Blackstone Mortgage Trust, Inc. (BXMT) Q2 2019 Earnings Call Transcript

Blackstone Mortgage Trust, Inc. (BXMT -1.53%)
Q2 2019 Earnings Call
July 24, 2019, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to today's conference call, which will begin shortly. Should you require assistance at any time, just key *0 on your telephone. In the meantime, I'll continue to play the music, and thank you all for your patience.

Welcome to today's conference call, which will begin shortly. If you require assistance at any time, just key *0 on your telephone. In the meantime, I'll continue to play the music. Thank you all for your patience.

Welcome to today's conference call, which will begin shortly. Should you require assistance at any time, just key *0 on your telephone. In the meantime, I'll continue to play the music, and thank you all for your patience.

Good day, and welcome to the Blackstone Mortgage Trust second quarter 2019 investor call. During your presentation, your lines will be on listen-only. If you require assistance at any time, just key *0 on your telephone, and [inaudible] to assist you. To ask a question, please key *1 to be added to the queue. Please limit your question to one, and one follow on. I'd like to advise all parties that this call is recorded for replay purposes, and I would like to turn to your host for today, Weston Tucker, Head of Investor Relations. Please go ahead.

Weston Tucker -- Head of Investor Relations

Great, thanks, Sonny. Good morning, everyone, and welcome to Blackstone Mortgage Trust's second quarter conference call. I'm joined today by Steve Plavin, President and CEO, Tony Marone, Chief Financial Officer, Doug Armer, Executive Vice President, Capital Markets, and Katie Keenan, Executive Vice President, Investments.

Last night, we filed our 10-Q, and issued a press release with a presentation of our results, which are available at 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. 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 audio cast is copyrighted material of Blackstone Mortgage Trust, and may not be duplicated without our consent.

So a quick recap of our results: we reported GAAP net income per share of $0.59 for the second quarter, while core earnings were $0.68 per share. Last week, we paid a dividend of $0.62 with respect to the second 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. Good morning, everyone. Our second quarter results again reflect the earnings power of the high-quality senior loan portfolio that we have built. Our core earnings of $0.68 generated 110% coverage of our dividend that yields an attractive 7% of the current share price. On the call in April, we announced the Q2 pipeline of $875 million. As the quarter progressed, the hangover from the Q4 volatility that slowed originations at the start of the year abated. Our originations accelerated, and we ended up closing $1.3 billion of loans in the quarter.

We continue to see an uptick in large loan opportunities, and our forward pipeline has grown. We now have another $3 billion of loans that closed post-quarter end, or are in the closing process, so we are well positioned for a strong second half. Our originations in Q2 exemplify our global capability: our largest loan this quarter was 192 million-Euro acquisition financing for an office portfolio in a very tight Berlin sub-market. In the US, we made a $210 million construction loan for a pre-leased asset in West LA, another very strong market. We also closed loans secured by apartments in Arizona, a hotel in California, and office buildings in Florida and the UK. In addition, we closed six more loans totaling $165 million in our partnership with Walker & Dunlop.

The growth in our pipeline is comprised of a broad international mix of larger loans, capitalizing on the power of the Blackstone global real estate franchise, and the strong relationships we have established. Blackstone generally owns real estate anywhere BXMT lends, and maintains geographic and sector-focused teams of investment and asset management professionals that are hugely beneficial in the sourcing, underwriting, and asset management of our loans.

As we saw our pipeline expand, and to further optimize our capital structure, we issued a $500 million corporate term loan that we mentioned on the last call. We also raised $300 million of equity. Doug and our capital markets team did a great job on the execution and market timing for all of this new capital. The equity raised, and our earnings in excess of our dividend also contributed to a nice pop in book value. Tony will take you through those details.

To keep pace with our portfolio and pipeline growth, we continue to expand our credit facility capacity in multiple currencies. Post quarter-end, we closed facilities with two new lenders to the company, and now have more than $13 billion of capacity from 12 lenders, with more in process. The scale and quality of our capital markets initiative is well matched to our origination capability, and it also benefits from the global Blackstone real estate platform, and its great track record as a borrower and banking client. Improving credit profiles continues to be a theme across our portfolio. We upgraded the risk ratings on 18 loans in the first half -- nine in each quarter -- generally driven by improved leasing and cash flow as the collateral properties advance in their business plans, and transitioned to a more stabilized operating performance.

In the second quarter, we put three loans secured by New York City Apartments on our watch list, the only risk rating downgrades of the year. These properties will be impacted by newly enacted legislation related to rent-regulated units that will ultimately result in less revenue growth over time than what we originally underwrote. We believe our credit position in these assets is still protected, even under the new regulations, but we still decided to watch list the loans due to the projected change in cash flow profile. The collateral properties are owned by strong, well-capitalized sponsors, and the three loans together represent only 1% of our portfolio.

The lending market overall remains competitive with spreads stable, and part because of anticipated declines in base rates in the US. Fundamentals are solid, with real tenant demand in the major markets that we target. We continue to achieve our best results with repeat clients, larger loans, special situations where speed and certainty matter most, construction loans, and loans in European markets. We've built a market-leading global senior mortgage lending business with a $16 billion portfolio, almost $5 billion of equity market cap, and a highly efficient match-funded liability structure. Our focus remains on dividend quality and stability, and with that, I'll turn the call over to Tony.

Anthony Marone -- Chief Financial Officer

Thank you, Steve, and good morning, everyone. This quarter, BXMT again delivered compelling results for our stockholders, with strong earnings, a well-covered dividend, and increased book value following an active capital-raising quarter. We generated GAAP net income of $0.59 per share, and core earnings of $0.68, providing 110% coverage of our stable $0.62 dividend for the quarter.

Our book value increased to $27.85, up $0.53 during the quarter and $0.65 year-to-date, driven by our issuance of 8.6 million shares of common stock during the quarter, raising $311 million of fresh capital at 1.3x our prior book value.

In addition to our common equity raise, we also closed our inaugural $500 million term loan B in April, which priced at a market-leading LIBOR+2.5%, with only 25 basis points of issue discount. Our term loan has limited amortization, a seven-year term, and flexibility to pre-pay after six months, further expanding the aperture of financing options for our business. The term loan and premium equity raised in 2Q will be used to fund the continued growth of our business in the second half of the year, and allow us to continue managing our cost of capital and competing for the best investment opportunities for our stockholders.

We also remain steadfast in our focus on balance sheet stability, in terms of our asset level credit facilities, which had an average cost of only LIBOR+1.89% as of quarter-end, and remain insulated from any capital markets-based mark-to-market provisions.

Closed the quarter with a debt-to-equity ratio of only 2.5x, down from 2.8x as of March 31st, and a liquidity of $962 million available to fund our active investment pipeline Steve mentioned earlier. Looking at 2Q originations, we closed $1.3 billion of new or upsized loans during the quarter, highlighted by our international and Southern California loan originations, and funded $1.1 billion under these and existing commitments. Our fundings were roughly in line with repayments of $1.4 billion, maintaining our total portfolio size of nearly $16 billion as of quarter end.

Asset yields in our total investment portfolio migrated modestly lower during the quarter, with spreads tightening about seven basis points, as a handful of legacy assets with higher spreads happened to repay this quarter. As we have highlighted on previous calls, we look to manage the impact of spread tightening with offsetting reductions in our cost of capital through accretive equity issuance, negotiating asset level pricing with our credit facility providers, and employing other sources of financing, like the term loan we closed this quarter.

Our portfolio credit quality remained stable, with an unchanged weighted average risk rating of 2.7 on a scale of one to five, as nine upgrades totaling $703 million offset the three minor downgrades Steve mentioned, totaling $167 million. It is important to note that these loans are fully performing, and we continue to have no non-accrual or impaired loans in our portfolio. We felt flagging the risk rating of these loans was a prudent disclosure to our stockholders, given the change in the New York City rent control regulations, but we have no expectation of loss on these loans. As a reminder, we have had two loans with a risk rating of four in the past, both of which have fully repaid with zero losses as we successfully resolved these loans with our borrowers.

In closing, we previously highlighted the floating rate focus of BXMT's portfolio, which was 97% floating rate as of quarter end, and how this positions us to capture incremental earnings as rates rise. In addition to that important benefit, we would also like to highlight that while higher rates will directly increase our earnings, we are partially protected from declining revenues, should rates decrease, with LIBOR floors baked into the structure of our loans, which we believe is another example of the stability of the BXMT business model.

Thank you for your support, and with that, I will ask the operator to open the call to questions.

Questions and Answers:

Operator

Thank you. The question and answer session will now begin. If you wish to ask a question on the audio, please key *, then 1 on your telephone. Please limit your question to one, and one follow on, thank you.

Thank you, your first question comes from the line of Doug Harter from Credit Suisse. Please proceed, Doug -- you're live on the call.

Douglas Harter -- Credit Suisse -- Director, Equity Research

Thanks. Could you just update us on kind of where you would expect leverage to get to kind of -- as the pipeline comes through, and how the term loan factors into that leverage calculation?

Douglas Armer -- Executive Vice President, Capital Markets

Hey, Doug, it's Doug here. That's a great question, that we do have a very strong pipeline. We do expect growth in our balance sheet, which will probably show up in increased leverage. We're down quarter-over-quarter from 2.8x to 2.5x at the end of the second quarter, and we'd expect that to increase inside of the range that's anchored right around 3x, in terms of debt to equity, so I think our expectations for the level of leverage remain consistent with where they've been for the last several quarters, in a range right around 3.0x, in terms of debt to equity.

Operator

Thank you; your next question comes from the line of Don Fandetti from Wells Fargo. Please proceed, Don, you're live in the call.

Douglas Armer -- Executive Vice President, Capital Markets

All right, good morning, Don. Are you there?

Donald Fandetti -- Wells Fargo -- Managing Director

Yes. Steve, could you talk a little bit about the New York multifamily properties, in terms of their risk rating change? What are the scenarios? How do you see that sort of playing out in a bull and bear case scenario?

Katie Keenan -- Executive Vice President, Investments

Sure, hey Don -- this is Katie. You know, it's 1% of our portfolio, so our risk is relatively limited, and I think in the various scenarios we expect that our loans are going to be well protected. These loans were 67% LTV on average when we originated them, so we had significant equity cushion, and while the rent regulations will affect the impact of cash flow growth going forward, we don't think that ultimately it's going to result in an impairment, as we have that equity cushion. So we've underwritten the loans today based what on the regulations are today; we're obviously closely monitoring any potential developments on the regulations, but we're basing the way that we're looking at the loans on the current regulations, and we thought it was prudent to risk rate them four, but again, they're performing and we don't expect impairments.

Stephen Plavin -- Chief Executive Officer

Yeah, and Don, I think we feel good about the fact that, although we didn't fully anticipate this kind of regulatory change, that we have strong sponsors and 65% loans that any kind of reasonable fluctuations in the business plan is at the risk of the equity, and not the debt. I think this is another case of that.

Operator

Thank you; your next question comes from the line of Rick Shane from JP Morgan. Please proceed, Rick. You're live in the call.

Richard Shane -- JP Morgan -- Analyst

Hi, guys, thanks for taking my question. Really on the same topic: there's at least one other New York multifamily property in the portfolio that continues to be on a three rating. I do know that the LTV is a little bit lower -- 62%, as opposed to mid-60s -- is that the distinction there, or is there something more nuanced we should all be thinking about, in terms of how we think about New York multi?

Katie Keenan -- Executive Vice President, Investments

Yeah, so I think it's important to note that New York rent regulations affect different properties in different ways. There's a lot of multifamily in New York that's fair market, and not impacted at all by rent regulation, and then other assets maybe have a few rent-regulated units and are less impacted, so we've taken the approach that we've looked at every loan in our portfolio, and assessed the impact, and the ones that we have downgraded are the ones we think are impacted in a way that would necessitate a downgrade, but the others we just don't think are materially impacted.

Stephen Plavin -- Chief Executive Officer

Did we lose you there? Just a note Sonny -- for the operator -- I just wanna make sure that the follow up questions are coming through there. We can go ahead with the next question.

Operator

Thank you, your next question comes from the line of Steve DeLaney from JMP Securities. Please proceed, Steve, you're live in the call.

Steven DeLaney -- JMP Securities -- Director of Specialty Finance Research & Senior Analyst

Good morning, everyone. Thanks for taking the question. Steve, you mentioned the $3 billion pipeline; I'm just curious if we could parse that a little bit. Are all those loans under term sheets at this time, or is that sorta just a visible number about what you're looking at? Can you just kinda clarify that for us?

Stephen Plavin -- Chief Executive Officer

Yeah, sure, Steve, thanks. It's a stat that we note on all of our earnings calls, and it's deals that have signed up -- where we have signed term sheets, agreed terms, and we're proceeding to closing, so the expectations is that they'll close.

Steven DeLaney -- JMP Securities -- Director of Specialty Finance Research & Senior Analyst

Good. So some in 3Q, and then some in 4Q as well, correct? So it's a big number for one quarter, but are you thinking that all these might actually close before September?

Stephen Plavin -- Chief Executive Officer

No, I think you're right -- some in 3Q, some in 4Q -- but we'll also continue to originate more loans, Steve, which will likely close in 4Q, but the origination process is ongoing. That's what we have signed up at the moment.

Steven DeLaney -- JMP Securities -- Director of Specialty Finance Research & Senior Analyst

Okay, thanks, Steve. A quick follow up, if I may, for Doug: Doug, there was an article on CMA Page One last week about sort of an evolved warehouse credit product that could provide low-cost alternatives to CLO financing. They mentioned specifically Morgan Stanley and K-Rep. I read the article, and the features that they were discussing -- about no mark-to-market, etc. -- it didn't sound like anything to me. It sounded like a lot of features that Blackstone already has, and I just wondered if you were familiar with that article, and if you could comment on that briefly. Thanks.

Douglas Armer -- Executive Vice President, Capital Markets

We are familiar with that article, and I think we share your view that the structure of those transactions -- particularly in terms of those features -- is very consistent with stuff that we've been doing for years. So we're happy to see the activity in the marketplace, and we think it'll ultimately accrue to our benefit, in terms of validating our business model and the market's acceptance of the loan-on-loan financing strategy that we have.

Steven DeLaney -- JMP Securities -- Director of Specialty Finance Research & Senior Analyst

Great, thank you for your comments.

Operator

Thank you; your next question comes from the line of Stephen Lewis from Raymond James. Please proceed, Steven, you're live in the call.

Stephen Lewis -- Raymond James -- Bond Trader

Hi, good morning. A couple questions around CECL. One I guess is: what do you think is the best historical data set that you look at, as far as historical performance versus the portfolio that you guys own, and the specific follow up to that is a situation like the Tishman -- the large loan you guys did -- $1.8 billion last April. You'd mentioned it won't start funding till 2020, but my understanding is you'll have to take the entire full CECL reserve, even if the funding is at zero. So given that accounting treatment, does that change your willingness to do large loans that have a significant delay in funding, going forward? Thank you.

Anthony Marone -- Chief Financial Officer

Thanks for the question. This is Tony, I could jump in on the CECL point. So I'd say a couple things: one is we are still going through our adoption of CECL -- I think as is everyone else in the mortgage REIT space, and frankly, a lot of the folks in the banking and specialty finance space overall -- so I can't get into too much specifics on exactly where we expect it to land.

We think that the important reference data is a mix of looking at our loans -- which have a great track record -- as well as seeing what data is available in the market that we can leverage, so I can't really speak to definitively what our record set is going to be that we'll use at this time, but we'll have more details on that as we finalize our process, and put those disclosures out more formally. I would say that we're being very thoughtful about ensuring that the reference data that we do use is as analogous to our loans as possible, and not picking up data that may have lower credit quality loans that are not comparable to the high-quality loans that we make here.

As for the Tishman loan example, kudos to your reading of the FASB rules. You're right: the CECL does require picking up a reserve on unfunded -- not just in a deal like Tishman that's fully unfunded, but even if a loan is 90% funded, the 10% unfunded has to be taken into account. Without getting into a ton of nuanced math, the way CECL looks at that, it does take into account the size of the loan over time, so there is a timing element to those fundings in terms of how you look at how impactful that will be. We think that overall, the credit quality of the loans that we make is very high, and so whatever the loan structure, our CECL reserve will be appropriately low, and we'll take that into account, so I don't expect that's going to influence our decision-making, in terms of our investments.

We make good loans to quality real estate, with quality sponsors, and that will continue, but you are right. There could be a one-off loan here or there that may have a little bit larger CECL reserve, but we don't think that's gonna move the reserve way out of a reasonable range.

Stephen Lewis -- Raymond James -- Bond Trader

Great, thanks for the color on that. I appreciate it.

Anthony Marone -- Chief Financial Officer

Sure thing.

Operator

Thank you. Your next question comes from the line of George Bahamondes from Deutsche Bank. Please proceed, George, you're live in the call.

George Bahamondes -- Deutsche Bank -- Senior Equity Research Analyst, Real Estate Finance

Hi, good morning. I'm sorry if I may have missed this point, but do you guys have any thoughts on what potential impacts on maybe the incremental attractiveness of borrowing as LIBOR declines, assuming that we do see some Fed rate cuts in the back half of '19 and into '20? I just wanted to get a general sense of -- if you think that becomes incrementally more attractive to borrowers, and maybe that impacts origination volumes, or -- just any sort of thoughts generally on what the landscape could look like, should we see some Fed rate cuts?

I think the second question is tied to that similarly is -- do we spreads maybe widen out a bit, just given that LIBOR would decline to ensure that the returns on these loans are similar to what they have been more recently? I just wanted to get your general thoughts on that, if possible. Thank you.

Stephen Plavin -- Chief Executive Officer

Thanks for your questions. I think as it relates to the impact on loan demand of lower LIBOR, it's certainly beneficial. Most of our borrowers are just floating rate borrowers, not because of they're guessing interest rates, but because they wanna maintain flexibility in their real estate ownership. They don't wanna lose a sale window if they have ongoing capital needs, they need loans that accommodate future advances, and floating rate loans do that much better than fixed rate loans, so I think on the margin it's beneficial having lower floating rates as it relates to loan demand, but our loan demand has been very strong throughout, when LIBOR was at a lower range, and also when LIBOR was in its current range.

I'll start off on the spreads question, Doug, if you have anything you wanna contribute. I think we would expect spreads -- we've seen spreads begin to moderate in the market already. I think that's in part because people just have minimum returns, and business models that can't withstand continually compressing spreads, but also I do think there's -- with the expectation of lower base rates -- that spreads have moderated, and I think there certainly is a possibility that spreads could increase as base rates go down, because -- again, a lot of the business models, a lot of the investors are looking at their total return, even on floating rate loans.

Douglas Armer?

I think that's a great point. It's just another illustration of how the LIBOR analysis is an all-else-equal analysis, and by definition, all else will not be equal as we move into a different rate environment. There may be headwinds coming from spread compression or a decrease in LIBOR, but there are a lot of tailwinds coming from other directions, albeit increased deployment or demand for our loans, potential moderation in spreads, and also all of the capital markets initiatives that Tony referred to, but reductions in our funding costs, optimizing corporate level leverage, raising premium equity -- so I think with regard to the capacity to offset those headwinds and maintain our earnings power, we feel very good about our asset-sensitive floating rate business model.

George Bahamondes -- Deutsche Bank -- Senior Equity Research Analyst, Real Estate Finance

Great very helpful thank you.

Stephen Plavin -- Chief Executive Officer

Thanks, George.

Operator

Thank you. Your next question comes from the line of Jade Rahmani from KBW. Please proceed, Jade, you're live in the call.

Jade Rahmani -- KBW -- Managing Director, Equity Research Analyst

Thanks very much. What drove surge in repayments in the second quarter? Was it anything surprising there, and what do you expect for the balance of the year?

Stephen Plavin -- Chief Executive Officer

No, I think Jade, it's hard to look at repayments in any one quarter, so I think those were repayments that maybe we thought would come last year, and just ended up coming in the first quarter. So we think we're in a sort of stabilized repayment mode. Again, the repayments tend to be correlated over longer periods with our originations, so when the market's more liquid we would expect to see more repayments.

But as we go forward, we feel very good about achieving portfolio growth again, like we have in most of the past quarters, so -- with a $3 billion pipeline, we do expect to see portfolio growth in the second half.

Jade Rahmani -- KBW -- Managing Director, Equity Research Analyst

Just turning to the New York multifamily issue, can you give any insights into the borrower mindsets on these loans? Are they taking a "wait and see" mode, and sort of hunkering down, focusing on maximizing cash flows, reducing expenses? Have there been any comps, any transactions in the market? I don't believe there have, so there hasn't been much price discover as of yet, and over what kind of time period do you expect this to play out? Is it over the next six months, or are you thinking much longer than that?

Stephen Plavin -- Chief Executive Officer

Great questions, Jade. I think the answer on a lot of them is it's too early to say. Our sponsors are very committed to their assets, to their New York City multifamily strategy, and so we -- again, we spend a lot of time vetting sponsors, and feel great about the sponsorship on the loans that we've been talking about. I do expect to see relatively few transactions in the near term. Typically, in periods of volatility, transaction volume slows, and I would assume that's what will happen here, as well, and then -- over time, as things stabilize -- we'll see transaction activity resume in the market.

It's gonna take a long time for the impact of this to play through that really relates to future rents, and so it's not an adjustment of our in-place cash flow, it's really just an impact on what the future cash flow might be, and typically, these deals have gradual increases in cash flow over time, depending upon how capital was spent, and how units turn over, and so that's what's been impacted here. And we think that -- again, that the underlying assets are still strong. We have a lot of confidence in our borrowers, and we'll just have to wait and see in terms of what the market adjusts, and what the long-term prognosis is here.

Operator

Thank you, your next questions comes from the line of Rick Shane from JP Morgan. Please proceed, Rick, you're live in the call.

Richard Shane -- JP Morgan -- analyst

Hey, guys, thanks. I got cut off as I was trying to ask my follow-up, and it's largely been explored, but I just wanted to ask -- related to the three New York multifamily properties -- is there any commonality among the sponsors, or are they different sponsors?

Katie Keenan -- Executive Vice President, Investments

We have different sponsors on various assets, so we generally expect all of them -- they're very well capitalized, so the commonality in the assets is really the business plans, which was investment of capital over time for gradual increases of rents. As we've said, we expect that will moderate, going forward.

Richard Shane -- JP Morgan -- analyst

Got it, and my question wasn't clear. Is it three discrete sponsors for those properties?

Stephen Plavin -- Chief Executive Officer

It's two discrete -- two sponsors, three loans.

Richard Shane -- JP Morgan -- analyst

Okay, got it. Thank you.

Stephen Plavin -- Chief Executive Officer

You're welcome.

Operator

Thank you. Your final question comes from the line of Doug Harter from Credit Suisse. Please proceed, Doug, you're live in the call.

Douglas Harter -- Credit Suisse -- Director, Equity Research

Thanks. Just following up on the term loan: just what are your thoughts? Do you view -- since it's a seven-year term, do you view that as leveragable capital in any way, and does that presence kind of give you some ability to kind of be north of 3x?

Douglas Armer -- Executive Vice President, Capital Markets

Hey, Doug. Thanks for the follow up; I realize I probably didn't address that as clearly as you had asked it. I think the post-term loan -- I think the range that we'll be able to achieve, in terms of our debt to equity ratio, is higher, and I think the long term outlook for being above 3x, as opposed to below 3x where we've historically been is significantly greater.

Again, it'll relate quarter-to-quarter to the amount of deployment that we're able to achieve in a given quarter, but -- yes, I think with the term loan being as well-structured as it is -- floating rate and, as you point out, a seven-year maturity -- that's capital that we're very comfortable leveraging, and it results in a capital structure that we're very confident operating on a slightly higher leverage basis than we have been historically. I think that'll be in a range around 3x, and more likely above 3x, as opposed to below 3x, compared to prior to the term loan issuance.

Douglas Harter -- Credit Suisse -- Director, Equity Research

And then as you think about kind of constructing the capital structure, kind of over the long term, how much term loan could we expect kind of in the capital structure, or -- more broadly -- how much kind of non-common equity could you expect to kinda make up that leveragable capital base?

Douglas Armer -- Executive Vice President, Capital Markets

I think the ratio that we have now -- and we think about the convertible debt together with the term loan, in sorta connection with this question -- is close to our target range. The amount of common equity is also in flux, and we continue to grow the balance sheet, and we'll continue to fund that through a mix of debt and equity. I think that you'd expect to see that mix stay roughly where it is today, in terms of proportions, but again -- I think with the term loan in the picture, that proportion is higher than it was previous to the term loan.

Douglas Harter -- Credit Suisse -- Director, Equity Research

Makes sense, thank you, Doug.

Stephen Plavin -- Chief Executive Officer

Thanks, Doug.

Operator

Thank you. There are no current questions, and I'll turn the call back to Weston for closing remarks.

Weston Tucker -- Head of Investor Relations

Great, thanks, everyone, for joining us this morning, and please let me know if you have any follow up questions.

Operator

Thank you to all speakers. That concludes your conference call for today. You may now disconnect. Thank you for joining, and enjoy the rest of your day.

Duration: 32 minutes

Call participants:

Weston Tucker -- Head of Investor Relations

Stephen Plavin -- Chief Executive Officer

Anthony Marone -- Chief Financial Officer

Douglas Armer -- Executive Vice President, Capital Markets

Katie Keenan -- Executive Vice President, Investments

Douglas Harter -- Credit Suisse -- Director, Equity Research

Donald Fandetti -- Wells Fargo -- Managing Director

Richard Shane -- JP Morgan -- Analyst

Steven DeLaney -- JMP Securities -- Director of Specialty Finance Research & Senior Analyst

Stephen Lewis -- Raymond James -- Bond Trader

George Bahamondes -- Deutsche Bank -- Senior Equity Research Analyst, Real Estate Finance

Jade Rahmani -- KBW -- Managing Director, Equity Research Analyst

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