Oct 29, 2026 earnings call — Legacy loan impairments and portfolio repositioning
Board declared a $0.30 per share fourth-quarter dividend and expects to cover it next quarter and in full year 2027.
Revenue $0.1B (est $0.1B) · EPS $0.38 (est $0.24)
Key quotes
"Since last quarter, we have 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."
"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."
"Additionally, our board of directors declared a dividend of $0.30 per share with respect to the fourth quarter."
Analyst Q&A 7
next steps on portfolio and loan sales
Q (Tom Catherwood · BTIG): Did you finish what you wanted in 3Q or is there more to do with sales, resolutions, and modifications? Also, please explain the $250 million sold, the $615 million held-for-sale, and how you get to the $0.93 recovery.
A: Management said they are mindful of the higher rate environment but feel good about the portfolio today. They reduced the watch list by nearly 60% this quarter and impaired loans and owned real estate are marked down by 30%. They sold about $250 million in the quarter, moved eight loans to held for sale and took a $64 million mark that implies the low-nineties sale price equating to about $0.93 versus carrying value.
"When we sort of look at the $0.93, it is essentially we are looking at versus where we are carrying the assets by the time of sale and at the end of the quarter." — Marcin Urbaszek (CFO)
why problems persisted; use of dividend savings
Q (Rick Shane · JPMorgan): Why did the identification of problems persist — is it purely higher rates or other factors? And will dividend savings be used for buybacks?
A: They said rising rates were a material factor, especially for legacy loans whose business plans lagged expectations. On the dividend, they called it a capital allocation decision focused on long-term earnings power and capital preservation, and said the cut gives flexibility to deploy dry powder accretively through buybacks and other investments while covering Q4 and full year 2027.
"As it relates to the dividend, really, ultimately, yes, this is a capital allocation decision, and it's focused on long-term earnings power." — Tim Johnson (CEO)
multifamily outlook and homebuilder JV risks
Q (Jade Rahmani · KBW): How do multifamily borrowers view the outlook and will performance face pressure? Also, how do you think about risks from entering homebuilder finance JVs given weak trends?
A: They said multifamily fundamentals remain solid with rent growth turning positive and new supply down, and they feel their multifamily portfolio is well positioned with strong liquidity and significant repayments year to date. On homebuilder JVs, they said they are excited, view housing as structurally undersupplied, are starting small, and the loans are well structured (generally under 65% LTV and cross-collateralized with recourse).
"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." — Austin Peña (PRESIDENT)
dividend coverage and Chicago loan status
Q (Marissa Lobo · UBS): What level of Distributable Earnings are you underwriting against the $0.30 dividend in 2027? And any update on the Chicago office loan resolution?
A: They said the dividend change is a capital allocation decision and they expect to cover the dividend in the fourth quarter and in 2027 despite near-term pressure. For the Chicago office loan, they said they have reached an agreement and entered discussions with the borrower to resolve it, but the deal has not closed yet and they hope to have more next quarter.
"As we mentioned last quarter, that loan we have reached an agreement, entering discussions with the borrower to resolve that." — Austin Peña (PRESIDENT)
leverage outlook and loan sales vs REO
Q (Harsh Hemnani · Green Street): How do you feel about leverage at current levels and will dividend savings pay down financing? Also, will you sell more loans to resolve impaired loans before moving to REO?
A: They said quarter-end leverage was 3.9 times debt to equity and was largely unchanged quarter-over-quarter, driven by CECL, timing of loan sales, and repayments, and they expect to stay in the middle of their range. On sales versus REO, they said loan sales provided good liquidity and sales at about 93 cents are an optional tool, but in many cases holding assets as REO may deliver higher ultimate returns.
"Look, as you mentioned, we finished the quarter at 3.9 times debt to equity, largely unchanged quarter-over-quarter." — Marcin Urbaszek (CFO)
diversified capital allocation and ROE outlook
Q (Gabe Poggi · Raymond James): Will you continue diversified capital allocation across net lease, loan portfolios, homebuilder finance, and what are the return on equity profiles for those buckets? Any change in return profiles versus 90 days ago?
A: They said yes, diversifying the portfolio has been intentional and they will continue to lean into differentiated platforms that add granularity. They also said levered ROEs are generally consistent with historical levels, they see interesting opportunities today, and buybacks remain a deployment option.
CECL reserve drivers and originations decline
Q (Chris Muller · Citizens): Why were CECL reserves up despite a smaller watchlist — lower property values or other drivers? And are lighter originations due to a defensive stance or quarter volatility?
A: They said CECL rose mainly because of asset-specific reserves while the general reserve fell as the portfolio and watchlist shrank. On originations, they said it's a bit of both: rate volatility can slow transactions, but they see an active pipeline, executed some deals this quarter, and plan to be selective with capital deployment including buybacks.
"The overall CECL was up mainly because of the asset-specific reserves." — Marcin Urbaszek (CFO)