← The TreppWire Podcast: A Commercial Real Estate Show
The TreppWire Podcast: A Commercial Real Estate Show
362. CRE Earnings Show Market Resilience, CMBS Issuance Nears $120B, 50-Year Mortgage Debate, & More
00:53:40
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- [00:00]
Lonnie Hendry
Foreign.
- [00:06]
Hayley Keen
Welcome to the trepwire Podcast, the show where commercial real estate meets data and insights. This is our Week in Review for the week ending November 14, 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 all eyes are on Washington as lawmakers race to make a decision on the government shutdown. The White House also floated a proposal for a 50 year mortgage, an idea that could ease monthly payments but also stretch risk across generations and reshape how Americans borrow. We also saw another massive bet on infrastructure and tech. Amazon is reportedly spending 700 million on land for future data centers, reinforcing where capital and corporate priorities are. Moving on today's show, we'll also break down the tale of two narratives in commercial real estate. Headlines continue to spotlight distress, vacancies, refinancing pressure and uncertainty. But now that earnings from the largest brokerages are out, we're getting a very different tone. Stronger leasing, more transactions and clients actively engaging again. We'll unpack what those firms are saying about whether the optimism matches reality on the ground. So Stephen, between policy shifts, the looming funding deadline and the divide between CRE headlines and earnings, how are you reading the market this week?
- [01:33]
Steven Bushbaum
Let's start with the short version. The shutdown ending removes one near term headwind, but it doesn't change the underlying story. This is still a slower, stickier cycle where capital is cautious and pricing discovery is happening in slow motion. And I mean that in slow motion. I was just on a call earlier today catching up with a resi trader and I was just, you know, probing them for themes, trends, volume and long and short of it is folks are sitting on their hands, right? There's not a lot moving now. It might pick up in December, but for right now it's been really sluggish. So let's do three quick takeaways. First, macro. With data delayed and inflation still stubborn, the the Fed can keep its higher for longer optionality tariffs, add a little more grit to the gears. So December may bring more guidance than action. For real estate. That means the cost of capital isn't breaking lower yet if our overall yields and CRE are more or less stable. So I'm talking like overall unlevered property level yield. So if that's more or less stable but our income growth prospects look weaker, then we could end up seeing cap rates continue to drift up where income growth can't keep pace and lenders will will remain selective. Now just as a quick reminder for how Gordon growth works for cap rates, you have your overall property yield minus your expected growth. That's both growth in cash flows plus your growth in value which oftentimes ends up being a depreciation. If you're going out cap rate is higher than your going in cap rate. So long and short of it, overall yield minus growth equals cap rate. So if we hold yield constant and growth breaks lower, that pushes cap rates higher. So now onto our second takeaway series, Sentiment versus the headlines the big brokerage prints. You're seeing stabilization and pockets of improvement Leasing where there's tenant demand and mission critical space but transaction volumes and capital markets fees are still below peak. That lines up with what we're hearing fewer forced sellers than feared more extend and amend as loans hit maturities and sharper bifurcation by asset quality and use case industrial tied to logistics and compute keeps leading necessity based retail holds its own, hospitality is market by market and office is still a knife fight for occupancy and TI dollars. And then finally third the big bets. A 50 year mortgage might make monthly payments lower, but it pushes duration and prepayment risk somewhere likely onto lenders and taxpayers and could inflate prices without solving the supply side issue. Meanwhile, Amazon dropping hundreds of millions of dollars on land for future data centers tells you where scarce value is accruing sites with power permits and proximity to fiber. Lonnie, if you and I start an industrial data center business, we're calling it P Cubed. I love it. Power permits and proximity to fiber. And that dovetails with the AI theme. Enormous capex up front, profitability hinging on utilization and power costs and net net AI is bullish for select land and industrial niches. But it's not a free lunch for margins. So where are we headed? It's a grind, not a sprint. Liquidity is available for the right deals, underwriting is tighter and the winners are assets with pricing power either because they serve growth like data and logistics or deliver true necessity. In the December we'll be watching services inflation, labor cooling and credit conditions and at CRE will continue to watch maturities, leasing role and increasingly power availability.
- [04:59]
Lonnie Hendry
I mean Stephen, I got to tell you, it's like every week you kind of one up yourself dude. So keep up the good work. I love the I love the delivery here, I love the salient nature of the points and it's a lot for me to try to unpack in a direct response with Me take a swing at a few of the topics. Right, the 50 year mortgage. I'm going to jump in right there. I think that's an interesting construct. I mean, obviously it's been all over social media this week. Twitter has been having a heyday with this and there's people for and against. And it highlights how some people don't even understand how amortizing mortgages actually work. I mean there's all kinds of different perspectives on this. The risk profiles and you know, duration prepay. All the stuff you mentioned is all, you know, that has to be worked out. The thing I haven't seen like fully addressed is do you think there was the same type of outrage when we went from a 15 year mortgage to a 30 year mortgage? Because in that instance you're effectively doubling up the mortgage itself in terms of tenure or length. Haven't we created some of this unaffordability bubble with government backing, all of these residential loans where you could effectively be a buyer with a 3.5% down payment on FHA. So like the cynical part of me says, okay, 50 year mortgage, like yeah, mathematically terrible idea. You, you especially if you run an amortization at a 6%, 7%, 7 and a half percent interest rate. I mean the amount of interest, you know, repaid over the term is twice what the loan balance is. But I think people will be making very similar arguments when you went from a 15 to a 30 year and we just didn't have social media back then. I don't know what your thoughts are. Then I'll give kind of my perspective.
- [06:33]
Steven Bushbaum
Yeah, I mean, I really, I don't love it. I can't say that I absolutely hate it. I just don't, I don't see the need for it, quite honestly. And let's, let's look at some, you know, hard numbers here, just for example, sake. So let's take a $400,000 mortgage on a 30 year term and a six and a half percent rate. Your payment on that is a little over $2,500 per month. And over the lifetime of that mortgage, if you hold it for all 30 years, you're paying $510,000 in interest. So let's say we push out that duration to 50 years and we keep the interest rate constant, which is a pretty big assumption. It's likely to be higher. But let's just keep the interest rate the same. Okay? That saves you a whopping 10 to 11% on your monthly payment. It drops it by $273 a month. Okay, that maybe does help on the margin for affordability, but the interest cost. Oh my gosh, Lonnie, what percentage more do you think you're paying in interest over the life of this loan?
- [07:28]
Lonnie Hendry
It's like 100%.
- [07:30]
Steven Bushbaum
Yes, exactly. It's 87%. It's nuts.
- [07:32]
Lonnie Hendry
It's nuts. I mean like. So, yeah, I don't think this solves any affordability issues because quite hon, honestly, the $200 a month that you're saving, if you're in a state that reassesses property taxes on any type of cadence, the increased market value because more people are now buyers in the buyer pool is going to drive up your property taxes at a level that's going to erode whatever savings you might have had on the P and I side when you make the purchase. So I don't think this is the saving grace that people think it is. In fact, I think it would drive prices up to make it even more unsustainable. I do just think it's interesting how some people, you know, take the high ground on this as if like this is a catastrophe when they've benefited from government backed loans, they've benefited from the securitization process, they benefited from all these things for their, you know, personal endeavor. If you're on, on the margin and you're, you're trying to find some way to own something and this maybe creates opportunity, like, I think it's something that should be discussed. But I, I did like some of the assumption talk that was happening on Twitter this week where maybe making more loans assumable and doing some things with existing mortgage, you know, inventory is a much better solution, which I think would, would, would be great. And like you could actually maybe have some sort of portability around a mortgage or whatever. Like those to me are much more like foundationally rooted solutions to some of the challenges. I think extending the term on these, to your point is a marginal affordability play at best and I think at worst it doesn't help at all and it just creates more risk for everyone in the system. So we'll see what happens with that. You know, on the, the shutdown stuff, I mean, look, we've been talking about this now for 30 plus days now. Officially the longest recorded government shutdown in US history. There's been several estimates put out. CBO put out an estimate that said 7 to 14 billion worth of permanent GDP loss. And we'll start seeing some of these like you, what you've been referring to as data fog. You know, the fog will start lifting and we'll start seeing some of the downstream implications of these things real time. And I think for the CRE stuff, like, listen, everything that everyone's concerned about and the bifurcation of the market and all of these things, the, the brokerage companies having, like, good earnings and solid, you know, reporting around the marketplace, but then all this risk and things in the, in the system, like those things have been there playing some tug of war for a while now. And I think I'm kind of like over the point of like, underestimating the market. I mean, at this point, you know, I can remember back just to a few years ago where all these analysts at the investment banks had recession pegged at like 99 uncertainty. Then the wheels fell off, interest rates went to the moon. All this stuff that, like, should have definitely pushed us into recession, never actually did. And the markets just kept chugging along. So, I mean, whether it's tariffs, whether it's government shutdown, whether it's data blackouts, whatever you want to call it, inflation, I think the market, I mean, I just did a presentation today. We're going to end the year on the CMBS side. I mean, we're going to definitely eclipse 120 billion in issuance, you know, unless something catastrophic happens over the next 30 days. And this is going to be the high watermark outside of 2005, 6 and 7. The market's on fire from the CRE perspective. The earnings from the brokerage firms support that. You're going to have a continued flight to quality, but that's every market. So I got to say, I'm finishing up this year pretty bullish on where we're at. And I think 2026 is set up, especially if some of these things, you get a new Fed chair, you see rates materially come down, there's some sort of program or something put in to try to address some of the affordability stuff, which it feels like after the elections, you know, a couple weeks ago, like, that's now one of the ticket items for the current administration. They're going to do some things to spur continued development and affordability. I got to be really bullish on the, on the, on 2026 from a CRE perspective.
- [11:23]
Steven Bushbaum
Yeah, absolutely. At least for the first half. You know, I'm concerned that there's something brewing in the cauldro that could set us into a tailspin 2H26. But that's, I mean, shoot, like you joked the other week, Lonnie, about anybody that has a roadmap for AI three years in the future is just flat out lying. You know, I'm going to be completely honest and say there's lots of things I could pontificate about, but there's no way we're projecting 2H26 with, with any sort of certainty. You know, one thing actually first let me touch on the, the 50 year mortgage. Lonnie. I don't know how long Bill Pulte is going to make it as a head over there, but I feel like you should throw your, your hat. You've got some creative ideas and I really do like that assumption idea. I'm on there on that train with you. I feel like if we were to maybe make a 50% pay down necessary on the old assumable loan that would maybe help assuage some of the capital redeployment concerns from the lender side, but also support availability. We're essentially splitting the difference and that could make a massive, massive difference. That combined with, gosh, basically just an overhaul in brokerage fees. If we can take it down from 5, 6% brokerage fees and we can get down to like the four and a half percent range, that's probably going to be just enough to move some of those hesitant sellers that are at least trying to break even, you know, and not try and top ticket with their sale and that'll help some move some inventory off the sidelines and ultimately I think help out a ton with transaction volumes. Now I want to get back to the AI trade. So we talked the other week about Michael Burry putting on that almost $1 billion in put options on Nvidia and Palantir. And it sounds like he's closed out those positions. But what struck me about one of his recent X posts was that he was posting memes of like Star wars and charts and book excerpts. But he noted that the growth could stall, surge in capital, yada, yada. But he said basically the winning move is to neither bet for it or against it, which is a head scratcher for somebody like Michael Burry. Like, okay, well where's the trade then? But that's, that's so true. I mean we see the risks of Palantir overvaluation. I think today it was trading at 125 times sales and 400 times earnings. You know, that's, that's an I think potentially unattainable amount of growth. But I'm not betting against it either. It's absolutely nuts.
- [13:44]
Lonnie Hendry
I mean, I think that's, that's the conundrum And I think this is where, like, the AI stuff, it's either going to make and those numbers eventually become acceptable or it's going to not. And we're all going to sit back and think, like, how in the world did we ever think that any of these companies should be valued anywhere close to where they are? I mean, that's just the reality. And I don't think we know enough on either side of that bet to like, have strong opinions. I mean, if you look at the Internet, you had a lot of people on, on one side of the table saying, this is a fad. It's never going to do anything. It's, it's just a passing, you know, new, new thing that's not going to actually materialize. But we know what happened there. You look at the iPhone and people were making fun of people for camping outside to get the iPhone. And it like completely transformed and revolutionized the entire world. And AI is something, you know, with the capability of being some multiple of that. I mean, just. But then, like the logical part of my brain, right, like I'm looking at this, this deal on the Amazon, you know, data services land deal. 188, 189 acres, Devlin Tech park, you know, Bristow, Virginia. 700 million. It's entitled for three and a half million square foot of data centers and three substations. That works out to about $3.7 million an acre. I don't, I don't care. Like, I mean, what are we talking about here? All right, so it's like, okay, there are some challenges though. Like there's still zoning and legal fights. Like they're going to have to deal with grid strain, noise buffers, rate impacts for the residents. All these things that, like, that price doesn't even contemplate what's going to happen with those issues, but you know that they're there. It highlights the fact that in real estate, scarcity still drives value. I mean, that's one of the, the four factors that drive value. You have dust, demand, utility, scarcity, transferability. Right? Those are four things that create value. You're seeing this play out right now. Scarcity of entitled land, entitlements, these things that were not fun to learn about in school that no one wants to spend any time talking about. Like you're seeing it play out to the tune of 3.7 million an acre here. We've, we've talked ad nauseam about the power, how you have to be proximate to power. And then just this dc, like broad, like industrial Crossover. It's fascinating, right? So it's, I mean, I read the stuff. I'm super jazzed and excited. Like half of me is like, this is incredible. We're going to look back in. 3.7 million an acre will feel like a bargain. The other half of me says, like, I don't know in what world you're living. There's no way that the math actually justifies you ever being able to pay 3.7 million an acre for this with the constraints that we see on the monetization side of a high right now to make this work.
- [16:19]
Steven Bushbaum
You know, if I had to draw a parallel to a similar moment pre 2008 crisis, this Amazon trade at 3.7 million an acre. This feels so similar to the EOP trade, Equity Office Properties Clearing. An 07. Maybe I'm wrong, but it wouldn't surprise me if this trade is very, very similar in some respects to that EOP top tick.
- [16:44]
Lonnie Hendry
Did you see the, the Barry Sternwick talking points this week?
- [16:47]
Steven Bushbaum
I haven't caught them all.
- [16:48]
Lonnie Hendry
Okay, so our friend Barry was on with our, our good friend Diana Olich from CNBC's Property Play and he was talking about how he's come to the realization that that AI is going to negatively impact workers. Right? Like they're going to be displaced. I think he framed it as AI as a productivity enhancer. The speed and impact is something that terrifies him at this point. You know, Starwood's definitely leaning into data centers. And so it'll be interesting just to see as some of these more prolific and more well known CEOs. We've seen it with Jamie Dimon, we've seen it with some of these other investment banks where they're saying like they're going in on these. And I think the, the balancing act. And this is where Stephen, like I know some of our listeners are going to be like, you guys talk about AI too much, but it's integral to our industry. Here is just, I don't think you can measure success on these things in an 18 or 24 month window. And we've seen the MIT report that came out that said 95% of the firms haven't realized any measurable gains or whatever, isn't that expected? When you have something that by definition is transformative in nature, like that early adopter, that very small percentage, the tip of the spear they're building and learning simultaneously, you're not going to realize the impact and the implication of that immediate. Like it's, it has to have a longer time horizon. On the curve before you actually get to start quantifying that. Yeah.
- [18:08]
Steven Bushbaum
And I mean, this is truly no offense to those MIT researchers. I know they're brilliant. I'm sure they worked very hard on this and put a lot of thought into the design, the structure of it. And maybe they're right in large numbers. But I'm going to push back and say I don't buy it. You look at Jamie Dimon, right? JP Morgan has spent an enormous amount on AI and AI infrastructure for them, their company, their firm. And he's already said like, they've done the ROI analysis and it has justified the cost. So I can't tell you exactly if it's just truly breaking even or if there's a strong positive ROI here, but I would venture to say it's at least a marginally positive roi. And it's only going to grow as we continue to expand. And you just keep hearing across industries. I really struggle to remember the name of the firm offhand today, but I was listening to a news report and basically the firm said we're going to be able to hold our headcount constant and grow our business by 30% over the next three years by the use of AI. So we're basically able to scale up our business without having to add headcount. So, yeah, I mean, I guess I just don't buy it. You know, at that point in time. I would buy it if we're rolling the clock back maybe 12 months. 12 to 18 months, absolutely. But we're in a whole new phase of the game now.
- [19:27]
Hayley Keen
And one other item this week I wanted to see if this came across your desk. Did you guys see that? Marriott abruptly cut ties with Sonder, which has now left thousands of hotel guests stranded because they essentially canceled all the bookings.
- [19:42]
Steven Bushbaum
Yeah, this was wild. A complete abrupt filing. And it hit a bunch of people off guard. Basically. You had some folks that had, you know, some cases. This wasn't a big deal. They were at the end of their stay. But I read about one instance where a couple had booked, I think it was a 15 night stay in New York. They were only halfway through their trip and they got a notice saying they had to vacate the hotel the next day and they ended up spending like a couple thousand dollars to rebook the rest of their trip. So there's been a sizable number of folks that have just been quite literally put out in the cold as a result of this immediate and unexpected bankruptcy filing.
- [20:19]
Lonnie Hendry
Yeah. So for maybe those that are not familiar with this, just a Little context. In August of 2024, Marriott signed a 20 year licensing agreement with Sonder, who was a short term rental and boutique hotel operator. The deal was aimed to add 9,000 Sonder units to Marriott's portfolio under the banner of Sonder by Marriott. Bonboy brand integration began in 2025 which allowed guests to book Saunders Day through the Marriott channels. And you actually were able, if you were a Marriott Bonvoy member, you could earn points and elite credits. So this was beneficial to Marriott, you know, theoretically in the sense that they were going to be entering the apartment style lodging segment which was going to compete more directly with Airbnb and other flexible, you know, stay platforms. Where I think this started to go off the rails was just Sandra was financially fragile from the beginning. They went public via SPAC in 2021 at a 2.2 billion dollar valuation. Their current valuation was now under 7 million dollar market cap. They reported a just over $101 million net loss in the first half of 2025 and a $715 million stockholder deficit. They face NASDAQ delisting notices and mounting debt. And then, you know, just to add to that, the integration with Marriott's tech systems were delayed and costly which caused revenue declines instead of growth. So obviously Marriott feels like they're throwing a lifeline out here and then they just can't get it onboarded. If you go to fast forward To August of 2025, Marriott provided a financial lifeline. They deferred fees and required sonder to raise 32.5 million by mid November, which is where we're at now. But Sandra defaulted. So on the 9th of November, they, you know, terminated the licensing agreement citing the Sonder default. But to your point Stephen, you know, that doesn't help anyone that had already booked. And that's the part where it just gets really interesting. I mean this was thousands of travelers that effectively got evicted mid stay. So it wasn't like they got a notification that said, hey, as soon as your trip's over, you won't be able to book anymore. They literally got put out in some cases. Some travelers reported having their belongings put in the hallways like without their notice. And then, you know, the timing of this clearly is not ideal with holiday travel upcoming. And so you have people that had booked in advance that are now having to try to rebook last minute accommodations at much higher prices. I think this is a negative look for Marriott, but a fairly small scale part of their business. So while we say thousands and it sounds like a big number on the whole, compared to what Marriott does, this is, this is kind of just a blip in the radar.
- [23:02]
Steven Bushbaum
Yeah. And really I'm curious if Marriott maybe has some plans to do something in house to backfill this, this particular business segment. You know, I don't want to go out there too far on speculation, but I just, I find it hard to believe that Marriott would be doing anything that would negatively impact the reputation with their loyalty customers because they do I think try and hold themselves to a fairly high standard. And some of these stories just, I don't know. For me it caught me a little bit by surprise with how some of these folks, I don't want to say were treated because it is what it is, right. You're being evicted. But if you're also a Marriott Bonvoy member, it seems like maybe there would be some consideration there.
- [23:42]
Lonnie Hendry
Well, yeah, look, I think as the story evolves we'll find out that for you know, Platinum Elite or Ambassador or Titanium or whatever that Marriott just eats some of this and figures out a way to get those folks, you know, accommodations at a net neutral cost to those travelers. But I do think it highlights some risk and this is something that I think we'll see as we, you know, continue down this, you know, more tech enabled. You know, CRE ecosystem is just that it's hard to integrate technology into existing ecosystems like in the hotel space in particular. I mean like that process has been the same for a very long time. They're trying to compete directly with these, you know, web based short term platforms but that's not the business model for, for most of these hotel brands. And so it'll be interesting, challenging. I don't know how you want to frame it to see like was this a one and done for Marriott? And they just said look, this just doesn't fit our model. We're profitable and we have a good margin with our existing book or to your point Stephen, did they do some due diligence at a nominal cost and then you know, now they come and roll some of some of their own in house solutions to the marketplace. I don't know which way this will go. You know, I think it does just create more tension though between short term rental platforms and hotel brands. Because if someone was a hotel loyalist trying this out for the first time and they get burned, they may go to the short term rental platforms now and say look, I've had it with the Marriott or with these other legacy brands.
- [25:19]
Steven Bushbaum
That's right. And market by market you're continuing to see Some ongoing tension from the regulation side as well. I mean, you have markets like New York City and I've read about a few others that are taking that NIMBY stance of we don't want the Airbnbs of the world increasing rental costs. We, we want to make sure all of this is above board regulated and you know, not, not working against housing affordability.
- [25:44]
Lonnie Hendry
Well, and look, the part that I don't tell you about that, and unless you read the fine print, Stephen, is hotel tax is a huge revenue generator for municipalities. And these short term rentals, in a lot of cases they don't pay that tax and they evade that. And so that's where the regulatory component comes in and people are really starting to clamp down on it because, I mean, I think in some cities or some states, you might pay 17% hotel tax if you go to an Airbnb of comparable location, but it's not registered or there's no regulatory oversight. I mean, that's significant revenue that just gets taken from these municipalities and diverted into non reported income.
- [26:25]
Steven Bushbaum
Yeah, but I mean, I can tell you from a couple of the Airbnb I've stayed in, in certain metros, I mean, I've looked at the line item taxation and it's in there. I mean, I'm paying it for, for some of these rentals and it's significant. You highlighted it's, you know.
- [26:39]
Lonnie Hendry
Yeah, I think for the regulated markets. And listen, like in those instances, you're going to see support from the cities because they're, if they're getting the revenue, then they're going to be supportive of the business model. But I know there's been several cities in Texas where they've effectively outlawed the short term rentals because there was no way for them to effectively capture that. I don't know if you saw, you know, Haley sent over another story while we were doing our intro here. Amazon CEO Andy Jassy recently predicted that brick and mortar retail will eventually go give way to E commerce dominance and the AI will accelerate this shift. He thinks that over time the ratio will be 80 to 85% non brick and mortar. And whereas right now it's about 80, 85% retail sales still occur in physical stores. What are your thoughts on that?
- [27:29]
Steven Bushbaum
Unless there's a much better inventory control system and better marketing, I just don't see it. Like to give you a really specific example, maybe too much information, I was wanting a weighted blanket. You know, I tried one a while ago, it didn't work great. So I was like, okay, I'm gonna try this again, but I want to be able to feel the fabric, you know, I want to be able to just experience it in person to say, is this the right product? I don't have to go through the return process with Amazon, and I don't mind spending a little bit of time in the store to have that certainty. In fact, I kind of enjoy it, you know, that tactile experience. And I think from a consumer standpoint, I don't think I'm the only one out there who enjoys the tactile experience.
- [28:07]
Lonnie Hendry
Listen, man, my kids already call me a millennial in a derogatory way, meaning I'm old. That's an old person's take, bro. Like, man. But I was having this discussion. I was invited to dinner with our. Our friend Mike G. And his friends in Dallas a few weeks ago on the Amazon stuff. And it is very interesting. Have you watched any of the Thursday Night Football or any of the shows on Amazon Prime?
- [28:37]
Steven Bushbaum
It's been a while. It's been a while.
- [28:39]
Lonnie Hendry
They have embedded in the commercial breaks QR codes and click here for more and direct ordering and all of this stuff. So if you want to talk about distribution channel, like, they have it. I mean, they're everywhere. All of us have Amazon. We're either on our phone. If they can get it digital, where like more shows, more sporting events, more things are shown on their video and they embed their advertising or subscription service or their delivery mechanisms are like part of the experience. I mean, it's really cool. It's like, click here to learn more about this while you're like watching a commercial or whatever. I could see this going. I don't. I think it's. We're still a ways away from it being like 80 to 85% online.
- [29:19]
Steven Bushbaum
Yeah.
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Lonnie Hendry
But I wouldn't be surprised if you get to 40% in the next five years.
- [29:22]
Steven Bushbaum
I'll concede that. 40%, sure. Sure. Especially if the E Commerce has a more efficient return pickup dynamic. They partner with Kohl's to do returns. Some of that gets more efficient. Or to your point, a couple of weeks ago, the drone delivery. If you're making it easier for me to return products I don't like. Awesome.
- [29:46]
Lonnie Hendry
The theft is the part that I think he was hammering home. Retail theft alone in the US 45 billion in 2024 expected to exceed 53 billion by 2027. If you're purely online, that that lost revenue doesn't hit your P and L.
- [30:04]
Steven Bushbaum
So speaking of theft and as we like to call it in the retail industry. Shrinkage. Quick pop quiz for you, Lonnie. Costco has, I believe, maybe the industry's lowest shrinkage rate. Do you know what it is?
- [30:18]
Lonnie Hendry
1%.
- [30:20]
Steven Bushbaum
Oof. Which would be great. It's 0.1 to 0.2%. Amazing.
- [30:28]
Lonnie Hendry
That's because I got those. They got those folks with the highlighters, man. That's exit. I mean, unlike these other stores where they. They kind of glance at your car and glance at the receipt. Like, I was at Costco the other day. I bought nine items. The lady kept counting. I was one short. I mean, I had one extra. She couldn't find it. And so she's like, the receipt Sundays, you know, nine items or whatever. I'm like, they're right here. So we're like, taking the stuff out. She finally figures out what the deal is. Then I get the pink mark on the receipt. I can leave. I was sweating even though I went through the checkout. I mean, I didn't even do the.
- [31:02]
Steven Bushbaum
Self checkout, so that's obviously a big chunk of it. But the other portion is their employee loyalty. Because they pay their employees so well, their employee retention is off the charts. I think the average employee tenure at Costco is something like 10 years. And if you look at the executive board, the average tenure across the C suite is 20 to 30 years.
- [31:24]
Lonnie Hendry
I mean, listen, you can get a whole large pizza there for $9.95, and that's pretty damn good.
- [31:30]
Steven Bushbaum
It is. It is. And. Sorry, go ahead.
- [31:34]
Hayley Keen
I don't know if this makes me a millennial or even older, but I will never stop going to Costco because I live for going there and seeing all the new items every month because they change out their inventory. It's pretty fun. I'm never going to stop that. But this whole topic, Lonnie, has me thinking and wondering and questioning about your tattoo. Are you going to have to change the retail renaissance to scratch it out and put retail apocalypse again, or are we still okay now that there's E Commerce and other forms of retail?
- [32:06]
Lonnie Hendry
Yeah, I think retail renaissance. I'm not. I'm not gonna. I'm not gonna tattoo over that. If. If the retail apocalypse comes back, I'm just gonna add, like, a separate line item down below. It's almost like those, you know, those commercials where you see, you know, the. The national championship or super bowl predictions that they just keep adding the years down the guy's arm. I'm just going to have to add another line item. It's going to be retail apocalypse. 2.0. But I, I think we're a long ways away from that. I mean I, I think this is just kind of ties back to our, our AI discussions today. Look, the CEO of Amazon, he's got inside information into like what their distribution is and he, if he says those things it's because he's got data or he's directionally feeling like that's where the market is going, that's their strategy. Does that mean it's going to happen? No, but I wouldn't put it off either. I mean like with, with the way technology is evolving in five years, like everything we do has to be questioned at some level on how technology is going to impact us. I mean the self driving stuff from Tesla now where they're like literally driving cars off the assembly line and it just drives to your house. I'm not that old but that's not even like fathomable in my brain 15 years ago. Like that's an impossibility. That now is just like standard, the robo taxi stuff in Austin with Tesla. I mean they're undercutting Uber prices by like 15 times and the response rates are better. Like everything is better just because technology, I mean like technology is, it's an exponential differentiator. So I think we're too early to call this any type of apocalypse. But I, I wouldn't say it's, it's something that can't happen. I did want to circle back. Hayley gave us on the lead in some of the brokerage stuff and we kind of briefly hit on it. But just to give some, you know, Quantifiable numbers here. CBRE Q3 25 revenue was up 14% year over year to 10.3 billion raised. Their fiscal guidance or full year guidance? Excuse me. Commentary highlights scale and outperformance across segments including what we just talked about with data centers. JLL Q325 six straight quarter double digit revenue growth. Capital markets up 22%, leasing up 8%. And they highlighted the strength of the US industrial markets. And then if you look at just industrial broadly, Colliers have put out a report Q3 highlighting absorption of about 60 million square feet. Vacancy maintaining around 7.4% and construction pipeline down to 270 million square feet. So supply is cooling as you start seeing these demand factors re accelerate. So I think for the, the naysayers in industrial or the people that were kind of like waving some flags of fear, the data maybe suggests that they just cooled off a little bit and it's time to ramp back up. So I gotta feel pretty, pretty bullish and strong about these results from these brokerage shops. I mean it's, these are the major players that tells you how strong the transaction markets have been both across leasing and sales for them to post those kinds of numbers.
- [35:13]
Steven Bushbaum
Yeah, this is incredibly encouraging, really what we were hoping to see at this stage of the cycle and oh man, it's going to make for an exciting first half of 2026. You mentioned issuance, Lonnie, so I just wanted to toss out an update on where we're at with deal count here for 2025. Right now we are up to 113, $113.7 billion in issuance that's been announced so far. Right now we're scheduling deals out to early mid December. So really we've probably got another two weeks on deal announcement before we're going to have to probably wind down the books on 2025 schedule. But like you said, this is awesome. Looks like we're clearly going to hit that 120 billion mark. And the question now is how our spreads going to hold as we continue to bump along through year end. I'm just looking quickly at the secondary spreads on super senior bonds. We had increased by about, let's call it 8 to 10 basis points increase from the mid September lows through early mid November. But we have taken a nice little step down. We've tightened in I think about three to five and probably about three basis points, maybe as much as five, depending on what you're quoting. So it's good to see spreads tightening a little bit as we get some certain year on the end of the government shutdown. If that continues, I'm hoping to see spreads continue to grind back tighter through year end.
- [36:44]
Hayley Keen
Yes. So I think some of these earnings reports can really be the proof that we've been looking for. We talk a lot about the headlines in the commercial real estate market and there's always going to be headlines about the distress. I mean, we report on the delinquency rates every month. But what is helpful is to understand the context behind those rates. We mentioned this last week, but we'll dig into our delinquency rates on this month's Market Pulse webinar where we'll give you that historical perspective on what the rate means currently and where the rate was, say a few years after the great financial crisis when we actually saw the peak delinquency rate. But it's really interesting to dig into these earnings reports and really just see where there's leasing activity, where the revenue is going and where they see the future of the industry. So we'll continue to watch this into the new year. Like you said, Steven, now that we're talking cre, let's turn to our deals and data segment and dig into some specific stories we've seen across the property types. Okay, so let's start in multifamily. We saw a headline in Commercial observer that BXP sold a 508 unit apartment property in Reston, Virginia for about $240 million.
- [37:58]
Steven Bushbaum
Yeah, so this is, this is maybe not quite our 3.7 million an acre, but it's still quite a nice headline. Sale. A venture of Sterling Investors and Simpson housing purchased the 508 unit signature at Reston apartment property in the Washington, D.C. suburb of Reston, Virginia from BXP. According to Commercial observer, the venture is said to have paid about $240 million, or $472,000 per unit, which is what the Boston REIT and its advisor Eastill secured were targeting. Signature at Reston at 11850 Freedom Dr. Was 94.3% occupied last year and generated an average monthly rent of $2,841 per unit, up from 2698 in 2023. The two building complex includes 25,000 square feet of retail space. BXP carried it on its balance sheet at a value of 220.64 million. Next up we have a Denver apartment Property sold for 125.6 million. Seminole Real Estate Fund has paid roughly 504,000 per unit for the 249 unit rally at Sloan's Lake apartment property in Denver. The Sovereign Wealth Fund of the Seminole Tribe of Florida bought the property at 1650 N. Rally St. From its developer Hines, which was represented by CBRE. To facilitate the latest deal, the fund turned to Northwestern Mutual Life Insurance Company for a $66 million loan. Raleigh at Sloan's Lake opened in 2020 and includes just over 4,000 square feet of ground floor retail. And it's along a lake within Sloan's Lake park, which offers two playgrounds, tennis courts, athletic fields, basketball courts, walking and biking trails, picnic areas and boating. The Seminole Tribe of Florida is one of three federally recognized Seminole tribes in the country. It launched its real estate fund in 2020. The tribe previously generated the bulk of its capital from casino operations. It operates five casinos throughout Florida, including the Seminole Hard Rock Hotel and Casino in Hollywood. And then rounding out our multifamily stories, we have Hilltop has bought a St. Petersburg, Florida apartment complex for $93 million. Hilltop Residential bought Provenza at St. Pete, a 308 unit apartment complex in St. Petersburg, Florida for 93 million or just about 302,000 per unit. This news coming to us from the Tampa Bay Business Journal. The Houston company bought the property from Momentum Real Estate Partners of Miami, which had purchased it in 2019 for 70.25 million. Bercadia brokered the sale and arranged 59 million of financing against the property. Provenza at St. Pete at 540 Trinity Lake was built in 2014 and has a mix of one, two and three bedroom units ranging in size from 655 to 1376 square feet. It is 95% occupied.
- [40:53]
Lonnie Hendry
So I just want to circle back on a couple of these Stephen that the the Denver apartment property Seminole Real Estate. You know, if you look at the LTV on that deal, $66 million loan from Northwestern Mutual on $125.6 million purchase price puts you at about 52.5% leverage.
- [41:11]
Hayley Keen
This episode is brought to you by Resilience Insurance analytics, insurance risk consulting and transaction management services designed to close the deal as the go to advisor for commercial real estate lenders. Resilience provides tailored solutions and supports over 100 of the nation's largest lending institutions with expert insight into structural risk, insurance costs and market expectations. Drawing on insights from 200,000 successful closings, resilience Insurance analytics consultants turn complexity into confidence so you can close every loan. Learn more and connect with a consultant today at resil-ins.com that's R E S I L-INS and I want us to move over to the industrial segment here. We saw a story this week that EQT Exeter bought two Jacksonville, Florida warehouses for $132.43 million.
- [42:16]
Lonnie Hendry
Yeah, so I'm excited that we have a couple of industrial stories. With all the data center talk that we had on the front end of the pod, I think it's required that we have a little bit of industrial talk that's not maybe data center related. So as you mentioned Haley, EQT Exeter bought the two properties in Jacksonville. Warehouse properties total just over 1.37 million square feet for just over $96 a square foot, 96.61 per square foot to be exact. That comes to us from the Jacksonville Daily Record. The Radner PA Company purchased the industrial buildings from Hillwood Investment Properties out of Dallas, which had bought them for a combined 115.6 million four years ago. The warehouses are located at 12200 Presidents Court, which sold most recently for 71.73 million and 2300 Pickettville Road which fetched 60.7 million. They're fully leased to Unilever and Keurig Dr. Pepper respectively. The 772,000 square foot President's Court property was built in 2008. It sits on a 64.14 acre site within the Westlake Industrial park while the 598 square foot Pickettville Road facility was constructed a year later. So this is a great story, you know, obviously with our office here in Dallas Hillwood, which is run by Ross Perot Jr. They have their hands in a lot of different development, pretty big players in the industrial space and this is a nice profit for them on a four year hold.
- [43:41]
Hayley Keen
And to close with something along the lines of what we started with on the topic of data centers, we just saw that there is a new $3.46 billion Blackstone industrial portfolio SASB deal that's coming to market. So walk us through what we know about this deal so far, Steven.
- [44:00]
Steven Bushbaum
Yeah, this is definitely ending 2025 with a bang here. So as you mentioned, Blackstone has announced a data center SASB deal that's scheduled to close in mid December and the deal size is 3.46 billion. This SASB portfolio is backed by 10 data centers and the pre sale report just dropped today and we're recording on November 12th. So let's take the collateral snapshot here. This is ten QTS owned data centers across six US markets including Atlanta, Dallas and Norfolk, Virginia. With an aggregate capacity of roughly two hundred and fifteen megawatts. The proceeds are being used to refi this QTS portfolio by Blackstone, consistent with this year's surge in securitization data center debt. Now get this Lonnie, the early read on investor appetite is strong. The Class D notes were nearly 23 times oversubscribed according to Global Capital. Absolutely nuts. Now if we want to look at how much data centers have really grown in their footprint in SASB space, Goldman put out a stat saying that roughly 13% of the SASB market is now tied to data centers this year, which is just underscoring the depth of buyer demand. And the fact that we continue to bring deals of this size to market with over subscription rates that are this strong is amazing. Now just a little bit more detail on the rent roll and the tenancy. The portfolio is 94.2% occupied across 680 contracts with a weighted average remaining lease term of 3.8 years. That's based on kilowatt hours and that's as of the September 2025 rent roll. The portfolio's largest tenant represents 10.2% of base rent. Across the portfolio, the top 10 largest tenants comprise just over 50% of base rent. And investment grade tenants represent roughly 53.7% of the underwritten base rent. Now what's really nice about this portfolio in terms of diversification, the portfolio doesn't have any tenant outside of the top five tenants that represents more than 3.4% of the base rent. So for all of this talk of, you know, how highly concentrated the market has become, this is really nice to see on a portfolio like this and is probably part of the reason why you see such a strong oversubscription rate for those denotes yeah, this is a.
- [46:35]
Lonnie Hendry
This is a pretty significant deal, Stephen. And I know as the data becomes more widely available, we'll be, you know, talking about this one again. So incredible to see that type of insatiable appetite for these, these offerings when they hit the market.
- [46:51]
Hayley Keen
So one other retail headline this week while we're on that topic, did you see that 555 group has extended the Mall of America loan?
- [47:00]
Steven Bushbaum
Yes, the Real Deal was out with a story here noting that the Girmesians 555 group has secured a four year extension on the $1.4 billion Mall of America loan which matured back in September. The extension involved the owners providing significant new equity and other collateral enhancements. So we'll be getting more details on this as the remittance data rolls in. This is the second time the loan has been reworked following an interest only conversion in 2020 after the loan missed payments during the pandemic. Now, just as a quick recap, we talked about this loan back in February when the remittance data noted that the value of the collateral behind that loan had received a 14% appraisal reduction. That asset has been reappraised seven times during the life of that loan from initial value of 2.31 billion at securitization in 2014 down to 1.95 billion in early 2024. And then that most recent appraisal received was back in December 2024 that produced a value of 1.68 billion.
- [48:07]
Lonnie Hendry
If you want some good news about the Mall of America, Steven, I don't know if you follow this, but Tom Brady has a storefront called Card Vault that's going to be opening a 1700 square foot store at the Mall of America. Slated to open November 16th. It's going to feature sports cards trading card games and authenticated memorabilia. Tom Brady himself will attend the grand opening at 5pm in the Huntington Bank Rotunda, coinciding with his Fox NFL broadcast duties for the Vikings and Bears game. So that's kind of an interesting story. For those in the the Minneapolis market, maybe you can go meet Tom Brady and ask him what it feels like to make 340 million broadcasting football games.
- [48:49]
Hayley Keen
All right, a few programming notes from our end this week. You have until Thursday, November 20th at 2pm Eastern to sign up for the Market Post webinar that I mentioned earlier. As a reminder, we will dig into those historical CMBS delinquency trends. We'll do a deep dive into data centers and we will have a special guest, Seth Glasser, the Senior Managing Director of New York Multifamily at Marcus and Millichap, who will join us to do a U.S. and New York City multifamily deep dive where he'll talk through rent policies, give a housing update, and we'll also dig into some broader TREP data to examine risks and trends across the US Rent regulated and affordable housing sectors. So send us an email, we will get you signed up for that webinar and make sure you're on the list. As a reminder, we have our Q3 2025 quarterly data review. This is an in depth magazine that you can get access to as a Trep listener or a Trep client. So send us an email and we'll send you a copy of this magazine. It has a lot of good pieces in there that walks through what happened during Q3. And if you are a Trep CRE client, you get access to exclusive office hours with our team. The next event will be on Tuesday, November 18th at 2pm Eastern. We've had a lot of you guys reach out and share specific questions or invite team members that you want to learn more about using the tool. So reach out to your account manager or send us a note and we will make sure you're signed up for the office hours training. We'll also have our product experts on the call giving a live demonstration on some of the new tools and just ways that you can maximize our data and our platforms and turning to shout outs. Andrew C said he frequently listens to the weekly podcast and really enjoys it. He said the show is concise but packed with insight, especially the opening market recap. Thank you Andrew for calling it concise. I know it's almost an hour long show, but we really appreciate that we do cover a lot in that 50 minutes to an hour. He reached out to us because we did an overview of our AI tools and the way that AI is really being used in commercial real estate last week and he was interested in learning more about our Proforma tools. We are going to set up time with Andrew and his team to walk through that. If you were interested or want to learn more about any of our AI offerings or just our data in general, send us an email. We're always happy to get on the phone with you and show you all that you can access. Matthew O was interested in the Marketplace webinar and it's good to hear from our friend Oz. So thank you for reaching out. Marlon M. Was requesting a copy of the QDR magazine and they were also requesting early access to our Year End magazine. That will be an even more in depth piece of content that we put together every year in partnership with Commercial Real Estate Direct. They said thanks for all your hard work and they tune into Trepwire every morning as I drive to work. Mads thanked us for a really great podcast. They're always looking forward to listening in during the morning commute and they were interested in our CRE rundown newsletter. Pierre said, hi team, thanks for a great show and was interested in the podcast that Lonnie did on CRE and AI. Andre V was interested in tuning into our webinar so we sent the link to sign up there.
- [52:21]
Lonnie Hendry
So as we wrap up this week's show, Hayley, I want to just take a few seconds. This is a cool week for us to have a podcast given that Tuesday was Veterans Day, which also happens to be my oldest son's birthday. He turned 16 this week, so that's a pretty big milestone. But just take a few seconds and shout out all of our military personnel, both active duty and retired, that have signed up, you know, taken the the call to action and decided to dedicate their lives, whether it be for two years, four years, or an entire career of making sure that we live in a safe and free country where we can do shows like this to talk about commercial real estate and we can, we can live in a place where we can feel safe and protected. So for all of our veterans out there, we greatly appreciate the sacrifices that you make both personally and with your families and you know, afford us the opportunity to do what we love to do here on our show.
- [53:14]
Hayley Keen
And with that we'll close. Thanks to our producers Karlee Sento and Mariana Sobrana. Join us next week as we look at what's on going happen during the week and how it may be impacting you. If you have a question or just a comment, send an email to podcast trep.com and subscribe to the Trepwire Podcast with your favorite provider. Thank you for listening and stay well. All right.