Blackstone Mortgage Trust Stock Downgraded and Experiences Slowing Downward Market Trend
Blackstone Mortgage Trust shares have been declining after receiving a downgrade from Keefe, Bruyette & Woods. The downgrade, along with market pressure on office-backed loans, has resulted in a significant slide in the stock price. Investors have raised concerns about the $1 billion in office-backed loans and the company's overall valuation in light of recent market trends.
Blackstone Mortgage Trust BXMT shares fell to a fresh 52-week low of $14.11 intraday on July 31, 2026 after Keefe, Bruyette & Woods downgraded the stock to market perform from outperform and cut its price target to $16 from $20, citing concerns about the durability of earnings and the pace of the company's office-loan exit strategy. The move followed a Q2 2026 earnings miss: distributable earnings of $0.31 per share came in 26% below the $0.42 consensus estimate, and BXMT shares fell 5.49% to $15.50 in premarket trading on July 30 before the stock closed the week down 25.4% year to date.
The downgrade centers on BXMT's exposure to commercial office loans, which has been the weakest part of the portfolio through the higher-rate cycle. Management flagged roughly $1 billion of office loans still under review for sale, about 5% of total investments, as sensitive to elevated interest rates. KBW analyst Jade Rahmani had already cut earnings estimates once before, in June, after a maturity default on a Chicago office tower loan.
That default involved a $343 million loan secured by One South Wacker, a 40-story, 1.2-million-square-foot office tower in Chicago's West Loop that is about 73% occupied. Borrower 601W Companies could not make the principal payoff due at the loan's June 9 maturity, and the asset had been on BXMT's watchlist since 2022, representing under 2% of the total portfolio. Chicago's central business district carries a 27% office vacancy rate, and comparable towers have traded at steep discounts to pre-pandemic prices, underlining why office credit remains fragile even as rates have stabilized elsewhere.
Despite the pressure, BXMT has been actively working down its troubled positions. Total watchlist exposure fell 23% to $2.0 billion from $2.5 billion last quarter after the company modified its largest watchlist loan and resolved a Dallas multifamily asset, and office exposure dropped to 21% of the portfolio from 36%, with management targeting a further 40%-plus cut to legacy pre-2023 and office exposure by year-end. The broader $17 billion loan book across 133 positions remained 97% performing at quarter-end. Investors will be watching whether additional office loans, including sales of assets like a 686-key Hyatt hotel in San Francisco, can be worked out without further earnings surprises.
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