Weekly Series: mREIT And BDC Recommendations (And Price Targets) As Of 10/05/2025

Summary

• Q3 2025 estimates for earnings and book value / net asset value are now ready for all of the mortgage REITs and BDCs we cover. They are included in this article for full members.
• Recent trades (within the last 2 weeks) include both analysts adding to BXSL and Scott starting a position in DX.
• Many upgrades in the BDC sector as prices were thoroughly smashed over the last 2 weeks.
• The dividend projections section of this article now includes Scott’s Q4 2025 projections.

In the exclusive section for full members:

• All of the current ratings and price targets, as we do each time we publish this article.
• The REIT Forum’s Q3 2025 estimates by Scott Kennedy for earnings and book values or net asset values.
• Tables comparing results to projections.
• The dividend projections for each mREIT and BDC for Q4 2025.

We aim to retain the same layout from week to week. I hope that makes it easier to find the parts that are most relevant to you.

Weekly Notes From Colorado Wealth Management Fund

Positions: 1 trade over the last 2 weeks. I increased my position in BXSL at $27.09 on 9/24/2025 (before the ex-dividend date).

Commentary: I recently updated targets for the preferred shares and baby bonds. Those targets are all live in the Google Sheets and were disclosed in real-time with an article. We have a substantial amount of BDCs entering the bullish range as the sector took a pretty big hit over the last 2 weeks.

Scott’s Ultra-Brief Summary

“2 trades over the prior 2 weeks (since we didn't provide an article last weekend). As you know, I once again initiated a position in DX as it dipped back into the BUY range in late September 2025 (already currently back into my/our HOLD range with this week's move higher) and I purchased some more BXSL after the dividend reset. Outside CIM, where I incorporated the recent 2.1 million common share issuance due to the HomeXpress merger on 10/1/2025 ((1%) BV dilution), I just kept all hybrid/originator + servicer/commercial mREIT BVs as of 10/3/2025 unchanged when compared to 9/30/2025. Again, I just kept the BDC NAVs as of 10/3/2025 unchanged when compared to 9/30/2025. I also finalized all mREIT and BDC calendar Q3 2025 earnings projections.”

Note: Those earnings projections are available to our paid subscribers near the bottom of this article.

Weekly Notes From Scott Kennedy

Positions: 2 trades over the past 2 weeks.

On 9/22/2025, I once again initiated a position in DX at a weighted average purchase price of $11.95 per common share. With the recent sub-sector sell-off, as BVs have been increasing during Q3 2025, this has led DX (and a couple other sub-sector peers) into the attractively valued range (1st time in a while regarding DX). I chose DX over ARR and CHMI due to the company's more attractive risk/performance rating. My opening purchase was small - modest.

On 9/30/2025, as telegraphed in discord chat the previous night, I increased my position in BXSL at a weighted average purchase price of $25.89 per share. As previously noted, I'm patiently building a position in this stock (not "a race" per se to build a position all at once).  Again, I'm layering into my position as market sentiment towards the BDC sector, as a whole, has recently soured.  The BDC sector has recently been "beaten up" over speculation regarding a more rapid interest rate cutting cycle and more bearish/negative projected future economic performance.  If such a scenario were to play out, this would  negatively impact BDC sector earnings and NAV performance. That said,  I continue to not be as bearish as some market participants/recent implied sentiment.  I continue to project more of a “soft economic landing”.  As such, BXSL’s valuation is becoming more and more compelling as the price drops which matches nicely to my/our valuation methodology. That's why I started with a small position and have been building up larger "blocks" as it has decreased. To remain unbiased, there will likely eventually be a dividend reduction in 2026 (even with the very large cumulative UTI balance). However, the recent quick drop in stock price from $32+ all the way down to the high $25’s is, in my opinion, the market coming to this reality. Even with a future dividend reduction, BXSL provides very good - great long-term value and I believe the market has "overshot" this recent decline in stock price.

Regarding potential upcoming mREIT common stock buying in my personal portfolio, I'll likely add to my RITM and CIM positions if each company's stock price hits $11 and $13 per common share, respectively. I'll likely initiate a MFA position if the company's stock price hits $9 per common share.   

In general, I am being patient regarding selectively deploying capital in attractively-valued mREIT common stocks with a less attractive risk/performance rating.  My sector allocation to mREIT common stocks remains high (thus aligning with continuing to hold existing positions and selectively adding for future appreciation over the long-term).  Patience remains key as catalysts/events will take time to play out (especially within commercial/multifamily mREITs).  I will continue to remain disciplined regarding “picking and choosing” investments and lot sizes.

BDC Weekly Change: For the 6th straight week, high yield/speculative-grade credit spreads were relatively unchanged.   As of early October 2025, we have continued to see a decent retracement in high yield/speculative-grade credit spreads after a very volatile April 2025.  This is mainly due to continued optimism regarding tariff negotiations and semi-attractive economic data (inflation remaining fairly subdued, relatively flat unemployment rate, etc…).  Spreads remained relatively unchanged during calendar Q3 2025 and the start of calendar Q4 2025 (through 10/3/2025).  This is in direct contradiction to the recent quick, modest - notable sell-off in the BDC sector.     

BDC Other Comments (Current Week):

I will continue to monitor Middle East and Russia/Ukraine geopolitical tensions and monitor impacts in high yield/speculative grade markets as new events unfold.  I continue to not anticipate any material/notable direct impacts to the BDC sector from these events.  I am also monitoring all ongoing tariff updates and their impacts to each BDC’s underlying portfolio companies via weekly credit research. As is always the case, I will continue to monitor upcoming U.S. economic data/monetary policy and each event’s impact to the BDC sector.

Regarding the recent BDC sector sell-off, I believe it basically comes down to how well one thinks the future economy will be. If one believes the economy is going to get very bad/negative, that means interest rates will have to rapidly decline, non-accruals will rapidly increase, spreads will notably "spike" higher, and valuations/multiples will notably contract. Simply put, this scenario would result in a decrease to both NII (earnings) and NAV (valuation). The recent BDC sell-off would, at least partially, seem to indicate some of this general sentiment. I continue to not be that negative/bearish. That said, as pointed out over the summer (in particular July 2025), I/we had most of the sector as being nearly overvalued, overvalued, or notably overvalued prior to this sector sell-off.  As such, the sector sell-off is not that much of a surprise. There's even still some names that I/we deem overvalued/notably overvalued. However, there appears to be a couple names where "speculation/fear" is overblown. I would classify BXSL as being one of those names (yes, even when considering lowering NII/adjusted NII, a likely "bump" in future non-accruals, and a 2026 dividend reduction).   

Calendar Q2 2025 + Q3 2025 + Q4 2025 Recommendation/Target Range + Risk/Performance Upgrades (Downgrades) (Running Tally):