, there would have to be some very significant declines in value to actually impact the par balance of our loans. But with all that said, we just felt it was appropriate to move them to floor ratings and view of the current disruption and the possibility of an elongated recovery.

[Arren Cyganovich, Citigroup Inc.]

Thanks. And in these conversations you're having with the sponsors, are they showing a willingness to put in additional [indiscernible] understand how that works from a structural perspective? Do they have like – these special entities where they can add additional equity to the property? I'm just trying to understand how that would work.

[Katharine Keenan, President]

Yes, I would say all of our sponsors and as I'm sure you can imagine, we’ve very frequent close dialogue with our sponsors on our hospitality assets as well as our overall portfolio. They continue to reiterate their intention and their ability to support these assets. These are good assets with business plans that they believe will still be viable, just prolonged or sort of pushed back through the period of disruption.

And because we've always been very focused on lending to large, well capitalized sponsors, generally large private equity funds, they have the liquidity to invest additional capital in these assets in order to carry them. So what that would look like would be contributing additional equity to the properties, to the borrowers to provide for the ability for the cash flow to carry through the period of disruption and get the assets to the other side so they can resume implementing their business plans.

[Arren Cyganovich, Citigroup Inc.]

Thank you.

[Operator]

The next question is coming from Jade Rahmani. Please proceed.

[Jade Rahmani, Keefe, Bruyette, & Woods, Inc.]

Thank you very much and glad to hear from everyone. In terms of the hotel loans, the slides note $1.2 billion of outstanding facility borrowings. Would you expect 10% to 20% pay downs to occur on those borrowings over the next one to two quarters in order to deleverage that financing?

[Douglas Armer]

Hey, Jade, it's Doug. I'd reiterate my previous comments in terms of that deleveraging. The specifics are different for each bank and it's in the context of cross-collateralized portfolios that involve a significant portion, obviously the vast majority that are not hospitality assets. And so we wouldn't quantify the deleveraging in those terms. But we would say that that we do feel like we've addressed in the context of our relationships with these banks that we've addressed the potential credit mark issues on the hospitality assets in particular with these agreements.

[Jade Rahmani, Keefe, Bruyette, & Woods, Inc.]

Okay. The $1.6 billion of unencumbered assets, could you please describe what that pool consists of? I mean, when I look at the balance sheet and make an estimation myself, I come up with a much lower number somewhere around about $200 million. So found that someone's surprising and just wanted to ask about that.

[Douglas Armer]

Yes, Jade. Hey, it's Doug again. That's a good point. I think that $1.6 billion of unencumbered assets reflects a couple of different categories of loans. There are some currently unfinanced first mortgages and there are also different positions retained security interests relative to our CLO transactions and SASB CMBS transactions and other structured interests in our first mortgage portfolio that make up the balance of that. There's also by the way a significant amount of cash on the balance sheet that's not included in that number, but it's also part of our unencumbered asset package, so to speak. If you think about it from the perspective of the subordinate and corporate debt in our capital structure.

[Jade Rahmani, Keefe, Bruyette, & Woods, Inc.]

Thanks.

[Operator]

The next question is coming from Stephen Laws. Please go ahead. You’re live in the call.

[Stephen Laws, Raymond James & Associates, Inc.]

Thank you. Good morning. To follow-up on Steve Delaney’s comments, appreciate the comments around the repayments and the slowdown there. Can you talk about the unfunded commitments a little bit? The expected drawdown on that? And then how you expect that to be on a net basis relative to the repayments?

[Stephen Plavin, Chief Executive Officer]

Hey Stephen. This is Steve. Historically, our repayments – the impact of our repayments is far exceeded the equity requirements associated with our future fundings. The future fundings are connected to loan, so we've previously made that are very strong assets like all the others in our portfolio. And we fund the future fundings related to the progress of construction. But a big component of is relates to good news. So as properties realized additional leasing, we covered the cost of leasing commissions and tenant improvements. And so a lot of the future funding is value adds that increases the value of the underlying real estate and improves our loan to value ratio.

The magnitude of the future fundings is well handled by our liquidity, both our existing liquidity and the repayments that we would reasonably expect to get over time. And also any alternative sources of liquidity that we might feel compelled to tap in any kind of an environment where perhaps repayments are slowed relative to historic levels, but we feel very good about our ability to meet those. And also, again, the impact of those advances tends to be very positive on the real estate.

[Stephen Laws, Raymond James & Associates, Inc.]

Great. Appreciate the color on that. And as a follow-up, any additional disclosure or comments you can provide around the LIBOR floors? I think at quarter end LIBOR – since quarter end LIBOR is down around 60 basis points, I believe. So where should we think about a weighted average LIBOR floor? How do we think about the impact or benefit of those floors they’ve been realized in the last month?

[Douglas Armer]

Hey, it's Doug. I'll take that one. I think the important point to consider in thinking about those LIBOR floors and there is – they are significantly in the money and did contribute significantly to our earnings in the first quarter. They'll contribute more significantly in the second quarter given where LIBOR is today.

But the important point to keep in mind there is that it's not the weighted average strike price of the floors that matters so much, but the difference between those strike prices and the corresponding floors or absence of floors in our financing. So we're able to lever the benefit of that income into our bottom line, and we do expect it to be a continued significant contributor to our core earnings on a go-forward basis.

[Stephen Laws, Raymond James & Associates, Inc.]

Great. I appreciate the update. Everyone take care.

[Douglas Armer]

Thank you.

[Operator]

The next question is coming from George Bahamondes. Please proceed. You’re live in the call.

[George Bahamondes, Deutsche Bank AG]

Hi. Good morning. Are you able to give us a sense of how many borrowers are [indiscernible] percentage of the portfolio that has asked for interest deferral forbearance to other loan modifications?

[Katharine Keenan, President]

George, to address that directly of our overall portfolio, we've got 20 loans that we're currently talking about various types of modifications, but less than half of that is around interest deferral. And I think the important point to keep in mind as we mentioned earlier, we are talking about interest deferral, we're not talking about interest relief and we're also pairing those conversations with additional equity coming into the deals that are most impacted by COVID. We view that overall as a positive because it increases our level of commitment of our sponsors, which is already quite substantial to these assets, but continues to increase it over time and reflects their desire to continue to support the assets.

[George Bahamondes, Deutsche Bank AG]

Great. Thank you for that color Katie. And just to follow-up on prepared remarks, you had referenced a repayment amount for the month of April. Can you just repeat that number?

[Anthony Marone]

Sure. It was $178 million.

[George Bahamondes, Deutsche Bank AG]

Great. Thank you so much.

[Operator]

Our final question comes from the line of [indiscernible]. Please proceed. You’re live in the call.

[Unidentified Analyst]

Good morning, everyone. In light of the challenging backdrop and wanting to increase liquidity, could you remind us of the dividend policy since dividend coverage relative to core earnings has tightened?

[Stephen Plavin, Chief Executive Officer]

Sure. I would just say generally that delivering income to shareholders is always a top priority for us. We just paid the Q1 dividend. It's only been – about two weeks ago. And after that payment, we still had over $800 million of liquidity. And I think the next dividend discussion that we'll have with the Board will be in June regarding the Q2 dividend, and we will make a determination based upon the facts and circumstances at the time. But our dividend policy and our goals remain that it's a very significant priority and objective for us to continue to provide income to shareholders that hasn't changed.

[Unidentified Analyst]

Okay. And then my follow-up is, should we continue to expect management fees to be paid in stock?

[Stephen Plavin, Chief Executive Officer]

I think there will be a quarter-by-quarter decision on the part of Blackstone. The great gesture of support and alignment by Blackstone to agree to take its fees and stock rather than in cash. Nice contribution to our liquidity, but more of a statement of alignment and commitment to the BXMT business. It's something that we'll discuss with Blackstone in future quarters, and we'll take it quarter-by-quarter. But I think – again, I think what you should take away from that is just the important and significant statement that Blackstone has made in terms of their belief and their commitment to be excellent team.

[Unidentified Analyst]

Great. Thank you.

[Stephen Plavin, Chief Executive Officer]

Thanks for your question.

[Operator]

Thank you so much for your questions everyone, and now I would like to hand the call back to Weston Tucker for closing remarks.

[Weston Tucker, Head of Investor Relations]

Great. Thanks everyone for joining us this morning. And please reach out to me after the call with any follow-ups.

[Operator]

Thank you so much everyone. That concludes your conference call for today. You may now disconnect. Thank you for joining and enjoy the rest of your day.