ブラックストーン・モーゲージ・トラスト (BXMT) 2026年第3四半期決算説明会：配当リセットとローン売却

要点

• ブラックストーン・モーゲージ・トラスト（NYSE: BXMT）が発表した2026年第3四半期のGAAPベース純損失は1株当たり1.95ドルでした。分配可能利益は1株当たり0.38ドル、実現損益調整前分配可能利益は1株当たり0.42ドルとなりました。
• 1株当たり純資産価値（BPS）は前四半期比12%減少の17.06ドルとなり、これは主にCECL（現行予想信用損失）引当金の増加、売却目的保有貸付金の評価調整、および所有不動産の減損処理を反映したものです。
• 取締役会は四半期配当について、第3四半期の1株当たり0.47ドルから第4四半期は1株当たり0.30ドルへと改定しました。経営陣は、改定後の配当額が2026年第4四半期および2027年通期を通じて十分にカバーされ、さまざまな信用・金利環境においても持続可能であると見込んでいます。
• BXMTは前四半期以降、帳簿価額に対し加重平均価格0.93ドルで10億ドル近くのローンを売却しました。同社のウォッチリスト（要警戒物件リスト）は前四半期比で約60%減少し、2019年以来の低水準となりました。
• 当四半期中の返済受入額は23億ドルに達し、2021年第4四半期以来の最高水準となりました。その90%近くがレガシーローン（既存案件）によるもので、2023年以前の投資からのシフトが加速しています。
• BXMTは第3四半期中に3,600万ドルの自社株買いを実施し、授権残高は1億1,000万ドルとなっています。経営陣は自社株買いと分散型の新規投資を、保留資本の主要な活用先と位置付けています。

主要財務データ

事業および業績の動向

BXMTは、2023年以前のレガシーローンに対するエクスポージャーの削減を継続しました。前四半期以降、合計約5億ドルのオフィス向けレガシーローン6件や、合計約2億ドルの集合住宅向けレガシーローン2件を含む、10億ドル近くのローンを売却しました。これらの大半は以前ウォッチリストに入っていたものです。

当四半期末時点で、170億ドルのポートフォリオのうち約50%が、リスク格付け1〜3の2023年以降のローン、およびネットリース、銀行ローン、住宅金融ポートフォリオへの直近の投資で占められています。この割合は2026年初めの3分の1未満から上昇しました。

減損ローンおよび所有不動産はポートフォリオの約14%を占めました。これらの帳簿価額は元の貸付原価を平均して約30%下回っており、経営陣によるとこれは担保価値が約55%下落したことを示唆しています。また、ポートフォリオの別の5%がウォッチリストに掲載されており、これは第2四半期から56%減少しています。

格付け3以上の2023年以前のレガシーローンは合計約57億ドルとなり、ポートフォリオの3分の1を占めています。BXMTは年初来、このセグメントから40億ドル近くの返済を回収しました。

オフィス、集合住宅、ホスピタリティ

BXMTの第3四半期末時点における格付け3以上のオフィス向けレガシーローン残高は20億ドルでした。このうち3億4,000万ドルは第4四半期序盤に償還され、さらに5億ドルは借り換え市場にあります。残る12億ドルは総投資ポートフォリオの7%を占め、平均現行デットイールド（借入金に対する営業純利益率）は12%でした。

格付け3以上の集合住宅向けレガシーローンは合計14億ドルとなり、年初の残高を50%近く下回りました。年初来の返済額は11億ドルに達し、これには第3四半期中の5件・計5億ドルの返済が含まれます。デットイールドが6%未満である計2億ドルのローン2件を除くと、残りのローンの加重平均現行デットイールドは6.6%でした。

格付け3以上の2023年以前のホスピタリティ（ホテル等）向けローンは合計13億ドルで、平均現行デットイールドは9%を超えていました。

新規投資戦略

BXMTは第3四半期に約5億ドルの新規投資を実行しました。これには、集合住宅および産業用不動産向けローンの新規実行約3億ドルと、ネットリースおよび住宅建設金融戦略におけるBXMT持分ベースでのおよそ1億5,000万ドルの投資が含まれます。

ネットリース、住宅建設金融、および銀行ローンポートフォリオ投資は現在、ポートフォリオの10%近くを占めており、2025年初めのゼロから拡大しました。平均投資規模は数年前の1億3,000万ドル超から1,800万ドルへと縮小し、ポートフォリオの小口分散化が進んだことを反映しています。

経営陣の見通し（ガイダンス）

経営陣は、1株当たり0.30ドルの四半期配当が2026年第4四半期および2027年通期を通じてカバーされると見込んでいます。この見通しには、減損ローン、ポートフォリオの縮小、および低収益の所有不動産による短期的収益圧迫が織り込まれています。

第4四半期の分配可能利益は、四半期で850万ドル以上の受取利息に寄与していた第3四半期のローン減損や、新規投資を上回る返済受入の影響を受けると予想されます。ただし、ホスピタリティ資産の季節的な好調さが一部相殺する見込みです。

10月までのローン売却および返済を受け、経営陣はBXMTがオフィス向けローンとレガシーローンの双方で掲げた「年末までに40%削減」という目標を達成、あるいは上回る見通しであると述べています。

同社は、手元流動性を活用して2027年第1四半期に償還を迎える社債・負債を償還する予定です。返済後、BXMTは2029年まで社債・負債の償還がなくなり、加重平均残存期間は4年近くとなります。

リスクおよび注視項目

• 金利上昇が資産評価や特定の2023年以前の投資の圧迫要因となり続けています。電話会議の時点で、米国10年債利回りは2026年初めから80ベーシスポイント上昇していました。
• BXMTは事業計画の進捗が想定より遅れ、借り手が追加資本の拠出に難色を示したことを受け、第3四半期中に主にレガシーオフィスローンおよびホテルローン1件を中心に約8億ドルのローンを減損処理しました。
• 1株当たり純資産は、CECL引当金の増加（1株当たり1.59ドル）、売却目的保有へ振り替えられたローンの調整（1株当たり0.38ドル）、および所有不動産の減損（1株当たり0.22ドル）を吸収しました。
• ポートフォリオの減少（ランオフ）、不稼働（利息未収）ローン、および低収益の不動産資産が、短期的な分配可能利益の押し下げ要因になると予想されています。
• 経営陣は、金利高止まりが住宅販売のアゲインスト（逆風）となっていることを認めたものの、住宅建設金融ローンの借入比率（LTV）は平均65%未満であり、概ねクロス担保設定や法人追及権（コーポレート・リコース）によって裏付けられていると述べました。

アナリスト質疑応答の要点

経営陣は、2025年末以降の一部のレガシー資産の悪化について、金利上昇と不動産事業計画の執行が想定より遅れたことが原因であると説明しました。また、BXMTの過去の引当金の大部分を発生させたオフィス関連の課題は現在、大半が純資産に反映されているとする一方、この規模のポートフォリオ全体にはリスクが残存していることも認めました。

資本配分に関して、経営陣は配当の引き下げにより自社株買いや新規投資に対する柔軟性が維持されると述べました。BXMTは第3四半期に3,600万ドルの自社株買いを実施し、経営陣は買戻しを資本運用における重要な選択肢と捉えています。

レバレッジに関しては、当四半期末以降のローン売却や返済を経てデット・エクイティ・レシオが緩やかに低下したと説明しました。BXMTは今後1〜2四半期で追加のポートフォリオ減少を容認する可能性がありますが、現在の流動性と借入構造は十分な下支えになると考えています。

経営陣は、減損ローンの売却によるリターンと、担保権を行使して所有不動産として管理・回収する場合の潜在的リターンを比較検討していくと述べました。ローン売却はより早期の撤退（エグジット）という選択肢を提供しますが、場合によっては所有不動産化による解決を図る方が最高のリターンを生み出す可能性があると考えています。

集合住宅については、年初来で10億ドルを超えるレガシーローンの返済があったことを挙げ、同社の集合住宅ポートフォリオの3分の2が2023年以降に実行されたものであると述べました。住宅建設金融においては、実績のある地域ごとの借り手、平均65%未満の借入比率（LTV）、そしてポートフォリオ全体での構造的保護策を強調しました。

決算説明会（トランスクリプト）全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good day, and welcome to the Blackstone Mortgage Trust Third Quarter 2026 Investor Call. Today's conference is being recorded. [Operator Instructions]

At this time, I'd like to turn the conference over to Tim Hayes, Vice President, Shareholder Relations. Please go ahead.

Timothy Hayes

Good morning, and welcome, everyone, to Blackstone Mortgage Trust's Third Quarter 2026 Earnings Conference Call. I'm joined today by Tim Johnson, Chief Executive Officer; Austin Pena, President; and Marcin Urbaszek, Chief Financial Officer.

This morning, we filed our 10-Q and issued a press release with a presentation of our results, which are available on our website and have been filed with the SEC.

I'd like to remind everyone that today's call may include forward-looking statements, which are subject to risks, uncertainties and other factors outside of the company's control. Actual results may differ materially. For a discussion of some of the risks that could affect results, please see the Risk Factors section of our most recent 10-K. We do not undertake any duty to update forward-looking statements.

We will also refer to certain non-GAAP measures on this call. And for reconciliations, you should refer to the press release and 10-Q.

This audiocast is copyrighted material of Blackstone Mortgage Trust and may not be duplicated without our consent.

For the third quarter, we reported a GAAP net loss of $1.95 per share, while distributable earnings were $0.38 per share and distributable earnings prior to realized gains and losses were $0.42 per share. A few weeks ago, we paid a dividend of $0.47 per share with respect to the third quarter. Additionally, our Board of Directors declared a dividend of $0.30 per share with respect to the fourth quarter. The dividend is payable on January 15, 2027, to stockholders of record as of December 31, 2026.

With that, I'll now turn the call over to Tim.

Timothy Johnson

Thanks, Tim. Interest rates continue to be the headline in our world. The 10-year treasury is up 80 basis points since the beginning of the year, briefly reaching a 25-year high earlier this month. The market is clearly focused on the potential impacts to our sector. But importantly, we believe the setup is quite different today versus the last time rates rose significantly.

Capital markets are functioning well, with CMBS issuance on track for a post-GFC record this year. Spreads are effectively unchanged from where we started the year and approximately 40% lower than their peak in 2023. As it relates to real estate values, elevated rates are a headwind, but strong fundamentals supported by continued demand and the collapse in new supply are a tailwind. This is evidenced by REIT same-store NOI growth reaching a 3-year high and reflected in performance with the REIT sector achieving a total return of approximately 12% year-to-date and 50% from the 2023 lows when the 10-year last touched 5%. These are all encouraging signs for continued liquidity in both real estate debt and equity markets.

Where we see rates having more of an impact is on certain investments made prior to 2023. Last quarter, we outlined a path to accelerate portfolio turnover and reduce our exposure to these legacy pre-2023 investments. Since then, we've made significant progress, proactively selling select loans more exposed to higher rates, harvesting repayments and reducing our watchlist. And while this has had a significant impact on our third quarter CECL reserves, we believe the impact of the recent rise in rates on our legacy loan portfolio is largely reflected in our third quarter book value.

To provide more detail on our progress this quarter, I'll start with loan sales. Since last quarter, we sold nearly $1 billion of loans at a weighted average price of $0.93 on the dollar, capitalizing on strong market liquidity even as interest rates moved higher. This included 6 legacy office loans totaling nearly $500 million and 2 legacy multifamily loans totaling approximately $200 million. Importantly, most of these loans were on our watchlist, driving a near 60% reduction in our watchlist quarter-over-quarter to its lowest level since 2019.

We're very pleased with this outcome, proactively reducing higher risk rated and office loans in our portfolio. Including $250 million of these sales that closed in the quarter, we received a total of $2.3 billion of repayments, our highest level since the fourth quarter 2021. Nearly 90% of these repayments consisted of legacy loans. This momentum has continued with the repayment of a $300 million legacy office loan that priced in the CMBS market earlier this week, real-time evidence of liquidity for high-quality assets in the current rate environment. Reflecting the loan sales and repayment activity so far through October, we are well on our way to meet or potentially exceed the 40% year-end reduction in both office and legacy loans that we referenced on our last earnings call.

Turning to book value. The largest driver of the decline was the impairment of approximately $800 million of loans in the quarter, mostly legacy office and one hotel loan. We identified these loans on our last earnings call as part of $1 billion on our watchlist where we observed slower business plan progress and increasing pressure from higher rates. All of these loans were pre-2023 originations, and in many cases, sponsors had injected meaningful equity. But as we anticipated could be the case, those borrowers are now unwilling to commit additional capital to further support their assets. As a result, we took significant reserves against these loans.

It's important to point out that we now have only one $57 million watchlist loan in the office sector that has not been previously impaired and reserved for. We believe that the secular change challenges in office that have caused the majority of BXMT's impairments are substantially reflected in our book value.

Turning to earnings. While we reported $0.42 of distributable earnings prior to realized gains and losses in the third quarter, we expect to see pressure on go-forward earnings as we reduce the size of our portfolio to account for the book value impact of these new impairments and as we work through resolving legacy investments. As has always been a priority for BXMT, we are committed to generating an attractive, sustainable dividend. and the capital allocation decisions we make today directly influence book value and long-term earnings power, both key components of total stockholder return.

With all of this in mind, our Board has declared a $0.30 per share dividend for the fourth quarter. Based on what we see today, we expect to be able to cover this dividend next quarter and in full year 2027, even considering the near-term earnings pressure from impaired loans and our lower-yielding owned real estate assets. Importantly, we believe this dividend can be sustained through a range of credit and rate environments.

A key component of this decision is the ability to preserve capital that can be allocated towards attractive new investments and accretive debt or share repurchases. And with a stable, well-structured balance sheet and a reset dividend, we believe BXMT has ample flexibility to dynamically allocate capital and deliver strong risk-adjusted returns for our shareholders. To that end, we bought back $36 million of stock in the third quarter and have $110 million of remaining capacity under our current authorization.

We continue to view buybacks as an attractive allocation of capital, especially given the progress we've made in repositioning our portfolio. First, we carry our owned real estate and impaired loans at nearly 30% below our prior loan basis, reflecting an approximate 55% decline in asset value. Second, our watchlist now stands at its lowest level since before COVID. And third, the remainder of the portfolio is well performing. As Austin will walk through in more detail, this includes legacy office, which is shrinking rapidly through repayments. Despite all of this, the market is pricing in significant downside from here with BXMT shares trading at an additional $1 billion discount to our book value. We believe this offers an attractive entry point while delivering an 11% current yield to investors.

I'll now pass it to Austin to unpack our portfolio and investment strategy in greater detail.

Austin Pena

Thanks, Tim. I'll start by providing some additional detail on our portfolio before touching on Q3 investment activity. At the end of the quarter, we had a $17 billion portfolio. About 50% of our portfolio is post 2023 loan originations rated 1 through 3 and recent investments in net lease bank loan portfolios and homebuilder finance. This is up from less than 1/3 at the beginning of the year, demonstrating the significant progress we've made turning over our portfolio and diversifying into new more granular strategies. About 14% of our portfolio comprises our impaired loans and owned real estate, which, on average, reflect carrying values nearly 30% below our prior loan basis, implying collateral value declines of approximately 55%. We continue to work diligently to resolve and exit these investments.

Another 5% of our portfolio consists of our watchlist, which declined 56% from last quarter and is now at the lowest level since COVID. Importantly, over half of the balance consists of loans that were previously impaired and reserved for with meaningful new equity commitments from sponsors. Finally, about 1/3 of our portfolio or approximately $5.7 billion consists of legacy pre-2023 loans with a risk rating of 3 or better. These loans, mostly office, multifamily and hospitality are more seasoned and were originated in a different market environment.

However, we continue to see good liquidity for these assets with nearly $4 billion of repayments collected in this segment so far this year and with many more currently in the market to repay. While there will always be some risk across a portfolio of this size, based on what we see today, we have good reasons to be confident in their performance.

To dive a bit deeper, starting with office. We ended the quarter with $2 billion of legacy office loans with a risk rating of 3 or better. So far in Q4, $340 million of these loans have repaid, and we are tracking another $500 million currently in the market for refinancing, representing nearly half of this pool in aggregate. The remaining $1.2 billion, which represents just 7% of our total investment portfolio has an average in-place debt yield of 12% and is benefiting from the office recovery we are seeing broadly across markets. Across the U.S., net absorption was positive for the fifth straight quarter, reflecting the near 75% decline in new supply from peak.

In multifamily, we had $1.4 billion of legacy loans rated 3 or better. This is down almost 50% from the beginning of the year, driven by $1.1 billion of repayments, including $500 million across 5 loans this quarter. Importantly, only $200 million of our legacy multifamily or just 2 loans have in-place debt yields below 6%. One is a new build asset in Miami with a basis approximately 40% below replacement cost and the other was recently modified with significant new equity commitment from the borrower. The rest of these loans have a weighted average in-place debt yield of 6.6%. While higher rates are putting pressure on valuations in this sector, the positive fundamental outlook continues to be supported by resilient demand amid a steep decline in new supply with year-to-date national net absorption at its highest level since 2021.

In hospitality, we had $1.3 billion of pre-2023 loans rated 3 or better, which had an average in-place debt yield of over 9% Fundamentals in this sector are underpinned by strong economic growth and resilient consumer spending as well as limited new supply. And finally, the remaining $1.1 billion of our legacy loans includes our $450 million Spanish mixed-use loan, which we modified and extended last quarter, with the rest primarily consisting of cash flowing industrial, storage and retail.

So in summary, despite the fact that these legacy loans were originated in a lower rate environment, the strong underlying cash flow performance in these assets is driving continued liquidity in this segment of our portfolio.

Turning to Q3 investments. BXMT closed approximately $500 million of new investments this quarter, which primarily included $300 million of loan originations, all newer vintage multifamily or industrial and approximately $150 million of investments at share across our net lease and homebuilder finance strategies, which we believe continue to offer highly attractive relative value and advance our goal of increasing diversification and granularity in our portfolio.

Our net lease, homebuilder finance and bank loan portfolio investments now comprise nearly 10% of our portfolio, up from 0 at the beginning of last year. And our average investment size across our total portfolio is now $18 million, down meaningfully from over $130 million just a few years ago.

Looking ahead, while we are mindful of potential impacts from elevated rates, we believe we are well positioned. We have significantly repositioned our portfolio and our investment channels are more diversified than ever. And of course, the proprietary data and insights gathered across our global real estate platform will continue to guide BXMT through a dynamic market environment and support our top priority of delivering attractive risk-adjusted returns for our shareholders.

With that, I'll turn it over to Marcin.

Marcin Urbaszek

Thank you, Austin, and good morning, everyone. In the third quarter, BXMT reported a GAAP net loss of $1.95 per share and distributable earnings or DE of $0.38 per share. DE included $7 million of realized losses, primarily related to the resolution of an impaired Bay Area mixed-use asset after closing on a deed in lieu of foreclosure of the collateral property during the quarter. We now hold the asset on the balance sheet as owned real estate.

DE prior to realized gains and losses was $0.42 per share, which was down $0.06 from the prior quarter, mainly due to loan repayments and impact from the loans we put on nonaccrual last quarter. DE prior to realized gains and losses also benefited by about $0.04 per share from a tax benefit related to one of our owned real estate assets.

We continue to deploy capital in our unconsolidated joint ventures, mainly across our net lease and single-family homebuilder finance businesses. Altogether, we had $371 million of our equity invested in our JVs at quarter end up from $322 million as of Q2, and $217 million at the end of last year, representing a 70% increase year-to-date. Our earnings continue to benefit from these investments, which contributed over $12 million to our DE this quarter and over $29 million since the beginning of the year.

Our owned real estate portfolio ended the quarter with carrying value of $1.5 billion across 15 assets. The portfolio contributed about $19 million of NOI, inclusive of a $6 million tax benefit. Looking ahead to Q4, we expect DE to be impacted by a few factors, including new loan impairments recognized in Q3, which contributed over $8.5 million of interest income in the quarter, Q3 repayments exceeding the volume of Q3 investments, partially offset by anticipated positive seasonality of our hospitality assets, which account for about 1/3 of our owned real estate portfolio.

Book value ended Q3 at $17.06 per share, down by 12% from Q2, primarily due to $1.59 per share increase in CECL reserves, $0.38 per share valuation adjustment on loans transferred to held for sale, $0.22 per share impairment of owned real estate and $0.13 per share of depreciation and amortization. These impacts were partially offset by accretive share buybacks, which benefited book value by $0.08 per share in the third quarter.

Most of the net increase in the CECL reserve this quarter was related to the impairment of 6 watchlist loans Tim discussed earlier. The ending balance of our specific CECL reserve also reflects a transfer to held for sale of $62 million of reserves recorded in prior periods related to 2 previously impaired subordinated notes that were included in loan sales that closed in October.

The modest decline in our Q3 general reserve balance reflects a smaller loan portfolio and risk rating movements resulting in a lower balance of watchlist loans, driven in part by loans transferred to held for sale, which are not included in the CECL population but are carried at fair value. In total, our third quarter book value includes $3.64 per share of total CECL reserves, of which $0.97 per share is the general reserve and $2.67 per share are asset-specific reserves. For further discussion of our CECL reserves, please refer to our Form 10-Q.

The $64 million valuation adjustment on loans held for sale relates to the sale of 8 whole loans that were under contract to sell at the end of the quarter. The $615 million balance of these loans reflects anticipated net proceeds from the sale, which closed in October, in line with our carrying value.

During the quarter, we also impaired 3 of our owned real estate assets by a total of $36 million. The valuation adjustment reflects our estimated fair value of these properties, which we anticipate bringing to market in the coming quarters as we continue to focus on turning over our portfolio and recapturing capital supporting our under-earning investments.

Turning to BXMT's capitalization. We ended the quarter with $1.3 billion of liquidity. Our Q3 debt-to-equity ratio was unchanged at 3.9x as the impact of higher CECL reserves was largely offset by the repayments realized during the quarter. Our upcoming corporate debt maturities in the first quarter of 2027 have been largely prefunded, and we anticipate repaying them with liquidity on hand. Upon repayment of the 2027 notes, we will have nearly 4 years of weighted average remaining term on our corporate debt and no maturities until 2029.

Our business remains well capitalized with strong liquidity and a funding mix diversified across multiple sources, which have remained stable through the recent market volatility. Our balance sheet continues to be very well positioned with non-mark-to-market borrowings now representing about 89% of our total debt.

Thank you again for joining us today, and I will now ask the operator to open the call to questions.

Operator

[Operator Instructions] We will take our first question from Tom Catherwood with BTIG.

質疑応答

William Catherwood

Maybe, Tim, starting with you, a simple question, but effectively, what's next? Did you get to everything you wanted to in 3Q? Or is there more to go with sales and resolutions and modifications? And then where do you go from here?

Timothy Johnson

Thanks, Tom. So I'd say, first of all, we're in a higher rate environment. So we, of course, need to be mindful of that. But as mentioned in the prepared remarks, we do feel good about where our portfolio stands today. We reduced our watchlist by nearly 60% this quarter. And as we said, it's now at the lowest level since pre-COVID. And in aggregate, our impaired loans and owned real estate have been marked down by 30%.

And when you take a step back, really almost all of the reserves we've taken in the history of the company have been driven by legacy office. And today, we believe those significant challenges that we've seen over the past several years are largely reflected. And as Austin mentioned, half of our 1 through 3 risk-rated offices in the market to refinance. The other half has a 12% weighted average debt yield. And the rest of our legacy loan portfolio, generally high cash flowing assets where we're seeing strong liquidity. You saw the $4 billion of repayments year-to-date. And so while there's always some risk in a portfolio of our size, we do feel really good about where we're positioned today.

William Catherwood

Got it. Appreciate that. And then as a follow-up, in terms of the loan sales, so I think you mentioned $250 million in the quarter. There's the $615 million that's sitting in the held-for-sale bucket. So could you provide a little bit more color on what was sold on 3Q? And then how you're getting to the $0.93 of recovery? Because if we look at the held-for-sale bucket, it looks like recovery is 81% of principal balance. So can you walk us kind of through what exactly is out? And then what's the math on those recoveries?

Marcin Urbaszek

Sure. Tom, it's Marcin. Happy to take this one. Look, when we sort of look at the $0.93, it's essentially we're looking at versus where we're carrying the assets at the time of sale and at the end of the quarter. So we had about $250 million that's sold during the quarter. And then when we moved the rest, the other 8 loans to held for sale, we took that $64 million mark on them vis-a-vis our carrying value. So when we sort of look at the nearly $1 billion of sales and that $64 million mark, that's sort of the low 90s price that we're referencing, that's how we sort of thinking about it.

Operator

We'll take our next question from Rick Shane with JPMorgan.

Richard Shane

Look, obviously, a lot going on here. And I guess I have really 2 questions. One is that it felt like at the end of '25, you guys were sort of comfortable that you had identified the bulk of the issues within the portfolio and we're sort of moving into the heavy resolution stage. Fine, you resolved a lot of loans this year, but the reality is the identification stage of problems within the portfolio has persisted. Is this purely a function of the movement in rates? Or are there other fundamental factors that we need to think about that have really contributed to this?

And then the second is when we look at the dividend cut and the savings associated with that, it represents a significant savings. Is a lot of that going to be redeployed into repurchases given -- does this give you more flexibility to buy back a lot more stock given what's going to be a very steep discount when the stock opens this morning?

Timothy Johnson

Yes. Thanks, Rick. I'd say on your first question, rates have certainly been a material impact. And as we mentioned last quarter, the challenges that that has created have really been in this kind of legacy portion of our loan portfolio, which had previously been on our watchlist, which borrowers had been previously supporting. And I think the combination of the increased pressure in rates and some of those business plans lagging behind what we expected them to be at this point really contributed to that sort of change in outlook from what you're describing as where we were at the end of 2025.

As it relates to the dividend, really, ultimately, yes, this is a capital allocation decision and it's focused on long-term earnings power. And a part of that is balancing payout with capital preservation, which does, as you said, give us a ton of flexibility to deploy dry powder accretively through share buybacks and other attractive new investments. And we set it to a level that we expect to cover in the fourth quarter and the full year 2027 despite the near-term earnings pressure from impaired loans and lower-yielding assets.

So -- and we set it to a level that we think can be sustained through a range of rate and credit environment. So we did all that to give ourselves maximum flexibility. And as we noted in the script, buybacks are a big component of that.

Operator

We'll take our next question from Jade Rahmani with KBW.

Jade Rahmani

I wanted to start with multifamily, and I appreciate you taking the time to go through the legacy portfolio, debt yields and your comments there. Just high level, how are borrowers who own these assets thinking about the outlook because fundamentals do finally seem to be nearing a trough. They may not be fully at a trough, but you can see that concessions are declining and the magnitude of negative rent growth is reaching close to flattish. We'll see what the rest of the multifamily REITs say. So that's a bright spot.

And then starts are down, as you've noted previously, but then rates are much higher, which could pressure values by 5% to 10%. So putting those things together, are they going to take a glass half full approach? Or do you expect there to be some pressure on performance? Or maybe opportunistically, would you look to even own some of these assets to play for the future upside?

Austin Pena

Yes. Jade, this is Austin. Thanks. I can take that one. When we look at multifamily broadly, I think as you pointed out, we do see the sector continue to be supported by solid underlying fundamentals. So as you mentioned, we are starting to see rent growth turn around. When you look nationally, I think we've seen 4 consecutive months of positive rent growth. I think September was the best month we've seen in over 3 years. And that's underpinned by new supply, which is down nearly 60% from peak.

And so when we think about our portfolio, we think it's pretty well positioned. It's obviously still early, but 2/3 of our multifamily portfolio was originated post 2023 when rates were more elevated. And as I described earlier, we feel pretty good about our legacy multifamily loans with most of those -- a very small amount of those with a debt yield less than 6% and the rest with an average debt yield of 6.6%. And we're seeing good liquidity in the space. We got over $1 billion of legacy multifamily loans repaid year-to-date and $500 million of that just this past quarter. And so overall, we feel pretty good about how we're positioned in multifamily.

Jade Rahmani

And then I wanted to ask about the homebuilding JVs. D.R. Horton, the largest homebuilder reported today and trends are very soft. There's also been scrutiny on land banking arrangements driven by another one of the large builders in their land banking spin-off. So just curious about how you're thinking about the risks of entering this business and it will have a lot of different dynamics from commercial real estate.

Austin Pena

Yes. Thank you. I would just say we're really excited about this adventure in this sector long term. The overall housing supply in the United States is still structurally undersupplied. And we think we have a platform here that is really a critical advantage in this space. This is obviously a very small part of our portfolio today. Our existing portfolio is performing well. And we think there's a big opportunity for us to deploy into the space, which adds diversification and granularity to our portfolio and sets up to really what we think are compelling returns.

I will say, obviously, higher rates are a headwind to home sales. But ultimately, our borrowers are very experienced regional developers. The loans themselves are very well structured. They're less than 65% LTV on average, and they're generally secured by cross-collateralized portfolios with recourse to corporate entities in most cases. So we feel good about what we have today, and we're excited about the opportunity going forward.

Operator

We will take our next question from Marissa Lobo with UBS.

Ameeta Lobo Nelson

On the $0.42 of distributable earnings that you generated this quarter, and we expect pressure on earnings from smaller portfolio nonaccrual assets. But thinking about the cushion versus the new dividend, what level of distributable earnings are you underwriting against the $0.30 dividend in 2027?

Timothy Johnson

Sure. I'll take that. Thanks, Marissa. Really, I think as I said before, this is a capital allocation decision, and we are focused on long-term earnings power, but we do also expect to be able to cover the dividend in the fourth quarter of this year and in 2027, despite that near-term earnings pressure from impaired loans and lower-yielding assets. So we took the perspective -- the Board took the perspective of looking at this both from a short-term and long-term standpoint and believe it can be sustained in a range of different scenarios from here on out.

Ameeta Lobo Nelson

Okay. And could you give us an update on the Chicago office loan and the expected resolution or any developments you last updated us?

Austin Pena

Yes. Marissa, this is Austin. I can take that. As we mentioned last quarter, that loan, we've reached an agreement and are in discussions with the borrower to resolve that. It hasn't closed yet, but hopefully, we'll have more to talk about next quarter.

Operator

We will take our next question from Harsh Hemnani with Green Street.

Harsh Hemnani

I guess thinking maybe this time last quarter, the commentary was roughly that leverage is high, but that might be temporary as you collect a lot of repayments in 3Q. But of course, given the sales and the impact that had on book value, I feel like that somewhat offset the impact of all the repayments. I guess on a look-forward basis, how are you feeling about leverage at current levels? Is this a place where you feel comfortable? Should we expect it to maybe take down some of the savings from the dividend cut being attributable to paying down financing? Any color on that would be helpful.

Marcin Urbaszek

It's Marcin. Thank you for the question. Look, so as you mentioned, we finished the quarter at 3.9x debt to equity largely sort of unchanged quarter-over-quarter, we obviously had 2 sort of major drivers during the quarter that impacted leverage. One is CECL and then some timing of the loan sales, but also the repayment. So that sort of kept the leverage as to where it is quarter-over-quarter. I will mention that there's a little bit of a timing difference as well on the loan sales, which we transferred them to held for sale and took the mark on them in Q3, but the loans and the associated borrowings are still on the balance sheet. That transaction has since closed.

And so with some of the additional repayments that the Tim referenced earlier, leverage is modestly down quarter-over-quarter. So I think as we're sort of thinking about it, we're probably -- we want to be within the range, but probably somewhere in the middle of the range. So there may be some modest portfolio runoff in the coming quarter or 2. But we feel given our liquidity and structure of our borrowings, we feel pretty good about where we are at the moment.

Harsh Hemnani

That's helpful. And then maybe on the asset side, right, it feels like there's 2 pools of suboptimally cash flowing assets on the balance sheet right now. The first is the REO portfolio and the second being the impaired loans. And this is one of those rare periods where it feels like given what's happened with rates, real estate transaction markets seem to be slowing in real time, but there still seems to be like some liquidity on the loan trading side -- I would say, better liquidity on the loan trading side. So, I guess, in terms of resolutions, could we expect to see more loan sales to start to resolve the impaired loan portfolio before the REO assets? Is that something we should be considering?

Timothy Johnson

Thanks, Harsh. This is Tim. I'd say the loan sales, we thought, as you said, we did achieve good liquidity this quarter. We were pleased with the outcome. And it's worth pointing out again that these loans were mostly legacy loans, and we sold them opportunistically. We sold them at $0.93 relative to carrying value. And when you -- it really was -- the majority of those loans were also on our watchlist. So it is a good tool for sort of reducing exposure. And we look at that in combination with also looking at the go-forward return possibility of owning the assets as REO.

And so it's basically going to be sort of a return of holding as REO versus selling assets, and it's just a really positive tool in the toolkit to have the loan portfolio sale optionality to sort of like do it earlier if we choose to. But in many cases, we think the ultimate resolution of moving through REO is going to be the thing that achieves the highest return on the investment. So it's really just a comparison of the 2 things. But as you noted, there's good liquidity in that market. And so it's a tool that we have at our fingertips if we need it.

Operator

We will take our next question from Gabe Poggi with Raymond James.

Gabriel Poggi

I want to ask a go-forward kind of front -- looking through the front windshield question. In regards to capital allocation, your capital allocation this quarter was pretty diversified across business lines. If I think forward, is that something that you want to do going forward, more diverse allocation across net lease, bank loan portfolios, homebuilder finance, et cetera? And then can you talk about what you're seeing today for return on equity profile of each of those buckets?

Austin Pena

Thanks, Gabe. This is Austin. I can take that. I would say, definitely, yes. I mean it's been a very intentional move to look at diversifying our portfolio. And some of the things that you mentioned, we think are quite differentiated where we have platforms that really create a really competitive advantage for us and adds a lot of granularity to our portfolio. So if you look at the investment activity that we've been doing post -- over the last few quarters, I think that's where you'll continue to see us primarily lean in going forward with certainly a focus on diversification.

I think the other thing to point out, as we mentioned earlier, is the stock buybacks is part of that deployment opportunity, we think, today, and we did a little bit this quarter, and we have a lot of capacity to do that going forward as well.

Gabriel Poggi

One follow-up, Austin. Any changes to kind of how you're looking at return profiles across those buckets today versus 90 days ago? Obviously, the world has changed dramatically. But there's anything more attractive today than it was prior? Or is it everything kind of still makes sense depending on what opportunities you're able to unearth.

Austin Pena

Yes. I think it's a fair question, Gabe. I think we are seeing interesting opportunities. We obviously deployed a little bit of capital in things this quarter. When you look at the levered ROEs, I think they're fairly consistent and in line. But when we think about the diversity of where we're achieving that and the risk we're taking, we feel really good about that. I think that's what markets like this sometimes create is the opportunity to really find some really interesting credits that generate a really attractive return.

And so I think when we think about kind of go-forward ROEs on investments, I think it will be probably pretty consistent with what we've generated historically. But we're certainly going to do that, as I said earlier, with a mind towards diversification.

Operator

We will take our final question from Chris Muller with Citizens Capital Markets.

Christopher Muller

Apologies, I was bouncing around calls this morning. So sorry if you hit on this already. But CECL reserves are up a decent amount despite the decline in watchlist loans. Can you just talk me through the main drivers behind it? Is it all coming from lower property valuations given the macro backdrop? Or is there other things kind of rolling through there?

Marcin Urbaszek

Chris, it's Marcin. So on CECL, I would point to 2 things. The overall CECL was up mainly because of the asset-specific reserves. The general reserve is actually down on a dollar basis, again, because portfolio is small and watchlist is down by half. So that's -- those are sort of like the main movements within the balance of the CECL reserves.

Christopher Muller

Got it. And then should we be reading into the lighter origination volumes as you guys taking a more cautious or defensive stance? Or was that more driven by the volatility in the quarter kind of broadly slowing activity?

Austin Pena

Yes. Thanks, Chris. This is Austin. I would say it's a little bit of both. I think it's fair to say when rates are volatile, transaction volumes can be impacted. But that said, sitting here today, we do see a broad, really interesting pipeline of opportunities. We executed on some of that this quarter.

But as I said earlier, we're also looking at buybacks and other ways to deploy our capital accretively. So I think we'll continue to look at all of that. I think given our platform and the team we have here and the global scale of the credit business we have, we really have an opportunity to be really selective in terms of where we invest and look for where we can deploy capital at the best relative value.

Christopher Muller

Got it. And it's good to have that optionality at your fingertips. I appreciate that.

Operator

With no additional questions in queue at this time, I'd like to turn the call back over to Tim Hayes for any additional or closing remarks.

Timothy Hayes

Yes. Thanks so much. Really appreciate everyone's time. Please feel free to reach out with any questions.

Operator

Goodbye.