黑石不動產信託 (BXMT) 2026 年第三季法說會：股利重置與貸款出售

重點總覽

• 黑石不動產抵押信託 (Blackstone Mortgage Trust) (NYSE: BXMT) 公布 2026 年第三季 GAAP 每股淨虧損為 1.95 美元。可分配收益為每股 0.38 美元，扣除已實現處分損益前的可分配收益則為每股 0.42 美元。
• 每股帳面價值較上季下降 12% 至 17.06 美元，主要反映當期預期信用損失 (CECL) 備抵金增加、待售貸款估值調整以及自持不動產減損。
• 董事會將第四季每股股利從第三季的 0.47 美元調整為 0.30 美元。管理層預期新的股利發放水準能在 2026 年第四季及 2027 全年獲得充分支撐，並能在各種信貸與利率環境中維持可持續性。
• 自上季以來，BXMT 售出近 10 億美元的貸款，加權平均出售價格相對於帳面價值為 0.93。其觀察名單規模較上季下降近 60%，降至 2019 年以來的最低水準。
• 該公司在該季度收到 23 億美元的還款，創下 2021 年第四季以來的最高水準。其中近 90% 來自既有舊貸款，加速脫離 2023 年之前的投資項目。
• BXMT 在第三季實施了 3,600 萬美元的庫藏股買回，目前剩餘授權額度為 1.1 億美元。管理層將庫藏股買回與多元化新投資視為保留資本的主要用途。

核心財務數據

業務與營運表現

BXMT 繼續降低對 2023 年以前既有舊貸款的風險曝險。自上季以來，公司出售了近 10 億美元的貸款，包括六筆總額近 5 億美元的既有辦公室貸款，以及兩筆總額約 2 億美元的既有多家庭住宅貸款。這些貸款大部分先前已列入觀察名單。

截至本季末，在 170 億美元的投資組合中，約有 50% 為 2023 年之後發行且評級為 1 至 3 級的貸款，以及近期在淨租賃、銀行貸款與建商融資組合的投資。該比例已從 2026 年初的不足三分之一顯著提升。

減損貸款與自持不動產約占投資組合的 14%。其平均帳面價值較原貸款基準折價近 30%，管理層表示這意味著抵押品價值下降了約 55%。另有 5% 的投資組合處於觀察名單中，較第二季下降 56%。

評級為 3 級或以上的 2023 年以前既有舊貸款總額約為 57 億美元，佔投資組合的三分之一。今年以來，BXMT 已從該領域回收了近 40 億美元的還款。

辦公室、多家庭住宅與飯店物業

截至第三季末，BXMT 擁有 20 億美元評級為 3 級或以上的既有辦公室貸款。其中，3.4 億美元已於第四季初提早償還，另有 5 億美元正在進行再融資。剩餘的 12 億美元占總投資組合的 7%，平均現有債務收益率 (debt yield) 為 12%。

評級為 3 級或以上的既有多家庭住宅貸款總額為 14 億美元，較年初餘額下降近 50%。今年以來還款額達 11 億美元，其中第三季包含五筆貸款共 5 億美元。若扣除兩筆總額 2 億美元且債務收益率低於 6% 的貸款，其餘貸款的加權平均現有債務收益率為 6.6%。

評級為 3 級或以上的 2023 年前飯店物業貸款總額為 13 億美元，平均現有債務收益率超過 9%。

新投資策略

BXMT 在第三季完成了約 5 億美元的新增投資。其中包括約 3 億美元的多家庭住宅與工業貸款發行，以及按 BXMT 份額計算，在淨租賃與建商融資策略中投資的約 1.5 億美元。

淨租賃、建商融資與銀行貸款組合投資目前已占投資組合近 10%，而 2025 年初這一比例為零。平均單筆投資規模從數年前的 1.3 億美元以上降至 1,800 萬美元，反映出投資組合更趨分散與細緻化。

管理層指引

管理層預計每股 0.30 美元的季度股利將在 2026 年第四季及 2027 年全年獲得收益覆蓋。該展望已考量減損貸款、投資組合縮減以及收益率較低的自持不動產所帶來的近期盈餘壓力。

預計第四季的可分配收益將受到第三季貸款減損的影響（這些貸款先前每季貢獻超過 850 萬美元的利息收入），以及還款金額超過新投資金額的衝擊。飯店資產的季節性強勁表現預計將抵銷部分影響。

隨著截至 10 月的貸款出售與還款進展，管理層表示 BXMT 有望實現甚至超越年底將辦公室貸款與既有舊貸款分別減少 40% 的目標。

該公司預計將利用現有流動性償還 2027 年第一季到期的公司債務。償還後，BXMT 在 2029 年之前將無任何到期的公司債務，且公司債務的加權平均剩餘期限將接近四年。

風險與關注事項

• 高利率持續對估值與部分 2023 年之前的投資項目造成壓力。在電話會議召開時，10 年期美國公債殖利率自 2026 年初以來已上升 80 個基點。
• 由於業務計劃進展緩慢且借款人無意追加資金，BXMT 在第三季對約 8 億美元的貸款進行了減損計提，主要涉及既有辦公室貸款及一筆飯店貸款。
• 每股帳面價值吸收了 CECL 備抵金增加（每股 1.59 美元）、轉入待售貸款調整（每股 0.38 美元）以及自持不動產減損（每股 0.22 美元）的影響。
• 投資組合自然縮減 (runoff)、非應計貸款 (nonaccrual loans) 以及收益不足的不動產資產，預計將拖累近期的可分配收益。
• 管理層承認高利率是住宅銷售的阻力，但表示其建商融資貸款的平均貸款成數 (LTV) 低於 65%，且普遍擁有交叉抵押與公司追索權的支持。

分析師問答環節重點

管理層將 2025 年底以來部分既有資產質量的惡化歸因於高利率以及物業業務計劃執行慢於預期。管理層表示，過往導致 BXMT 提列大部分備抵金的辦公室相關挑戰目前已大幅反映在帳面價值中，同時也承認此類規模的投資組合仍存在風險。

在資本配置方面，管理層表示調降股利保留了實施庫藏股買回與進行新投資的靈活性。BXMT 在第三季買回了 3,600 萬美元的股票，管理層將庫藏股買回視為其資金配置選項中的重要組成部分。

關於槓桿率，管理層表示在季末完成貸款出售與還款後，負債權益比已小幅下降。BXMT 可能會在未來一到兩個季度內允許投資組合進一步自然縮減，但認為目前的流動性與融資結構具有足夠的支撐力。

管理層表示，將比較出售減損貸款的報酬率與接管抵押品轉為自持不動產的潛在報酬率。出售貸款提供了一種較早退出的選擇，但管理層認為在某些情況下，尋求將資產轉為自持處置可能會創造最高報酬。

在多家庭住宅方面，管理層指出今年以來既有貸款還款額已超過 10 億美元，並表示該公司三分之二的多家庭住宅投資組合是在 2023 年之後發行的。在建商融資方面，管理層強調其借款人均為具備經驗的區域業者，平均貸款成數低於 65%，並享有投資組合層面的結構性保護。

法說會完整逐字稿

完整財報電話會議逐字稿

管理層陳述

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.

分析師問答

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.