UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

FOR THE QUARTERLY PERIOD ENDED March 31, 2020

OR

FOR THE TRANSITION PERIOD FROM                  TO                 

Commission File Number: 000-55931

 

 

Blackstone Real Estate Income Trust, Inc.

(Exact name of Registrant as specified in its charter)

 

 

Registrant’s telephone number, including area code: (212) 583-5000

 

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    Yes  ☐     No  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of May 15, 2020, the issuer had the following shares outstanding: 628,957,103 shares of Class S common stock, 813,407,202 shares of Class I common stock, 44,880,370 shares of Class T common stock, and 101,746,152 shares of Class D common stock.

 

 

---

TABLE OF CONTENTS

 

 

 

 

---

 

PART I. FINANCIAL INFORMATION

Blackstone Real Estate Income Trust, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except per share data)

 

 

See accompanying notes to condensed consolidated financial statements.

1

---

 

Blackstone Real Estate Income Trust, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

2

---

 

Blackstone Real Estate Income Trust, Inc.

Condensed Consolidated Statements of Changes in Equity (Unaudited)

(in thousands, except per share data)

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

3

---

 

Blackstone Real Estate Income Trust, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

 

 

 

4

---

 

 

See accompanying notes to condensed consolidated financial statements.

5

---

 

Blackstone Real Estate Income Trust, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Business Purpose

Blackstone Real Estate Income Trust, Inc. (“BREIT” or the “Company”) invests primarily in stabilized income-oriented commercial real estate in the United States and, to a lesser extent, in real estate debt. The Company is the sole general partner of BREIT Operating Partnership, L.P., a Delaware limited partnership (“BREIT OP”). BREIT Special Limited Partner L.P. (the “Special Limited Partner”), a wholly-owned subsidiary of The Blackstone Group Inc. (together with its affiliates, “Blackstone”), owns a special limited partner interest in BREIT OP. Substantially all of the Company’s business is conducted through BREIT OP. The Company and BREIT OP are externally managed by BX REIT Advisors L.L.C. (the “Adviser”). The Adviser is part of the real estate group of Blackstone, a leading global investment manager, which serves as the Company’s sponsor. The Company was formed on November 16, 2015 as a Maryland corporation and qualifies as a real estate investment trust (“REIT”) for U.S. federal income tax purposes.  

As of March 31, 2020, the Company had received net proceeds of $17.5 billion from selling shares in the Offering, as defined below, and selling unregistered shares of the Company’s common stock. The Company had registered with the Securities and Exchange Commission (the “SEC”) an offering of up to $5.0 billion in shares of common stock (the “Initial Offering”) and accepted gross offering proceeds of $4.9 billion during the period January 1, 2017 to January 1, 2019. The Company subsequently registered with the SEC a follow-on offering of up to $12.0 billion in shares of common stock, consisting of up to $10.0 billion in shares in its primary offering and up to $2.0 billion in shares pursuant to its distribution reinvestment plan (the “Current Offering” and with the Initial Offering, the “Offering”). The Company intends to sell any combination of four classes of shares of its common stock, with a dollar value up to the maximum aggregate amount of the Current Offering. The share classes have different upfront selling commissions, dealer manager fees and ongoing stockholder servicing fees. The Company intends to continue selling shares on a monthly basis.

As of March 31, 2020, the Company owned 1,158 properties and had 215 positions in real estate debt investments. The Company currently operates in eight reportable segments: Industrial, Multifamily, Net Lease, Hotel, Retail, Office and Other Properties, and Investments in Real Estate Debt. Multifamily includes various forms of rental housing including apartments, student housing and manufactured housing. Other Properties includes self-storage properties. Net Lease includes the real estate assets of The Bellagio Las Vegas (“Bellagio”) and the unconsolidated interest in the MGM Grand and Mandalay Bay joint venture, as further described in Note 5 – Investments in Unconsolidated Entities.  Financial results by segment are reported in Note 14 — Segment Reporting.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The condensed consolidated financial statements, including the condensed notes thereto, are unaudited and exclude some of the disclosures required in audited financial statements. Management believes it has made all necessary adjustments, consisting of only normal recurring items, so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its condensed consolidated financial statements are reasonable and prudent. The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC.

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the balance sheet. During the first quarter of 2020, there was a global outbreak of a novel coronavirus, or COVID-19, which has spread to over 200 countries and territories, including the United States, and has spread to every state in the United States. The World Health Organization has designated COVID-19 as a pandemic, and numerous countries, including the United States, have declared national emergencies with respect to COVID-19. The global impact of the outbreak has been rapidly evolving, and as cases of COVID-19 have continued to be identified in additional countries, many countries have reacted by instituting quarantines and restrictions on travel, closing financial markets and/or restricting trading and operations of non-essential offices and retail centers. Such actions are creating disruption in global supply chains, increasing rates of unemployment, and adversely impacting many industries. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions. The Company believes the estimates and assumptions underlying the GAAP condensed consolidated financial statements are reasonable and supportable based on the information available as of March 31, 2020, however uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and the Company’s business in particular, makes any

6

---

 

estimates and assumptions as of March 31, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19. Actual results may ultimately differ materially from those estimates.

The accompanying condensed consolidated financial statements include the accounts of the Company, the Company’s subsidiaries and joint ventures in which the Company has a controlling interest. For consolidated joint ventures, the non-controlling partner’s share of the assets, liabilities and operations of the joint ventures is included in non-controlling interests as equity of the Company. The non-controlling partner’s interest is generally computed as the joint venture partner’s ownership percentage. Certain of the joint ventures formed by the Company provide the other partner a profits interest based on certain internal rate of return hurdles being achieved. Any profits interest due to the other partner is reported within non-controlling interests. All intercompany balances and transactions have been eliminated in consolidation.

The Company consolidates partially owned entities in which it has a controlling financial interest. In determining whether the Company has a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, the Company considers whether the entity is a variable interest entity (“VIE”) and whether it is the primary beneficiary. The Company is the primary beneficiary of a VIE when it has (i) the power to direct the most significant activities impacting the economic performance of the VIE and (ii) the obligation to absorb losses or receive benefits significant to the VIE. BREIT OP and each of the Company’s joint ventures are considered to be a VIE. The Company consolidates these entities, excluding its equity method investment, because it has the ability to direct the most significant activities of the entities such as purchases, dispositions, financings, budgets, and overall operating plans.

As of March 31, 2020, the total assets and liabilities of the Company’s consolidated VIEs, excluding BREIT OP, were $11.0 billion and $7.7 billion, respectively, compared to $9.5 billion and $6.6 billion as of December 31, 2019. Such amounts are included on the Company’s Condensed Consolidated Balance Sheets.

Certain of the Company’s joint ventures are accounted for under the equity method of accounting as the requirements for consolidation are not met. Investments in unconsolidated entities are initially recorded at cost and subsequently adjusted for the Company’s pro-rata share of net income, contributions, and distributions. The Company’s investments in unconsolidated entities are periodically assessed for impairment and an impairment loss is recorded when the fair value of the investment falls below the carrying value and such decline is determined to be other-than-temporary.

As of March 31, 2020, the Company’s investment in the joint venture which owns the real estate of the MGM Grand and Mandalay Bay is not consolidated. Refer to Note 5 for additional details on the Company’s investments in unconsolidated entities.

Fair Value Measurements

Under normal market conditions, the fair value of an investment is the amount that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). Additionally, there is a hierarchal framework that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment and the state of the marketplace, including the existence and transparency of transactions between market participants. Investments with readily available actively quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Investments measured and reported at fair value are classified and disclosed in one of the following levels within the fair value hierarchy:

Level 1 — quoted prices are available in active markets for identical investments as of the measurement date. The Company does not adjust the quoted price for these investments.

Level 2 — quoted prices are available in markets that are not active or model inputs are based on inputs that are either directly or indirectly observable as of the measurement date.

Level 3 — pricing inputs are unobservable and include instances where there is minimal, if any, market activity for the investment. These inputs require significant judgment or estimation by management or third parties when determining fair value and generally represent anything that does not meet the criteria of Levels 1 and 2. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed.

7

---

 

Valuation of assets measured at fair value

The Company’s investments in real estate debt are reported at fair value. As of March 31, 2020 and December 31, 2019, the Company’s investments in real estate debt consisted of commercial mortgage-backed securities (“CMBS”), residential mortgage-backed securities (“RMBS”), which are mortgage-related fixed income securities, corporate bonds, and term private mezzanine loans of real estate-related companies. The Company generally determines the fair value of its investments in real estate debt by generally utilizing third-party pricing service providers and broker-dealer quotations on the basis of last available bid price. 

In determining the fair value of a particular investment, pricing service providers may use broker-dealer quotations, reported trades or valuation estimates from their internal pricing models to determine the reported price. The pricing service providers’ internal models for securities such as real estate debt generally consider the attributes applicable to a particular class of the security (e.g., credit rating, seniority), current market data, and estimated cash flows for each class and incorporate deal collateral performance such as prepayment speeds and default rates, as available.

Certain of the Company’s investments in real estate debt, such as mortgages or mezzanine loans, are unlikely to have readily available market quotations. In such cases, the Company will generally determine the initial value based on the acquisition price of such investment if acquired by the Company or the par value of such investment if originated by the Company. Following the initial measurement, the Company will determine fair value by utilizing or reviewing certain of the following (i) market yield data, (ii) discounted cash flow modeling, (iii) collateral asset performance, (iv) local or macro real estate performance, (v) capital market conditions, (vi) debt yield or loan-to-value ratios and (vii) borrower financial condition and performance.

As of March 31, 2020 and December 31, 2019, the Company’s $4.3 billion and $4.5 billion, respectively, of investments in real estate debt were classified as Level 2.

The Company’s investments in equity securities of public real estate-related companies are classified as trading securities and reported at fair value. As such, the resulting unrealized gains and losses are recorded as a component of Other Income (Expense) on the Company’s Condensed Consolidated Statements of Operations. In determining the fair value of public equity securities, the Company utilizes the closing price of such securities in the principal market in which the security trades. As of March 31, 2020 the Company’s $335.2 million of equity securities were classified as Level 1 and recorded as a component of Other Assets on the Company’s Condensed Consolidated Balance Sheets. The Company did not own equity securities as of December 31, 2019.

Valuation of liabilities not measured at fair value

As of March 31, 2020, the fair value of the Company’s mortgage notes, term loans, and secured revolving credit facilities, repurchase agreements, and unsecured revolving credit facilities was approximately $66.0 million below carrying value. As of December 31, 2019, the fair value of the Company’s mortgage notes, term loans, and secured revolving credit facilities, repurchase agreements, and unsecured revolving credit facilities was approximately $54.9 million above carrying value. Fair value of the Company’s indebtedness is estimated by modeling the cash flows required by the Company’s debt agreements and discounting them back to the present value using the appropriate discount rate. Additionally, the Company considers current market rates and conditions by evaluating similar borrowing agreements with comparable loan-to-value ratios and credit profiles. The inputs used in determining the fair value of the Company’s indebtedness are considered Level 3.

Recent Accounting Pronouncements

Due to the business disruptions and challenges severely affecting the global economy caused by the COVID-19 pandemic, many lessors may be required to provide rent deferrals and other lease concessions to lessees. While the lease modification guidance in Accounting Standards Codification (“ASC”) Topic 842 (“Topic 842”) addresses routine changes to lease terms resulting from negotiations between the lessee and the lessor, this guidance did not contemplate concessions being so rapidly executed to address the sudden liquidity constraints of some lessees arising from the COVID-19 pandemic. In April 2020, the Financial Accounting Standards Board (“FASB”) staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows the Company, if certain criteria have been met, to bypass the lease by lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances.

The Company has elected to apply such relief to avoid performing a lease by lease analysis for the lease concessions that (i) were granted as relief due to the COVID-19 pandemic and (ii) result in the cash flows remaining to be substantially the same or less. The

8

---

 

Lease Modification Q&A has no material impact on the Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2020. However, its future impact to the Company is dependent upon the extent of lease concessions granted to tenants as a result of the COVID-19 pandemic in future periods and the elections made by the Company at the time of entering such concessions. It is not possible at this time to accurately project the nature or extent of any such possible concessions.

3. Investments in Real Estate

Investments in real estate, net consisted of the following ($ in thousands):

 

 

 

During the three months ended March 31, 2020, the Company acquired interests in 10 real estate investments for $2.7 billion, which were comprised of 74 industrial, 22 multifamily, six retail and two self-storage properties categorized as other.

The following table provides further details of the properties acquired during the three months ended March 31, 2020 ($ in thousands):

 

 

The following table summarizes the purchase price allocation for the properties acquired during the three months ended March 31, 2020 ($ in thousands):

 

The weighted-average amortization periods for the acquired in-place lease intangibles, above-market lease intangibles and below-market lease intangibles of the properties acquired during the three months ended March 31, 2020 were four, eight and four years, respectively.

9

---

 

Impairment

If the effects of the COVID-19 pandemic cause economic and market conditions to continue to deteriorate or if the Company’s expected holding period for assets change, subsequent tests for impairment could result in impairment charges in the future. Certain investments within the Company’s portfolio, specifically its hotel assets, are more susceptible to future impairment considerations due to the significant declines in occupancy as a result of extended closures and uncertainty around future cash flows. The Company can provide no assurance that material impairment charges with respect to the Company’s investments in real estate and unconsolidated entities will not occur during the remaining quarters in 2020 or future periods. Accordingly, the Company will continue to monitor circumstances and events in future periods to determine whether any impairment charges are warranted.

Dispositions

On January 30, 2020, the Company sold a 61,000 square foot industrial property. Net proceeds from the sale were $4.5 million, which resulted in a realized gain of $0.4 million recorded as Net Gain on Dispositions of Real Estate on the Company’s Condensed Consolidated Statements of Operations.

Properties Held for Sale

As of March 31, 2020, the Company did not have any properties classified as held for sale. As of December 31, 2019, six properties were classified as held for sale. Subsequent to December 31, 2019, five of the properties were no longer classified as held for sale as the purchase and sale agreement was terminated during the three months ended March 31, 2020. During the first quarter of 2020, the carrying value of the five properties was adjusted for any depreciation expense that would have been recognized while the properties were classified as held for sale. Upon termination of the purchase and sale agreement, the buyer forfeited an $8.0 million deposit, which the Company recorded as a component of Other Income (Expense) on the Company's Condensed Consolidated Statements of Operations.  

4. Intangibles

The gross carrying amount and accumulated amortization of the Company’s intangible assets and liabilities consisted of the following ($ in thousands):

10

---

 

The estimated future amortization on the Company’s intangibles for each of the next five years and thereafter as of March 31, 2020 is as follows ($ in thousands):

 

 

5. Investments in Unconsolidated Entities

 

On February 14, 2020, the Company closed a transaction to form a new joint venture with MGM Growth Properties LLC (“MGP”) to acquire the Las Vegas real estate assets of the MGM Grand and Mandalay Bay for $4.6 billion (the “BREIT MGP JV”). MGP owns 50.1% of the joint venture, and the Company owns 49.9%. At closing, the joint venture entered into a long-term triple net master lease agreement with MGM Resorts International (“MGM”), which provides the joint venture with a full corporate guarantee of rent payments by MGM. The lease has an initial annual rent of $292 million with an initial term of 30 years with two 10-year extension options for MGM. The lease agreement provides that the rent will escalate 2% annually for the first 15 years and then the greater of (i) 2% or (ii) the increase in the consumer price index during the prior year, subject to a cap of 3%. As of March 31, 2020, the Company did not consolidate the joint venture.

The following table provides a summarized balance sheet of the BREIT MGP JV along with a reconciliation to the Company’s equity investment in unconsolidated entities ($ in thousands):

The following table provides summarized operating data of the BREIT MGP JV along with a reconciliation to the Company’s income from unconsolidated entities ($ in thousands):

11

---

 

 

6. Investments in Real Estate Debt

The following tables detail the Company’s investments in real estate debt ($ in thousands):

 

 

 

 

The following table details the collateral type of the properties securing the Company’s investments in real estate debt ($ in thousands):

12

---

 

 

The following table details the credit rating of the Company’s investments in real estate debt ($ in thousands):

 

The Company’s investments in real estate debt included CMBS and loans collateralized by properties owned by Blackstone-advised investment vehicles and CMBS collateralized by loans originated or acquired by Blackstone-advised investment vehicles. The following table details the Company’s affiliate investments in real estate debt ($ in thousands):  

For additional information regarding the Company’s investments in affiliated CMBS, see Note 5 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The terms and conditions of such affiliated CMBS held as of March 31, 2020 are consistent with the terms described in such Note.

As of March 31, 2020 and December 31, 2019, the Company’s investments in real estate debt also included $143.8 million and $186.8 million, respectively, of CMBS collateralized by pools of commercial real estate debt, a portion of which included certain of the Company’s mortgage notes. The Company recognized $2.6 million and $1.3 million of interest income related to such CMBS during the three months ended March 31, 2020 and 2019, respectively. 

During the three months ended March 31, 2020 and 2019, the Company recorded a net unrealized loss of $1.0 billion and unrealized gain of $31.0 million, respectively, related to investments in real estate debt as a component of Income from Investments in Real Estate Debt on the Company’s Condensed Consolidated Statements of Operations. The COVID-19 pandemic caused significant market pricing and liquidity dislocation in March 2020, causing a broad-based market decline impacting the unrealized value of certain of the Company’s investments in real estate debt.

During the three months ended March 31, 2020, and 2019 the Company recognized a net realized gain of $328 thousand and $12 thousand, respectively, due to the sale or paydowns of certain of the Company’s investments in real estate debt.  

13

---

 

7. Mortgage Notes, Term Loans, and Secured Revolving Credit Facilities

The following table is a summary of the mortgage notes, term loans, and secured revolving credit facilities secured by the Company’s properties ($ in thousands):

 

 

The following table presents the future principal payments due under the Company’s mortgage notes, term loans, and secured revolving credit facilities as of March 31, 2020 ($ in thousands):

 

On March 9, 2020, the Company paid off the mezzanine loan collateralized by certain of the Company’s industrial properties at carrying value. As such, the amortization of related deferred financing costs was accelerated resulting in a realized loss of $0.9 million recorded on the Company’s Condensed Consolidated Statements of Operations.

 

The Company is subject to various financial and operational covenants and financial reporting requirements pursuant to the executed mortgage notes, term loans, and secured revolving credit facilities agreements. These covenants require the Company, to maintain certain financial ratios, including leverage, fixed charge coverage, and debt service coverage, among others. As of March 31, 2020, the Company believes it was in compliance with all of its loan covenants. The Company’s continued compliance with these covenants depends on many factors and could be impacted by current or future economic conditions associated with the COVID-19 pandemic.

8. Repurchase Agreements

The Company has entered into master repurchase agreements with Citigroup Global Markets Inc. (the “Citi MRA”), Royal Bank of Canada (the “RBC MRA”), Bank of America Merrill Lynch (the “BAML MRA”), Morgan Stanley Bank, N.A. (the “MS MRA”), MUFG Securities EMEA PLC (the “MUFG MRA”), HSBC Bank USA, National Association (the “HSBC MRA”), and Barclays Bank PLC (the “Barclays MRA”) to provide the Company with additional financing capacity secured by certain of the Company’s investments in real estate debt. The terms of the Citi MRA, RBC MRA, BAML MRA, MS MRA, MUFG MRA, and HSBC MRA provide the lenders the ability to determine the size and terms of the financing provided based upon the particular collateral pledged by the Company from time-to-time. The Barclays MRA has a maximum facility size of $750.0 million and repurchase agreements under the Barclays MRA have longer dated maturity compared to the Company’s other master repurchase agreements. Additionally, the Barclays MRA contains specific spread and advance rate provisions based on the rating of the underlying investments in real estate debt. The Company is in compliance with all financial covenants of the Barclays MRA.

14

---

 

The following tables are a summary of the Company’s repurchase agreements ($ in thousands):

 

 

 

The weighted average interest rate of the Company’s repurchase agreements was 2.28% (L+1.34%) and 2.95% (L + 1.26%) as of March 31, 2020 and December 31, 2019, respectively. The term “L” refers to the one-month, three-month or six-month U.S. dollar-denominated London Interbank Offer Rate (“LIBOR”).

 

9. Unsecured Revolving Credit Facilities

The Company is party to an unsecured line of credit with multiple banks. The line of credit expires on February 22, 2023 and may be extended for one year. Interest under the line of credit is determined based on one-month U.S. dollar-denominated LIBOR plus 2.50%. As of March 31, 2020, the capacity of the unsecured line of credit was $1.3 billion. As of March 31, 2020, the Company had a $30.0 million letter of credit outstanding, which reduced the available capacity of the unsecured line of credit. There were no other outstanding borrowings on the line of credit as of March 31, 2020.

The Company also maintains a $150.0 million unsecured line of credit with an affiliate of Blackstone of which there was no outstanding balance as of March 31, 2020. For additional information regarding the affiliate line of credit, see Note 8 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

15

---

 

10. Other Assets and Other Liabilities

The following table summarizes the components of other assets ($ in thousands):

 

 

The following table summarizes the components of accounts payable, accrued expenses, and other liabilities ($ in thousands):

 

 

11. Equity and Redeemable Non-controlling Interest

Authorized Capital  

As of March 31, 2020, the Company had the authority to issue 10,100,000,000 shares, consisting of the following:

 

16

---

 

Common Stock

The following table details the movement in the Company’s outstanding shares of common stock (in thousands):

 

Share Repurchase Plan

For the three months ended March 31, 2020, the Company repurchased 45,720,839 shares of common stock and 7,334,420 BREIT OP units representing a total of $599.8 million. The Company had no unfulfilled repurchase requests during the three months ended March 31, 2020.

Distributions

The Company generally intends to distribute substantially all of its taxable income, which does not necessarily equal net income as calculated in accordance with GAAP, to its stockholders each year to comply with the REIT provisions of the Internal Revenue Code.

Each class of common stock receives the same gross distribution per share. The net distribution varies for each class based on the applicable stockholder servicing fee, which is deducted from the monthly distribution per share and paid directly to the applicable distributor.

The following table details the aggregate distributions declared for each applicable class of common stock for the three months ended March 31, 2020:

 

Redeemable Non-controlling Interest

In connection with its performance participation interest, the Special Limited Partner holds Class I units in BREIT OP. See Note 12 for further details of the Special Limited Partner’s performance participation interest. Because the Special Limited Partner has the ability to redeem its Class I units for Class I shares in the Company or cash, at the election of the Special Limited Partner, the Company has classified these Class I units as Redeemable Non-controlling Interest in mezzanine equity on the Company’s Condensed Consolidated Balance Sheets.

The following table summarizes the redeemable non-controlling interest activity related to the Special Limited Partner for the three months ended March 31, 2020 ($ in thousands):

 

In addition to the Special Limited Partner’s interest noted above, certain of the Company’s third party joint ventures also have a redeemable non-controlling interest in such joint ventures. As of March 31, 2020, $22.2 million related to such third party joint ventures was included in Redeemable Non-controlling Interests on the Company’s Condensed Consolidated Balance Sheets.

17

---

 

The Redeemable Non-controlling Interests are recorded at the greater of their carrying amount, adjusted for their share of the allocation of income or loss and distributions, or their redemption value, which is equivalent to fair value, of such interests at the end of each measurement period. As the redemption value was greater than the adjusted carrying value for certain of the non-controlling interests at March 31, 2020, the Company recorded an allocation adjustment of $0.5 million between Additional Paid-in Capital and Redeemable Non-controlling Interest.

12. Related Party Transactions

Due to Affiliates

The following table details the components of due to affiliates ($ in thousands):

 

 

Management Fee

The Adviser is entitled to an annual management fee equal to 1.25% of the Company’s NAV, payable monthly, as compensation for the services it provides to the Company. The management fee can be paid, at the Adviser’s election, in cash, shares of common stock, or BREIT OP units. The Adviser has elected to receive the management fee in shares of the Company’s common stock to date. During the three months ended March 31, 2020 and 2019, the Company incurred management fees of $49.5 million and $17.2 million, respectively.

During the three months ended March 31, 2020 and 2019, the Company issued 2,837,038 and 1,021,790, respectively, unregistered Class I shares to the Adviser as payment for management fees. The Company also had a payable of $17.0 million and $13.9 million related to the management fees as of March 31, 2020 and December 31, 2019, respectively, which is included in Due to Affiliates on the Company’s Condensed Consolidated Balance Sheets. During April 2020, the Adviser was issued 1,631,209 unregistered Class I shares as payment for the $17.0 million management fees accrued as of March 31, 2020. The shares issued to the Adviser for payment of the management fee were issued at the applicable NAV per share at the end of each month for which the fee was earned.

Accrued affiliate service provider expenses and incentive compensation awards

For further details on the Company’s relationships with its affiliated service providers, see Note 11 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The Company issued incentive compensation awards to certain employees of affiliate portfolio company service providers on January 1, 2020 that entitles them to receive an allocation of total return over a certain hurdle amount, as determined by the Company (the “2020 Awards”). The Company has determined the value of the 2020 Awards to be zero. Additionally, the Company issued similar incentive compensation awards to certain employees of affiliate portfolio company service providers on January 1, 2019 (the “2019 Awards”). The value of the 2019 Awards at January 1, 2019 was $8.0 million and will be amortized over the four year service period. As of March 31, 2020, the total unrecognized compensation cost relating to the portfolio company incentive compensation awards was $5.5 million and is expected to be recognized over a period of 2.8 years from March 31, 2020. None of Blackstone, the Adviser, or the affiliate portfolio company service providers receive any incentive compensation from the aforementioned arrangements.

18

---

 

The following table details the amounts incurred for affiliate service providers during the three months ended March 31, 2020 and 2019 ($ in thousands):

 

Affiliate service provider expenses and portfolio company incentive compensation awards are included as a component of Rental Property Operating and Hotel Operating expense, as applicable, in the Company’s Condensed Consolidated Statements of Operations. Transaction support service fees were capitalized to Investments in Real Estate on the Company’s Condensed Consolidated Balance Sheets. Neither Blackstone nor the Adviser receives any fees from the aforementioned arrangements.

Performance Participation Allocation

The Special Limited Partner holds a performance participation interest in BREIT OP that entitles it to receive an allocation of BREIT OP’s total return to its capital account. During the three months ended March 31, 2020, the Company recognized no Performance Participation Allocation expense in the Company’s Condensed Consolidated Statements of Operations as the performance hurdle was not achieved as of March 31, 2020. During the three months ended March 31, 2019, the Company recognized $20.2 million of Performance Participation Allocation expense as the performance hurdle was achieved as of March 31, 2019.

In January 2020, the Company issued approximately 11.7 million Class I units and 0.7 million Class B units in BREIT OP to the Special Limited Partner as payment for the 2019 performance participation allocation. Such units were issued at the NAV per unit as of December 31, 2019.  Subsequent to the Class I and Class B units being issued, 7.3 million of such units were redeemed for $83.6 million and 0.8 million of such units were exchanged for unregistered Class I shares in the Company. As of March 31, 2020, Blackstone and its employees, including the Company’s executive officers, continue to own an aggregate of $190.3 million worth of shares of the Company and Class I and Class B units in BREIT OP. The remaining Class I units held by the Special Limited Partner are included in Redeemable Non-Controlling Interest on the Company’s Condensed Consolidated Balance Sheets.

 

Other

As of March 31, 2020 and December 31, 2019, the Adviser had advanced $2.1 million and $2.0 million, respectively, of expenses on the Company’s behalf for general corporate expenses provided by unaffiliated third parties. Additionally, as of March 31, 2020, the Company did not have any accrued repurchases of Class I shares due to the Adviser. As of December 31, 2019, the Company had $42.1 million of accrued repurchases of Class I shares due to the Adviser.

Affiliate Title Service Provider

During the three months ended March 31, 2020, the Company paid Lexington National Land Services $1.6 million for title services related to 9 investments and such costs were capitalized to Investments in Real Estate or recorded as deferred financing costs, which is a reduction to Mortgage Notes, Term Loans, and Secured Revolving Credit Facilities on the Company’s Condensed Consolidated Balance Sheets. For additional information regarding this affiliate relationship, see Note 11 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Other

As of March 31, 2020, the Company had a receivable of $3.9 million from Livcor, L.L.C. and such amount is included in Other Assets on the Company’s Condensed Consolidated Balance Sheets.

As of March 31, 2020, the Company had a receivable of $1.7 million from funds affiliated with the Company’s Adviser for post-closing settlements related to the Jupiter 12 Industrial Portfolio acquisition. Such amount is included in Other Assets on the Company’s Condensed Consolidated Balance Sheets.

19

---

 

13. Leases

Lessee

Certain of the Company’s investments in real estate are subject to ground leases. The Company’s ground leases are classified as either operating leases or financing leases based on the characteristics of each lease. As of March 31, 2020, the Company had 15 ground leases classified as operating and two ground leases classified as financing. Each of the Company’s ground leases were acquired as part of the acquisition of real estate and no incremental costs were incurred for such ground leases. The Company’s ground leases are non-cancelable, and two of the Company’s operating leases contain renewal options for additional 99 and 10 year terms.

The following table presents the future lease payments due under the Company’s ground leases as of March 31, 2020 ($ in thousands):

 

 

The Company utilized its incremental borrowing rate, which was between 5% and 7%, to determine its lease liabilities. As of March 31, 2020, the weighted average remaining lease term of the Company’s operating leases and financing leases was 56 years and 76 years, respectively.

Payments under the Company’s ground leases primarily contain fixed payment components that may include periodic increases fixed to an index or periodic fixed percentage escalations. One of the Company’s ground leases contains a variable component based on a percentage of revenue.

The following table summarizes the fixed and variable components of the Company’s operating leases ($ in thousands):

 

 

The following table summarizes the fixed and variable components of the Company’s financing leases ($ in thousands):

 

 

20

---

 

Lessor

The Company’s rental revenue primarily consists of rent earned from operating leases at the Company’s multifamily, industrial, retail, office, net lease and other properties. Leases at the Company’s industrial, retail, and office properties generally include a fixed base rent and certain leases also contain a variable component. The variable component of the Company’s operating leases at its industrial, retail, and office properties primarily consist of the reimbursement of operating expenses such as real estate taxes, insurance, and common area maintenance costs. Rental revenue earned from leases at the Company’s multifamily properties primarily consist of a fixed base rent and certain leases contain a variable component that allows for the pass-through of certain operating expenses such as utilities. During the current period, the Company changed its presentation for the payment of leasing commissions in the Condensed Consolidated Statement of Cash Flows as investing activities from operating activities to better align with how the Company assesses its overall investments in its properties. The Company does not believe the change in presentation to be material as the Company had $5.6 million of leasing commissions during the three months ended March 31, 2020.

Rental revenue from the Company’s lease at the Bellagio consists of a fixed annual rent that escalates annually throughout the term of the lease and the tenant is generally responsible for all property-related expenses, including taxes, insurance and maintenance. The Company assessed the classification of the Bellagio lease and determined the lease was an operating lease. The Company’s assessment included the consideration of the present value of the lease payments over the lease term and the residual value of the assets under the lease.  

Leases at the Company’s industrial, retail, office, and net lease properties are generally longer term and may contain extension and termination options at the lessee’s election. Leases at the Company’s multifamily and other properties are short term in nature, generally not greater than 12 months in length.

The following table details the components of operating lease income from leases in which the Company is the lessor ($ in thousands):

 

 

The following table presents the undiscounted future minimum rents the Company expects to receive for its industrial, net lease, retail and office properties as of March 31, 2020 ($ in thousands). Leases at the Company’s multifamily and self-storage properties are short term, generally 12 months or less, and are therefore not included.

 

 

14. Segment Reporting

The Company operates in eight reportable segments: Multifamily properties, Industrial properties, Net Lease properties, Hotel properties, Retail properties, Office properties, Other properties and Real Estate Debt. The Company allocates resources and evaluates results based on the performance of each segment individually. The Company believes that Segment Net Operating Income is the key performance metric that captures the unique operating characteristics of each segment.

21

---

 

The following table sets forth the total assets by segment ($ in thousands):

 

The following table sets forth the financial results by segment for the three months ended March 31, 2020 ($ in thousands):  

 

22

---

 

The following table sets forth the financial results by segment for the three months ended March 31, 2019 ($ in thousands):  

 

 

15. Commitments and Contingencies

From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of business. As of March 31, 2020 and December 31, 2019, the Company was not involved in any material legal proceedings.

16. Subsequent Events

Acquisitions

Subsequent to March 31, 2020, the Company acquired an aggregate of $460.7 million of real estate, exclusive of closing costs, across three separate transactions.

Proceeds from the Issuance of Common Stock

Subsequent to March 31, 2020, the Company had received net proceeds of $691.9 million from the issuance of its common stock.

Repurchases

Subsequent to March 31, 2020, the Company repurchased $105.8 million of shares of our common stock/units.

 

23

---

 

References herein to “Blackstone Real Estate Income Trust,” “BREIT,” the “Company,” “we,” “us,” or “our” refer to Blackstone Real Estate Income Trust, Inc. and its subsidiaries unless the context specifically requires otherwise.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto appearing elsewhere in this quarterly report on Form 10-Q.

Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue” or other similar words or the negatives thereof. These may include our financial projections and estimates and their underlying assumptions, statements about plans, objectives and expectations with respect to future operations, statements with respect to acquisitions and statements regarding future performance. Such forward-looking statements are inherently uncertain and there are or may be important factors that could cause actual outcomes or results to differ materially from those indicated in such statements. We believe these factors also include but are not limited to those described under the section entitled “Risk Factors” in our prospectus and our Annual Report on form 10-K for the year ended December 31, 2019, which are accessible on the SEC’s website at www.sec.gov, as well as those set forth in Part II Item 1A Risk Factors herein. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this document (or our prospectus and other filings). Except as otherwise required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

Overview

BREIT invests primarily in stabilized income-oriented commercial real estate in the United States and, to a lesser extent, real estate debt. We are the sole general partner of BREIT Operating Partnership L.P. (“BREIT OP”), a Delaware limited partnership, and we own all or substantially all of our assets through BREIT OP. We are externally managed by BX REIT Advisors L.L.C. (the “Adviser”). The Adviser is part of the real estate group of The Blackstone Group Inc. (“Blackstone”), a leading investment manager, which serves as our sponsor. We currently operate our business in eight reportable segments: Industrial, Multifamily, Net Lease, Hotel, Retail, Office and Other Properties, and Investments in Real Estate Debt. Multifamily includes various forms of rental housing including apartments, student housing and manufactured housing. Other includes self-storage properties. Net Lease includes the real estate assets of The Bellagio Las Vegas (“Bellagio”) and the unconsolidated interest in the MGM Grand and Mandalay Bay joint venture.

BREIT is a non-exchange traded, perpetual life real estate investment trust (“REIT”) that qualifies as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”) for U.S. federal income tax. We generally will not be subject to U.S. federal income taxes on our taxable income to the extent we annually distribute all of our net taxable income to stockholders and maintain our qualification as a REIT.

We had registered with the Securities and Exchange Commission (the “SEC”) an offering of up to $5.0 billion in shares of common stock (the “Initial Offering”) and accepted aggregate gross offering proceeds of $4.9 billion during the period January 1, 2017 to January 1, 2019. We subsequently registered with the SEC a follow-on offering of up to $12.0 billion in shares of common stock (in any combination of purchases of Class S, Class I, Class T, and Class D shares of our common stock), consisting of up to $10.0 billion in shares in our primary offering and up to $2.0 billion in shares pursuant to our distribution reinvestment plan, which we began using to offer shares of our common stock in January 2019 (the “Current Offering” and with the Initial Offering, the “Offering”). The share classes have different upfront selling commissions and ongoing stockholder servicing fees.

As of May 15, 2020, we had received net proceeds of $18.2 billion from the Offering and the sale of unregistered shares of our common stock. We have contributed the net proceeds to BREIT OP in exchange for a corresponding number of Class S, Class I, Class T, and Class D units. BREIT OP has primarily used the net proceeds to make investments in real estate and real estate debt as further described below under “— Portfolio”. We intend to continue selling shares on a monthly basis.

Recent Developments

The global outbreak of COVID-19 has adversely impacted global commercial activity and contributed to significant volatility in financial markets. Many countries, including the United States, have reacted by instituting quarantines and restrictions on travel and

24

---

 

limiting operations for non-essential businesses. Such actions are creating disruption in global supply chains and adversely impacting a number of industries, such as retail, transportation, hospitality and entertainment, as well as negatively impacting most investment asset classes, including real estate. Although global growth will be significantly negatively impacted by the COVID-19 pandemic, the ultimate length of the period of economic contraction or recession is uncertain.

In accordance with local government guidance and social distancing recommendations, the vast majority of the employees of our Adviser have been working remotely since mid-March 2020. The Adviser’s technology infrastructure has proven to be robust and capable of supporting this model. The Adviser has implemented rigorous protocols for remote work, including increased cadence of group calls and updates, and frequent communication across leadership and working levels. The Adviser is leveraging technology to ensure its teams stay connected and productive, and that its culture remains strong even in these unusual circumstances. The Adviser continues to operate across investment, asset management and corporate support functions.

Impact of COVID-19 - Results of Operations

Rent collections and occupancy across our multifamily, industrial, retail, net lease, office, and other segments during the three months ended March 31, 2020 remained strong and consistent with prior periods. However, beginning in the April 2020 rent collections at our multifamily, industrial, retail, office, and other properties have been adversely impacted by COVID-19. Additionally, certain of our tenants impacted by the COVID-19 pandemic have requested temporary rent deferral or other forms of rent relief. April rent collections for our multifamily, industrial, net lease, retail, and office properties were only 2.5% lower compared to a typical month.

Beginning in March 2020, our hotel segment experienced a material decrease in occupancy, ADR, and RevPAR due to the full closure of our two full service hotels and our select service property located in Hawaii. In addition, certain of our select service hotels in common markets have consolidated operations into a single property. These conditions impacted the performance of our hotel assets in March 2020 and we expect significantly reduced occupancy, ADR, and RevPAR at our hotel properties to continue as properties remain closed or operate at reduced capacity as quarantines and travel restrictions remain in place. See “—Results of Operations – Same Property Results of Operations.”

The COVID-19 pandemic caused significant market pricing and liquidity dislocation in March, causing a broad-based market decline across securities including CMBS. This had a significant impact on our investments in real estate debt, which consist mostly of single asset, single borrower CMBS with assets and borrowers that the Adviser believes to be of high quality. See “—Results of Operations – Income (Loss) on Investments in Real Estate Debt.”

For additional discussion with respect to the potential impact of the COVID-19 pandemic on our NAV and liquidity and capital resources see “—Impact of COVID-19 on Our NAV” and “—Liquidity and Capital Resources” below.

Please refer to Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019, and our prospectus dated April 21, 2020 and filed with the SEC, as supplemented, as well as Part II, Item 1A Risk Factors and elsewhere in this quarterly report on Form 10-Q for additional disclosure relating to material trends or uncertainties that may impact our business.

Q1 2020 Highlights

Operating Results:

25

---

 

Investments:

Financings:

Overall Portfolio:

 

26

---

 

Portfolio

Summary of Portfolio

The following chart outlines the allocation of our real estate⁽¹⁾ and investments in real estate debt based on fair value as of March 31, 2020:

 

 

Real Estate Investments

The following charts further describe the diversification of our real estate investments⁽¹⁾ based on fair value as of March 31, 2020:

 

27

---

 

The following map identifies the top markets of our portfolio composition in real properties based on fair value as of March 31, 2020:

 

As of March 31, 2020, we had acquired 1,158 properties resulting in a diversified portfolio of income producing assets primarily consisting of Multifamily and Industrial properties, and to a lesser extent Net Lease, Hotel, Retail, Office and Other properties, concentrated in growth markets across the U.S. The following table provides a summary of our portfolio as of March 31, 2020:

 

 

28

---

 

Real Estate

The following table provides information regarding our portfolio of real properties as of March 31, 2020:

 

29

---

 

 

30

---

 

 

 

Subsequent to March 31, 2020, we acquired an aggregate of $460.7 million of real estate, exclusive of closing costs, across three separate transactions.

Impact of COVID-19 – Impairment Analysis

As of March 31, 2020, we had not recorded an impairment on any investments in our real estate portfolio. Despite revisions to future cash flows as a result of the anticipated impacts of COVID-19, as of March 31, 2020, the undiscounted cash flows of our real estate investments exceeded carrying value. Certain investments within our portfolio, specifically our hotel assets, are more susceptible to future impairment considerations due to the significant declines in occupancy as a result of extended closures and uncertainty around future cash flows. Due to the rapidly evolving environment, we will continue to evaluate the feasibility of our cash flow assumptions, which may result in impairments to certain of our investments in future periods.

31

---

 

Lease Expirations

The following schedule details the expiring leases at our consolidated industrial, retail, office and net lease properties by annualized base rent and square footage as of March 31, 2020 ($ and square feet data in thousands). The table below excludes our multifamily and self-storage properties as substantially all leases at such properties expire within 12 months:

 

Investments in Real Estate Debt

The following charts further describe the diversification of our investments in real estate debt by credit rating and collateral type based on fair value as of March 31, 2020:

 

32

---

 

As of March 31, 2020, our investments in real estate debt consisted of 184 investments in CMBS, 14 corporate bond investments, 10 loans, and seven investments in RMBS. The following table details our investments in real estate debt as of March 31, 2020 ($ in thousands):

 

 

 

Affiliate Service Providers

For details regarding our affiliate service providers, see Note 12 to our condensed consolidated financial statements included herein and Note 11 to the consolidated finance statements included in our Annual Report on form 10-K for the year ended December 31, 2019.

33

---

 

Results of Operations

The following table sets forth information regarding our consolidated results of operations ($ in thousands):

Revenues, Rental Property Operating and Hotel Operating Expenses

Due to the significant amount of acquisitions of real estate and investments in real estate debt we have made since March 31, 2019, our revenues and operating expenses for the three months ended March 31, 2020 and 2019 are not comparable. However, certain properties in our portfolio were owned for both the full three months ended March 31, 2020 and 2019 and are further discussed below.  

General and Administrative Expenses

During the three months ended March 31, 2020, general and administrative expenses increased $24.7 million compared to the corresponding period in 2019, primarily due to a $20.8 million forfeited deposit related to a transaction we decided not to pursue. The remaining variance is due to various corporate level expenses related to the increased size of our portfolio.

Management Fee

During the three months ended March 31, 2020, the management fee increased by $32.3 million, compared to the corresponding period in 2019. The increase was primarily due to the $10.5 billion growth of our NAV from March 31, 2019 to March 31, 2020.

Performance Participation Allocation

During the three months ended March 31, 2020, the unrealized performance participation allocation was zero due to the performance hurdle not being achieved. For the three months ended March 31, 2019, the performance participation allocation accrual was $20.2 million.

34

---

 

Depreciation and Amortization

During the three months ended March 31, 2020, depreciation and amortization increased $189.3 million compared to the corresponding period in 2019. The increase was driven by the growth in our portfolio, which increased from 491 properties as of March 31, 2019 to 1,156 properties as of March 31, 2020.

Income from Unconsolidated Entities

During the three months ended March 31, 2020, we recorded $13.3 million of income from unconsolidated entities related to our investment in the BREIT MGM Joint Venture. We did not have any unconsolidated investments during the corresponding period in 2019.

Income (Loss) from Investments in Real Estate Debt

During the three months ended March 31, 2020, income from our investments in real estate debt decreased $1.1 billion, compared to the corresponding period in 2019. The decrease was primarily due to unrealized mark-to-market declines across our investments in real estate debt due to significant market volatility caused by COVID-19. While our investments in real estate debt were marked down, we believe our portfolio is well protected with sufficient subordination at a 55% weighted‐average loan-to-value (“LTV”). The LTV is calculated by summing the original balance of a loan and all debt with a senior claim on the loan’s collateral, and dividing the result by the value of the loan’s collateral at origination or purchase.

Interest Expense

During the three months ended March 31, 2020, interest expense increased $96.9 million compared to the corresponding period in 2019. The increase was primarily due to the growth in our real estate portfolio and investments in real estate debt and the related indebtedness of such investments.

Other income (expense)

During the three months ended March 31, 2020, other income (expense) decreased $29.3 million compared to the corresponding period in 2019. The decrease was primarily due to a $37.1 million unrealized loss on our equity securities offset by $8.0 million of income earned from the forfeiture of a deposit on a portfolio of properties that were previously classified as held for sale as of December 31, 2019 and $3.2 million of dividends earned on our investments in equity securities.

Same Property Results of Operations

We evaluate our consolidated results of operations on a same property basis, which allows us to analyze our property operating results excluding acquisitions during the periods under comparison. Properties in our portfolio are considered same property if they were owned for the full periods presented, otherwise they are considered non-same property. Recently developed properties that have not achieved stabilized occupancy (defined as 90% or greater for properties other than hotels) and properties held for sale are excluded from same property results and are considered non-same property. We do not consider our investments in real estate debt segment to be same property.

For the three months ended March 31, 2020 and 2019, our same property portfolio consisted of 105 multifamily, 322 industrial, 25 hotel, and three retail properties.

Same property operating results are measured by calculating same property net operating income (“NOI”). Same property NOI is a supplemental non-GAAP disclosure of our operating results that we believe is meaningful as it enables management to evaluate the impact of occupancy, rents, leasing activity, and other controllable property operating results at our real estate. We define same property NOI as operating revenues less operating expenses, which exclude (i) depreciation and amortization, (ii) interest expense, and (iii) other non-property related revenue and expense items such as (a) general and administrative expenses, (b) management fee, (c) performance participation allocation, (d) affiliate incentive compensation awards, (e) income from unconsolidated entities, (f) income from investments in real estate debt, (g) net gain on dispositions of real estate, (h) interest income, and (i) loss on extinguishment of debt.

Our same property NOI may not be comparable to that of other REITs and should not be considered to be more relevant or accurate in evaluating our operating performance than the current GAAP methodology used in calculating net income (loss).

35

---

 

The following table reconciles GAAP net loss attributable to BREIT stockholders to same property NOI for the three months ended March 31, 2020 and 2019 ($ in thousands):

 

The following table details the components of same property NOI for the three months ended March 31, 2020 and 2019 ($ in thousands):

Same Property – Rental Revenue

Same property rental revenue increased $5.4 million for the three months ended March 31, 2020 compared to the corresponding period in 2019. The increase was due to a $6.7 million increase in base rental revenue partially offset by a $1.3 million decrease in tenant reimbursement income.

The following table details the changes in base rental revenue period over period ($ in thousands):

 

 

36

---

 

Same Property – Hotel Revenue

Same property hotel revenue decreased $11.7 million for the three months ended March 31, 2020 compared to the corresponding period in 2019. ADR for the hotels in our same property portfolio decreased from $172 to $167 while occupancy decreased 14% and RevPAR decreased from $130 to $103 during the three months ended March 31, 2020 compared to the corresponding period in 2019. The decreases can be attributed to closures of our full-service hotels and reduced occupancy at our select-service hotels as a result of the COVID-19 pandemic.

Same Property –Other Revenue

Same property other revenue decreased $0.4 million for the three months ended March 31, 2020 compared to the corresponding period in 2019. The decrease in other revenue for the three months ended March 31, 2020 was primarily a result of lower non-recurring lease related fees such as late fees and termination fees at our multifamily properties.

Same Property – Rental Property Operating Expenses

Same property rental property operating expenses decreased $1.8 million during the three months ended March 31, 2020, compared to the corresponding period in 2019. The decrease in rental property operating expenses for the three months ended March 31, 2020 was primarily the result of a decrease in general operating expenses related to the decrease in occupancy at our industrial properties and a decrease in snow removal expenses at our industrial and retail properties.

Same Property – Hotel Operating Expenses

Same property hotel operating expenses decreased $1.6 million during the three months ended March 31, 2020, compared to the corresponding period in 2019. The decrease in hotel operating expenses was primarily the result of closures of our full-service hotels and reduced occupancy at our select-service hotels as a result of the COVID-19 pandemic.

Non-same Property NOI

Due to our substantial fundraising and continued deployment of the net proceeds raised into new property acquisitions, non-same property NOI is not comparable period over period. We expect the non-same property NOI variance period over period to continue as we raise more proceeds from selling shares of our common stock and invest in additional new property acquisitions.

Funds from Operations, Adjusted Funds from Operations and Funds Available for Distribution

We believe funds from operations (“FFO”) is a meaningful supplemental non-GAAP operating metric. Our condensed consolidated financial statements are presented under historical cost accounting which, among other things, requires depreciation of real estate investments to be calculated on a straight-line basis. As a result, our operating results imply that the value of our real estate investments will decrease evenly over a set time period. However, we believe that the value of real estate investments will fluctuate over time based on market conditions and as such, depreciation under historical cost accounting may be less informative. FFO is a standard REIT industry metric defined by the National Associational of Real Estate Investment Trusts (“NAREIT”). FFO, as defined by NAREIT and presented below, is calculated as net income or loss (computed in accordance with accounting principles generally accepted in the United States of America (“GAAP”)), excluding (i) gains or losses from sales of depreciable real property, (ii) impairment write-downs on depreciable real property, plus (iii) real estate-related depreciation and amortization, and (iv) similar adjustments for non-controlling interests and unconsolidated entities.

We also believe that adjusted FFO (“AFFO”) is a meaningful non-GAAP supplemental disclosure of our operating results. AFFO further adjusts FFO in order for our operating results to reflect the specific characteristics of our business by adjusting for items we believe are not related to our core operations. Our adjustments to FFO to arrive at AFFO include removing the impact of (i) straight-line rental income and expense, (ii) amortization of above- and below-market lease intangibles, (iii) amortization of mortgage premium/discount, (iv) unrealized (gains) losses from changes in the fair value of investments in real estate debt, (v) forfeited investment deposits (vi) amortization of restricted stock awards, (vii) non-cash performance participation allocation or other non-cash incentive compensation even if repurchased by us, (viii) gain or loss on involuntary conversion, (ix) realized (gains) losses on extinguishment of debt, and (x) similar adjustments for non-controlling interests and unconsolidated entities.

We also believe funds available for distribution (“FAD”) is an additional meaningful non-GAAP supplemental disclosure that provides useful information for considering our operating results and certain other items relative to the amount of our distributions by removing the impact of certain non-cash items from our operating results. FAD is calculated as AFFO excluding (i) realized gains (losses) on investments in real estate debt and (ii) management fee paid in shares or BREIT OP units even if repurchased by us, and including deductions for (iii) recurring tenant improvements, leasing commissions, and other capital projects, (iv) stockholder servicing fees paid during the period, and (v) similar adjustments for non-controlling interests and unconsolidated entities. FAD is not indicative of cash available to fund our cash needs and does not represent cash flows from operating activities in accordance with

37

---

 

GAAP, as it excludes adjustments for working capital items and actual cash receipts from interest income recognized on investments in real estate debt. Cash flows from operating activities in accordance with GAAP would generally be adjusted for such items. Furthermore, FAD is adjusted for stockholder servicing fees and recurring tenant improvements, leasing commissions, and other capital expenditures, which are not considered when determining cash flows from operating activities in accordance with GAAP.

The following table presents a reconciliation of FFO, AFFO and FAD to net loss attributable to BREIT stockholders ($ in thousands):

 

 

FFO, AFFO, and FAD should not be considered to be more relevant or accurate than the GAAP methodology in calculating net income (loss) or in evaluating our operating performance. In addition, FFO, AFFO, and FAD should not be considered as alternatives to net income (loss) as indications of our performance or as alternatives to cash flows from operating activities as indications of our liquidity, but rather should be reviewed in conjunction with these and other GAAP measurements. Further, FFO, AFFO, and FAD are not intended to be used as liquidity measures indicative of cash flow available to fund our cash needs, including our ability to make distributions to our stockholders.

Impact of COVID-19 on Our NAV

For the month ending March 31, 2020, BREIT’s Class S NAV per share declined $0.98, from $11.44 as of February 29, 2020 to $10.46 as of March 31, 2020. BREIT’s Class I NAV per share declined from $11.42 to $10.44, BREIT’s Class D NAV per share declined from $11.27 to $10.31 and BREIT’s Class T NAV per share declined from $11.23 to $10.27. This price movement was the result of BREIT’s rigorous monthly valuation process and was driven by unrealized mark-to-market declines across our investments in real estate debt portfolio, as well as reduced valuations of our real estate properties from incorporating our estimate of the impact of the global outbreak of COVID-19.

38

---

 

Real Estate Portfolio Valuation

 

 

 

 

Investments in Real Estate Debt Valuation

 

 

During the March review period, our thorough approach to valuations took into account changes in the investment environment as the COVID-19 situation continued to evolve. We believe that our valuation process incorporates the most current information available as of March 31, 2020, and reflects the ongoing significant market volatility and uncertainty resulting from the COVID-19 pandemic.

BREIT’s rigorous monthly valuation process includes the following key components:

 

 

 

 

 

 

For more information on our Net Asset Value Calculation and Valuation Guidelines please refer to our prospectus. Please also refer to Item 1A Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019, our prospectus dated April 21, 2020 and filed with the SEC, as supplemented, and elsewhere in this quarterly report on Form 10-Q for additional disclosure relating to material trends or uncertainties that may impact our business.

Net Asset Value

The purchase price per share for each class of our common stock will generally equal our prior month’s NAV per share, as determined monthly, plus applicable selling commissions and dealer manager fees. Our NAV for each class of shares is based on the net asset values of our investments (including investments in real estate debt), the addition of any other assets (such as cash on hand) and the

39

---

 

deduction of any liabilities, including the allocation/accrual of any performance participation, and any stockholder servicing fees applicable to such class of shares.

Our total NAV presented in the following tables includes the NAV of our Class S, Class T, Class D, and Class I common stockholders, as well as partnership interests of BREIT OP held by parties other than us. The following table provides a breakdown of the major components of our total NAV as of March 31, 2020 ($ and shares/units in thousands):

 

 

The following table provides a breakdown of our total NAV and NAV per share by share class as of March 31, 2020 ($ and shares in thousands, except per share data):

 

Set forth below are the weighted averages of the key assumptions in the discounted cash flow methodology used in the March 31, 2020 valuations, based on property types. Once we own more than one office property we will include the key assumptions for such property type.

 

40

---

 

These assumptions are determined by the Adviser and reviewed by our independent valuation advisor. A change in these assumptions would impact the calculation of the value of our property investments. For example, assuming all other factors remain unchanged, the changes listed below would result in the following effects on our investment values:

 

 

The following table reconciles stockholders’ equity and BREIT OP partners’ capital per our condensed consolidated balance sheet to our NAV ($ in thousands):

 

 

The following details the adjustments to reconcile GAAP stockholders’ equity and total partners’ capital of BREIT OP to our NAV:

 

41

---

 

Distributions

Beginning March 31, 2017, we declared monthly distributions for each class of our common stock which are generally paid 20 days after month-end. We have paid distributions consecutively each month since such time. Each class of our common stock received the same gross distribution per share, which was $0.1592 per share for the three months ended March 31, 2020. The net distribution varies for each class based on the applicable stockholder servicing fee, which is deducted from the monthly distribution per share and paid directly to the applicable distributor. The table below details the net distribution for each of our share classes for the three months ended March 31, 2020:  

 

 

The following tables summarize our distributions declared during the three months ended March 31, 2020 and 2019 ($ in thousands):

 

 

Through March 31, 2020, our distributions have been funded entirely from cash flows from operations.

 

Liquidity and Capital Resources

Subsequent to March 31, 2020, the global outbreak of COVID-19 continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. While the long-term impact of COVID-19 to our business is not yet known, we believe we are well positioned from a liquidity perspective with $2.9 billion of immediate liquidity as of May 15, 2020, made up of $2.7 billion of undrawn line of credit capacity and $0.2 billion of cash on hand.  

Our primary needs for liquidity and capital resources are to fund our investments, make distributions to our stockholders, repurchase shares of our common stock pursuant to our share repurchase plan, operating expenses, capital expenditures, margin calls under our reverse repurchase agreements, and to pay debt service on our outstanding indebtedness we may incur. Our operating expenses include, among other things, fees and expenses related to managing our properties and other investments, the management fee we pay to the Adviser (to the extent the Adviser elects to receive the management fee in cash), the performance participation allocation that BREIT OP pays to the Special Limited Partner (to the extent the Special Limited Partner elects to receive the performance participation allocation in cash), and general corporate expenses. We do not have any office or personnel expenses as we do not have any employees.

Our cash needs for acquisitions and other capital investments will be funded primarily from the sale of shares of our common stock and through the assumption or incurrence of debt. Subsequent to March 31, 2020, we have experienced a decline in net proceeds received from our Offering and from the sale of unregistered shares of our common stock. In addition, beginning in March 2020 we have experienced increased repurchases under our repurchase plan. However, we continue to believe that our current liquidity position

42

---

 

is sufficient to meet our expected investment activity. Other potential future sources of capital include secured or unsecured financings from banks or other lenders and proceeds from the sale of assets. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures.

As of March 31, 2020, our indebtedness included loans secured by our properties, master repurchase agreements with Barclays Bank PLC (the “Barclays MRA”), Royal Bank of Canada (the “RBC MRA”), Citigroup Global Markets Inc. (the “Citi MRA”), Bank of America Merrill Lynch (the “BAML MRA”), Morgan Stanley Bank, N.A. (the “MS MRA”), MUFG Securities EMEA PLC (the “MUFG MRA”), and HSBC Bank USA, National Association (the “HSBC MRA”) secured by our investments in real estate debt, and unsecured lines of credit.

The following table is a summary of our indebtedness as of March 31, 2020 ($ in thousands):

 

 

As of May 15, 2020, we had received net proceeds of $7.6 billion from selling an aggregate of 705,040,067 shares of our common stock in the Current Offering (consisting of 373,087,939 Class S shares, 234,874,098 Class I shares, 23,718,916 Class T shares, and 73,359,114 Class D shares).

Cash Flows

The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash ($ in thousands):

 

43

---

 

Cash flows provided by operating activities increased $136.0 million during the three months ended March 31, 2020 compared to the corresponding period in the 2019 due to increased cash flows from the operations of the investments in real estate and income on our investments in real estate debt.

Cash flows used in investing activities increased $3.4 billion during the three months ended March 31, 2020 compared to the corresponding period in primarily due to an increase of $1.8 billion in the acquisition of real estate investments, $0.8 billion due to our investment in unconsolidated entities, $0.4 billion related to our investments in real estate-related equity securities and a net increase in the investments in real estate debt of $0.4 billion.  

Cash flows provided by financing activities increased $3.5 billion during the three months ended March 31, 2020 compared to the corresponding period in 2019 primarily due to a net increase of $3.5 billion from the issuance of our common stock and a net increase in borrowings of $0.2 billion. The increase was offset by a decrease of $0.1 billion in subscriptions received in advance and $0.1 billion of redemption of redeemable non-controlling interest.

Critical Accounting Policies

The preparation of the financial statements in accordance with GAAP involves significant judgments and assumptions and requires estimates about matters that are inherently uncertain. These judgments will affect our reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our condensed consolidated financial statements. We consider our accounting policies over investments in real estate and lease intangibles, investments in real estate debt, and revenue recognition to be our critical accounting policies. See Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019 for further descriptions of such accounting policies.

Recent Accounting Pronouncements

See Note 2 — “Summary of Significant Accounting Policies” to our condensed consolidated financial statements in this quarterly report on Form 10-Q for a discussion concerning recent accounting pronouncements.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Contractual Obligations

 

The following table aggregates our contractual obligations and commitments with payments due subsequent to March 31, 2020 ($ in thousands).

 

 

44

---

 

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Indebtedness

We are exposed to interest rate risk with respect to our variable-rate indebtedness, whereas an increase in interest rates would directly result in higher interest expense costs. We seek to manage our exposure to interest rate risk by utilizing a mix of fixed and floating rate financings with staggered maturities and through interest rate protection agreements to fix or cap a portion of our variable rate debt. As of March 31, 2020, the outstanding principal balance of our variable rate indebtedness was $8.1 billion and consisted of mortgage notes, term loans, secured and unsecured revolving credit facilities, and repurchase agreements.        

Certain of our mortgage notes, term loans, secured and unsecured revolving credit facilities and repurchase agreements are variable rate and indexed to one-month U.S. Dollar denominated LIBOR, six-month U.S. Dollar denominated LIBOR, three-month GBP denominated LIBOR, three month Euro denominated LIBOR or six month Euro denominated LIBOR (collectively, the “Reference Rates”). For the three months ended March 31, 2020, a 10% increase in the Reference Rates would have resulted in increased interest expense of $2.2 million.

Investments in Real Estate Debt

As of March 31, 2020, we held $4.3 billion of investments in real estate debt. Our investments in real estate debt are primarily floating-rate and indexed to the Reference Rates and as such, exposed to interest rate risk. Our net income will increase or decrease depending on interest rate movements. While we cannot predict factors which may or may not affect interest rates, for the three months ended March 31, 2020, a 10% increase or decrease in the Reference Rates would have resulted in an increase or decrease to income from investments in real estate debt of $0.8 million.

We may also be exposed to market risk with respect to our investments in real estate debt due to changes in the fair value of our investments. We seek to manage our exposure to market risk with respect to our investments in real estate debt by making investments in securities backed by different types of collateral and varying credit ratings. The fair value of our investments may fluctuate, thus the amount we will realize upon any sale of our investments in real estate debt is unknown. As of March 31, 2020, the fair value at which we may sell our investments in real estate debt is not known, but a 10% change in the fair value of our investments in real estate debt may result in a change in the carrying value of our investments in real estate debt of $429.4 million.

Evaluation of Disclosure Controls and Procedures

An evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this quarterly report on Form 10-Q was made under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based upon this evaluation, our CEO and CFO have concluded that as of the end of the period covered by this report our disclosure controls and procedures (a) were effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by SEC rules and forms and (b) included, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

There have been no changes in our “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the period covered by this quarterly report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

45

---

 

PART II. OTHER INFORMATION

From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of March 31, 2020, we were not involved in any material legal proceedings.

For information regarding factors that could affect our results of operations, financial condition and liquidity, see the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019.  

In light of developments relating to the COVID-19 pandemic occurring subsequent to the filing of our Annual Report on Form 10-K for the year ended December 31, 2019, we are supplementing the risk factors discussed in our Annual Report with the risk factor “The current outbreak of the novel coronavirus, or COVID-19, has caused severe disruption in the U.S. and global economy and has had an adverse impact on our performance and results of operations" disclosed in our prospectus dated April 21, 2020, which should be read in conjunction with the risk factors contained in our Annual Report.

 

46

---

 

Unregistered Sales of Equity Securities

During the three months ended March 31, 2020, we sold equity securities that were not registered under the Securities Act as described below. As described in Note 12 to our condensed consolidated financial statements, the Adviser is entitled to an annual management fee payable monthly in cash, shares of common stock, or BREIT OP Units, in each case at the Adviser's election. For the three months ended March 31, 2020, the Adviser elected to receive its management fee in Class I shares and we issued 2,837,038 unregistered Class I shares to the Adviser in satisfaction of the management fee for January and February 2020. Additionally, we issued 1,631,209 unregistered Class I shares to the Adviser in April 2020 in satisfaction of the March 2020 management fee.

We have also sold Class I shares to feeder vehicles primarily created to hold Class I shares that offers interests in such feeder vehicles to non-U.S. persons. The offer and sale of Class I shares to the feeder vehicles was exempt from the registration provisions of the Securities Act, by virtue of Section 4(a)(2) and Regulation S thereunder. During the three months ended March 31, 2020, we received $2.9 billion from selling 250.6 million unregistered Class I shares to such vehicles. We intend to use the net proceeds from such sales for the purposes set forth in the prospectus for our Current Offering and in a manner within the investment guidelines approved by our board of directors, who serve as fiduciaries to our stockholders.

Share Repurchases 

Under our share repurchase plan, to the extent we choose to repurchase shares in any particular month, we will only repurchase shares as of the opening of the last calendar day of that month (each such date, a “Repurchase Date”). Repurchases will be made at the transaction price in effect on the Repurchase Date (which will generally be equal to our prior month’s NAV per share), except that shares that have not been outstanding for at least one year will be repurchased at 95% of the transaction price (an “Early Repurchase Deduction”) subject to certain limited exceptions. Settlements of share repurchases will generally be made within three business days of the Repurchase Date. The Early Repurchase Deduction will not apply to shares acquired through our distribution reinvestment plan.

The aggregate NAV of total repurchases of Class S shares, Class I shares, Class T shares and Class D shares (including repurchases at certain non-U.S. investor access funds primarily created to hold shares of the Company but excluding any Early Repurchase Deduction applicable to the repurchased shares) is limited to no more than 2% of our aggregate NAV per month based on the aggregate NAV of the prior month and no more than 5% of our aggregate NAV per calendar quarter based on the average of the aggregate NAV per month over the prior three months.

In the event that we determine to repurchase some but not all of the shares submitted for repurchase during any month, shares submitted for repurchase during such month will be repurchased on a pro rata basis. All unsatisfied repurchase requests must be resubmitted after the start of the next month or quarter, or upon the recommencement of the share repurchase plan, as applicable.

Should repurchase requests, in our judgment, place an undue burden on our liquidity, adversely affect our operations or risk having an adverse impact on the Company as a whole, or should we otherwise determine that investing our liquid assets in real properties or other investments rather than repurchasing our shares is in the best interests of the Company as a whole, then we may choose to repurchase fewer shares in any particular month than have been requested to be repurchased, or none at all. Further, our board of directors may make exceptions to, modify, suspend or terminate our share repurchase plan if it deems such action to be in our best interest and the best interest of our stockholders. Material modifications, including any amendment to the 2% monthly or 5% quarterly limitations on repurchases, to and suspensions of the share repurchase plan will be promptly disclosed to stockholders in a prospectus supplement (or post-effective amendment if required by the Securities Act) or special or periodic report filed by us. Material modifications will also be disclosed on our website. In addition, we may determine to suspend the share repurchase plan due to regulatory changes, changes in law or if we become aware of undisclosed material information that we believe should be publicly disclosed before shares are repurchased. Once the share repurchase plan is suspended, our board of directors must affirmatively authorize the recommencement of the plan before stockholder requests will be considered again.

If the transaction price for the applicable month is not made available by the tenth business day prior to the last business day of the month (or is changed after such date), then no repurchase requests will be accepted for such month and stockholders who wish to have their shares repurchased the following month must resubmit their repurchase requests.

 

47

---

 

During the three months ended March 31, 2020, we repurchased shares of our common stock in the following amounts, which represented all of the share repurchase requests received for the same period.

 

 

The Special Limited Partner continues to hold 23,788 Class I units in BREIT OP. The redemption of Class I units, and shares held by the Adviser acquired as payment of the Adviser’s management fee are not considered part of our share repurchase plan.

 

None.

Not applicable.

Not applicable.

 

48

---

 

 

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

49

---

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

50