April 25, 2024
Mortgage

‘Wanna-Bet?’ Carson Block Offers Side-Bet on His Blackstone Mortgage Short


At Friday’s price of $21.36, they’re off around 5% since his Dec. 6 critique, while many other real-estate investment trusts have risen by a like percentage in celebration of easing interest rates.

Block’s claim that the Blackstone trust will cut its dividend by half—as its borrowers struggle to refinance at higher rates—has stirred the hornet’s nest that an outspoken short seller can expect among a stock’s longs. When Blackstone Mortgage Trust issued a “fact sheet” saying most borrowers have been able to replace maturing loans (albeit with some injections of equity capital), the REIT’s fans tweeted that Block’s short thesis had been debunked.

So on Wednesday, he offered a side bet to the mortgage REIT’s bulls.

Clapping back to the tweet of a New York realtor, Block offered to donate $100,000 to a charity picked by the realtor, if the broker could sell one of the commercial properties in Blackstone Trust’s portfolio in the next six months, at a value equal to Blackstone’s mortgage on the property.

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“See how much money you can raise for that,” Block’s tweet challenged his critic, Ariel Cohen, a residential real-estate broker with

Douglas Elliman

in Manhattan.

“Thanks for your response and offer,” Cohen tweeted back, pointing out that Blackstone hasn’t hired him to sell the properties. “Happy that you offer to give $100,000 to charity but let’s set a different standard than selling these performing loans which will naturally payoff at or prior to maturities and whose lender, [Blackstone Mortgage Trust], doesn’t want to liquidate regardless.”

Blackstone Mortgage declined to comment on the debate. Cohen told Barron’s that he is happy to debate the merits of Blackstone Mortgage, which is one of his favorite stocks. Block would not comment on the Twitter exchange, but said he stands by his research and noted that there will be additional reports on the mortgage REIT.

Like many stocks tied to commercial real estate, shares of the Blackstone mortgage REIT lost a third of their value in the last two years, as Covid emptied offices and malls, and then interest rates soared. The REIT has maintained its dividend payments at an annual level of $2.48 a share, but the stock’s drop has lifted its yield above 11%.

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But the commercial-real-estate market ordeal seems to be easing, as the 10-year treasury yield has retreated from 5% to below 3.9% in the last couple of months.

The Blackstone Mortgage debate will play out in 2024. Block’s report said that a third of the loans in the REIT’s portfolio will mature next year, and he expects they’ll be too expensive for some to replace. The REIT’s bulls are betting that rates will have eased further by then.

The betting interest on the $3.6 billion market-cap stock is substantial. More than 16% of the free-trading float was sold short, as of Dec. 15.

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But there’s more than one way to bet.

“Why don’t we focus on figuring out a mutually acceptable and bilateral wager structure for the $100,000 you suggested towards our preferred respective charities?,” Cohen tweeted to Block, on Thursday. “This wager is of strong interest to me.”

Write to Bill Alpert at william.alpert@barrons.com



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