← The TreppWire Podcast: A Commercial Real Estate Show
The TreppWire Podcast: A Commercial Real Estate Show
349. Economic Resilience vs. Headlines: Tale of Two Consumers, Record Office CMBS Delinquency, & Multifamily & Office Inflection Point?
00:48:34
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Foreign.
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Welcome to the trepwire Podcast, the show where commercial real estate meets data and insights. This is our Week in Review for the week ending August 29, 2025. I'm Hayley Keen with Trep, a data modeling and analytics firm for the CMBS commercial real estate and CLO markets. I'm with Lonnie Hendry, Chief Product Officer and and Steven Bushbaum, Research Director. This week, economic data and events pointed to a tentative path forward for the last quarter of the year. Inflation readings were mixed with CPI staying contained and PPI running hot, while Jay Powell's Jackson Hole remarks struck a balanced tone, acknowledging persistent price pressures but leaving the door open to policy easing. Labor market signals remained murky, jobless claims stayed historically low, but sluggish hiring and downward payroll revisions suggest a cooling trend that's difficult to ignore. And hot off the press, trapp's latest CMBS delinquency data is in and we saw the office delinquency rate hit another all time high. But what do those figures actually mean for the state of the office market and commercial real estate at large? We will unpack that on today's show. I know it's been a slower news week, Steven, but we have been keeping a pulse on retail earnings and you've been digging into some of those for specific retailers. So why don't you kick us off by talking about the main topics there?
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C
Sure. So since last week we talked about the issues of dirty economic data. I thought this week it'd be good to talk about some financial data. Now we're wrapping up the second quarter 2025 earnings run and and what stuck out to me as an interesting theme is specifically the retail sector and it's giving us a tale of two consumers. And we've talked about this bifurcation a fair bit in the past, but I felt like it would be good to provide a high level summary of what's happened with second quarter 25 earnings. And I think it's no surprise to anyone. Value driven and resilient retail has shown up at the low to mid price points, but cautious and sometimes sharply so. Caution has been given where bigger ticket items and dining out things such as discretionary expenditures are the main drivers of that retailer. So on the strength side, value is clearly winning. Take five Below for instance. They've delivered double digit comp growth with sales surging over 23% and comparable sales jumping 12.4% in the quarter. Five Below also lifted their full year sales and EPS guidance leaning into traffic and new store momentum, Dollar General also raised its outlook after beating on the quarter. Traffic and basket size both helped comps and management nudged sales and EPS targets higher. Even the biggest box is leaning in Walmart's mid August print came in with a higher full year outlook as grocery and E commerce continued to do the heavy lifting. Walmart saw a solid 4.6% increase in US comparable sales with grocery and wellness fueling its growth. And some of the surprising prints for me were Dick's Sporting Goods and Victoria's Secret. So Dick's Sporting Goods joined the Rays Club on its record Q2 sales, pointing to healthy demand for experiential formats and team sports. And even Victoria's Secret surprised to the upside and took its full year sales view and pushed it higher. Now on the cautious side, I think to nobody's surprise, Best Buy is one of the big names that sticks out. Now. Best Buy beats on comps and revenue, but they kept their guidance unchanged and warned that we're gonna have some tariff noise as a reminder that big ticket categories are still grinding. Target posted a solid quarter, but again they held their full year guidance flat and kept a measured tone with sales still expected to be down slightly on the year. Perhaps one of the most negative sectors have been restaurants. Now you have had some standouts, some winners, but there's a clear pressure point here. Across Q2, operators talked about softer traffic, heavier promos to defend value and costs that aren't falling fast enough, especially where price fatigue is set in. We saw mixed prints and cautious commentary even from scale players. Value menus help, but margins are tight and consumers are picking their spots very selectively. So all in all we've had bifurcation. But what surprised me is some of the retailers that I would view as perhaps more discretionary have been standouts on the positive side. So clearly there's some margin flexibility and the tariffs haven't bitten as negatively as I think we'd expected to see. Now we're still early in the game, but the fact that retailers are being bold enough to raise forward guidance for full year is a positive sign for me. So we'll talk about some other property sectors here throughout the segment, but I wanted to kick it off on retail. All in all, going into earnings season I would have expected a slightly more negative tilt to guidance and all in results, but I've come away slightly on the bullish side. What do you think Lonnie?
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I think you sound a little bit more than slightly on the bullish side, Stephen. Like those numbers are really positive and I tend to agree with you in the sense that if you look at the headlines and I'll have some numbers here that I'll go over in just a second, you would believe that things would start slowing down. I mean, if you look at consumer confidence as an example, it was down again 1.3 points. This is a conference board Consumer confidence index was down 1.3 points to 97.4 in August, which was down from July's 98.7. It's obviously still in an acceptable range, but it does indicate that people are a little bit nervous about short term expectations for income, business conditions. If you look at that part of the index, business conditions and job market fell by 1.2 points to 74.8, which was significantly below 80, which is the marker that generally can signal a recession as a head. So if you look at consumers confidence, it would tell you that the consumers are not feeling like they're on stable footing. But if you look at the retail earnings, you know, their spending shows a different pattern. And what's really interesting is you look lump all this together. The US economy grew 3.3% in Q2. So that growth was stronger than what was initially thought and doesn't give any indication that we're starting to see a slowdown or that a recession is on the doorstep. So GDP rose at 3.3% on an annualized pace in the April through June period. That's from the Commerce Department. They pushed this out on Thursday and you know, it was better than the initial 3% estimate. And the Dow Jones had a consensus forecast of 3.1%. If you dig a little bit deeper into their consumer spending is what helped push the number higher, which it rose by 1.6% compared to the 1.4% estimate. So to your point, you know, I like the term bifurcation, although I'm afraid some of our listeners may start a drinking game if we keep using the term bifurcation or we work. But the reality is, even though some of these retailers on the high end maybe are starting to see the slowdown, and restaurants obviously are seeing the slowdown, there's enough of that value play for consumers that they're continuing to push the envelope. And so, you know, I'm with you. With retailers raising some of their full year forecast, that tells you the data that they're looking at makes them feel pretty bullish about where they're positioned. And so it'll be an interesting end to the year. But at this point, despite all of the negative headlines, despite all of the things that could derail Consumer spending, sentiment, et cetera, et cetera. It's proven to be resilient and companies are still making money and the tariffs haven't derailed everything. And so I think all in all you got to feel really good about where we're at. I mean we've talked about it for the last couple of months. I remember us being on the podcast and all of the economists had forecasted 100% probability of recession just a couple of years ago, never materialized. And here with all the tariff talk and everything that the sky was going to fall and all of this stuff like again, maybe it's still early, maybe we're not there yet, they're not baked in. But at this point I don't know how you see these things and not feel bullish. I mean, I think the worst has to be behind us based on what we're seeing today. Now I'm hopeful that that plays itself out, but I don't think you'd see all these institutions raising their guidance and having the results they're having if they felt like the market was about to crater.
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Yeah, I mean I'm not even seeing some of the yellow, orange or red flags that I'm looking for in consumer health. Like you're not seeing a dramatic amount of FICO score slippage, you're not seeing a dramatic rise. Now it's maybe a little bit of creep in credit card delinquencies, but you're not seeing like the sharp spikes. So while there has been some deterioration in the margins for certain consumer loan products, consumer borrowing products, all in all the US consumer health has held up pretty well. And so what I'm looking at on a go forward basis is if we do have long end rates come down just enough to spur an increase in home sales activity, if we do see a noticeable increase in transaction volumes on the resi side, what that's going to mean for broader retail health and GDP growth could be extremely positive. Now I think to some extent that might be what the Fed is a little bit worried about if that is going to trigger a fresh wave of inflation in 2026. But on whole it's typically a pretty straightforward correlation between an increase in residential housing transactions and GDP growth due to that knock on spending effect.
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Yeah, I mean I listen like that, that part. We're, we're still waiting to see how and when the residential market goes, whatever direction it's going to go. But with pals tenor coming out of Jackson Hole indicating they're probably going to make a rate cut as we've said even though it doesn't maybe materially impact interest rates, it does create a psychological boost for people to feel like maybe now's the time to get back in. You know, and I read some stuff this week that said, you know, they're anticipating 25 basis points, the next two meetings. So I think heading into the end of this year, you could start seeing some traction on the residential side. To your point, the knock on effects are there. You know, it's, there's just so much activity in the market, Stephen. It's just, it's hard to kind of triangulate all of these things into some, something that actually is an indicator because if you look at the residential market, you can make the case that there's so much available inventory. You know, I was seeing this last week where you can buy new construction homes for significantly less than existing inventory of pre owned homes. That's usually not a great sign, however, you know, we haven't seen any knock on effects where we're seeing foreclosure numbers jump through the roof or anything like that at this point. You know, it remains to be seen what will happen there. But I think, you know, the Fed is finally going to pivot. You know, the one thing that's, that's kind of interesting is when we haven't talked about it really in the last couple of months, is just the Fannie Freddie privatization. That's a whole nother thing that on its face, kind of the last remaining remnant of the great financial crisis where, you know, they set up the fhfa, they put them under conservatorship. It was intended to be a short term kind of, I won't call it bailout, but basically like a protection mechanism to keep them solvent. And here we are in 2025, almost 2026, with them still under conservatorship with the FHFA. And it's interesting just hearing people's perspective on privatizing them. You know, like there are some people that. There was a quote in the commercial observer article, it says the old saying is if it ain't broke, don't fix it. But when it comes to the second Trump administration approach to government, the mindset appears to be break now, fix later. And I kind of laugh at that in the sense that the only reason they're in conservatorship is because it was broken. And the idea was that the government wasn't going to continue to be a vital part of that process. But I just want to get your thoughts on that because I think that's another thing that could be a really bullish signal or a bearish signal, depending on how you sit with just what's happening with everything else in the markets.
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C
Yeah, I mean, on whole, at this point in time, I'm neutral on the topic. I don't have reason to be extremely bullish, no reason to be extremely bearish. I'm neutral in my stance. And if anything, I would probably tilt toward the bearish side if only because I believe at some level follow the leader has worked well for certain trades. And so if you believe in Bill Ackman's conviction and the success of Fannie and Freddie, well, he's placed a significant bet to the positive on that end. And so, yeah, I mean, I think there's probably going to be some disruptions, perhaps some reallocation of credit availability, but by and large their mandate is going to remain the same.
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Right.
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Their primary mission is to support homeownership and housing affordability in the US Maybe dialing back the housing affordability somewhat because of how contentious that topic can be. But I think by and large I don't expect there to be any dramatic pullback in credit availability as a result of privatization.
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Yeah, I agree with you. And I just think just given the timing of this with all of the other issues, it's precarious in the sense that if there were a pullback that could cause some havoc just given where we are with some of the residential and other challenges that we've talked about today, if it continues status quo even in a privatized format, no harm, no foul, it actually returns things back to where they should be in the first place. So yeah, this has been great. Kind of an overview of where we're at this week. I do feel more optimistic today than I probably have in a while, just given the numbers that have come out over the last week or so.
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Well, I'm glad you're optimistic, Lonnie. I want to see if you still are after this next headline and I think you guys will. But this is a topic that every month we talk about and I want again for you both to give some context here. So we'll turn now to our latest CMBS, or Commercial Mortgage Backed Securities Delinquency Report. And this month we saw that distress is still climbing. The multifamily rate hit a nine year high and office hit another all time high. But remember, this doesn't always mean that we're seeing permanent distress and we are seeing pockets of life in these sectors in other parts of commercial real estate. So why don't we start with some of the report takeaways, Steven, and then you guys can dig into what this really means for the sectors and the market and maybe how this is serving as a proxy for what might play out in the months ahead.
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C
Absolutely. So the TRUP CMBS delinquency rate increased for the sixth consecutive month in August, increasing 6 basis points to 7.29%. In August, the overall delinquent balance was 44.1 billion. That's an increase from 43.3 billion. And the outstanding balance, which is the overall universe of CMBS loans, we track that outstanding balance was 604.6 billion. That's up from 598.9 billion in July. Now, breaking it down by property type, there were three main sectors that showed substantial changes on a month over month basis. Multifamily and office rates both surged, with multifamily up 71 basis points to a nine year high, as Haley mentioned, to 6.86% and office climbing 62 basis points to yet another all time high of 11.66%. Now on the flip side, the retail delinquency rate dropped 48 basis points to 6.42%, receding to its lowest level over the past year. Now, if we just look at the aggregate loan level statistics for August, we saw a substantial volume of newly delinquent loans, but we also saw a pretty a pretty sizable volume of loans that cured newly delinquent loan balances totaled 4.8 billion, while cured loans totaled 3.8 billion. So on net, still an increase, but that is a healthy amount of cures on the month. So let me just run down the property type delinquency rates really quick and then I'll kick it over to you, Lonnie. So the industrial delinquency rate increased 8 basis points to 0.6%. The lodging delinquency rate decreased 5 basis points to 6.54%. Multifamily increased 71 basis points to 6.86%. Office increased 62 basis points to 11 spot 66%. And the retail rate decreased 48 basis points to 6.42%. So some positives, some negatives, but all in all, I think this is pretty well in line with what we've been seeing over the past three months or so in terms of property sector trajectory trends.
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Yeah, I mean, I think if you were, you know, just looking at this in a vacuum, you would say, wow, that multifamily rate seems really high. And as Hayley mentioned, it's it's some a high watermark over the last several years. So it is high by definition. But I don't take that as any real cause for concern in the sense that we knew that there was a lot of multifamily distress and some Sunbelt markets with the floating rate debt. A lot of those have been taken care of or they've been repackaged into new deals, but it doesn't mean that all of them have. And you're going to see this number tick up until those things work themselves through the system. The office number, while again setting a new all time high. It's not like it went from 11% to 30%. We're talking about, you know, less than 100 basis point increase from the previous high water mark. So I, you know, I think this is in line with what we would expect given kind of where the market is today. And you know, this is where, you know, we've made a pretty direct connection between the two narratives being true at the same time. You could also, if we wanted to today go through the new origination volume and issuance. I mean overall CMBS issuance year to date over 80 billion was at 67 billion. Same time period last year significantly higher CRE CLO issuance year to date is over 20 billion. It was at 5 billion last year. So while yes, some of the delinquency by property sector and the overall rate is up, it's, it's battling with the reality that there's a lot more deals and a lot more transactions being originated on the new side of the equation. So I, I think this is part of the process and quite honestly I think for all of us that are in the market, we'd love to see this actually play out faster in the sense that lenders know which properties are troubled, borrowers know which properties are troubled. We've, we've done the proverbial kick the can down the road. It's time to kind of just deal with the reality at some level. Like deal with the, the non performing properties, get them off your books, take the hit, sell them at a discount, let somebody else come in and reposition them. I'd like to see us moving in that direction. And it feels like maybe in multifamily we're starting to see that in office. We're definitely seeing that. We've had several deals in San Francisco recently that we've talked about on the podcast where we're starting to see some traction in some of these zombie office markets. So again, I'm with you Steven. This is kind of where we would expect it. Even though the numbers are higher, they're still within, you know, kind of that expected range, all things equal. And the retail going down I think is a story. You know, if we didn't see the other two line items going up, retail might have been the headline for this, this month's delinquency, because we're starting to see some retrenchment in, in the retail number, which I think is positive. So overall, I think this doesn't change my sentiment at all around just kind of the optimism where, where we're at. It will be interesting just to see if the office number continues to increase. I think I was on record saying, you know, closer to 20%. Still don't think we get there based on what we've seen thus far this year, but it wouldn't be out of the question to see 12 or 13% based on what we've seen the last couple of months.
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Yeah, when I sketched out the maturity numbers for the office sector eight months ago, so back at year end 24, it looked like what we should see is a push to about 12% delinquency by mid year. Now we're past mid year, we're still not quite at 12%, but I still feel pretty good about that 12. And like you said, Lonnie, maybe 13% being the peak rate. Now if we think back to what happened in the 2008 crisis, the delinquency rate peaked well after peak equity distress in the market. And if anything it was really P.E. the market was past its inflection points and back on the upward trajectory, at least for values and transaction volume. Given that we've seen values start to creep back up, transaction volumes start to creep back up. Yeah, I feel pretty good about being relatively close to the inflection point for office delinquency at least, and probably multifamily as well. Though I think multifamily could be a longer tailed issue.
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The one caveat I would say here, and I think, you know, it's hard because we don't have the underlying data to get into the weeds here, but with the emergence of the private credit markets and, you know, this current disruption as compared to the lack of capital and credit and availability of funds in the gfc, we're probably masking a significant number of deals that using the same methodologies would have been delinquent, but now have had rescue capital, preferred equity, other things injected into the deals which have kept them above the line or kept them off the radar. So, you know, if I wanted to kind of take a negative view at this, at some level it's positive in the sense that now there's this additional sophisticated market that's providing funds that are keeping things moving. The negative though would be that it's super opaque and there's got to be more distress than what we're actually seeing is the old shadow vacancy, shadow distress type of narrative here. And there's a lot of people online, obviously that's, that's the world they live in and they will scream from the rooftops that all of the reported numbers and everything that's been brought to the surface is just scratching, you know, barely scratching the surface relative to the actual pent up distress in the market. I don't probably subscribe to that level of fear relative to the marketplace, but I do think it's worth acknowledging that there is more distress than what's being reported. It's just obfuscated at some level because of the submergence of the private credit markets.
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Yeah. And really, I mean that's on balance though, I would call that a very positive thing. You know, we didn't have the liquidity and capital availability back in 08. Things were just so bloody on the street that it was really in everybody's best interest for equity just to walk away. So the fact that we continue to play in that middle ground where the equity and debt capital are kind of splitting losses is really the optimal workout solution that you want to see for efficient market outcomes. So I still feel pretty good on hold, but I completely agree, Lonnie. There's a lot more stress or de stress in the background than maybe what shows up in the statistics a lot of times. And I think this is, you know, very evident when you start reading through social media and how much, you know, negativity about the extended pretend game you see out there. But I, I tend to, my default stance tends to be on the positive side for the extended pretend because again that's the debt and equity negotiating to split losses and avoiding the deadweight loss of foreclosure.
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I think deadweight loss could be a pretty good song title. Dead weight Loss of foreclosure. We'll have to put that in the.
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GPT or a band name.
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Yeah, that'd be cool too.
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So let's move on here and dig into some of our property type stories in our deals and data segment. So let's start us off this week. In the industrial segment there was a story from our friends at the Commercial observer about Starwood lending $500 million for a Westchester county industrial asset?
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C
Yes. A joint venture between affiliates of Dune Real Estate Partners and Robert Martin Co. Has sealed a $500 million loan to refinance 42 industrial properties in New York's Westchester County. According to Commercial Observer, Starwood Property Trust originated the loan for the portfolio which spans 2.4 million square feet across three industrial parks. The loan closed nearly four years after Robert Martin Co. Landed a $455 million recapitalization for the industrial assets from bank of America that also involved entering a new joint venture with affiliates of Dune. JLL arranged the transaction with capital markets team led by Christopher Pratt, Andrew Scandalous and Tyler Peck. Now JLL's Rochford quotes the financing supports the sponsors continued value creation strategy following the recapitalization of the portfolio in December 2021. With these properties demonstrating remarkable resilience through multiple economic cycles, combined with benefiting from Westchester County's severe supply constraints and premium demographics, we expect continued outperformance.
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I think that's a, it's a nice quote and it holds true for the industrial sector broadly. In supply constrained markets, you're still seeing really good tailwinds for some of these industrial assets. They're still definitely on lenders radar for, you know, recapitalization, et cetera. More broadly in markets where you've seen an influx of supply, we started to see some of that demand weighing a little bit, Steven. But you know, in this market here in Westchester, it's great to see it's a pretty good sized deal for that marketplace. You know, $500 million across 42 properties. A pretty significant deal and good for our friends at JLL and the folks at Dune getting this deal done and Starwood getting the, getting the loan.
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But let's talk about a player in industrial prologis. But this will take us to our office segment because we saw another article in the Commercial observer that Prologis has more than tripled its office space in midtown Manhattan.
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Yes, industrial giant Prologis has more than tripled its office space in midtown Manhattan. As highly mentioned, they're a global leader in logistics, real estate, development and investment. They signed a renewal and expanded to 23,000 square feet across two floors of S.L. green's, 461 Fifth Avenue. According to a release from tenant broker Cushman and Wakefield. Asking rent was $105 per square foot. The REIT originally occupied 6,900 square feet. When it moved into the 26 story office building near Bryant park in 2020, Prologis was able to expand to 23,000 square feet through a sublease with an existing tenant vacating the building. It's unclear who the vacating tenant is. However, to quote the senior vice president and marketing officer for prologis, Mike Sacro, he says expanding our New York office reflects prologis deep commitment to the New York metro. We support hundreds of companies and thousands of jobs across New York City, and this investment strengthens our foundation for continued growth in one of our most critical markets. The length of the renewal wasn't immediately clear. So if you or anybody that you know was part of this transaction, give us a shout out, link us, reach out. We'd love to talk to you about this transaction. We always love connecting with folks on LinkedIn and social media. So if you had your ear to the ground on this one, we want to hear from you.
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Yeah, we talk about so many deals on this pod and it's kind of cool when months or years later someone says, oh yeah, you, you gave me a shout out for that deal. That's actually how we found our friend Samir Tejpal at Madison Realty. We talked about their office to resi conversion, found him at a conference and said, now we need to get you on the pod. So we'll give a quick plug for that guest episode. If you haven't checked it out yet, that was a really great episode with Madison Realty Capital that we released in the last week or so.
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So, Stephen, on this story here, the numbers are not significant. I mean, 20 plus thousand square foot of space in New York doesn't even register in terms of like sizable leases. But the fact that you're seeing such an active submarket leasing environment, I think is emblematic of just how strong the New York office market is for these nice buildings. You know, for prologis to basically triple their footprint is a good story. And it shows that, you know, there are some constraints. I mean, the only reason that they were able to take down that additional square footage is because somebody else vacated and created a sublease opportunity. So there wasn't just organic availability in this, in the building for them to grow into. It took some sublease capabilities for them to actually procure that type of square footage. So I think we've been pretty positive around the office market in New York for some time. And this is just another example of if and when somebody moves out, there's somebody, you know, ready, willing and able to take that space fairly quickly in a sublease type arrangement.
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B
So this next story here is an interesting One for the office market. We'll stick to the New York market. And I want us to talk about a 21 story office building that is now being proposed to turn into a 30 story hotel. So not so much office to resi, but this is actually an office to hotel conversion. And we saw this article in the Real Deal and Cranes New York this week.
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C
Yes, given how tight the hotel market has been in Manhattan, this seems like a very, very logical play. Concico Properties proposed converting 509 Madison Avenue in Midtown from a 21 story office to a 30 story hotel with ground floor retail space. According to Craines, Nabil Chartuni's firm filed a rezoning application with the Department of City Planning. The conversion plans call for 96 hotel rooms as well as a lobby and amenity spaces, all stretching across 139,000 square feet. The retail space would occupy 3,300 square feet and have separate frontage from the hotel. A decade ago, it wasn't even clear if Conseco would be holding onto the property. In 2017, it put its leasehold of the office property on the market. Despite high occupancy rates remaining strong, the leasehold never sold. Tenants at the building today include investment firm Banyan Tree Capital Management, private equity firm Yellowstone Capital Partners, and Conseco itself, all of which would likely be displaced by conversion. That doesn't appear to leave any office space behind.
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A
So I know it's a far cry from New York, but in Fort Worth, Stephen, we've had multiple office to hotel conversions and they've all turned out really, really nice. They make a nice transition. There's a couple of Kimpton Hotels, Marriott Autograph Addition and AC Marriott that were all office buildings that moved into a new hotel use. And actually the conversion was not nearly as time consuming. It didn't seem to take as long as what we've seen on some of these office to resi conversions. So you know, this is a fairly small deal, 96 rooms. But hopefully they see some success here because I do think it adds another potentially viable option for conversion.
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B
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- [29:58]
A
Yeah. So I wish I was able to tell you, Haley, that I'm actually in San Jose today to check this sale out. That part's not true, but I am in San Jose today because I'm going to be doing a presentation for the Northern California chapter of the CCIM institution. And so I'm actually recording today's podcast from my hotel here, sitting right off the highway in San Jose, which is a great city by the way, but it's Good news here. $450 square foot sales price for this office property in San Jose is a venture of Ellis Partners and Bob Post Group for Campus at Scott. It's a 460,000 square foot office property in Santa Clara, about seven miles northwest of San Jose that comes to us from commercial property executive. Ellis of San Francisco and Bob Post of Boston acquired the property from Clarion Partners which had purchased it in 2015 for 305 million. So this was pretty significant hit for the Clarion Group but potentially reset basis for the the new acquirers at 207 million. This building was built in 2014 and currently has occupancy sitting at about 84%. So we'll see how this one plays out. But seems like a pretty good attractive purchase price for the new buyers. Got a couple of other office sales this week. David Werner pays 100 million for Manhattan office property. So this is part of the David Werner real estate investments. They paid, As I mentioned, 100 million or $227 a square foot for the 441,000 square foot office property located at 449th Ave. In Manhattan. This sale comes to us from Commercial Observer. They bought the art deco property previously known as the Harding Building from a venture of Taconic Partners and Nuveen Real Estate which had purchased it in 2018 for 269 million. So again, it's kind of a mixed green story. If you're part of the original ownership here, you're not feeling great about this sale. But if you're, if you're on the acquiring side you're feeling really positive about where you're at. CBRE arranged the latest transaction. This building was built in 1926 and had a fairly recent renovation in 2020. And Steven, I have one more here and I'll get your thoughts. If we look at the Tulsa, Oklahoma market, we know we have some Tulsa listeners to the pod and we appreciate it when they email us and thank us for talking about some, some Oklahoma properties. And I'm actually going to be in Tulsa first week of November doing a little drag racing. They have a really nice racetrack in Tulsa. So this is a deal. Fenway Capital Advisors paid 65 million or $250 a square foot for the 260,000 square foot office property at 222 N. Detroit Ave. In the heart of Tulsa. The Solana Beach, California investor acquired the property from its developer, an affiliate of WPX Energy in Oklahoma City and BOK Financial. So bank of Oklahoma provided a 45 million dollar mortgage that was arranged by JLL Capital Markets. JLL has been busy on this pod. The 11 story property opened in 2022. Cost estimates for construction was around 89 million. It's 95% leased to tenants that have a weighted average lease term or a Walt DIS of 11.6 years. Includes parking for 700 vehicles as well as 15,000 square foot of additional retail space. Some of the notable tenants include law firm Crow and Dunleavy which lease 34,000 square feet. They actually have signage on the building. An oil drilling technology provider Helmrich and Payne, which leases 80,000 square feet. So a nice story for maybe a market that we don't talk a lot about here in Tulsa.
- [33:23]
C
Yeah, this last deal in particular I think is a really interesting one. On whole, obviously positive the fact that you have transaction financing going through on an office property. Again it's a brand new one. So I think this continues with the theme that the higher end, newer, higher quality finish office is doing okay. So this was just a touch under 70% LTV on the financing based on acquisition price. But this is also almost, it's not quite 30%. I think it's about like 28% discount to original cost. So. Right. This is a loan to cost, loan to original cost of 50%. So all in all this is positive.
- [34:00]
A
Yeah, it is, except for the developer.
- [34:05]
C
But that's real estate for you, you.
- [34:07]
A
Know, like quoting the, the Commercial observer quote from earlier. You know, if it ain't broke, don't fix it. There's another quote that's like Mattel is old as time, right? And the reality is every new acquisition, the acquiring party always tries to say, well, we got this at below replacement cost. And those are sometimes hard to quantify because for a lot of buildings, they were built several years earlier. And you can't really backtrack what, what the true cost to replace is. But in this case, you have a pretty strong sentiment that this was acquired significantly below replacement cost because it's new construction and you know what it costs. And so, you know, for the developers, you do too many deals like this, you're not going to be a developer any longer. But to your point, it just shows that the right price deals can get done. And I think going back to our discussion around the delinquency rate and other things, this property obviously was not delinquent, but there just has to be a resetting of the values in some instances to get things moving. And this is a great example of that. The developer obviously doesn't want to take a loss on this deal. However, they had leased it up. It was determined by the market that this is what it's worth and they felt it was better to go ahead and, you know, sell it at the discount. And so I think we'll see more of these, the latter part of 25 and definitely into 2026, where the market finally gets to some level of capitulation on value. And more of these deals, maybe that are even a little bit underwater, get transitioned and that's part of the free market that's required. I mean, this is part of the cycle and it's great to see.
- [35:29]
C
Yeah, the range of uncertainty on values is narrowing. We're getting better transparency on what transaction cost is likely to be on assets, which is going to trigger more volume. So it's going to be a self reinforcing cycle so long as this trend continues.
- [35:44]
B
And moving over to the multifamily sector, there was an article this week about Invesco Real estate making a $390 million acquisition loan for a Houston multifamily portfolio.
- [35:57]
C
Yes, Invesco real estate started 2025 hot and is continuing its investment run into the second half of the year. Sixth Street Partners and Madeira Residential have secured 390.1 million in five acquisition financing from Invesco to buy six Class A multi family properties in Houston that hold nearly 2,000 combined units, according to Commercial Observer. No broker was listed on the transaction. The financing will help the joint venture acquire Domain at City Center, Lamaison, River Oaks, Chelsea Museum District, Vantage Med center and Montrose at Buffalo Bayou, which hold a combined 1967 units across Houston. Charlie Rose, the global head of credit for Invesco, described 6th street and Madeira Residential in a statement as two of the largest, most active and most sophisticated global real estate investment firms. He touted the growth potential the portfolio presents across the Houston msa.
- [36:55]
B
And let's close here with some multifamily sales across the country.
- [37:00]
A
Stephen, we had so many apartment sales I won't be able to get to all of them this week, but I have a few that will highlight and you can, you can add some color. So affiliate of the Mormon Church purchased a South Florida apartment for 152.5 million. This is Property Reserve, which is a real estate investment arm of the Church of Jesus Christ of Latter Day Saints. But the Del Ola apartment complex in Boca Raton, Florida, as I mentioned, for 152.5 million or just under 400,000 per unit. That comes to us from the South Florida Business Journal. They purchased the 384 unit property from Cortland out of Atlanta which had acquired it back in 2019 for 120.84 million. So about a $30 million gain on sale here for Cortland. Pretty solid transaction. We have another property here. Raintree Partners buys a Ventura, California apartment property for 100 million or 373,000 a unit for Cypress Point, which is a 268 unit apartment property in Ventura. The Dana Point, California developer purchased the property from an investor group in a deal arranged by Marcus and Millichaps Institutional Property Property Advisors Unit this property was built in 1990. It has one, two has one and two bedroom units that range from 740 square feet up to 1,000 square feet. Raintree now has a portfolio of 46 properties with 7,600 units in the San Francisco Bay, Louisiana, San Diego and Orange County, California area. So they definitely are making a push to continue to grow their footprint there. And I'll give you one more, Stephen, and then you can comment if you think any of these are interesting. Let's go to maybe another market that we don't talk about every week. Bonaventure Senior Living paid 90 million or 236,000 per unit for Cayenne South Creek, a 380 unit apartment property in Overland Park, Kansas. This comes to us for multi housing News. The Elizabeth, New Jersey company acquired the property at 13220 Foster street from Livecore, which is an affiliate of Blackstone. Wells Fargo provided a 53.8 million dollar Freddie Mac loan to finance the purchase. Property is about 20 miles south of Kansas City. Kansas was built in 2021 and has one, two and three bedroom units that range from 661 square feet up to almost 1500 square feet with rent starting at a very affordable 1345 per month.
- [39:14]
C
Yeah, the financing level on that last deal, I'm curious about that. I mean, it's, it's a decent LTV rate. You got about just under 60% LD LTV for that one. I don't know, I'm just curious if the financing didn't pencil closer to like 65, 67% LTV. Again, there's nothing necessarily positive or negative there. Just I would hope or expect for a slightly higher leverage point for that one. But again, that's, that's very dependent upon fund strategy, how the financing is priced. But that's, that's just one thing that stuck out to me.
- [39:46]
A
Well, since you asked, Stephen, let me go into some of our data here and see what I can tell you around senior housing LTV trends across the nation. So give me just one second and I will give you some data here. If we look at, at a state level, so across the all 50 states nationwide, most recent transactions to your point, in 2025, our LTV weighted average LTV across senior housing deals has been 64.8%. Nationally, it was 61.1% in 24, 62.2% in 2023, 62.9% in 22, and 65.6% in 21. So it's hovered between that, call it 61 and 65% threshold on a national basis. Now, if we come in and we look at Kansas as where this property was located at same analysis, 66% in 25, 67.5 and 24, 64.4 and 23. High water mark, 67.1 and 22, and 65.7 and 21. So yeah, this, this shows in this market about 65, 66% LTV is kind of the norm.
- [41:00]
C
Yeah, but you know, to be fair, with senior living can pencil all over the place. And personally, like when, whenever I was underwriting these deals, if I was ever uncertain, you always dial back leverage just a hair.
- [41:11]
A
Right.
- [41:11]
C
Unless your mandate is to really try and ramp up volume. And you do have to be a little bit more aggressive on proceeds. But given how much pain we've seen across the senior living sector post Covid and the fact that we're still in kind of that recovery phase, I think now that I rethink it, yeah, 60% feels like an appropriate leverage point.
- [41:32]
A
Yeah, definitely not outside the range. But I think some of this might be sponsor too. You know, in that senior living. These are much more operationally intensive. So you as a lender, depending on where that Bonaventure O I think is pretty well versed in the space. So maybe they just chose to go in with the lower ltv. They might have been rolling some proceeds in from a sale of another property. The story doesn't say, but kind of interesting. You know, you pegged it though. While this is in the range, it's definitely on the lower end of the range, especially for this particular market.
- [41:59]
B
All right. And I have a lot of programing notes for us this week. We've been sending out a lot of research even though it's the end of summer. So make sure that you are subscribed to our daily newsletter, our research, our blogs, and you're following us on LinkedIn and X. That's where you can find any of our research reports. We also have upcoming webinars and conferences that we'll be attending. So we have a webinar exclusive for our trip CRE clients that we've been talking about that's coming up on Tuesday, September 9th. So if you're a client and you want to get access to that, send a note to podcastrep.com or email your account manager and we'll make sure that you're on the list for upcoming conferences. We have a team that will be at the Crei summit on September 10, and Lonnie and I will both be speaking at this conference. I'll be with our friend Yona Weiss on a podcasting panel and Lonnie will have a session specifically about the power of data and content and incorporating these together to really be able to tell your story and lead with data. Power to insights. So this should be a good one. We're excited to see all our friends in the industry and connect with a lot of the leaders in commercial real estate and social media. Our chief economist, Rachel Symanski will be speaking at the CCC New Jersey event on October 15th. So if you're in the area, reach out to us and we'll see how you can get access to go to that event. We'll have our CMBS and Structured Finance teams at the ABS East Conference October 20th. If you're in that part of the industry and you attend those events, send us a note. We'd love to book time with you already and get you on the calendar. We know the events can be very busy and the exhibit hall is always bustling so make sure you reach out to us. We'd love to meet you there. 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But if you're a podcast listener, I'm happy to extend that until September 5th. So send us a note. We'd love to get you into these courses. We've had a lot of great feedback from the first cohort of students who've taken it, some of which have actually taken one, and then asked right away to join us for the second course. So we'd love to have you send us the notes podcastrep.com and we'll make sure you can use the discount code and get signed up right away. Turning to Shout Outs, Michael J. Told us he's a huge fan of the podcast and has listened to every single episode since it began and he appreciates the insights and entertainment that Lonnie, Steven and Haley have been providing every week. And he closed his email with an all right, so thank you Michael. We loved that message and it's great to hear that you have been such a loyal listener. Sol R. Said he can think of no better way to stay informed than reading Trapp's daily emails and listening to the weekly podcasts. 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If you're listening to this podcast, you would have just missed our latest Market Pulse webinar. But send us a note and we'll make sure that you learn how to get access to this free monthly webinar that we host. As always, thank you for listening. I do this plug sometimes, but go rate us on Apple or Spotify or wherever you listen. Give us five stars. Give your comments there or tell us where you listen. Reach out to us. We'd love to hear from you. So with that we'll close. Thanks to our producer Carly Sento. Join us next week as we look at what's happened during the week and how it may be impacting. If you have a question or just a comment, send an email to podcastrub.com and subscribe to the Tripwire Podcast with your favorite provider. Thank you for listening and stay well.
- [48:27]
C
All right.