← The TreppWire Podcast: A Commercial Real Estate Show
The TreppWire Podcast: A Commercial Real Estate Show
361. NYC's Rent Regulation Debate, AI Innovation for CRE, Inside the Loans Driving Distress & Notable Transactions
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- [00:06]
A
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 November 7, 2025. I'm Hayley Keane 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 Buschbaum, Research director. This week, the Fed's 25 basis point cut is still rippling through markets, but its decision to hold off, signaling a December move, pushed long end yields higher. Meanwhile, the government shutdown is now the longest in U.S. history. And this week the biggest strain is showing up in the airline industry and travel sector as operations slow and backlogs grow. So on today's show, we'll break down the Fed's cautious stance, the prolonged shutdown, and in cre, a key headline out of New York City's election this week, what shifting leadership could mean for rent regulation, housing policy and the broader multifamily market. We'll look at what this could signal for landlords, investors and distressed portfolios already under pressure from rising expenses. And of course, AI continues to dominate headlines. But how is it actually being used in commercial real estate? We'll dig into that and share how TRIPP is applying AI in ways that matter for CRE and cmbs. So, Stephen, start us off here. Between policy shifts in New York and another week talking about the shutdown, what does all of the news tell us about where the economy and real estate markets are headed next?
- [01:41]
B
Well, if I had to boil it down to just one common thread this week, I think I'd have to land on the fact that the cost of time has gone back up. The Fed gave the front end a 25 basis point breather last week, but not by teeing up December. So effectively they're pushing the term premium up on the long end as long end yields have reminded everyone that duration still bites. And for cre, that keeps the buyer seller gap wide. Now, fortunately, we have narrowed that massive bid ask gap significantly over the last two years. So maybe we'll see a little bit of widening back out. But I don't expect what's happened this week to really change anything by and large. But it is something worth taking note because we've widened out on the 10 year, I'm gonna say about 15, 16 basis points on the week and on the short end for the two year, we've widened about 10 to 13 basis points. So if you remember last week I talked about bull and bear steepeners well, what we've got this week was a bear steepener, right? The yield curve has steepened because the long end has increased, which means yield up, price down. So for Siri, this means that we could see some cap rate drift higher. Obviously with a lag, refinancing will remain selective. And some of those value add business plans that rely on a quick expansion are still not going to pencil. That's not going to change now. The shutdown adds a second layer, a data fog with official prints limited. Lenders and investors are flying more by their instruments at this point. So servicer commentary, delinquency and special servicing trends, watch list migrations, actual transaction comps. We're having to go back to the good old fashioned fundamentals. And in this kind of a market, liquidity bifurcates prime clean cash flow is still going to clear and then higher credit is still going to pay up or sit on the sidelines. And then interestingly, we'll perhaps talk a little bit about this on this week's segment. We had that curveball for New York. What we've been waiting to see play out is now right in front of us, we have a change in mayor for New York. And so that's going to put front and center a big question mark about what this means for rents.
- [03:53]
C
Right.
- [03:53]
B
We have a potential for a four year rent freeze. That would be a massive regime shift from what we've come out of. So this is going to create a lot of uncertainty for lenders, buyers, sellers, I mean, and honestly the group I feel worst for. Lonnie, you can appreciate this. Appraisers, appraisers are going to have their work cut out for them because there's just going to be a lot up in the air. So what that's ultimately going to mean is we're going to be facing some stabilized NOI pressures, some DSCR tightness and perhaps some more scrutiny on capital plans. So in other words, we're going to be needing more cushion for loans, multifamily loans that are getting underwritten in New York City currently. But hey, this is only day zero, so we have a lot left to flesh out in terms of what is actually going to change with policy. That's going to take weeks, months, and honestly, maybe nothing happens. We have no idea. All we know at this point is the election results. So finally, my favorite topic, AI. Now, we're going to talk about this pretty much every week these days because, you know, the rapid rate of advancement with that technology and what it means for us and our Productivity is mind blowing. So I'll hit pause on this topic because, Lonnie, I know this is like a passion for you, and I can't do it as much justice as your enthusiasm will. So I'm going to leave that one for you. The bottom line this week, policy risk and term risk are back in the price. The winners are going to be patient capital, durable cash flows, and business plans with multiple off ramps.
- [05:19]
C
I think that's a really great open, Stephen, and there's a lot to cover there. And we'll get to all of those things throughout this episode. I think the headline numbers for me this week are that we're now sitting at day 36. When most people listen to this podcast, it'll be the day 37, supposing they don't get some agreement in place of the US Government shutdown. So now we've, we've ventured into unchartered territory. We're now the official, you know, officially the longest government shutdown on record, surpassing the 35 day shutdown that was during Trump's first term. You know, I think the number here that jumps off the page at me is the Senate has failed for the 14th time to advance the funding bill. And you're starting to see some of these ripple effects that we've talked broadly about over the last couple of weeks actually start to mount in the marketplace. So the Senate, you know, with their failure to advance spending, you saw some snap funding start running dry over the weekend. As Haley mentioned in the lead in, you're starting to see flight delays start to really back up. You're seeing air traffic controllers not showing up for work as well as TSA personnel. I saw some stuff online today where a guy said that he just boarded his flight and the pilot came on and said they were going to be taking a different route due to the shortages in air traffic controllers. And they were going to be flying at an altitude of 8,000ft, which I don't even know. Like, that's, I don't, I mean, I'm assuming this is legit, but, you know, most flights are usually 30, 35,000ft, maybe 28,000 in a short duration flight 8000. It just kind of tells you where we're at. I mean, I think the airline challenges are what's really going to push this over the top for them to have to get to some sort of an agreement. Like the economy needs people to be able to go to an airport, get on a flight and go to wherever they need to conduct business. And the images of seeing People stand in three and four hour lines are just not good for either side of the aisle here. And so hopefully we get something done. It's an interesting week this week too, with the Supreme Court, you know, looking at some of the tariff inquisition around, like, is this even legal or is it not? And, you know, I have to say, based on, you know, the anecdotes that came out today, it feels like based on some of the questioning, that this is probably not going to go the way that Trump and his team are hoping for. Which creates a whole nother series of questions around, what do you do with all this tariff revenue that's been raised? How does that get dispersed back into the market to people? Do they find some other backstop measure that allows them to continue to proceed with this? And then ultimately, what does that mean for the deficit when these things get pushed back out and effectively this revenue source gets deemed as not legal? Supposing that happens, obviously, we have no insight into that, but the questioning today would lead one to believe that there was some confusion from the Supreme Court around just kind of the methodology and the rationale used in order to actually start this in the first place. And so, you know, I like your commentary on the Fed cuts. I mean, you know, we're going to start hearing from some of the Fed officials, you know, we'll start seeing what their perspective is as it pertains to December. Powell was pretty forthright and saying at the FOMC meeting that, you know, December is anything but a foregone conclusion and that there was some intense debate around December between the committee members. So I think you're going to start seeing people balance, you know, spending resilience against labor cooling. And is this inflationary pressure that we're seeing from tariffs transitory or sticky? I kind of joke saying the term transitory because we made so much fun of that last time, but it may be applicable this time. We'll see what happens. So, a lot of stuff happening, Steven. I mean, I know we've talked a little bit about the spreads and you talked a little bit about the yield curve. You know, secondary spreads are tightest since the GFC 2025 new issue is, you know, 20 basis points tighter across tranches and 24. And so we're, you know, trying to determine, you know, these tight spreads, are they a signal of durable demand or are they really just masking some latent fragilities that the macro is going to worsen? So a lot of stuff to get to today. I think we're in this place with the election with New York mayor. I'll just touch on that as we kind of get into it. I would just caution our listeners here to understand that in most cases the worst case scenario rarely plays out. And especially as it pertains to politics. I mean, the reality is people campaign people will go out there and get themselves elected making all kinds of promises. And we've seen this throughout the duration of history. And in reality there's just, there's already inertia and momentum. It's really hard for any singular individual to come in and just completely disrupt something. So this makes good headline fodder. There's definitely some concerns for the commercial real estate space as you've outlined. We've already seen some of the rent controlled, rent stabilized units suffering challenges even without the new mayor in place. So there's definitely some concern that some of those things may be negatively impacted even more. But I think for people, you know, on the whole we got to just take a step back and tap the brakes a little bit. Like it's just one person in a role that has some checks and balances in place. And I don't think this guy is falling as some of the narratives might make you think.
- [10:20]
B
Yeah, speaking along those lines, I don't want to get too far off topic here, but there is a really good topic I think that can help our listeners appreciate, you know, the difference between your promises in the campaign trail and then reality once you actually get in office. One of the things that we see time and time again in elections is people pounding the table saying we're going to fix the broken student loan program. Right? We're going to come in here and we're going to do X, Y and Z in every single campaign cycle, at least for the executive office. You hear that over and over and over again and decades worth of history shown us nothing ever comes of that. And so if anybody's ever wondered why, I can at least shed some very interesting light on this. Most folks don't realize that student lending is actually a deficit reducing activity for the federal government. This is not widely known, widely publicized. Probably a lot of people don't appreciate me saying this, but it is a fact. The actuarial assumptions around government backed student loans make them a deficit reducing lending activity. So every dollar of student loan debt that we issue this year is going to go to reduce the budget deficit by maybe 5 to 15 cents, something like that, for every dollar. I don't know what the exact number is. But that really little known or unknown fact about how Student loans play into budget deficit is. I think it helps explain why you never ever see anything change with student lending. So this could be the same case for New York City rent control. I know there's been fantastic efforts by the real estate lobbying groups out there to get in front of the new mayor and you know, help lay out a menu of options and not just focus strictly on rent control. So I am optimistic that like Lonnie said, we're going to avoid the worst case scenario and we'll find some common middle ground because I think it's a bipartisan agreement. Affordability is an issue in New York City and so hopefully we'll, we'll come out on the other side with some positivity and cross aisle cooperation.
- [12:23]
C
Yeah, I mean, I think what this does is it creates an opportunity for there to be more dynamic discussion around some of the root causes of some of the unaffordability components. Right. And you know, I think there's been a pretty push from the ownership side of the lobby to say if you're going to cap revenue, you have to provide some relief on the expense side. And one of the benefits, I guess of being an owner the last couple of years is just that you have really strong data to show exactly how inflationary some of these expenses have been, both with taxes and insurance is kind of leading the charge here. So if you look at, you know, some of these rent control, rent stabilized assets, according to Rafael Cistero of cpc, they said there's an Eightfold jump in foreclosures for what they will consider conservative fixed rate rent stabilized assets over the last two years. Insurance up 52% over a five year period. And definitely they put together some proposals that say should there be some sort of public property insurance option? You know, they're effectively creating an analogy between the flood programs that we've talked about on the show and as of right, tax abatements. And so we'll see what happens. I mean, I think it's going to create a lot of talking points. There's definitely going to be a lot of articles written over the next four years around this topic. But for us today, you know, I think everyone just needs to tap the brakes a little bit and let's just see how this plays out. I mean, the current situation is not great and you know, we've had some more well known folks in office and their policies have not generated significant superior outcome. So, you know, I'm taking a wait and see approach on this one. I'm more concerned about the government shutdown I mean, at this point, you got to get that thing resolved and you got to get the markets back to functioning properly where GSA landlords are going to get paid their rent. Section 8 landlords get paid the rent. TSA employees show up, air traffic controllers show up. I mean, there are things that are actually quantifiable, tangible, that need to get fixed immediately. And so I'm hopeful. It feels like, I think for the first time over the last month or so, now that the elections have passed, you're going to start seeing people migrate towards some sort of resolution that gets things open back up.
- [14:29]
B
I hope so, because I think what we are probably failing to fully appreciate is just how long of a tail this is going to have on data cleanliness. If the shutdown had only lasted two weeks, we would probably only have had one month of dirty data. Four weeks, that's at least two months, six weeks, that's probably a solid quarter worth of questionable data prints. The first month back is going to be really noisy. The second month back will be questioning, you know, if we found normalization. And it's really going to take a full quarter until we get that third monthly print after the government shutdown ends to really know where current equilibrium is at.
- [15:08]
A
So we mentioned this on the lead in, but AI is clearly here to stay and it's here to stay in the headlines. We saw that case this week with OpenAI signing the $38 billion deal with Amazon Web Services. So this was recognized as one of OpenAI's biggest moves away from Microsoft and is giving OpenAI flexibility to scale their infrastructure through 2026 and beyond. So this is a huge headline. I don't think this is going anywhere. We're going to see crazy headlines like this week after week. Talk to us a little bit about this deal and let's get into some of AI specific to our commercial real estate industry, what we're seeing there and then how TREP has a role in that space.
- [15:52]
B
Yeah, I mean, from the OpenAI AWS contract, this is good to see. I mean, I like the diversification and not just relying solely on one major compute partner. So this was, I'm guessing, probably just an eventuality for OpenAI and is telling me that they're moving very rapidly to that, gosh, I don't want to call it mature phase, but right. They're. They're moving up in the world in terms of who they're signing contracts with, partnering with strategically. So this is exciting, but still a lot of questions to be answered about the revenue Gap for, you know, basically your compute cost versus incoming revenue for services and everything else that these LLMs are, are providing us in the workplace. So I know for us at trep, we have some pretty exciting features that we have rolled out that we have in the pipeline. So Lonnie, do you want to give us a tease of what some of these fantastic advancements are?
- [16:53]
C
Yeah, I mean it's, you know, we, we live in the space and I know we're not an AI show and we've spent a large portion of our shows the last couple weeks talking about AI. So for some of our hardcore CRE folks, hopefully you'll understand after listening to this a little bit why it's so front of mind for us because we're, you know, embracing this new frame of building tools, solutions, products for the market, leveraging these AI tools that everyone is now, you know, integrating into their workflows. And so we talked about the $38 billion Amazon deal. I mean OpenAI signed about 1.4 trillion worth of infrastructure agreements in 2025. So again, these are not like trip concepts or we're thinking, oh, AI is going to be this really big thing. I mean, all of the data is pointing to this as being the future. So what we've done is affirm, is start to build out solutions that have native AI capabilities within them. So one of the first things that we released as a product company is an AI enabled search which allows our users to effectively access data through our platforms using natural language text search. Instead of having to use a slide bar or multi select or a dropdown, you effectively just type in what you're looking for and the AI takes what you type in and associates that with our data objects and it returns the results real time in the same platform. So the user experience doesn't change dramatically in the, in the sense of they're still seeing the same screens. Where it does change dramatically is they're not having to do any of the legwork themselves. They want to see some specific data in a particular location. They literally just type in a question or type in what they're looking for and the AI tool completes the search for them. We also have built out AI market summary chatbots. So we have a lot of people in our markets in our tools that invest in multiple markets and it's hard to be an expert in every single market, especially if you're geographically not close to where you're investing. And our AI chatbots now allow you to go in and select a property type in a market area and in seconds, it generates a really robust comprehensive narrative about what's taking place in those markets with actual data to support the thesis. And so, you know, one of the interesting things with our use of AI is all of our models are trained exclusively on just the 30 plus years worth of data that Tripp has compiled. So that historical repository that we've built our legacy off of is now being brought to the forefront in a modern frame because it's used to train all of the models to, you know, produce these types of outputs. So the AI Market summary is a really awesome tool because it gives you granular insights. Vacancy rates, cap rates, expense ratios, properties that recently transferred to special servicing, all with just a couple of clicks. And then we built a bunch of engines that can be incorporated into our front end, you know, web platform tools or can be licensed as individual engines where you can create sales comps analysis using our AI technology. You can look at income and expense comps using AI technology. So we're basically looking at more than just what your typical geographic property type, property sector type of things that would drive historical comp analysis. And now looking at machine learning based model that effectively digs deeper and brings in additional attributes to find the best comps. The thing that I'm probably most proud of is our pro forma model. So Steven, you know, having underwritten thousands of deals, that process is somewhat arduous. And if you don't have good data, it's really hard to underwrite something at an accurate clip. And so, so what we've done is taken 30 plus years worth of income and expense data and built a pro forma calculator model that will effectively give you a synthetic operating statement for any property, any commercial property in the US real time. And then as a user you have the ability to go in and make modifications based on your local market expertise. But it's going to give you a directional proxy for valuation just by selecting a property in the system. And so it's really unique in the way we've set this up because all of the data, as I mentioned, is trep data. It's proprietary, it's curated, it's good data, which as you mentioned earlier, the data fog, like we're not having hallucinations or data fog here because all of the models have been built off of the 30 plus years worth of trep data. So if you have any interest in learning more about those things or you want to see them in action, we're happy to showcase them. You can reach out to us, we'll set up A call. We've highlighted some of these features on some of our Market Pulse webinars where we've actually shown people some of the market summaries and other things. But we just wanted to kind of highlight for our audience that when we're talking about AI on the podcast, it's because we have AI committees and subcommittees here at trep, where we're focused daily on trying to, as best we can, keep up with the rate of change in which these tools are being deployed. And it's, it's a pretty challenging task because the investment in these things are significant and the technology is advancing, you know, day by day. It's literally that fast.
- [21:55]
B
And it makes it tough from a project planning standpoint, because when we're trying to think ahead in, say, quarters every six months or a year, those varying timelines, things that were really completely unfeasible two years ago, all of a sudden are now within our grasp. So it's, it's a lot of fun, I gotta say, just seeing how quick this evolution progresses and, you know, really mentally salivating over the possibilities to come.
- [22:24]
C
It requires from a product management perspective. You basically run multiple processes. You have your standard kind of business as usual roadmap planning exercise that builds out your quarterly roadmaps and goes to an annual roadmap. And then AI is more of a squad approach. You have some dedicated AI specific team members where they're iterating at a much faster clip. You take something from concept to idea to production in weeks, not months. It's interesting. I was on a panel a few months ago, Stephen, where I said, anyone that tells you they have an AI roadmap for the next couple of years is lying to you because there's no way to know. And I got a few folks that kind of push back on me on that, but I'm even more convinced of it at this point. I mean, literally what gets released today in some cases could be outdated at 30 days just because of the pace in which these things are adapting. So we're all excited about this. And I think the concern for me is not just the application. I think people are smart and they know their workflows and they're going to. The natural progression will be. People will say, wow, this tool can do this, I can use it, and this workflow is going to make me more efficient. It's just the spending here and it's the financing and it's the commitments and it's all of these things. I mentioned OpenAI had 1.4 trillion in infrastructure agreements. I don't know if you saw this most recent article in Reuters. $75 billion worth of corporate bond issuance in October for data centers and AI. We start looking at this on a broad spectrum significant capital being placed in these deals. So just to give some perspective here, this is from a Bank of America analysis. As I said, 75 billion of US investment grade debt was issued by AI focused big tech in September and October alone, which is more than double the sector's average annual issuance of 32 billion from 2015 to 2024. So in two months they doubled up the average annual output. There was a $30 billion deal for Meta, $18 billion deal from Oracle and then Google owner Alphabet's new borrowing announced on this most recent Monday was the $38 billion high grade loan linked to Oracle's Vantage data centers that was reported by Bloomberg. Now if you look at this, 75 billion in deals from September and October only make up about 5% of the 1.5 trillion in US investment grade debt issued this year. But Barclays said AI related tech debt issuance is the key determinant for potential credit market supply in 2026. And so where you get really concerned, excited depending on which end of the spectrum you're on Steven, is you mentioned the Hyperion Meta deal the other day. We didn't really have some of the details behind it but they agreed to a $27 billion financing arrangement with Blue Owl Capital in a joint venture structure which keeps the debt off of Meta's books. And there's some, some questions on just how that plays itself out. And so you know you, you have not just the, the really large sizable deals that are getting talked about here, but you have you know, issues around credit risk rising. So Oracle shares, if you look at them that are 54% in 2025, which is the most powerful annual rally since 99again.com bus timeframe. The AI driven surge has in revenues made it one of Wall Street's most valuable companies this year. It's been pretty well documented but there are some people worried about some of the challenges there. I mean their credit default swaps, you know, show investors are worried about the tech giants debt levels. And then if you look at AI related junk bonds, you're starting to see, you know, people tapping into that market brings back again shades of some previous downturns. You're also seeing asset backed securities being offered which we saw you know, leading up to the great financial crisis with illiquid assets that are somewhat complex and opaque on and on and on. So we're trying to balance this new tech reality of building tools and solutions, but with this backdrop of there's a lot of private money going around out here and nobody really has full transparency on where and what this means.
- [26:49]
B
Well, I like all of this that you've pulled together. So let's use an analogy here. Are you familiar with the oarfish? Whenever an ore fish washes ashore, there's a Japanese folklore, there's an earthquake coming. Well, perhaps we have a similar one in the investing world with Michael Burry. So I don't know if you saw this headline this week, but he is once again very active back in the market with two huge short positions. He bought, I think, more than a billion dollars worth of put on Nvidia and Palantir. Now, Nvidia, I'm not quite there on the bearish level with Burry here, but Palantir, yeah, I get that one. Have you seen what their price to sales ratio is? Yeah, it jumps off the page 137 times. I mean, absolutely nuts. So, yeah, when you start looking at the pricing of Palantir stock, I get it. You know, those put options make a lot of sense. Nvidia, I'm just not there yet. You know, I understand what he's doing at some level. You know, I don't think any of us can really keep up with Michael Burry in the weeds, but I'm very curious to hear how this plays out, how he continues to support that position because there's been so many folks, you know, flashing warning flags saying, you know, this is, this is a bubble, we're getting overpriced, this is overdone, yada, yada. And it just seems like those rally cries have gotten louder, but at the same time, the, the markets continued to rally harder. So, you know, this is, this is definitely echoes of 98, 99, 2006, 2007. You know, there's some, some rhyming with history here.
- [28:40]
C
Yeah, I mean, one thing I heard this week was maybe one of the differentiation points is during the dot com bust, you literally just had people that had registered a domain name.
- [28:49]
B
Yes.
- [28:49]
C
And at least here there's tangible components that you can see, whether it be chips, whether it be outputs, models, et cetera. But if we bring this back to commercial real estate, you could argue the entire market's been in a bubble, even with this correction, with this most recent interest rate hike over the last couple of years. I mean, asset values, you mentioned it on your lead in Stephen, the bid Ask spread is still there and people don't want to pay the previous trades price for an asset that they think isn't worth that much, especially with today's higher cost of capital. So, you know, I think you look at the stock market, you look at AI, you look at commercial real estate. I mean, all of these things at some level have been inflated to a point that you just have to ask yourself if any of them are worth what, what they show to be worth, because the reality is they're probably not.
- [29:44]
A
All right, so I want to move us along here and reflect on something that we teased out last week and that was our latest CMBS delinquency data. So for those that caught last week's episode or saw our report, the Trep CMBS delinquency rate resumed its climb in October 2025 and now is at 7.46%. So we wanted to do a deep dive in our deals and data or property type segment this week and really explain the stories behind those numbers. So we track the details of the loans that cure or are resolving or that are newly going delinquent. So this week maybe you guys can walk through a few examples to show what was really driving the delinquency moves for October and walk us through some of the office and multifamily loans that either cured or went newly delinquent with October's data.
- [30:43]
B
Sure. So let's start off with the office sector. So we'll start off looking at some of the large office loans that cured this past month. So first up we have HP Plaza at Springwoods Village in Spring, Texas, which is part of the Greater Houston area. HP Plaza is a 378,000 square foot office complex in Spring, Texas remains fully leased to HP through 2033. The borrower recently renegotiated a second maturity extension, pushing it out through November 2025 following an additional principal curtailment. Discussions around refinancing are ongoing with life insurance capital sources in play. Next up we have Hutchinson Metro Center 1 in the Bronx, New York. This loan is tied to the Hutchinson Metro Center 1 in the Bronx and transferred to special servicing after missing its June maturity balloon payment. The borrower had remained current until now and was reportedly seeking a modification. The 422,000 square foot office property is anchored by Mercy College with occupancy last reported at near 100%. And then third up we have 11 Madison Avenue in Manhattan. The 2.29 million square foot office tower at 11 Madison Avenue in Manhattan's Flatiron district continues to benefit from a robust tenant mix led by Credit Suisse and Sony. The property is backed by over 1 billion in securitized debt, with the largest portion tied to a SASB transaction. Long term lease commitment and institutional tenancy have helped sustain demand at the Class A asset. Now we'll switch over to some newly delinquent office loans this past month. Braven Office commons in Bellevue, Washington is first up. The $304 million loan behind Braven Office Commons in Bellevue, Washington transferred to Special Servicing for imminent monetary default. The Class A office complex, once fully occupied by Microsoft, now sits fully vacant after the tenant's departure. The loan had remained current on payments until recently and does not mature until early 2027. Servicing teams are monitoring the situation closely. Next up we have the factory in long Island City, New York. The $300 million loan behind the factory, a 1.1 million square foot office property in Long Island City, has transferred to Special Servicing for eminence maturity default. The borrower had previously exercised extension options, pushing the final maturity out until October 2025. The property, anchored by Advertex Communications, had seen declining performance with occupancy and DSCR trending downward. And then third up we have 1700 Market street in Philadelphia, Pennsylvania. The $188 million loan behind 1700 Market street has entered foreclosure proceedings after maturing earlier this year. The office tower, located in Center City, Philadelphia, has been under special servicing since 2023. Receiver remains in place, overseeing operations and leasing, with occupancy reported at 74%. The property was last renovated in 2019 and includes tenants such as Reliance Standard Life Insurance and Deloitte.
- [33:51]
C
All right, Steven, so let's, let's play this back a little bit. If I'm a listener to the Tripwire podcast that maybe hasn't spent a ton of time listening to us and I'm jumping on this episode, we just went through a bunch of terms and words that people might not be super familiar with, Right? So I don't I toss some things out and you give me some definitional understanding or some background. So when we say cured multifamily loans, cured office loans, cured retail loans, what are we saying?
- [34:21]
B
So these are loans that prior to the most recent month had been reported as delinquent. So this is the broad delinquency category. That's 30 plus days, including in foreclosure or REO. And so when the loan went from status of in some phase of delinquency to non delinquent. So that could be current within race or if it's past its maturity date, that would be moving from non performing matured balloon over to performing matured balloon. So basically what that means is the loan has passed its maturity date and previously it was not current on interest payments and now the borrower has caught back up and the loan is back current on interest payments, past maturity.
- [35:01]
C
Perfect. And if they get a modification or an extension, those are terms that get agreed upon between the borrower and whom the special servicer.
- [35:11]
B
So the borrower is effectively negotiating or renegotiating the terms of their contract, not with their original lender or the originator or with the master servicer. This is in the hands of the special servicer. They have the fun duty of dealing with the complex, difficult situations such as contract extensions or loan modifications.
- [35:32]
C
Now we've had some of our guests on Slow Mo Chop and a few others where they've talked about some of these workouts and some of these deals that need extensions or modifications or whatever. That's, that's effectively the space in which they live. I mean, you've highlighted, I mean this happens, this is not a rare occurrence where something is in the delinquency status or non performing and they get the payments current and then they're able to execute on a modification or an extension. You know, and so it's good to see these things actually play out real time. And in some of our, you know, public reports that we put out, like our traditional delinquency report, we don't dig down into this property level granularity, but every month on the background, we're doing this type of analysis at a property by property level to see what happened within each property sector, what happened at the individual property level. So it's not uncommon to see these things, you know, get to some form of interim resolution. It doesn't mean in a lot of instances that they'll stay in a cured status. I mean, some of these deals, they're unable even after the extension or modification to continue to meet those newly agreed upon terms.
- [36:40]
A
So we have a lot more details on all of the loans that have moved into both of those buckets. Clients, you get access to this in a an exclusive report. And if you're not a trap client and you're just curious to see where we get this data, how we track it, send an email to podcastrep.com we're always willing to get on the phone with you and walk you through it. We know we're going to keep seeing this push pull of the delinquency rates. We're expecting to see the delinquency rate continue to push higher, but we will make sure to keep everyone apprised of what this really means, what's driving that rate, and how it compares to other times in the market. And that's a great segue here for a quick plug for our upcoming Market Pulse webinar this month. We will be hosting our Market Pulse webinar a little bit early this month because of Thanksgiving. So you can join us on Thursday, November 20th at 2pm Eastern. And we will do just that. We're going to do a deep dive into CMBS delinquency trends over time. Walk you through data going back to 2000 and where we saw spikes, what the property type data shows, and give you all of the context behind what this really means. So if you're interested in learning about that, send an email to podcastrep.com and we will get you access to that webinar. Before we close, I want us to talk specifically about multifamily here. We're seeing some transactions across the country and some in some markets that we're not always covering. So let's walk through some of the interesting apartment sales that we've seen seen in the last few weeks.
- [38:13]
B
Sure. So first up we have Stockdale Capital has paid 110.25 million for some newly constructed apartments in Scottsdale, Arizona. So this works out to just over 414,000 per unit for the 266 unit Quincy at Kearland apartment property in Scottsdale, Arizona. The Los Angeles investment manager purchased the property from its developer, Embry Partners of San Antonio in a deal arranged by Marcus and Mill Chaps Institutional Property Advisors. Unit Quincy at Kierland at 15826 North Scottsdale Road opened last year and has one and two bedroom units with monthly rents that start at 1862 per month. It's 20 miles north of Phoenix and next to the Kierland Commons mixed use property that has office, retail, restaurants and residential condominiums. Next up we have Millburn has paid 71.3 million for some Phoenix area apartments. Now this worked out to just over $331,000 per unit for the Echo Biltmore, a 215 unit apartment property in Phoenix. This news coming to us from Multi Housing News. The Salt Lake City investment firm acquired the property from its developer, Wood Partners. CBRE Capital markets arranged a $41.3 million Fannie Mae loan to facilitate the purchase. Echo Biltmore at 1720 East Camelback Road opened last year and has studio one and two bedroom units with monthly rents starting at 1709. A move in special is being advertised that offers up to eight weeks of free rent, a $1,000 gift card and free parking.
- [39:52]
C
Gotta love when they throw in the gift card and some free parking. Steven. I remember back in the day when I was leasing apartments, we used to have a promotion we'd run once a year where we would partner with like Carnival Cruise or some of these lower tier cruise lines and we would give away a free cruise for two. It was like, you know, a $400 value or something. I don't know where the cruise even went to. It might not even have, you know, left the dock. But it was something we would try to get people in and at one point they, you know, flat screen TVs were a huge deal. We'd give away a flat screen tv. So it's, it's interesting. I've noticed an uptick at least in the DFW metro of some of these lower, you know, class B properties having a lot more Now Leasing Specials, 4 weeks free type of things on the outside of their properties to try to get people into the, into the leasing center. It's interesting, we've seen the spike in the CMBS multifamily delinquency. Also seen some really positive headlines around multifamily, around concessions and other things burning off. But this is a reminder that it's market by market, sub market by sub market, property by property. And there's still several that are having to give away a lot more than the ownership would like them to have to give away.
- [41:06]
B
Yeah, I mean with monthly rent starting at just over 1,700 per month, you can kind of see, you know, it might take a little bit of, a little bit extra to get that lease inked. In an environment where consumers are increasingly budget constrained.
- [41:23]
C
Well, Phoenix is a market that we thought the bottom was going to fall out of, you know, a couple of years ago. It's honestly performed much better than we thought. But just for those out there inquiring minds, if you did a 12 month lease in an apartment, which is typical, and you give away two weeks free, you're giving away 16.67% of your economic rent. You know, the ability to collect rent, you're collecting 10 of 12 months, which means you're stated a better way, you're creating about 17% economic vacancy the moment the lease is signed. And so it'll be, you know, it's pretty significant you added an extra thousand dollar gift card and some free parking. I Mean, they're, they're effectively giving away, call it plus or minus 20% of their potential rent just to get leases signed.
- [42:08]
B
Yeah, but on the back end, they're probably looking at their renewal stats and saying, hey, if we're able to keep doing what we've done these last two, three years and get retention rates of, I don't know what the number is, but let's call it like 80% or something, it's worth it. You know, we'll give away a little bit on the front end, but we'll push rents or be able to retain rents more aggressively on the back end. And you know, that stickiness in renters I think is probably helping some of these properties in the long run. Even though the concession Steam Brothers steep today.
- [42:40]
C
Yeah, for sure. And these owners, look, they want you to take those concessions on the front end of the lease, they burn off and then they start getting, you know, they'll give away two months for free. So they get collected 10 months at market rent and then to your point, the retention helps them. I always ask this question to my students, Stephen. If you're leasing an apartment on a 12 month lease and the owner gives you two months free, would you rather take both months up front for free? So pay nothing for the first 60 days and then pay the full market rate for the next 10 months, or would you rather prorate the two months over the entire term? So you pay rent 12 months but you pay a considerably reduced amount over the 12 months? What is your response?
- [43:21]
B
Isn't there some time value of money math here?
- [43:24]
C
Not even that. I don't even get that technical. I'll give you my answer. I think as a renter you want to prorate the rent over the 12 months because it effectively gives you a lower net effective rent that upon renewal hopefully gives you some leverage to try to keep the rent at a, at a lower level. If they try to give you a 10 or 20% increase, you can go in and negotiate based off of your effective rent. If you take the two months up front free, which is what most people say, because that gives you some reprieve on the front end, they effectively get you to market at that point and they know the likelihood of you moving out is greatly reduced after you've established residency there. So if you're the owner, in my opinion, you want the two months upfront free, you put a goose egg get market for the next 10. If you're a renter, you want a prorate over 12. I'd love to hear from Some of our property management folks or owner operators in the audience that are listening tell us how they treat this or how they would like to see it.
- [44:20]
B
Yes, because the universal truth that helps property managers, in the end, moving sucks.
- [44:28]
C
And tenant, I mean unit turn costs are up significantly. So I mean that's a factor for them. It's not like the good old days where you could turn units and you immediately it was accretive because rents were going up. In this market, you may turn a unit over and you might get a slight increase in rent to the new tenant, even though this would be a little bit contrary to that based on the concessions. But the cost to turn that unit is significant. It's no longer a negligible cost, it's a real cost.
- [44:57]
B
Yeah, it's funny, it's state by state dependent law, but in some states there's actually regulations that you have to replace the carpet if the previous owner has lived in the apartment more than X months. Whatever it is, it's funny how many times that carpet doesn't seem like it gets replaced these days.
- [45:13]
C
Now, I'm not gonna, this is a hypothetical. I'm not gonna admit or deny if this was true or not. But maybe one time when I was a young, when someone my age, someone that had my resemblance, was managing an apartment complex and was getting a quarterly NOI target bonus, went to some extreme lengths to not have to replace carpet because we didn't treat them as capital. And so it was above the noi. And so I can tell you those carpet cleaners are like magicians. They can do all kinds of things to make carpet look new, at least for the first couple months.
- [45:45]
B
Yes. And you can always re stretch it.
- [45:49]
C
Hatchet diet. I've seen it all.
- [45:52]
A
Let's close here with some industrial stories. We saw a Richmond area industrial building sell for 70.5 million.
- [46:01]
B
Yes. LaSalle Investment Management has bought the Axial Gateway 95, a 505,000 square foot industrial property in Colonial Heights, Virginia for 70.5 million or just under $140 per square foot. This news coming to us from Commercial Property Executive. The Chicago investment manager purchased the warehouse from Crescent communities of Charlotte, North Carolina in a deal brokered by JLL Capital Markets. Santander bank provided a $32.5 million loan for the property's construction. Additional equity was provided by a U.S. affiliate of Kaishu Electric Power. Axial Gateway 95 opened last year on a 57 acre site at 1641 Walt Hall Industrial Parkway, about 18 miles south of downtown Richmond. It's fully leased to Hill Phoenix, a subsidiary of Dover Food Retail of Madison, Georgia. And then next up we have a call it about a 261,000 square foot industrial property in Northern California is sold for 62.75 million. Sagard Real Estate has paid just over $240 per square foot for the just under 261,000 square foot warehouse at 2021 Farallon Drive in San Laredo, California. According to the Denver Business Journal, the Denver Investor acquired the industrial building from an affiliate of the Rosalind and Arthur Gilbert Foundation, a Los Angeles nonprofit that has owned the property since 2003. The property was built in 1973 on a 10.83 acre site that is 22 miles east of San Francisco. It underwent renovations last year and has 28 foot clear heights, 20 dock positions and four ground level doors. Pacific Fusion, a clean energy startup, recently signed a lease for 135,000 square feet at the property.
- [47:53]
C
I think you're seeing the difference location plays in both of these sales here, Stephen. So you look at the Richmond area deal at about 140,000 at about $140 per square foot and then the the one outside of San Francisco at $240 a square foot, about a hundred dollar per square foot. Delta obviously slightly different. The the Richmond area 505,000 square feet and this one was 260. So you have economy of scale factoring into that price per foot. But you know, anything within driving distance of San Francisco, you're going to see that premium across all property sectors. And we're seeing it play out here with this industrial site.
- [48:30]
B
I gotta say, of all the properties we've talked about over the last month, I want to go visit this one like six months from now after the tenant gets the space fully built out. I mean, with a name like Pacific Fusion, I can only imagine what this space has got to look like.
- [48:44]
C
It sounds like a Capri sun flavor.
- [48:47]
A
I was going to say it sounds like one of those smoothie or shake shops. All right. Of course we have more stories that we can't get to this week, but we do have some announcements. So let me turn to our programming notes for those of you that receive our Trep research, Trep emails, Trep webinars. We have a lot of content we know, and we hope you're enjoying it. But you might have seen that we released our Q3 2025 quarterly data review. If you didn't receive that. This is a quarterly magazine that we release in partnership with our sister company, Commercial Real Estate direct and we recap the activity in the commercial real estate, finance and CMBS markets. This edition is looking specifically at Q3 and we're calling this one is stability. Returning to Commercial Real Estate, we have a lot of topics in this magazine including stories about major office REITs, international trade and the commercial real estate impact, CMBS issuance numbers, special servicing volumes and a lot more. So if you want access to this magazine, it's chock full of data. Send an email to podcastrep.com and we will get you a copy. We are also planning for our Year End magazine which is bigger and better. We have a lot of people who have asked to contribute stories or looking for advertising slots in that magazine. So send us a note so you don't miss out and you can take part in the Year End magazine. We talked about the Market Pulse webinar, but I'll give a little bit more context Again on Thursday, November 20th at 2pm Eastern we'll talk about those CMBS delinquency trends that I mentioned. We'll also do a deep dive into data centers looking at AI driven demand power constraints and leasing trends are shaping the financing and some performance metrics using Trep data. And then we will also have our friend Seth Glasser from Marcus and Millichap on to talk about the state of the multifamily market, specifically looking at rent policies, rent regulated and affordable housing sectors and what are the broader trends and performance metrics looking like there. So if you want access again podcastrep.com and we will get you the link to register. We also have another exclusive webinar for our Trep CRE clients. As a reminder every month if you're a Trep client of any kind, you can join a client only training where we sit down with you and walk you through the latest tools, features, enhancements to make sure you're getting the most out of our products. In this month's training we are making it even more interactive and we'll be giving you live office hours. So if you have specific questions or you have team members that are using our front end platforms and want to be using it better or making sure they're getting the most out of it, send it our way, send it to your account managers and then join our targeted training Office Hours which is taking place on Tuesday, November 18th at 2:00pm Eastern and you will get best practice guidance directly from our product team. So this is a really cool feature of being a Trep client. You have around the clock care with a dedicated account manager, support team you get access to our product teams, but we also want to host these interactive sessions so you can really feel like you can ask questions and use our data to the full extent. So you can ask your account manager about how to get access to that or send us an email and we will make sure you're signed up. We still have a little bit of time left. If you're graduating in December 2025 and looking to make an impact in commercial real estate, you can join our class of TREP Future Commercial Real Estate Leaders. We've had so many of you reach out already and you have until Friday, November 14th to submit your application. So get those in. We'd love to highlight you and feature you in our Future Leaders December 2025 class. Turning to Shout Outs, Kevin R. Was interested in the AI Real Estate panel that you participated in, Lonnie, so we shared that podcast. Jason S reached out to us after hearing we would be at the SIOR conference and he booked some time to meet with our team. So thank you Jason. I know you had some specific questions on some of the data that we have, so we will walk you through that at the conference. James C. Was interested in some of the reports we mentioned on our podcast last week. Cedric F. Also was interested in the AI and CRE panel. Sarah T. Wanted to see our latest report looking at the CRE debt universe and the mortgages maturing. Mr. Was interested in our Market Pulse webinars and Ryan S. Had some specific questions around the loans driving the increase in the office delinquency rate. So hopefully you are listening to this episode and you heard some of that here today. And then again, our teams are at the SIOR conference as we speak and they've met a lot of our listeners already, so we always appreciate getting to meet you guys in real life. I have a list here of several of the folks that we got to meet and I'll run through those quickly. If I didn't catch you, send us an email and we will give you a shout out next week. But thank you to Rob K, Scott S, Carl B, Phil S, Jason S, Aaron D, Christy, Willa E, Steve Z, Kathy J, Ryan T, Mark D and Conrad E. For coming by the TREP booth, talking about your love for the podcast and probably being sad they didn't get to see Lonnie and Steven's faces in person. But they'll catch you at another show to that point.
- [54:41]
C
Haley if they want to catch us. I'm going to be on the SIR webinar on November 12 at 2pm Eastern where we talk about office industrial and the state of CRE in 2025 beyond. So there's going to be a 45 minute webinar. Actually, it's an hour long webinar where I'm going to be talking about what we're seeing in the marketplace. So if you're interested in catching that, you can email us@podcastrep.com we'll send you the registration link or you can register on the SIOR website and get access to that webinar. That's coming up next Wednesday.
- [55:16]
A
And we gave a shout out last week, but coming soon will be our special podcast episode with John Santora, the CEO of WeWork. He was so interesting and so transparent about the future of that company. So I'm really excited for our podcast listeners to get to hear that. That should be out in November and we have so many podcast guests lined up. We've had a lot of really interesting pitches this week, so we get a lot of you guys reaching out, sending us your CEOs, your partners, or just interesting people within your firm doing really cool things that want to come on our show. If you have someone in the industry that you want to refer to us, just send them a note, introduce them to us, reach out to us on LinkedIn. We'd love to talk to people in the industry doing big things or that have a specific area of interest. So we're always open. Send us a note. And with that, we'll close. Thanks to our producer, Mariana Sobrana. 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 podcastrup.com and subscribe to the TrupWire podcast with your favorite provider. Thank you for listening and stay well.
- [56:28]
B
All right.