Thank you for standing by. You are on hold for the Blackstone Mortgage Trust third quarter 2026 investor call. At this time, we are gathering additional participants and should be underway shortly. We appreciate your patience and ask that you continue to hold. Good day, and welcome to the Blackstone Mortgage Trust third quarter 2026 investor call. Today's conference is being recorded. At this time, all participants are in a listen only mode.
If you require operator assistance at any time, please press star zero. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. At this time, I would like to turn the conference over to Tim Hayes, Vice President, Shareholder Relations. Please go ahead.
Good morning, and welcome everyone to Blackstone Mortgage Trust third quarter 2026 earnings conference call. I am joined today by Tim Johnson, Chief Executive Officer, Austin Peña, 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 would 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 15th, 2027 to stockholders of record as of December 31st, 2026. With that, I will now turn the call over to Tim.
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. 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 three-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 have made significant progress, proactively selling select loans more exposed to higher rates, harvesting repayments, and reducing our watch lists.
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 will start with loan sales. 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.
This included six legacy office loans totaling nearly $500 million and two 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 are 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 is 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 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.
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. 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. Third, the remainder of the portfolio is well-performing.
As Austin Peña 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 Peña to unpack our portfolio and investment strategy in greater detail.
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 one through three and recent investments in net lease bank loan portfolios and homebuilder finance.
This is up from less than a third 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 one-third 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 three 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 three or better. This is down almost 50% from the beginning of the year, driven by $1.1 billion of repayments, including $500 million across five loans this quarter. Importantly, only $200 million of our legacy multifamily, or just two 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 a 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 three 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. 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.
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 that 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 zero at the beginning of last year. 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.
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.
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 non-accrual 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 a third of our owned real estate portfolio.
Book value ended Q3 at $17.06 per share, down by 12% from Q2, primarily due to a $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 six watch list 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 two 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 watch list 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 eight 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 three 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 3.9 times, 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 pre-funded, and we anticipate repaying them with liquidity on hand. Upon repayment of the 2027 notes, we will have nearly four 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 a call to questions.
Thank you. As a reminder, please press star one to ask a question. We ask you limit yourself to one question and one follow-up question to allow as many callers to join the queue as possible. We will take our first question from Tom Catherwood with BTIG.
Thanks, and good morning, everybody. Maybe Tim, starting with you, 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? Where do you go from here?
Thanks, Tom. I'd say first of all, we're in a higher rate environment, so we of course need to be mindful of that. As mentioned in the prepared remarks, we do feel good about where our portfolio stands today. We reduced our watch list by nearly 60% this quarter, and as we said, it's now at the lowest level since pre-COVID. In an aggregate, our impaired loans and owned real estate have been marked down by 30%.
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. Today, we believe those significant challenges that we've seen over the past several years are largely reflected. As Austin mentioned, half of our one through three risk-rated offices in the market to refinance.
The other half has a 12% weighted average debt yield. 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. While there's always some risk in a portfolio of our size, we do feel really good about where we're positioned today.
Got it. Appreciate that. As a follow-up, in terms of the loan sales, I think you mentioned $250 million in the quarter. There is the $615 million that is sitting in the held for sale bucket. Could you provide a little bit more color on what was sold on 3Q, and then how you are 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. Can you walk us kind of through what exactly is out, and then what is the math on those recoveries?
Sure. Hey, Tom, it is Marcin. Happy to take this one. Look, 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. We had about $250 million that sold during the quarter. When we moved the rest, the other eight loans to held for sale, we took that $64 million mark on them vis-à-vis our carrying value. When we sort of look at the nearly one billion of sales and that $64 million mark, that is sort of the low nineties price that we are referencing. That is how we sort of think about it.
Got it. Thanks, everyone.
Thank you. We will take our next question from Rick Shane with JPMorgan.
Hey, guys. Thanks for taking my questions this morning. Excuse me. Look, obviously a lot going on here, and I guess I have really two questions. One is that it felt like at the end of 2025, you guys were sort of comfortable that you had identified the bulk of the issues within the portfolio, and were 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? 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? 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?
Yeah. Thanks, Rick . I'd say on your first question, rates have certainly been a material impact. 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 watch list, which borrowers had been previously supporting. I think the combination of the increased pressure and 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. 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.
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. We set it to a level that we think can be sustained through a range of rate and credit environments. So we did all that to give ourselves maximum flexibility, and as we noted in the script, buybacks are a big component of that.
Got it. Okay. I appreciate it, guys. Thank you very much.
Thank you. We'll take our next question from Jade Rahmani with KBW.
Thank you very much. Wanted to start with multifamily. I appreciate your 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. That's a bright spot. Starts are down as you've noted previously. Rates are much higher which could pressure values by 5% to 10%. 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? Maybe opportunistically, would you look to even own some of these assets to play for the future upside?
Yeah. 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. As you mentioned, we are starting to see rent growth turnaround. When you look nationally, I think we've seen four consecutive months of positive rent growth.
I think September was the best month we've seen in over three years. That's underpinned by new supply, which is down nearly 60% from peak. When we think about our portfolio, we think it's pretty well positioned. It's obviously still early, but two-thirds of our multifamily portfolio was originated post-2023 when rates were more elevated. 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%. 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. Overall we feel pretty good about how we're positioned in multifamily.
I wanted to ask about the home building 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 and their land banking spinoff. Just curious about how you're thinking about the risks of entering this business and it'll have a lot of different dynamics from commercial real estate.
Yes, thank you. I would just say we're really excited about this venture and this sector long term. The overall housing supply in the U.S. 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 this 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. We feel good about what we have today, and we're excited about the opportunity going forward.
Thanks very much.
We will take our next question from Marissa Lobo with UBS.
Good morning, and thanks for taking my question. On the $0.42 of Distributable Earnings that you generated this quarter, and we expect pressure on earnings from smaller portfolio, non-accrual 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?
Sure. I will 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. 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. 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.
Okay. Thank you. Could you give us an update on the Chicago office loan and the expected resolution, or any developments since you last updated us?
Yeah. Hi, Marissa, this is Austin. I can take that. As we mentioned last quarter, that loan we have reached an agreement, entering discussions with the borrower to resolve that. It has not closed yet, but hopefully we will have more to talk about next quarter.
Okay. Thank you for taking my question.
We will take our next question from Harsh Hemnani with Green Street.
Thank you. 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.
Sure. Good morning, Harsh. It's Marcin. Thank you for the question. Look, as you mentioned, we finished the quarter at 3.9 times debt to equity, largely unchanged quarter-over-quarter. We obviously had two main major drivers during the quarter that impacted leverage. One is CECL, and then some timing of the loan sales, but also the repayments.
That 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. With some of the additional repayments that the team referenced earlier, leverage is modestly down quarter-over-quarter.
I think, as we're thinking about it, we want to be within the range, but probably somewhere in the middle of the range. There may be some modest portfolio runoff in the coming quarter or two. But we feel given our liquidity and structure of our borrowers, we feel pretty good about where we are at the moment.
That's helpf ul. On the asset side, it feels like there's two 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. 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.
There still seems to be some liquidity on the loan trading side. I would say better liquidity on the loan trading side. 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?
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. It's worth pointing out again that these loans were mostly legacy loans. We sold them opportunistically, and we sold them at 93 cents relative to carrying value.
The majority of those loans were also on our watch list. It is a good tool for reducing exposure. We look at that in combination with also looking at the go-forward return possibility of owning the assets as REO. It's basically going to be a return of holding as REO versus selling assets. It's just a really positive tool in the toolkit to have the loan portfolio sale optionality to do it earlier if we choose to.
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. It's really just a comparison of the two things. 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.
Got it. Thank you.
We will take our next question from Gabe Poggi with Raymond James.
Hey, good morning, guys, and thanks for taking the question. I want to ask a go-forward kind of looking through the front windshield question in regards to capital allocation. Your guys' capital allocation this quarter was pretty diversified across business lines. If you 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. Can you talk about what you're seeing today for return on equity profile of each of those buckets?
Thanks, Gabe. This is Austin. I can take that. I would say definitely yes. It's been a very intentional move to look at diversifying our portfolio. 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.
If you look at the investment activity that we've been doing 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 stock buybacks is part of that deployment opportunity we think today. We did a little bit this quarter, and we have a lot of capacity to do that going forward as well.
One follow-up, Austin. Any changes to how you're looking at return profiles across those buckets today versus 90 days ago? Obviously, the world has changed dramatically. But is anything more attractive today than it was prior, or is everything kind of still makes sense depending on what opportunities you are able to unearth?
Yeah. I think it is 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 are fairly consistent and in line. But when we think about the diversity of where we are achieving that and the risk we are taking, we feel really good about that.
I think that is what markets like this sometimes create, is the opportunity to really find some really interesting credits that generate a really attractive return. So I think when we think about go forward ROEs on investments, I think it will be probably pretty consistent with what we have generated historically. But we are certainly going to do that, as I said earlier, with a mind towards diversification.
Thank you.
We will take our final question from Chris Muller with Citizens Capital Markets.
Hey, everyone. Thanks for taking the questions. Apologies, I was bouncing around calls this morning, so sorry if you hit on this already. 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?
Hey, Chris. It's Marcin. On CECL, I would point to two 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 the portfolio is small and watchlist is down by half. So those are sort of the main movements within the balance of the CECL reserves.
Got it. 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?
Yeah. 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. That said, sitting here today, we do see a broad, really interesting pipeline of opportunities. We executed on some of that this quarter. 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.
Got it. It's good to have that optionality at your fingertips. I appreciate that. Thanks for taking the question this morning.
Thank you. 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.
Yeah. Thanks so much. Really appreciate everyone's time. Please feel free to reach out with any questions.
Goodbye