Yahoo Finance Blackstone Mortgage Trust at risk of ‘liquidity crisis’, says hedge fund boss
A New York-listed mortgage trust managed by the private equity giant Blackstone is at risk of a cash crunch, the hedge fund Muddy Waters has said.
Carson Block, chief executive of Muddy Waters, revealed on Wednesday that it had begun shorting the stock, saying souring commercial loans could trigger a “liquidity crisis”.
The move pits Block, one of the world’s most feared investors, against Blackstone billionaire founder Stephen Schwarzman and underscores growing concerns over the commercial property sector.
Mr Block warned that commercial property companies which had borrowed money from Blackstone’s trust could struggle to pay back the cash amid soaring interest rates which has increased the cost of repaying loans.
The trust comprises more than 200 loans, mostly linked to US office property, but also linked to some property in the UK.
The rise of working from home has left many offices empty and accelerated the drop in the value of once-valuable sites.
Mr Block said: “It is at a good risk of a liquidity crisis. This is not a story where bad people have done bad things, they are just unlucky.
”Blackstone may modify the loans but it’s such a big number of loans terminating next year that will not be able to be swept under the rug.”
Shares in the trust, which is listed in New York, shed more than 6pc on Wall Street on Wednesday night.
Blackstone hit back and said Block was seeking to send shares lower. Short sellers borrow shares and then sell them in the hope of buying them back at a lower price and pocketing the difference.
“We believe this self-interested and misleading report is designed solely for the purpose of negatively impacting BXMT’s share price for the short seller’s own benefit,” a Blackstone spokesman said.
“We will respond in greater detail – however the steps we have taken on both sides of our balance sheet, including proactive asset management, a conservative liquidity posture, and a patient approach to new investments, leave us well positioned to navigate this environment.”
Mr Block’s attack is not the first time Blackstone has faced heat over its property investments.
The private equity firm was forced to limit investor withdrawals from another of its trusts, the Blackstone Real Estate Income Trust, last year following a wave of investor redemptions.
Mr Block unveiled the short position at the Sohn Investment Conference, an event where money managers pitch their best investment ideas.
He said the trust would likely cut its dividend in half next year and that large numbers of borrowers would be unable to refinance or repay the trust.
US borrowers make up 64pc of the trust’s loan book,
He claimed that the trust could be hit by losses of its loan book of up to $4.5 billion and its shares were at risk of being completely wiped out.
