Timothy Johnson

Chairman of the Board, Global Head of BREDS & Senior MD, BLACKSTONE MORTGAGE TR INC

Timothy Johnson at NYU Capital Markets 2015

🎥 Nov 19, 2015 📺 NYUSPS Schack Institute of Real Estate ⏱ 2m 👁 136 views

Timothy Johnson Managing Director and Head of U.S. Originations at Blackstone.

About Timothy Johnson

In a 2015 appearance at the NYU Capital Markets conference, Timothy Johnson, then Managing Director and Head of U.S. Originations at Blackstone, discussed the firm's focus on transitional real estate lending. He stated that Blackstone had positioned itself to compete in balance sheet lending, where risk is retained on the book, rather than in the CMBS market. Johnson explained that the firm had avoided the CMBS origination business because it requires distribution capabilities that he said fit better in a bank than at Blackstone. Johnson noted that competition in transitional real estate lending had not increased dramatically, as Blackstone was primarily competing against banks whose book structures had remained stable. He attributed this partly to regulatory changes that, in his view, made it harder for banks to conduct such lending on their balance sheets, citing GE's exit from the business as an example. Johnson added that pricing for high-quality loans continued to tighten as banks sought safe investments, but he expressed confidence in Blackstone's ability to underwrite more complex transitional deals.

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Transcript (2 segments)

Interviewer0:00

It's massive amounts of capacity to not only fill some voyage, but in terms of regulatory, you guys obviously need to buy GE Capital's loan, but you're also using your balance sheet. There's a vast amount of different lawsuits.

Timothy Johnson0:18

Yeah, we've kept our business relatively simple. We focus on transitional real estate, which is not really financed via the CMBS market, so we've positioned ourselves to compete a bit more, in some cases, with some of the folks up here on the balance sheet lending side where the risk is retained on book. We've liked that business because CMBS moves really quickly, allocations go up and down internally to banks, you're exposed to the volatility of the markets. You can do really well at it, but in a lot of cases you would assume it just fits better in a bank than it does in a place like ours. You've got to have distribution, you've got to have all that stuff, and so we haven't jumped into the CMBS origination business. Today, the transitional space is actually still really good in our minds. It's not easy for banks, although a lot of them see the value in it and like to do it. There's a limit to how much any one bank can really do in transitional real estate lending, and that's where we've made our business and grown it over the past handful of years. I wouldn't say that right now it feels a little less competitive, especially for the bigger deals, and that might be a bit of year-end, but I also think it's just we see the end of capacity for these things. There'll be some new allocations next year that may change that, but I'd say we haven't seen a dramatic uptick in competition, and because we're competing mostly against banks and they're holding another book, the structure has remained in place. I think that's really important. Pricing for really good, high-quality, down-the-fairway stuff for the banks continues to grind in, and I see that continuing because banks need to put money in safe places. But for things that take a little more thought, a little more transitional, we feel like we can underwrite that because it's what we like to own. On the equity side of our business, I still see it as not really changing a lot. And your regulatory comment, I think, helps because it makes it harder to do that type of real estate lending on balance sheets. You see things like GE Capital was a unique example. They were a big competitor of ours before they decided to exit the business, and it became all regulatory in nature, and their shareholders told them it was time.