357. Shutdown? Maybe in DC… CMBS Issuance Surges, Bank Consolidation, Office Recapitalization

Summary

The TreppWire Podcast (Episode 357): "Shutdown? Maybe in DC… CMBS Issuance Surges, Bank Consolidation, Office Recapitalization"

Date: October 10, 2025
Hosts & Contributors:

• Hayley Keen (Host, Trepp)
• Lonnie Hendry (Chief Product Officer, Trepp)
• Steven Bushbaum (Research Director, Trepp)

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Episode Overview

This episode focuses on the ongoing federal government shutdown’s impact on markets, surging CMBS (Commercial Mortgage-Backed Securities) issuance, continuing bank consolidation—including Fifth Third’s $10.9 billion merger with Comerica—and creative approaches to office recapitalization, highlighted by RXR’s major Midtown Manhattan deal. The team discusses macroeconomic uncertainty, regulatory shifts, notable real estate transactions, and fresh market data.

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Major Discussion Points & Insights

1. The Federal Government Shutdown: Risks, Real Estate, and “Flying Blind”

[00:06–12:16]

• Current Situation: The shutdown is in its second week, causing uncertainty and delaying key economic data releases, such as nonfarm payrolls.
• Market Implications: So far, brief shutdowns haven’t derailed markets, but a prolonged event (4–6 weeks or more) could have severe, nonlinear ripple effects.
• Market Analogy:

  "I like the analogy of trying to land the plane, you know, when you can't see out the windshield... you also don't have access to the equipment."
  — Lonnie [05:16]

• Specific CRE Impacts:
  • National Flood Insurance Program paused—no new policies/renewals for federally-backed mortgages in flood zones.
  • HUD & USDA running with limited staff, slowing FHA/VA/rural loan processing.
  • IRS slowdowns hinder income verification for mortgages.
  • TSA staffing issues causing airport delays.
  • Retailers could suffer if shutdown extends into peak holiday spending, which could trigger ripple effects for percentage-based retail leases.
• Notable Quote on Shutdown Consequences:

  "If this thing were to, heaven forbid, stretch on for two months, I shudder to think what that would mean for the economy. If we've entered it that long, the breakdown would be unfathomable for what the fallout would be."
  — Steven [02:50]

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2. Uncertainty and “Kryptonite” for CRE

[07:00–08:48]

• Uncertainty’s Effect: Any ambiguity—be it Fed rate decisions, government operations, or rental payments—erodes CRE confidence and hinders underwriting.
• Tariffs: Combined with the shutdown, tariffs are exerting downward pressure during a crucial retail period.
• Stimulus Possibility: Emergency stimulus or tariff relief could be on the table if the economy deteriorates sharply.

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3. Credit Markets and Oddities: Microsoft Bonds vs. Treasuries

[08:48–10:20]

• Notable financial oddity: Microsoft bonds have been yielding below comparable U.S. Treasuries—a sign of either increased U.S. debt risk or exceptionally strong corporate demand.

  "Short term Microsoft debt had a yield that was lower than US Treasury. So it's a negative spread to Treasury. Really odd thing."
  — Steven [09:20]

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4. Federal Reserve Division & Alternative Data Reliance

[12:44–16:44]

• FOMC Split: After a recent 25 bps rate cut, Fed officials are divided, with dot plots “all over the place.” Some favor waiting due to persistent inflation, others want cuts as job growth slows.
• Labor Market Debate: Official data is paused, so markets increasingly turn to alternative data (e.g., Bank of America reporting a 10% YOY rise in unemployment benefits; Carlyle Group’s private hiring estimate).
• Quote on Fed Uncertainty:

  "Bifurcation between the hawkish members and the dovish members are really starting to play out. And not having readily available data is going to just exacerbate the differences."
  — Lonnie [16:12]

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5. CMBS Issuance: “On Fire” in October

[16:44–23:57]

• Q3 & October Update: 21 private-label deals in October totaling $15.66 billion; year-to-date 2025 CMBS issuance already at $102 billion, with projections to break through $130 billion (the highest since the '05–'07 boom).
• Trend Changes:
  • Strong SASB (Single Asset/Single Borrower) activity
  • Mix of fixed and floating deals, with fixed-rate becoming more prominent as rates drop.
• Spread Compression: AAA paper recently priced at 78 bps over; “accordion” effect of risk moving down the stack is sign of a bull market.

  "We've already broken that hundred billion dollar mark... This will be the highest year on record since 2005, 6 and 7, which clearly are outliers."
  — Lonnie [19:01]

• Deal Sizing: Fewer deals than last year, but with larger sizes, mainly due to the SASB trend.
• Optimism: Barring major shockwaves, expectations are for a strong finish to 2025 and a robust start to 2026.

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6. Bank Consolidation: Fifth Third & Comerica Merger

[23:57–29:25]

• Headline: Fifth Third buying Comerica ($10.9bn deal), creating the 9th largest U.S. bank.
• Regulatory Easing: Recent changes at DOJ, OCC, and FDIC have streamlined approvals, encouraging further M&A among banks, especially those below the $100bn “bright line.”
• Market Strategy: Regional banks seek scale, diversified balance sheets, and strong positions in markets like Texas.

  "This to me is a better scenario than what we thought we might see when there were bank failures and there was going to be forced consolidation."
  — Lonnie [27:20]

• Texas as a Growth Center: Multiple banks growing footprint in Texas; recent transactions cited include Huntington/Veritex, Pinnacle/Synovia, and increased interest in “Wall Street South.”

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7. Property Highlights: Recapitalizations & Conversions

A. New York Office Recapitalization: RXR’s 1211 Avenue of the Americas

[31:57–36:44]

• Deal: $1.45bn recapitalization with $367m toward tenant improvements (Fox News, Dow Jones, NY Post primary tenants); major loan extension and substantial equity infusion.
• Significance: Signals creative approaches to unlocking office value by major operators amid stubborn vacancies and market stress.
• Anecdote:

  "Elevators are usually, you know, very well monitored, maintained, regulated. But in New York City, it's a whole other level of regulation and maintenance."
  — Steven [34:47]

• Quote on RXR’s Resiliency:

  "When the COVID fallout was decimating the office sector, his quote... was it's like we have a Polaroid camera in a digital age and now... you're seeing him just, you know, knock the ball out of the park."
  — Steven [35:11]

B. NYC Office-to-Residential Conversions

[36:44–38:59]

• Bloomberg Report: 29 West 35th Street to be converted into 107 studio apartments (400–575 sq ft), a $70m investment plus $25m acquisition; reflects Midtown South zoning changes and growing trend from offices to housing.
• Unit Costs: All-in costs approach $900k per unit—potential mill-plus pricing per studio.

C. Dallas Office Market: Crescent’s Uptown Acquisition

[38:59–41:11]

• Deal: Crescent acquires 2000 McKinney for $295m ($645/sq ft), setting a post-COVID high mark in Dallas.
• Tenant/Base: Texas Capital Bank signed through 2040, ~80% leased, signaling capital migration from coastal to Sunbelt markets.

  "This sets the stage for more capital to flow into this uptown neighborhood... capital migration from coastal markets to Texas."
  — Lonnie [39:56]

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Notable Quotes & Memorable Moments

• On government shutdown and markets:

  "Let's just say, if we push into four weeks of a complete full shutdown, the economic implications are going to get nasty."
  — Steven [01:57]

• On the wisdom of penalizing Congress:

  "If the government shuts down, nobody in Congress is eligible for reelection. Do you think we can get a shut down then?"
  — Steven [03:41]

• On Microsoft’s bond yields:

  "Microsoft bonds having a lower borrowing cost than U.S. treasury debt?"
  — Steven [08:48]

• On New York elevator maintenance:

  "...fire department has to save people probably on a daily basis from locked up elevators."
  — Steven [34:53]

• On office-to-resi pricing:

  "I just bought me a 400 square foot studio for about a million two fifty. Crazy man. Come down to Texas, you can be a king for a million 2:50."
  — Lonnie [39:03]

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Timeline of Key Segments

• 00:06 — Episode intro, government shutdown context
• 01:37 — Market reactions and what history suggests
• 07:00 — Discussion on retail, tariffs, CRE uncertainty
• 08:48 — Microsoft bonds and Treasury yields
• 10:20 — Real estate-specific shutdown effects
• 12:44 — Fed rate debate and labor data reliability
• 16:44 — CMBS issuance trends, record projections
• 23:57 — Fifth Third/Comerica merger and rise of Texas in banking
• 31:57 — RXR’s Midtown recapitalization
• 36:44 — NYC office–to–residential conversions
• 38:59 — Dallas Uptown office market activity

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Closing Notes

• Job Market Data: TREP has published a new anonymized bank CRE loan performance report (request via [e-mail]).
• Training/Webinars: TREP clients can attend property update walkthroughs, banking/lending webinars, and Market Pulse sessions later this month.
• Shout-outs: Thanks to listeners, contributors, and special mention for the Texas Tech banking program and RXR’s leadership.
• Upcoming Events: Lonnie to speak at North Texas Realty Conference and NAI’s event at the NFL Hall of Fame.
• Birthday: Co-host Lonnie celebrates his birthday on October 10.

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For more information or to request reports, reach out to [e-mail].

Engage on Twitter, LinkedIn, or subscribe via your preferred podcast platform.

Transcript

[A]

Foreign.

[B]

Welcome to the Tripwire podcast, the show where commercial real estate meets data and insights. This is our week in review for the week ending October 10, 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 Steven Bushbaum, Research Director this week. The federal government shutdown has now stretched into its second week, creating uncertainty across markets and stalling key economic releases, which will make it even harder to read the Fed's next move. At the same time, the September Fed meeting minutes revealed a divided committee following last month's 25 basis point rate cut. Some members argued to hold steady, citing persistent inflation, while others supported further easing as the labor market cools. Elsewhere, banking headlines grabbed attention with reports that Fifth Third may be eyeing a bid for Comerica, a potential merger that would reshape the regional lending landscape and carry ripple effects for CRE exposure in the REIT world. We'll discuss how dividend moves and the growing focus on AI strategies continue to shape sentiment. And in property markets, RXR made waves with a major Midtown recapitalization deal, signaling how some firms are finding creative ways to unlock value even amid higher rates. So, Stephen, with the government still shut down and economic data on pause, how do markets steer when they're flying blind?

[C]

I love this one. How do we steer when we're flying blind? Well, we hope that all of the data we've collected thus far, all of our mapping, is going to continue to hold steady and that we don't have any unexpected obstacles enter our path. And right now, I think so far that's going to hold true. Right. One to two weeks of a government shutdown is not going to crater markets. If this continues on for four, six weeks, we're going to be entering some very, very dicey territory. We haven't seen the government fully shut down like this. Beyond, I want to say it was like what, two odd weeks? So, yeah, if we push into four weeks of a complete full shutdown, the economic implications are going to get nasty. And let's just think ahead for a moment, right, because we're not getting data currently. So when the government shutdown ends and we start getting our data releases, things like non farm payrolls, that will be for the prior month. So the current release for September data will be okay. What's going to get really hairy is the future releases. So when we enter November, the data for October will be very suspect. So the longer the Shutdown stretches on, the more noise and difficulty it's going to cause us for future economic releases. And I don't know if that's a linear or a nonlinear problem. It seems like it's more of a nonlinear problem and hopefully if it's one of those exponential type paths that we don't go too far up the curve. If this thing were to, heaven forbid, stretch on for two months, I shudder to think what that would mean for the economy. If we've entered it that long, the breakdown would be unfathomable for what the fallout would be. So my hope is that we maybe hit, we could hit three weeks here on the shutdown. The blood in the streets will start being very, very untenable for both sides of the aisle. And we'll come together and find some sort of a, a path forward to at least kick the can down the road a couple of months. But honestly, we should have already done that. So who knows? Who knows? I don't remember, did I mention this idea last week on the podcast that, you know, one way to solve these shutdowns is we could propose the nuclear option. Lonnie, and say on a go forward basis, this new resolution is going to say if the government shuts down, nobody in Congress is eligible for reelection. Do you think we can get a shot shut down then?

[A]

That's not nuclear. I think that's just like common sense approach, right? Like if we don't like the outcomes of the shutdowns, you know, there's very simple, logical ways to prevent this from happening. I don't think you're going to see that happen for obvious reasons. And I think the real challenge here is like, as this progresses the first week or two, you know, I mentioned a little bit last week about it being some political theater. I think the reality starts to set in, though, where this has real implications for the marketplace. And I think for us, like, that's where the attention is focused, is that these decisions that are being made every day, that this continues, there's going to be direct and indirect implications for the macro economy as well as the CRE marketplace. And it's, it's really interesting to see these dynamics playing out real time. Stephen. I mean, we're going to have an segment today where we talk about CMBS issuance, which is like off the charts rockstar solid. And if you looked at that number on its face, you would say, man, the market has to be like, just running so efficiently right now. Everyone has to have exceedingly exceptional confidence in the market's ability to deliver. Unemployment's probably low, inflation's under control. There's got to be this broader macro theme that's really positive for us to see the type of issuance numbers that we've seen. But you peel back the a little bit and you start to see all this government shutdown and everything else, like it just doesn't quite square. And. And to your point, at some level, if this continues, you know, you're not going to see that continued issuance the way that we've seen it. And if those things start to slow down and you see unemployment tick up and you see inflation start to rear its head, and you don't have regularly scheduled data coming in that we're used to looking at to make decisions, and the market starts pricing things in based off of, you know, segmented or fragmented data at whatever level or scale they have access to. That's where things go off the rails. I like the analogy of trying to land the plane, you know, when you can't see out the windshield. In this case, it's not just you can't see out the windshield, but you also don't have access to the equipment. You can't read any of the gauges. And so, you know, that's kind of where they're. They're flying blind at some level. I'm still confident that they will get to some resolution if this, you know, persists for another week or two. I don't think it's irreparable damage if this goes beyond 30 days. That's where I think you start seeing some stuff that just by definition, you know, slips through the cracks. And then the administrative bureaucratic process to try to get those things rectified will be very challenging. I'm still confident if we can get something resolved in the next 10 days or so. Not great. Not a good look, but not catastrophic.

[C]

Yeah. What I worry about is, I don't know if you saw the note about the White House memo saying something like, back wages during a shutdown are not guaranteed, which was like, whoa, whoa, whoa, wait a second here. We might not get paid. This is not the time of year for something like that to happen. That's. That's one of my bigger concerns, is the timing of the shutdown. If it bleeds too far into October, we start messing with consumer confidence and peak spending season. And the effects that could be felt in the retail sector really are not good. I mean, the percentage leases that count on these two to three months of retail sales receipts. Yeesh. That's devastating right there.

[A]

Well, this is on top of the tariff pressure that we're already seeing. Like you could already make the case heading into this seasonal shopping uplift that we usually see that there was already going to be some downward pressure due to tariffs or the unknowns or the uncertainty around tariffs. Now you just add this as an additional layer. You know, it could be really bad now. You know, listen, it's, it's just like anything else. If the data actually shows that the markets are reacting very poorly or the down, the shutdown is having some significant negative impact on the market, I would not be surprised to see some sort of emergency stimulus or some sort of, you know, tariff relief in the form of, you know, people getting checks from the tariff revenue. I mean, those are all ideas that have been floated out there. I think for cre. It's, it's just this tale of two markets that we've been talking about. I mean, if you look at the issuance numbers. I'll go back to that. I mean, it's, the market is on fire. If you look at lenders, you know, they're seeing increased appetite across pretty much all the different lender types. And this is in spite of still struggling office occupancy across many major markets across the US And a lot of multifamily stuff that hasn't been fully absorbed. And so there's this contra, that's push pull that happening real time where in a normal market if everything in the macro and the government everything was working like it was supposed to, those fundamental challenges are still prevalent. When you add in this, this uncertainty, and that's what we've said for some time is uncertainty is a kryptonite of cre. Whether it's direct uncertainty with interest rates or it's uncertainty with whether or not the government's going to make their Section 8 rental payments next month. I mean, all of those factors negatively impact the marketplace. We like certainty. We like knowing what we can underwrite to. I'm hopeful that to your point, retailers don't suffer the consequence here. They've been through enough with COVID and everything after the fact. Hopefully this gets resolved. Hopefully people come out and shop during the holidays and this is just a blip on the radar screen.

[C]

You know, you mentioned credit strength and just how bullish fixed income markets have been recently. I was curious. We didn't cover this last week. I feel like this one maybe slipped between the cracks. You see that Wall Street Journal piece about Microsoft bonds having a lower borrowing cost than U.S. treasury debt?

[A]

I, I didn't see it, but give us, give us some insight into that. I mean it's, we're living in some crazy times right now.

[C]

So I don't think it was, was a ton. I'm trying to pull that article up right now, but I want to say it was, you know, maybe a couple basis points below the equivalent U.S. treasury yield. Now this has happened before. Funny thing. I was pulling some data for a real estate finance lecture I was giving at Texas Tech back in either fall of 2017 or fall of 2018 and this exact same thing happened. Don't ask me why, but Microsoft was the corporation I was using to put together this risk pricing slide. And I believe it was fall of 2018. Sure enough, Microsoft short term Microsoft debt had a yield that was lower than US Treasury. So it's a negative spread to Treasury. Really odd thing. And there's a number of different reasons why that can happen. So anyway, for you folks out there, that might be something that you'll catch on LinkedIn. I know one of my friends out there, Mark J. Had actually mentioned that on LinkedIn and I couldn't help but comment. But yeah, that's always good. For a fun debate about whether this is speaking to risk for US Debt or strong demand for Microsoft debt.

[A]

I wanted to circle back to a couple of things related to the shutdown, Steven, just to kind of quantify this for, for CRE or just for the broader, you know, real estate markets. We said that there's some short term implications and obviously we're more concerned about the longer term. But just the National Flood Insurance Program has already been paused, so there's no new policies or renewals for homes in flood zones that if the borrower is taking out a federally backed mortgage, so just that alone could stall a lot of transactions or create significant uncertainty for buyers and builders. So if you're taking out a mortgage, it's federally backed, they're going to require that you have flood insurance. If you can't get a policy, that's going to be problematic and it may make some of those closings not actually happen until this gets resolved. HUD and USDA are operating with limited staff. So just loan processing. If you're taking out an FHA loan, you may not get that loan processed in a timely fashion because there's not enough people showing up. There's a lot of other rural housing programs that require federal staffing that right now they're just not going to be at the same level. And it's not like these things were rocket ships to begin with. In terms of efficiency. And then, you know, you look at the irs, I mean, they could slow down mortgage approvals that rely on income verification. So those are just some, you know, we were fairly broad in our overview. Those are some things that are like very pinpoint problematic for the real estate industry where, you know, a large portion of buyers in the single family space rely on FHA financing. It's a 3.5% down payment. It's a great opportunity for people to get in low cost to new homes and, and if that program is slowed down, same with va, same with all of these things. You know, even the TSA at the airports, I saw several airports this week where they had multiple hour long delays with people checking in because the TSA agencies were running low on staff showing up for work. So those are some maybe quantifiable impacts that we're seeing day to day that maybe don't impact the macro as much. But, but if you're in one of those positions, it's not fun.

[C]

Yeah, well, and the longer this drags on, that's where the non linearities come in. So you think about the lack of transactions that will happen and what that means as the data gradually rolls up into the aggregate. I mean, there's eventually going to be a direct line to spending. Right. If you have transaction slowdown because they truly cannot be processed. So this, this needs to be resolved, needs to be resolved quick. And as much as it gives us material to talk about, I'd love to be talking about something else.

[A]

Well, good thing you mentioned that, Stephen, because here at the end of the month, guess what we have coming up. We have an FOMC meeting right on the heels of them cutting last month. And they had the meeting minutes that came out and it's, it's interesting. You know, I think the headline for this is Divided. FOMC saw another two rate cuts by the end of 2025. So there's not a lot of time left between now and 2020 five year end. And so you're basically pricing in two more rate cuts over the next couple of meetings. But it's not a slam dunk. It seems like, you know, for the last several years Powell had everyone in lockstep whether they truly bought into the narrative that he was selling. At least on the, on the outside. And in all of their meeting minutes and in the dot plots, everything generally aligned and it seemed like there was a consensus. Over the last couple of months you started to see that div went from when you had two dissenting votes to now you know, you've had the rate cut in the dot plot that just is all over the place. And it doesn't look like that's resolving itself. In fact, it looks like it's probably going the other direction where you're having less consensus than we've had in a very long time.

[C]

Yeah. So this division in the Fed is going to be really interesting and specifically I'll be very interested to read the upcoming Fed minutes for this. This next meeting we're going to get at the end of the month, whenever they come out. Gosh, it's probably six, seven weeks away from right now because essentially you have. At least if we're looking at this on a spectrum, the two main camps are those that are more concerned about the re acceleration in the economy and inflation ticking back up. I've heard one or two Fed members really come out with fairly hawkish commentary saying that we think it would be foolish to commit to a, a series of rate cuts here when really it looks like to us we're closer to neutral. Consumer spending has stayed resilient. If you look at immigration and what that means for the need in the labor market, we're really right about break even on new hirings. So it's really not as bad as it might look on the face of the data. So really we're a proponent of just holding, holding pat. But then the other camp, you know, I would say if I had to pick somebody to lead it, that would be our new member, Steven Myron is very much saying, let's cut, let's cut now. We shouldn't be waiting. The downside risk far outweighs whatever reacceleration you think will. Might think might happen because the labor force, labor force turns, it turns quick, it turns hard. Let's get ahead of it. Really. This is, this is very much centering on what you think is going on in the labor market. If you think this incredibly low number of jobs is neutral or a sign of potentially weakening where we could turn negative here in coming months. So I don't think we're going to get any resolution. The labor data, the last quarter of the year gets very messy as people start staffing up for the holidays. And so ultimately the dust probably won't settle until, you know, February, March. So we'll see. The debate's going to be interesting.

[A]

Yeah, I mean, I think we're definitely in this period of, you know, debate. There's going to be a lot of pontification around what people think might or is happening. There was an article in The Wall Street Journal this week where they put out what they called unofficial jobs numbers or alternative jobs data. And the consensus, or the, the takeaway here was that the US labor market is cooling with obviously the federal government shutdown preventing the real data from coming out. Bank of America observed a 10% rise in unemployment payments in October compared with a year ago, alongside slowing job growth. And then Carlyle Group estimated US employers added 17,000 jobs in September, a decrease from 22,000 jobs in August. So again, you're going to see an increased spotlight on some of these alternative data sets as long as the shutdown persists. And it's just going to lead to some interpretation that you typically don't have to make. And I'm with you, Steven. I think, you know, the bifurcation between the hawkish members and the dovish members are really starting to play out. And not having readily available data is going to just exacerbate the differences in their opinion and approach.

[B]

So while some of the data out there is a little fuzzy or we're not getting all of it, we do have a lot of CMBS data that we can talk about and frame. We've given predictions on issuance numbers and we talk about new originations and what's happening in the market. But we just reported some Q3 CMBS issuance figures and we're also projecting what we'll see to end 2025. And the figures are pretty interesting. So let's dig into that and just reference what we're seeing in the CMBS market.

[C]

Yeah, October has been on fire. I mean, absolutely on fire. A wonderful month for issuance. So deals that have already closed so far in the month, which is really only one or two, I guess. If you want to consider today as well, we have A total of 21 private label CMBS deals that are getting issued here in October. 21, that comes to a total of $15.66 million across conduit and single borrower or single asset, single borrower deals. Now, as has been the trend throughout this entire year, a majority of that 15.66 million is SASB issuance. So a total of 14 SASB deals have been issued. A little bit over $10 billion. So that continues to be the driving force. Now what's been interesting for me is that we've actually seen a mixture here of fixed and floating deals over the last couple of years. Most of these SASB deals, it's been predominantly floating rate issuance. So to see fixed rate creeping in here. I like that. That was actually Part of what I thought we should be seeing happen here in the coming year as rates decline and borrowers ultimately look to lock in financing at what they think are appropriate neutral rates. So what's been driving this issuance has been the just voracious demand for, for yield for fixed income assets. And Lonnie and I talked about this at the beginning of the year about what we could see in issuance right now. Year to date we're sitting at about $102 billion in CMBS issuance. So we've already broken that hundred billion dollar mark. And Lonnie, correct me if I'm wrong, didn't we project that we would get to 100 roughly about 120, 130 billion this year?

[A]

Yeah, I think right around 130 was the top of our range. I don't remember referencing it as voracious, but I liked your use because that's what this month has been. And last year, you know, just for some context for our listeners, we were at 108 billion when we finished the year. We're going to blow past that this year I think for sure. So this will be the highest year on record since 2005. 6 and 7, which clearly are outliers. I mean we have a chart that we present when we do presentations that just go back and look at CMBS issuance, you know, starting in 2000 and just rough numbers here. 2005 was over 150 billion, 2006 was right at 200 billion. 2007 was well in excess of 200 billion. I don't think we'll ever see those numbers again. Those were just not supportable as evidenced. But to get to 120, 130 maybe if you slightly above 130, I think it's really remarkable and it's interesting. I think we'll look back at this time period, Stephen, in three, four or five years and we'll see just how this current cycle, how effective it is. I mean we've seen a huge shift from 10 year paper to 5 year. We've seen a significant shift from conduit deals to SASB deals and then the composition of the SASB deals. As you mentioned, there's been a really interesting dynamic between the floating and fixed rate nature of those deals. All of this is fairly new in the last couple of years relative to historical norms in terms of the duration and the structure. I'm hopeful and optimistic that this plays out well and this becomes just a really great avenue. But it'll be very interesting because if it does Turn the other way. If SASB's fall out of favor, if these properties don't perform form, there's a lot of issuance tied up in some of these SASB deals.

[C]

Yes. Now I do want to pull back up 2021's number because that was a banner year for issuance as well. We hit 1:18.5 billion in 2021. But I feel like we need a little bit of an asterisk for that volume because a lot of that was carryover from COVID Like, you know, we did have a little bit of a mechanical problem in getting deals over the put together and over the finish line out of COVID So what's been, you know, ultimately driving this issuance has been the continued spread compression. I noted this, you know, I think pretty good amount early in the year when I was putting together my projections for issuance and that CMBS spreads still had more room to run. You know, I heard some folks balking and saying oh yeah, like you know those, those spreads, there's no way they could possibly go that much tighter. I said, well hey, let's look back at the historical correlations between CMBS and IG corporates. And if you look at what CMBS has tended to do during bull market runs during periods of, you know, drastic spread compression on the corporate side, we do find ways to grind tighter and that's exactly, exactly what's happened. One of the most recent conduit deals we had issued here are having issued in October, the senior AAA paper priced at 78 basis points over, I mean, 78, that's wild. You know, when we broke 100 we were cheering for that, we broke 90. I mean the fact that, you know, now we're in the 70 handle is amazing for spreads. And if you just go down the stack, I mean you're seeing this accordion on spreads compress. That is the signature, you know, move of a bull market run in issuance is when you see that demand creep further and further deeper into the credit stack, into the riskier bonds. So we'll see where this ends up. I think it's entirely possible we hit 130, but 140 might be a bit of a stretch. We'll have to have some blowouts Thanksgiving and December deals here.

[A]

Yeah, I don't think I'm going to go say above 130 at this point. If you look at the total number of deals, it's interesting. In 2025 year to date we've already had 145 deals in 2024 for the full year we had 155 deals. So we're 10 deals short of where we were last year for the full year, but only about 6 billion short in issuance. And so we're going to, you know, this tells me the deal size is larger in 25 than what it was in 24, driven predominantly from the SASB. If you go back to 2023, we had 67 deals, 2020 to 97 deals. So, you know, in some of those years we're going to 2x plus the, the total number of deals, not including, you know, just the overall issuance numbers. And so very positive story. I mean, I think we, we started off the year with high expectations on the issuance side. When Liberation Day came and the tariffs were announced, I think everyone hit the pause button and we weren't real sure how that was going to play out. Despite maybe a 30 day cooling period when that announcement was made. I mean, things have just pretty much roared back. And I'm optimistic that even with the headwinds that we're seeing with tariffs and the macro uncertainty, we're going to continue to see strong issuance through the end of the year. I think this will be a banner year for us and I think it sets us up for strong 2026. I mean, I think we could start off 26 with a really strong appetite as well.

[B]

And I know we've had a lot to talk about this week, but one more big headline I want us to get into is news of recent banking consolidation. So we saw headlines all week that fifth third is to buy Comerica in a $10.9 billion deal. And this will create the ninth largest U.S. bank. So walk us through what this merger could mean and then if we are going to see more of this in the banking market.

[C]

Yeah, absolutely. So Fifth Third has acquired Comerica in a $10.9 billion deal. And as you mentioned, Hayley, this is the biggest bank deal of the year and is creating the nation's ninth largest lender. This is on the heels of PNC acquiring First Bank. Comerica CEO Curtis Farmer said that the administration's pro business stance was one of the factors behind the deal timing. The shifting regulatory environment has gotten more conducive to M and A. And we saw windows starting to open where there might be a chance for us to consider partnering with another institution. Farmer told Reuters in an interview. He said the talks took just a few weeks. I mean, this is, that's the amazing part of this. But I think in fairness, I want to say that I Heard that this deal was being considered for probably a little bit longer than that. So the reality is they probably already had a pretty good idea of how this was going to get executed well before those talks started. The deal is still going to require approval from regulators and some additional due diligence. The parties are confident the transaction will get the green light from officials. The CEO said, we would not be moving forward if we did not feel like we had regulatory support. More broadly, regional lenders are also looking to diversify their revenue, strengthen balance sheets, and expand in growing markets as they seek to compete with larger rivals. So, Lonnie, I'll be curious what you think, but do you feel like this transaction could usher in more combinations, especially for banks with assets up to $100 billion? Because we were talking a good amount about this last year about that. What was the $100 billion bright line? And essentially, some of these banks really need to merge if they want to thrive and not just survive.

[A]

Yeah. So I think there's a couple of things in here. In 2024, the DOJ withdrew the 1995 bank merger, pivoted to applying the more recent 2023 merger guidelines to bank guidelines to banks. In 2025, the OCC rescinded its 2024 policy and restored expedited streamline approvals, and the FDIC rescinded its 2024 merger policy and reinstated its pre2024 framework. So there's a lot of things happening in the background that I think is going to help expedite some of these. As you mentioned, you know, this went from concept to reality very quickly, and hopefully approvals, you know, happen just as swiftly. I definitely think we're set up to see some increased merger activity here. We've been talking about this for a while. I mean, obviously we felt like when the bank disruptions hit a couple of years ago and you had some bank failures, and we thought maybe that was more of a systemic risk, that that might usher in some forced mergers or forced takeovers or some forced activity that never really materialized. But I think now that things have settled a little bit, you're going to see some of these opportunistic acquisitions taking place. I mean, earlier this year, Huntington purchased Vertex, and it'll be interesting to see if we see anything else at the end of this year kind of come in before the end of the year. I would not be surprised to see more announcements made. And I think it's healthy. I mean, for that ecosystem. You want to see banks grow their footprint when they have Healthy balance sheets. And they have a strategy that's working. And you want to see banks that are struggling or maybe over levered or have too much concentration in one particular asset class or another, have an opportunity to get out without having some, you know, real challenge to their depositors and, or to the broader marketplace. And so this to me is a better scenario than what we thought we might see when there were bank failures and there was going to be forced consolidation.

[C]

Yeah, I'll be interested to see how this, this merger ultimately plays out, assuming it does happen ultimately, what kind of continued growth you see. You know, one of the things that I heard highlighted on this interview was that 5th 3rd was really excited about gaining, you know, a larger market share and footprint in Texas. Comerica has a pretty sizable footprint in Texas. I want to say they have about 108 bank branches. And so that's very, very attractive for fifth third from a strategic standpoint.

[A]

Yeah, I mean, Texas is where it's at for all, all things financial. I mean, we've, we've talked about the stock exchange, we've talked about all the new construction, we talked about the population trends and demographics. You also had Pinnacle and Synovia this year, 8.6 billion. All stock that was announced back in July expected to close Q1 of 26 now as a southeast merger of equals, you know, which crosses over the $100 billion threshold we talked about. I think that'll be a test case in the, for the post $100 billion oversight. What we're saying, you know, with, with some mixed market reactions. See how this goes. PNC and first bank, we mentioned the Huntington Veritex. So like, there's going to be a lot of, a lot of things playing out. And again in the Huntington, you know, that was Texas entry at scale. So it reinforces Texas as the busiest M and A location. So hopefully that pans out for some of these folks making some bets here. I think the demographic shift and just where Texas is right now as an economy bodes well for some of these, you know, banks making a play here.

[C]

You know, since we're talking banks and we're talking Texas, I, I just can't help it. I feel like I need to give a shout out here to Texas Tech and their real estate and banking programs. For any of our listeners out there in the banking industry, if you're looking to hire, and you're looking to hire junior employees that actually understand how banks run, how they operate, look at Texas Tech. Texas Tech is one of the few schools in the nation that has a dedicated banking program. It's, it's, it's put together in an absolutely fantastic way. I mean, truly groundbreaking, truly phenomenal with I couldn't pick a better person at the helm, Mike Malden. So if you're interested in learning more about that, we can help put you in contact with some of those folks over at Texas Tech so you can learn more about their center. And they're absolutely fantastic banking students and real estate students not to, to put them second in line. There's both are absolutely fantastic.

[A]

Oh, it's great to see what they've done combining both the real estate and the banking aspects. And you mentioned Mike Malden. I mean, 41 years in the banking space. I think he was 34 years as CEO, 37 years in executive management. He's now been at the college for a few years and really got that program off the ground and definitely making some waves throughout Texas. I mean, if you're in the banking space in Texas, you're very familiar with this program. And it sounds like we're going to have a lot of new folks coming to Texas based on some of these mergers. So shout out to Texas Tech who by the way is dominating in football this year. But that's for a different podcast. But yeah, it's an interesting time to be in the banking space. I think we're going to see a lot more activity as this market continues to evolve.

[B]

And speaking of banking, last week we teased our bank CRE loan performance report. This is our TREP anonymized loan level repository data which brings some light to the banking market. And now we have the report out this week. If you want to see see what is happening with origination volumes, credit quality, delinquency rates, charge offs in the banking world. Send an email to podcastrep.com and we will share that report with you. So let's turn to our property type stories of the week. I want us to start with office. I mentioned this earlier, but we saw a big headline this week in a report from Commercial observer that one of midtown Manhattan's top office towers just completed a $1.45 billion recapitalization, with much of that money going toward tenant upgrades and property renovations. So what property is this? And let's dig into the story.

[C]

So we are looking at 1211 Avenue of the Americas. RXR has secured 1.45 billion in recapitalization. I mean, fantastic deal. RXR led by Scott Rechler, secured the new financing for 1211 Avenue of the Americas. That's the 45 story million square foot tower near Rockefeller center that's home to News Corp. And Fox News, both part of Rupert Murdoch's media empire. RXR bought a 49% stake in the building back in January 2025 from Ivanhoe Cambridge, which still holds a share in the property. The recap includes a three year extension on just over a billion dollars in debt from Apollo Global Management, moving the loan's maturity from August 2025 to June 2028. That CMBS loan, which has been sent to Brickadia's special servicing unit, is now part of the new financing package. A group of major investors are contributing between 250 and $400 million in new equity. The deal was arranged by Newmarks Adam Spies, Doug Harman, Marcella Asulo and Adam Doniger. According to an offering memo, about $367 million in equity will go toward tenant improvements and upgrades. That includes 130 million for Fox News renovations and leasing costs, 110 million to re lease and approve space formerly occupied by ropes and gray, plus 61 million in capital expenses and 54 million for other tenant work. An RXR spokesperson said the building is now fully capitalized for release and redevelopment costs. This property was built in 1973 and last renovated in 2006. 1211 Avenue of the Americas spans the block between West 47th and West 48th Streets.

[A]

So you mentioned Fox News and News Corp as being major tenants there, Steven. They also have Dow Jones & Company, Wall Street Journal and the New York Post as tenants in that building. So this is a great deal if you're rxr. I mean, they've been on a tear lately. I mean, we've seen them in the news. They had been, you know, fairly prolific in the, the downturn with COVID and Scott Rechler was pretty adamant about some of his portfolio not, you know, being up to standard. But it feels like they've really turned a corner and they've, they've got themselves positioned favorably with lenders and they've been able to execute on some of these deals over the last couple of months. That's really, really great. Shows kind of operator that they are and they brought in some great talent. And this will be another good story. Hopefully this, you know, recapitalization allows them to re tenant the building and do the stuff that they're, they're planning on doing. You know, kind of an interesting, you know, anecdotal. They have 36 passenger elevators and 10 service elevators. Just imagine the cost to keep those things. I mean, that's not outlandish for New York. That's probably pretty standard for a building this size. But you know, when you start thinking about just operational expenses for these things, I mean, keeping 36 passenger and 10 service elevators up and running, it costs a lot of money to keep those things serviced.

[C]

Elevators are usually, you know, very well monitored, maintained, regulated. But in New York City, it's a whole other level of regulation and maintenance. I mean, the fire department has to save people probably on a daily basis from locked up elevators. So yeah, that's no joke right there in terms of maintenance overhead. You know, I just want to pull back up one of Scott's quotes from RXR, you know, @ the. Basically when the COVID fallout was decimating the office sector, I believe his quote Lonnie was it's like we have a Polaroid camera in a digital age and now like you're seeing him just, you know, knock the ball out of the park. And I can't help but chuckle a little bit because aren't Polaroid cameras coming back in vogue with young folks?

[A]

Yeah, I think they've seen a little bit of a resurgence. It's always funny, like when I was growing up, you know, Kodak was like one of the premier companies in the, in the country. And it's amazing seeing these new tech startups that actually don't own anything except for code. You know, they've just surpassed these legacy companies in market cap. But you know, hopefully Kodak has a little bit of a resurgence. But just the concept of thinking, you know, Haley and Carly and Jen, they've probably never actually dropped film off to be developed. Like they've lived in a digital world their entire lives. Like I remember you used to take photos and you would actually take the film out of the camera, take it to the drugstore, have them develop the photos or to a Photoshop and have them develop the photos and then you go pick them up. It's, it's amazing how things have changed. Real time.

[B]

Does CVS count?

[A]

Yeah, I mean, I think that kind of counts. It's. You know what's, what's interesting is when I grew up, I think my parents have like, you could probably count less than 50 or 100, like candid shots of me as a little baby because like you just didn't. That wasn't a thing. Like you had a camera but like you had to go get it. Yeah. Now like you got tens of thousands of photos on your phones and it's, it's a completely different world. So good for rxr man, it's great to see them kind of turn it around.

[B]

And it almost seems like we can't go a week without talking about some office to residential conversion projects. And we saw an article in Bloomberg this week that some New York City offices near Penn State Station are set to turn into 107 studio apartments.

[C]

Yes. New York City developers Marty Berger and Andrew Heiberger are embarking on one of the first office to residential conversion projects in an area of Manhattan known as Midtown South. A joint venture led by the duo plans to invest nearly 70 million into the redevelopment of 29 West 35th Street. According to a statement, the office building, purchased for roughly $25 million will become 107 studio apartments. It's the latest among a growing list of struggling office properties finding new life as housing across the city. New York City is in desperate need of residential housing, Berger, the founder of Infinite Global Real Estate Partners, said in an interview. We hope to do many more. The studios will range from 400 to 575 square feet. Most of the units will have flexible spaces including home offices, alcoves or bonus rooms. It's the first major office to housing conversion to follow recent zoning changes in Midtown South. The building sits just a few blocks south of Bryant park and will include a rooftop amenity space with an outdoor movie screen, game tables and seating areas, according to the statement.

[A]

So Stephen, I know Hayley teased this one out. It seems like we're seeing more and more of these office to resi conversions and I'm excited for it. I'm here for it. If you just do some simple math here. Take the 70 million in renovation that they plan to invest for redevelopment. Divided by the 107 units, you're about 654,200 per unit. That doesn't include the basis for the purchase of the building and obviously any profit or entrepreneur enterprise would be associated with that. So I'm thinking you're looking minimum million, million, two 50 kind of starting price point for these depending on finish out.

[C]

Yeah, yeah. I mean I think the 70 million in renovation cost plus the 25 million that puts you just shy of 900,000 per unit. So yeah, you're spot on. You're probably looking at a million and a quarter, you know, easy. Which honestly for this part of Manhattan and general pricing on a studio like that, I mean that, that pencils just crazy man.

[A]

I just bought me a 400 square foot studio for about a million two fifty. Crazy man. Come down to Texas, you can be a king for a million 2:50. I can show you some really nice spots. In fact, that's a pretty nice segue to this office transaction down in Texas. I'm not sure if you saw this Stephen, but our friends at Crescent has made the headlines again with their most recent office acquisition. They actually just purchased 2000 McKinney which is a Dallas office building is 442,000 square foot. It's in the uptown neighborhood which has been on fire lately. I mean construction cranes, new buildings going up like crazy. And Crescent, you know, run by John Goff Fort Worth Texas Company. They purchased the 21 story property from Union Investment Real Estate of Hamburg Germany which had bought the property back in 2016 for about 226 million. Word on the street is that the most recent transaction was around 295 million which pegs the price at around 640, $645 a square foot, which is a really high watermark for a Dallas office building. Especially post Covid. I mean it's a great sale to see, you know Those prices approaching $700 a square foot again in the office sector. Now this location is tough to beat. It's about 80% lease. The building is Texas Capital bank is its main tenant. It has a lease in place that runs through 2040. The building was built in 2008 and was recently renovated just two years ago. And it has a small retail component as well as almost 1400 space parking garage. So this has mixed use retail office parking garage in a highly desirable uptown location. A couple of other anecdotal thoughts on this, Steven. I think this sets the stage for more capital to flow into this uptown neighborhood. I think you're going to see PE and pension back buyers really targeting uptown. This sets the high water mark in terms of price. I don't think we've had an uptown office trade for this much. And it'll be really interesting to see how much capital flows into this. You know you could find online there. I think the term was capital migration from coastal markets to Texas. And I think this really sets the stage for more of that to take place.

[C]

Yeah, I mean if, if Wall street south comes to fruition and all of the other deals that we've talked about over the last year, you know, all play out. I don't see how Texas doesn't continue growing and you know, absolutely breakneck speed. Infrastructure and energy are really the two things holding back the expansion path.

[B]

And as always we had can't get to today that were featured in the CRE rundown this week in Tripwire, which is a client only newsletter and in CRE Direct. If you're interested in learning how to get access to any of those, please send us a note. We're happy to get you set up and we do have a lot of programming notes here. On Tuesday, October 21st at 2pm Eastern, we will have an exclusive targeted training for our TRAP CRE clients. We will be sharing a live walk through of all of the newest product updates. We'll share some enhancements including some pro forma attribution and other new features including affordable housing property type, aggregate portfolio, financials and so much more. So if you're a client and you're looking to see all that we've done in the past few months, please send us a note to podcastrep.com and we'd love to have you join us on this webinar the next day. On Wednesday, October 22nd at 2pm Eastern, we will have a banking and lending focused webinar where our Head of Product Sumit Grover and Director of lending solutions Ian McCready will look at the current state of the CRE debt market. They'll talk about shifts in credit spreads and risks and give some examples from our proprietary data sets. They'll talk about managing excess spread and they'll also talk about our loan valuation system. So this will be an interesting one. If that is your focus area, we'd be happy to have you just send us a note and tell us you're interested in the lending webinar. And as always, we will host our Market Pulse webinar this October. That will be on Thursday, October 30th at 2pm Eastern. If you want early access, send us a note and we'll make sure you don't miss it. Turning to shout outs, Sander B said they are a regular listener of the Tripwire podcast and was interested in our delinquency report and they appreciate everything we do. So thank you for listening. Britain L wanted to sign up for our TRAP webinar. Peter G was interested in a recording of our webinar. Kevin R. Said, another terrific show. We love your data and was interested in the anonymized bank data report. He also said if you ever need any intel on Houston, please do not hesitate to call. So we will be calling you and getting your boots on the ground. Perspective John H. And Janet G. Reached out and said they were interested in the taller report. And our friend Andy, who is now a TREP employee, was out to lunch today with our friend Dr. Jet Yield who just came on the podcast. If you missed our recent guest episode with John B. From Byline bank, that was a really insightful episode. He has been a behind the scenes listener for years, but we needed to bring his expertise on the show. So look up Byline Bank Trap and you'll find that podcast episode. But it was great to see that Andy and Dr. Det yield connected in Chicago this week.

[A]

So I have a couple of shout outs to HALEY this Friday, October 10th, which happens to be my birthday, I'm going to be at the 16th annual North Texas Realty Conference presenting to the appraisal folks from the Appraisal Institute. It's the North Texas chapter, something they've done for a while. Got a pretty great lineup of speakers. I'm thankful to be one of them. I'm going to be presenting around 11:30. I'm kind of going through what we see in the market real time. And then next week on Wednesday I'm going to be up in Canton, Ohio at the National Football Leagues, you know, the NFL hall of Fame, giving a presentation at the NAI regional event that they host. And so kind of excited about this one. Not excited about the flights. It's connecting flights both ways, but the venue is going to be great. The Pro Football hall of Fame, super cool Jim Trestle is going to be there, Lieutenant Governor of Ohio, and our friend Bo Baron's actually doing a presentation there as well. So looking forward to that. So at a couple of upcoming events, hopefully that'll slow down a little bit as we round out the year. But looking forward to seeing our friend Alec P up at the NAI event and shout out to my friend and Texas Tech alum Mitchell A for the invite to the Appraisal Institute stuff here on Friday. So a lot of great things. We love being a participant in these events, sharing our insights and data with with folks across the country. And these are going to be two great events upcoming.

[B]

And if you make it this far in the podcast, send us an email to podcastrep.com and wish Lonnie Hendry a happy birthday. As always, thanks for listening. Leave us a review. Send an email, tweet at us, post on LinkedIn. We love it and it's always great to see your engagement. 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 you. If you have a question or just a comment, send an email to podcastrepp.com and subscribe to the Tripwire podcast with your favorite provider. Thank you for listening. Listening. And stay well.

[C]

All right?