A report from short seller Muddy Waters Research predicts Blackstone Mortgage Trust, or BXMT, will take financial hits in the coming year and that the REIT is “at risk of a liquidity crisis.”

Muddy Waters founder Carson Block reiterated the report's claims at a conference in London this week, revealing that his firm has started shorting the REIT's stock.

The report entitled Here Comes the Cliff! predicts that BXMT will cut its quarterly dividend as soon as the second half of 2024, perhaps by as much as half, as borrowers struggle to repay the REIT in a tough refinancing environment.

“BXMT is at risk of a liquidity crisis,” the report says, and its losses could reach between $2.5B and $4.5B, which would put the company's $4B market cap in danger of being “completely wiped out by these losses.”

Blackstone pushed back on Muddy Waters' characterization of its position in an email to Bisnow Thursday.

“This report is highly misleading and represents a fundamental misunderstanding of our senior secured lending business,” the company told Bisnow. “The facts are that BXMT is running at record liquidity levels of $1.8B, collected $3.8B of repayments in the last twelve months, and generated near-record dividend coverage of 126% in the third quarter.”

“We believe this self-interested and misleading report is designed solely for the purpose of negatively impacting BXMT’s share price for the short seller’s own benefit,” Blackstone said in a comment to Seeking Alpha.

Muddy Waters said that macro conditions in commercial real estate are squeezing BXMT.

Among other factors, office net operating incomes are down because vacancies are poised to increase as existing leases end, making it harder to service debt, the report says. CRE asset values are down because of higher interest rates, and many borrowers are unable to refinance and pay off interest-only loans.

“Anticipated rate cuts would be too little, too late for many CRE borrowers,” the report says.

BXMT stock edged up nearly 1% Thursday morning. Compared with a year ago, its stock is down by about 10.5%.