← The TreppWire Podcast: A Commercial Real Estate Show
The TreppWire Podcast: A Commercial Real Estate Show
374. Back from CREFC Miami: Commercial Real Estate Market Sentiment, Macro Headlines, & Special Servicing Trading Alerts
00:59:08
Loading summary
Transcript57 lines
- [00:06]
A
Welcome to the Truck Wire podcast, the show where commercial real estate meets data and insights. This is our week in review for the week ending January 16, 2026. I'm Hayley Keen with Trup, 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 Buschbaum, head of Applied Research and analytics. This week, markets are digesting a heavy mix of macro headlines and early signs from commercial real estate as 2026 gets underway. On today's show, we'll start with the big developments shaping rates and risk sentiment, including inflation data, renewed questions around Fed independence and upcoming bank earnings that may offer insight into the direction of of CRE lending and credit conditions. We'll also touch on what we heard from the market on the ground at this week's CRE Finance Council conference in Miami, where conversations centered on improving liquidity, tighter spreads and optimism around CMBS issuance. There was also talking points of stress that still remains in the market, particularly in multifamily and and recent single asset, single borrower deals. And we'll wrap up the show with a few trading alerts that show just how sensitive markets remain to policy headlines and rate moves. So, Steven, as macro signals and on the ground sentiment start to align, what matters most right now for commercial real estate?
- [01:40]
B
I think the biggest thing right now is resisting the temptation to treat all of these better vibes as a trend and kind of like we talked about in last week's podcast, separate the price action from fundamentals. So on the momentum side, the market is clearly telling us something. Liquidity feels incrementally better, spreads have tightened in spots, and CMBS conversations have shifted from can we print? To what clears and at what levels. So that's real. When you see multiple channels improving at once, primary execution, secondary trading tone, and more consistent bid lists, that's not just noise, but the fundamentals haven't magically reset. The way I'm framing it is momentum is in financing conditions and the stress is still in cash flows. We're still dealing with loans that were underwritten in a different rate regime, and a lot of assets are walking into refinance math that just doesn't pencil, at least not without some combination of fresh equity extensions or valuation realism. But I want to pause here because you know, this is all good and well to pontificate about, but our team just got back from CREF C in Miami and I know, Lonnie, you have some hot takes just ready to go for us here so let me pivot to you. Tell me, what did you hear? Boots on the ground this week at.
- [03:01]
C
CREF C, I can tell you there was no measured approach as you just outlined here. It was overwhelmingly, abundantly hyperbolic, almost positive in terms of where people feel we're headed in 2026. I mean, if you look at just the number of attendees and the meetings and to give some perspective. So for those that have been to crefc, you'll know the layout of the hotel at the Lowe's. You come up the first floor escalator to the second floor. They have the check in desks there to the right. Just for some context, there was a line, a standing line, 20 to 30 minute wait type of line for registration on Monday until after 12 noon. Yo, wrapped around the. Where we had our golf simulator and everything. I mean it was incredible. I've never seen. And that was not with one or two people checking the attendees in. I mean they had an entire team, 8 to 10 people with kiosks checking people in. And it was a solid standing line until after lunch. Outside they have the, you know, the walkway between the tower and the main hotel with the nice fountains and usually there's some really good meetings taking place out there. There's. This year they actually set up tables and chairs because there was so much overflow. And the number of Ubers that were dropping people off until after lunch on the first day, just car after car after car was unlike anything I've seen and I've been to CRE the last seven or eight years. It was really remarkable. So just from, from that perspective alone, having been there, you know, in 2021, post Covid, when I think there was around 750 people that showed up, this was unlike any other time I've seen at the, at the conference in terms of attendance. Then if you look at the, the vibe from everyone, I mean it was deal on risk on busting at the seams with availability of capital. You know, all of the lenders saying that they're getting back in the space. Everyone a little bit nervous about how competitive banks are going to make it for them in 2026 because they've been on the sidelines the last couple of years. And so there was definitely some reality checks that, wow, banks are going to be back in the mix. Spreads are probably going to be tighter, competition is going to be more fierce. We already heard from people saying that 1Q25 was already showing some signs of that. So it's interesting, Stephen, because I'm with you, the fundamental part of the equation hasn't dramatically changed. But like we've said before, sometimes capital flows can overpower fundamentals in the short term. And it feels like there's an overwhelming wave of we need to get deals done. We've waited long enough, values have settled where they're going to be and we're going to get deals done in 2026 regardless. And so I hope for us, and I hope for all the other practitioners and participants in the market that they are as active as they say they're going to be. I mean, there were estimates of $140 billion worth of issuance in 2026 and we were in that 130 plus range. But at 140 plus, huge jump on the heels of a really strong 2025. So as we kind of go through today, we can, we can fill in some anecdotes about some of the sessions and some of the takeaways, but there was no cautious optimism. There was no tempered or restraint. It was 2026 is going to be an incredible year. And that was pretty resounding across everybody that we spoke with.
- [06:28]
B
Yeah, I mean, if you look up what we have already announced for Siri Clo space for 2026, I mean, we're already at five and a quarter billion in deals announced. So yeehaw, off to the races.
- [06:42]
C
Well, to that end, Stephen, we actually, our friend Chris M from Prime Finance, we had Prime Finance on as a, as a guest in 2025. So Steve Chao talked about the CRE silo issuance that they did in 2025. They've already got a deal out and it's the largest in their history. $1.2 billion pool at 33 loans on 39 properties. Really, really interesting timing on this. Priced on January 8th, scheduled to close on January 30th. You know, the weighted average cost of funds was SOFR plus 164bps. And if you look at the composition as an 88% multifamily and industrial, which has been the highest multifamily industrial concentration across any of their previous issuance. And so if you look at some of the credit metrics, 64% weighted average as is LTV 7.7% underwritten, as is NOI debt yield and stabilizing to 60% and 9.3% respectively. So, you know, we did hear from our own CEO Anne Marie decola, just how active our internal teams have been with these issuances coming in the latter part of December and first part of January. And, and there were several other people on the roundtable that were highlighting kind of unprecedented activity in January relative to maybe the last 10 years.
- [08:00]
B
We're dusting off our running shoes, man, we're upgrading.
- [08:04]
C
It was, listen, after the last three or four years and you know, Haley was there too and she can give her thoughts but it, I had kind of grown tired of just hearing the same platitudes and kind of everyone straddling the fence and like where we were in the market. And it was almost equal weight optimism and potential risk and negative. And so you left the conference the last several years kind of with this generally positive outlook. But there was a lot of hedging around like what was going to actually play out. And you know, even with data centers this year, which was a hot topic, you know, for everyone that says their, you know, pencils down or their risk off on them, there were others saying how they think this is viable and it's going to continue to grow and part of the broader ecosystem. And you know, it was, it was really interesting. We'll talk a bit today. Just around, I felt like there was some negative sentiment around multifamily unjust negative sentiment relative to what the numbers say. However, on the whole, I mean everyone was just overwhelmingly positive. I mean even office, like multiple lenders saying that they're getting back into the office lending space. A lot of people saying return to office is real now we'll see if that plays out if the class B office actually gets financing. We haven't seen that at scale yet. So I'm a little bit leery of maybe people just getting a little bit excited on stage. But if they follow through on what they said, it's going to be really, really interesting year where transaction universally everyone was saying transaction volume, both refis, even amidst the challenging interest rates that you're talking about and acquisitions are going to be up significantly in 26.
- [09:40]
B
Yeah. So Lonnie, you mentioned data centers and my ears just instantly perked up because that's an asset class like so many of us grapple with in terms of how it's classified really what's real, what's hype, what's viable, what's potentially questionable from a long term repurposing and demand standpoint. So can you give us a little bit more details on what you were appearing at the conference?
- [10:05]
C
Yeah. So obviously AI was a huge topic which ties back to the data center. So those two are conjoined. And, and you know, I would say maybe the best way to frame this is there's still a little bit of data center confusion. And what I mean by that is depending on who was talking, you know, they, some people would say they think this is real estate as evidenced by the fact that these are in CNBS pools and they're obviously tangible assets. They're, they're bricks and sticks. You had others saying, I'm not sure that this is real estate. I think this is a hybrid. There's, you know, this infrastructure component, there's being connected to the fiber network. There's all of these things that are required that yes, there's a real estate component. But honestly, after that initial, you know, lease term is up, is there any viable additional use for these data centers at scale? A lot of them said they don't think so. And then the others were just saying, you know, pure play. These are, these are, you know, generally not real estate related, depending on what they are for hyperscalers or colocation, how the lease structures are set up. And you know, there's a lot of discussion around these being financed in addition to CMBS as ABs and a bunch of different financing, private financing structures on these deals. And so, you know, I think a couple of interesting takeaways on my end. One, as a firm, we're going to be detailing and researching and doing a lot more around the infrastructure play as it pertains to commercial real estate. Because at this point I think they're intertwined specifically on the data centers. But even beyond that, power, water, access to utilities, etc. Fiber network, these things, these are intrinsic to the viability of these buildings. And then two, we're going to see this continued evolution. Like this is one of those things where there's not a black and white answer and we're going to have to kind of see how the market reacts to these things. So I would suspect that you're going to continue to see some CMBS issuance, some ABS issuance, a lot of private deals. As for the folks saying, you know, how viable are these after that initial lease term? A couple of interesting points that were made, Steve, I like to get your thoughts on this was none of these operators are actually wanting to buy the real estate. So if you're making such a huge capital investment and you believe that this is the future, why wouldn't you, as, you know, effectively an operator that needs the data center, not want to own the real estate and every other asset class? These folks are owning the buildings that they're operating out of. And for this one, at least thus far, there's been a reluctance for these folks to actually want to procure the buildings.
- [12:47]
B
Yeah, that aspect doesn't bother me all that much.
- [12:51]
A
Right.
- [12:51]
B
If we just step back and think from a tax efficiency standpoint, by and large, it usually doesn't make sense for firms to own their real estate. Right. It's more tax efficient to lease it. So from just kind of an overly simplistic standpoint, you have that aspect, and then we're dealing with plays that take immense amounts of capital. All right, so we talked about ground leases a couple of weeks ago, and you know, one of the really attractive aspects of ground leases is that, you know, it makes the investment play, well, less capital intensive. Right. You're kind of offloading that land to somebody else and then that allows you to focus solely on the vertical collateral above the land. Well, it's kind of a similar play with Data Center. If you're not having to finance the shell, you get to plow all of your capital into these really expensive chips. Right. Those Blackwell chips are wickedly expensive. So I mean, I just look at it in a very simplistic, you know, capital allocation and tax perspective like that.
- [13:53]
C
Yeah, I think, and that was obviously discussed on the panels. And I think you're right. I mean, I think if you boil it down, that's probably what it comes down to. But there's a little bit of me that thinks these folks are thinking maybe 20 years out we're going to be doing something completely different than what we're doing today as it pertains to data centers, power, et cetera, et cetera. So look, we've talked a lot about data centers on the show. We talked a lot about AI. It was, it was nice to hear some of the commentary on AI. I think people are hungry for AI that goes beyond automation and, and just kind of streamlining. They want stuff that can actually make intelligent, informed decisions throughout their critical workflow, not just standardizing data or, you know, finding pattern recognition. So I think that was kind of a nice takeaway and it felt good for us. You know, we were just awarded a couple of AI awards as a firm at Trep because I think we've done a pretty good job of being proactive and actually building out AI solutions that do just that. I mean, comp selection, more quickly identifiable natural language text search capabilities. And we're about to roll out our AI research assistant that just allows you to have query data results through a natural language question. So it was validation for kind of where we're going. And I think, you know, for, for those that have have had enough of the AI, unfortunately. I think this conference kind of cemented that. This is still going to be a talking point in 2026. Oh yeah.
- [15:28]
B
I mean absolutely. It's for better or worse, it's, it's with us for the foreseeable future. Gosh. What it means for productivity gains. I think I've said this for just about every year for the last couple of years that the productivity gains driven by AI will be so transformative in our economy. It's hard for us to even really fully appreciate or shoot size them up. I mean, let's face it, we have no clue just how dramatically our day to day work life is going to be reshaped five years from now.
- [16:05]
C
Yeah. So I wanted to give a shout out to our CEO Amarita Cola, who was on the industry leader roundtable and she actually answered a question on the AI and what she thought it meant for commercial real estate and it was really great. She has her hand on the pulse of what's taking place there, obviously seeing what we're doing here. But she did a great job on the panel and that panel obviously is kind of the highlight of the conference for those of us that attend. I thought this year's panel was really great on the roundtable and it was just good to hear kind of the unconstrained optimism from executives for various reasons. I mean, I think there's a lot of talk about risk adjusted returns from commercial real estate as compared to some of these other investment grade opportunities. You know, we didn't really get into the Fed chair replacement. There are a few things that I would like to have heard from folks around like what do they think is going to happen? There was geopolitical concerns obviously with the stuff going on in Venezuela, same with Iran and I think it looks like there's probably some imminent activity from the US towards Iran that we're going to see this week. You know, if we'd had the, if that happens in the conference that happened after that, we probably would have got some more visibility and how people thought that will actually impact cre. It was on everyone's radar. I think we'll, we'll have a little better clarity this week on whether or not that happens. If it does, we'll be seeing what the immediate impacts are if there is any in spreads. You know, we track the weekly spreads through our trip eye service and so we will, we'll see if there's any type of, you know, spread action this upcoming week. Supposing that there's something that takes place in Iran. So I think notwithstanding some geopolitical which obviously none of us control again overwhelmingly confident people in 2026 that it's going to be a banner year for them.
- [17:59]
B
Yeah, it really is amazing the amount of risks that lenders in the market at large have ultimately set aside. If you look at rates spreads over the last couple of weeks they've been surprisingly low volume. I mean really surprisingly like the range boundness of the 10 year throughout the Fed chair drama really shocked me a lot. It's a testament to I think just how level headed traders are at this moment. Like you said Lonnie, that could change in a moment. If anything escalates beyond more of a more than the simmering point that we have right now.
- [18:39]
A
I think alongside geopolitical headlines and risks there were a lot of other headlines this week. Maybe we can cover some of those quickly just to get your takes. We're still watching the Supreme Court and the potential that they're going to issue a ruling on the legality of tariffs. There's also news about the Fed bank earnings and we got updated inflation information this week.
- [19:06]
B
Yeah, you've had to be like head on a swivel this past week. So let me kick off at least my take on just a few of these. First up the, the Jerome Powell subpoena. I'm, I'm hoping this doesn't continue to escalate. It seems like since that came as a surprise and rates traders really didn't move, they didn't trade the news all that much. I'm really hoping that this kind of just goes sideways and we can make it through mid year when we'll get a Fed chair replacement without anything further coming from this. In other words, I hope we can de escalate from here and that's what ultimately rates, our pricing at this moment is more or less a non event. That's I think our best case scenario right there.
- [19:53]
C
I just think it's a bad look. I mean it's, it's for everyone involved, the markets, it needs to go sideways, it needs to go away quite honestly because it's, it's just bad timing. It's, it's bad form, it's a bad look. I thought Powell's statement was direct and to the point and very well stated and to your point. I think the markets are kind of just assuming that this goes away and it should but it just adds intrigue to kind of where we're at. I mean it's undeniable at this point that that has to be Considered and you know, I think it sets up mid year this year for some really interesting dynamics because at this point it's undeniable that whomever is appointed there, that political pressure is, whatever it's been to this point is going to be ratcheted up from day one with whomever is put in that, in that role.
- [20:49]
B
Yeah. And then we had a couple other announcements from the administration that were perhaps a little bit more market moving. Probably the most meaningful from at least a real estate and rates perspective was the 200 billion in mortgage backed securities that Trump was authorizing the agencies to engage in. So that was a very carefully calculated target. If you look at the balance sheets of Fannie and Freddie, they had about 202,203 billion of breathing room on their balance sheets for liquid assets. So in other words, like they had capacity to buy pretty much exactly 200 billion of securities. And right now it's a question of, okay, exactly how much of a rates impact do we see? How long does it take for it to play out and how persistent is it? If you look at what's happened between the spread on the 30 year fixed rate mortgage relative to say like 5 year treasuries because really the mortgage market is pricing more to a five year duration at this point that spread has tightened in 50 basis points or the last seven, seven months call it. So this $200 billion announcement could easily result in, you know, probably another, I don't know, call it 20 to 40 basis points of tightening depending on conditions. So I'm excited to see what that will mean for mortgage affordability and what kind of stimulus activity we get out of that. The other announcement was the credit card rate cap with Trump basically saying we're going to try and cap credit card interest rates at 10% through the year. That one Lonnie man, talk about clause out from just the general market. And their response, that was spicy. I got to say though, I got to hand it to bank of America, they did an excellent job in their earnings on how to handle the response on that. Absolutely a masterclass in corporate communications, you know.
- [22:44]
C
So I want to hit on both those topics. I'm going to go to the credit card one first. I mean the scale and directness of response from people online related to this I think were surprising to me advocating for why this is a terrible idea and that it has broader implications that were not considered and that you know, that bottom tier credit rung, you know, the lenders have to price in the risk accordingly and therefore if you cap it at 10%, it just makes the availability of credit go away for those folks. I'm on the fence here because it's almost like when your teenage kid doesn't want to give you their iPhone and you force them to give it to you and they go into a meltdown because they're at some level addicted to having it in their hands. It's healthy to kind of do that occasionally so they break a little bit of that addiction. And if we're saying that our economy only works when that bottom rung of credit seekers have availability of credit at 25 plus percent interest, which by definition just means they're never paying it back, I just, I feel like that's not great. Like, that's like we're, we're giving them, we're, we're feeding the addiction practically. Logically though, from a market perspective, like you would never, you would never just cut that off and you would never cap that to where it has those like, blunt implications immediately across the marketplace. So again, I think this administration over the last couple of weeks has put a lot, a lot of headline fodder out there. I mean, the banning institutional homeowners or homeownership for institutions and even reaching out into the build to rent community based on the commentary, and then now this, like there's, there's got to be more to come. I think they're really throwing some stuff out there. There was even talk about the, the interest rates on car loans being tax deductible. You know, we'll see what actually sticks. I think some of this is just to try to see what gets momentum. I think there's too much pushback here. I agree with you that bank of America and others have toed the line in a, in a way that's, you know, noteworthy and good. But the reality is the reality, the other thing on the, the GSE is doing the, you know, buying the mortgage backed securities. You know, I think you hit the nail on the head when you said you don't know how long this would last. And I think if you're looking at it from the administration's perspective, they just need it to last to the middle of the year. I mean, they're basically pulling out all the stops.
- [25:13]
B
Bingo.
- [25:13]
C
To kind of do the short, fill that gap of now to the middle of the year. At that point they won't have to do this kind of engineered rate reduction. They'll just reduce the rates. And so I think there's enough momentum for them to see traction for the first few months of this Year, minimally and probably through the first half of the year and look like we've seen it. If you get mortgage rates, both residential and commercial, into the fives, if you get them into the low fives, activity is going to explode. Yeah, that, that three and a half to five is much more palatable than three and a half to seven.
- [25:53]
B
Yeah, I, I'm really, I'm excited about this from a research perspective. Like, I want at least some of these things to hit because I want to see the impact, you know, they just, it's a social science aspect of me, just wants to see action response play out now.
- [26:08]
C
Well, you know what, you know, step to that end, Stephen, it's, it's almost like, look, and if we look at the tariffs, right, I mean, every time the Supreme Court is like expected to discuss this and they don't, I think it's more and more likely that they're going to leave them in place. And if you, if we look at the tariffs objectively, I don't think, I think the positive has outweighed the negative on the whole. And I think the sentiment broadly has shifted. When you look at trade deficit, when you look at some of these things, like, as crazy as it felt like and as crazy as the banter was when these things were initially rolled out and all of the academic pushback, it feels like we've turned a corner there and you haven't seen the market seize up at all. So this is another one we're keeping our eyes on. But some smart people we talked to this week, they were pretty steadfast in saying the longer this goes without something coming out, they think more likely it is that they, that they keep them in place. And I think if they don't, that's going to be something where you can. How are we going to. How does that even work?
- [27:13]
B
Yeah, that's exactly it. I'm like, at this point, folks, can we just move on? Like, we've, we've kind of found an equilibrium. Maybe we dial back some of the margins. I'm fine with that, but let's not cause a massive load of chaos and uncertainty like that. That will do more damage. Obviously the economy hasn't collapsed from tariffs, so let's just move on. And then I think the last bit of news we had to cover this week was the cpi. We don't need to dig too deep under the hood here. We can touch on it at high level. Bottom line, CPI came in really fairly tame. All in all, I think generally the market was very happy, very Pleased that both headline and core inflation came in at or slightly below census. And this sets us up for perhaps a more positive economic data path over the next couple of months because let's remember, it's still going to take until, you know, probably April or May before a lot of the government shutdown data noise finally burns out of the inflation data. So I was glad to see that this number came in fairly benign because I feel like that's really important as we continue to burn off the shutdown noise.
- [28:31]
C
Yeah, I think this look on the macro, this was great. This got soft landing narrative back in people's vernacular. I've seen it online quite a bit. I think in face of the cooling labor market, this was exactly what we kind of needed to see. I'm with you. I think this sets us up for some softer tone. And although I still, and people mentioned this on the panel, Stephen, I mean, they can say CPI is whatever, grocery store says something different.
- [29:04]
B
There you go.
- [29:05]
C
You know, and it's this, the dichotomy between, you know, what's reported and what people actually are spending. The, the disconnect, the, the delta is, it's real. And you know, I don't know how we fix that part of the equation because wages have stood fairly stagnant. In fact, you know, if you're a job seeker today, it's one much more difficult to get a job today than it was say in 2021, 2022. And the salary ranges have been significantly compressed, especially across the tech sector.
- [29:40]
B
Yeah, I mean the, the food at home or grocery inflation, recreation and home insurance were the three categories that really flashed more of a warning sign. Food at home was up 0.7% of the month, which was the biggest gain since 22. Recreation jumped 1.2% on the month, which was the most ever. And home insurance rose 1%. Yeah, it's painful. It's hitting our pocketbooks in certain categories. So, you know, fortunately this didn't play out nastier at the headline and core levels. But that doesn't mean there wasn't some pain felt beneath the surface.
- [30:16]
A
While the market chases the next digital trend, smart investors are rediscovering opportunity in something real. Cash flowing assets built for scale and durability. Spinoso Real Estate Group is the nation's leading privately held operator of enclosed shopping malls, partnering with institutional and family office investors to acquire undervalued centers and unlock alpha through data, precision, leasing and operational excellence. Spinoso Real Estate Group investing in performance, not perception. Visit spinoso reg.com to learn more. So let's cover some of the CMBS and commercial real estate specific stories we wrote about this week in our newsletters and that we saw in some headlines. I'll have a start in Office we sent out a trading alert about a large single tenant triple net lease office Portfolio loan that was sent to Special Servicing. So walk us through the story and maybe a refresher on triple net leases.
- [31:21]
B
Sure. So for this first story, our January remit data showed the $271.1 million State Farm portfolio Loan transferred to Special Servicing for non monetary default. The loan is currently less than one month delinquent on its most recent payment. It's been delinquent three times during its loan life but but has not been delinquent over the last 12 months. Currently the model maturity is February 2026, but that's because of the maturity structure, which I'll get to in just a moment. So we last mentioned this loan in a November 23rd edition of Trupwire when it was transferred to Special Servicing in September of 2023 at the request of the borrower. The transfer was made to effectuate a loan modification featuring a partial release of one of the original 14 collateral properties and pay down the loan returned to the Master Servicer in January of 25 before this most recent transfer back to the Special. So updated Special Servicer Commentary reports that files are under review to determine a workout strategy going forward. So we'll have more on this situation here in the coming months. Now back to the maturity structure. This is some details that I pulled up. We didn't have this in our original story. The loan had an ARD of April 24th and a stated maturity date of April 29th. So that's an anticipated repayment date. So just as a quick refresher for our listeners out there, when a loan has an ARD date and a stated maturity date, think of it as like a soft maturity versus the hard maturity. If the loan doesn't pay off at the ARD date, typically the loan payment terms will change. Sometimes it's like a cash flow sweep and it's hyper amortization. For this one it's an interest rate change. So the loan was I O through the ARD and date at an interest rate of 4.63%. From April 24th through April 26th the rate becomes the greater of the five year treasury plus 3.5% or 7.63%. And then for April 26th through April 29th the rate is the greater of the 5 year treasury plus 4.5% or 8.63%. Now the loan collateral is a portfolio of 14 triple net office properties with a total of just under 3.4 million square feet, all leased by State Farm Insurance across the US with the largest properties by allocated balance being the Charlottesville, Virginia and Murfreesboro, Tennessee properties. These were built in 1977 and 2003 respectively, with renovations occurring on several of these properties between 1998 and 2013. Properties in Tulsa, Oklahoma and Columbia, Missouri have been released from the original collateral pool. Over the first three quarters of 2025, the loan posted a DSCR based on net cash flow of 2.27 times with occupancy of 100%. Now this loan is split across a number of CMBS deals and there's also mezzanine debt that is attached to this portfolio. This is one of those more complex CMBS loans Now for our listeners. Lonnie, do you want to give us a quick refresher on what it means when you have a triple net deal?
- [34:39]
C
So triple net is something when you get into the commercial real estate space, you will hear thrown around very liberally and if you're new and don't quite understand it can be a little bit intimidating. But effectively it just talks to the the different types of lease structures that you see across commercial real estate. So before I get into the specifics of triple net, your most basic lease type would be a gross lease type, which effectively means the tenant pays one stated amount and the landlord covers all of the expenses, the common area maintenance, the insurance, the taxes, the generally the electric, etc. If you start peeling some of those expenses back then you could go into a modified gross or a single net lease, or a double net lease or a triple net lease. And effectively each net that you add there is just an expense that gets passed to the tenant in lieu of the landlord or the owner actually paying for it. And so what you end up with is a little bit lower base rent and then you have your triple net, you know, reimbursements or recapture or triple net expenses. However you want to frame that, that gets billed back individually to the tenant for their proportionate share of those costs. And so that's the lease structure that's preferred by most owners in the sense that as the taxes increase, as the insurance increases, as utilities increase, as common area maintenance increase, those expenses are directly passed back to the tenant. They do add some complexity though, because you have to reconcile those things. The owner doesn't know at the beginning of the what the taxes or insurance or Common area maintenance, there's the three most common expenses that get passed through are going to be. So they give a best estimate, but at the end of the year, if they've underestimated, then they have to get made whole by the tenants. And so you have additional billing that goes out that puts some downward pressure on your tenants. Additionally, in states that aggressively and frequently reassess property taxes, those can really negatively impact the tenant's viability. If you see an increase, a significant increase in property tax coupled with insurance and some, some common area maintenance, you know, your occupancy cost, which effectively is kind of a health tracker for how much can your tenant actually pay before you negatively impact their business? Those things add up and your occupancy cost becomes unsustainable. Sometimes the owner has to actually contribute and kind of offset some of those increases. So triple nets preferred for the owner. Triple net does provide some risk potentially to the tenant, although it does give them a lower base rent. And if the owner is good at managing those other expenses, it's a win win for both parties.
- [37:20]
B
You know, there's one other detail I want to mention, this property, because I did say that it was 100% occupied, but you got to take that with a grain of salt because we, we put out a tripwire alert back in 2020 noting that a lot of the properties in this portfolio were going to State Farm closures. So the physical occupancy might be 100%, but the actual occupancy is a heck of a lot lower. So State Farm is still obviously having to pay rent on these triple net leases, but they're hoping to sublease a lot of the space. So I think I just totaled it up back of the Envelope. It was 70 to 80% of the portfolio was impacted by these closures.
- [37:59]
C
Yeah, I think, Stephen, that's, that's something that the markets just don't really know how to effectively report. Right. If we, we covered this a little bit a couple of weeks ago with the multifamily discussion where you say, okay, if you give away free rent in the form of a concession that negatively impacts your economic occupancy, you can, you can quantify the economic vacancy that has been accrued based on the number of weeks free that you give a tenant. But in this scenario where you have multiple buildings and some of those buildings, the tenants have just effectively moved out, but they're contractually obligated to pay the rent, you can still do an effective physical occupancy calculation, but it's not economically negatively impacting you until it does all at once. And so like for all reporting purposes, this, this would not, you would not see, you know, a bunch of dark space. I don't think even though it's reported that we know that, you know, a large number of these offices have closed down. So I'd love to hear from people in the market if there's you know, maybe some regional nomenclature or some, you know, industry specific terms that people use for this type of scenario where they, they quantify and measure that beyond just reported closures.
- [39:11]
A
You mentioned closures and that makes me want to talk about another headline that we saw this week. So I'll move us over to retail. There was a lot of news about GameStop and our colleague Carly C. Mentioned it's not in the meme stock way, but it's actually in the store closure way. So talk to us about GameStop's plans to scale back its physical presence which honestly I'm surprised they had such a large physical presence still.
- [39:40]
B
Yeah, I know like Roaring Kitty was, was really bullish on him there for a while and it, that strength looked like was playing itself out in a positive way. But to your point, Haley, that the gas just seems to kind of run out on some of that trade. So GameStop, once a dominant mall based video game retailer and later that means stock sensation. You haven't watched it. The movie Dumb Money is absolutely fantastic. I highly Recommend it. So GameStop has continued to scale back its physical presence with more store closures expected in 2026. The company closed five hundred and ninety stores in fiscal 2024 and has warned it will shutter a significant number of additional locations in fiscal 2025, though it is not disclosed where or how many. While Gamestop hasn't confirmed specific closures, social media posts suggest that stores are quietly shutting down across multiple states. Structural challenges persist as digital game downloads, e commerce competition and declining mall traffic continue to pressure the core business. Despite strategic shifts, including changes to its investment policy and performance based incentives for leadership, revenue continues to decline and the company remains far smaller than its meme era peak.
- [41:01]
C
This is an interesting one, Stephen. If you just look at what they had when that went to the moon, you know, money wise and where they're at today, it's, it's a, it's just an interesting, you know, we talked a little bit earlier about some of the research. This is one that you could do a lot of and I'm sure people will, it'll probably be a movie made be made about this at some point with the roaring kitty stuff. But look, their, their business model is just broken for today's consumer. And I think the digital downloads and just the way people interact with games generally has shifted from bricks and mortar to more of an online interaction. And so hopefully for them they can close these stores and remain relevant with a smaller footprint. But I, I think this is maybe the beginning of the end for them.
- [41:44]
B
Yeah, I, I don't see a great path forward. I think some of their strip center locations probably still serve, you know, some sort of viable market. But the, the mall locations, I don't know, I, I struggle on this one. I just don't see them being able to survive in some of those dying or dead malls.
- [42:04]
C
Yeah, it gives me kind of Radio Shack vibes here. Yep, 100 had a very, very solid use case when they opened and they expanded and took advantage but the market shifted and it shifted in a way that just doesn't allow them to really pivot to capitalize on it, you know.
- [42:20]
B
Still on the topic of struggling retailers, we also saw Sachs file for bankruptcy a year after adding debt to buy Neiman. Sachs has filed for Chapter 11 bankruptcy after mounting losses, stalled turnaround efforts and heavy debt tied to its acquisition of Neiman Marcus. The retailer took on billions of new debt just over a year ago to fund the merger. But the debt quickly fell in distress and Sachs later skipped more than 100 million in interest payments. Court filings show Sachs owes at least 3.4 billion with liquidity pressures limiting its ability to stock stores and meet vendor obligations. Former Neiman Marcus CEO has been tapped to lead the company through bankruptcy with potential changes to its store footprint under consideration. Sachs secured roughly 1¾ billion in bankruptcy financing to keep operations running while its major banners will remain open and customer programs honored during the restructuring.
- [43:18]
C
This is one we had talked about I think right before the end of the year, Stephen, where we were saying they were contemplating bankruptcy and again you have this legacy. Retail took on a bunch of debt. It's tale as old as time. They're going to restructure. We'll see what happens here. But it is, it is the timing on this I think is noteworthy just given, you know we've, we followed pretty closely that, that luxury high end retail for the most part had been doing better than expected through this, you know, most recent disruption, economic disruption. So I think it just shows that debt can, it's like a campfire. It can keep you real warm in the winter or it can burn your house down.
- [43:58]
A
All right, and let's round out our retail segment by talking about another trading alert. According to our latest January data, we saw that the $312.6 million Lakewood center loan transferred to Special Servicing for imminent balloon maturity default. So this is an LA Mall SASB loan that's being sent to Special servicing?
- [44:21]
B
Yes, this Lakewood Center Loan was set to mature in June and had not been delinquent throughout its life. The servicer watch list commentary for this $312.6 million loan according to December, said the borrower was aware of the maturity date but had not yet provided plans regarding timing. The collateral is an enclosed 2 million square foot super regional mall located approximately 20 miles south of downtown LA. The collateral includes the entirety of the property including all anchors, boxes and pads. The property was built in 1951 and renovated in 2012. Properties anchored by Macy's, Costco, J.C. penney's, Target and Home Depot. For the first quarter of 2025, the loan posted a DSCR based on net cash flow of 1.33 times with occupancy of 93%.
- [45:13]
C
Yeah Stephen, when you went through those anchor tenants, it's kind of interesting to see a Costco and a Home Depot being anchored. Now obviously I would assume these are not physically attached to the mall, but maybe they are. Remember the story we had a few months ago? Or you had the Walmart in the in the shopping mall down in the the Texas Valley?
- [45:34]
B
Oh yeah.
- [45:35]
C
So maybe this is a mall with a Costco and a Home Depot. I'm not sure, but I would assume those are just non attached anchors. If not, it's a very interesting tenant mix, including the Target as well.
- [45:47]
A
Okay, so we had a busy week. There's a lot of other stories we covered across our newsletters. Reach out to us@podcastrepp.com if you would like to learn how to subscribe. And I have a few other programming notes. We sent out our invite for the Trep Market Pulse webinar that is taking place on Thursday, January 29th at 2pm Eastern. So if you weren't at CREFC, you didn't get a chance to hear from our experts and you're looking for more. This will be a free webinar that anyone can join. We'll be talking about the 2026 CRE outlook. We'll be talking about CMBS receivism and looking at a repeat default analysis. And what a pattern of loans that default cure and default again reveals about credit stress and delinquency volatility. And then we'll be sharing a GSE market snapshot reflecting on the FHFA's increased loan limits and the GSE privatization talk track and what's happening with agency multifamily performance trends and key metrics across Fannie Mae and Freddie Mac data. So send us A note to podcastrep.com to sign up for that webinar or check your emails or our social media pages so you can sign up. We also have another webinar. This is exclusive for our Trep CRE clients and it is a targeted training. On Tuesday, January 20th at 2pm Eastern, we'll be sharing our latest powerful data enhancements that really can help you just get a deeper market insight and increase your understanding and the ways that you can use our data and analysis in your daily workflow. So if you're a TRAP CRE client, send us a note or reach out to your account manager to get access to that. If you're not a TRPCRE client and you're curious to see who uses our system, how they use it, or how it might help you, send us a note. We'd be happy to get on the phone with you or invite you to the webinar so you can see it firsthand. We've been mentioning this a lot, but you should have seen the release of our Year End magazine in your inboxes this week. The magazine has a lot of in depth insights and stories. People were picking it up at the CREF C conference, we were handing out hard copies and you can find a digital copy online. Send us a note and we will make sure that you get access to that magazine. We want to thank all of our sponsors and advertisers that took part in that magazine and all of our trip teams that took part in piecing the magazine together to really have a full picture on what happened in commercial real estate and cre Finance in 2025. This week we also released our Special Servicing report and we found that in December 2025 the special servicing rate pulled back due to declines in loans moving to special servicing in office and lodging. So if you want to see all the details behind that rate and also see specific rates by property type, send us a note and we'll get you a copy of that report. And again, we're going to mention that we are gearing up for our Trep Connect in New York City event taking place May 6th through 7th in New York City. A lot of our friends and colleagues that we met with in Miami at CREF C already signed up and bought tickets, so we're excited to see all of you again there. We'd love to see all of our podcast listeners there. Send us a note. We can get you an extra discount code. And we are we are still running our Early Bird special, but this will be a really cool chance for you to network you to learn from other experts in the industry and really for you to talk with others that are doing deals, lending, financing. And the conference will have a very data driven aspect to it, as this show does, as our Marketplace webinars do. So you will hear some exclusive data and insights there and get to hear from some very impactful and senior leaders in this industry who are doing things across the market. Turning to shout outs. I don't know if I have my full list rounded up here yet, Lonnie, of everyone we talked to at crefc, but we'll give some names to start and then we probably will get some more on the list next week. We got to meet with our friend Stuart R. Who is a renowned researcher in the industry. We get to meet with Stuart every year and he picks our brains. We pick his brain about different markets, performance, what's going on in the industry. He's a longtime listener and it's always great to sit down and really catch up and discuss all things commercial real estate. We also got to chat with another longtime friend and listener, Kurt A. Kurt is always happy to share some boots on the ground perspective on San Francisco specifically and what's happening in California commercial real estate. So it was great to chat with Kurt and catch up with him. We'll be talking more about some of Kurt's happenings and news and insights on upcoming podcasts. We also got to see Samir T. A friend who was recently on the podcast. If you didn't hear our guest episode with Sameer Tejpal of Madison Realty, go check out that episode. But I know Lonnie got to hang out with the team at Madison Realty and it was just great to see everyone in person again because we've met that team at another Crepsy event in the past.
- [51:16]
C
Yeah, so I got to go to their their after conference party and you know, obviously Madison does everything, not just financing big. Their party was exceptionally nice as well. Got to hang out with Samir, as you mentioned, who'd been on our podcast. He was on a panel as well. And as someone that does a lot of public speaking, it's always great when you see someone that's on stage and you're like, wow, that person is really good at what they do. And Samir checks that box. I mean, that guy is incredibly sharp, well spoken, has his hand on the pulse. So getting to hang out with him a little bit afterwards was great. You know, they actually have been pushing the envelope still post our our podcast episode they Just Lend Madison Realty Capital just did $125 million Forest Hills condo tower loan. We didn't talk about it on the show today, but 125 million for a new condominium development in the Grand Central Parkway of Forest Hills, Queens was featured in the Commercial observer, and Rafael and the other folks there at Madison were very welcoming and they want to have more collaboration. I think we'll see or hear from them on a podcast here in 2026 as well. that event, I got to meet one of their contemporaries, Pranav, that's based there in in Florida, and it was just really great to see the networking that was taking place, and I'm excited to see what they continue to do and how our two firms continue to partner and work together going forward.
- [52:37]
A
We also met with Bill F. Who is a client and a longtime listener. So thank you, Bill. We were chatting briefly and then he realized, wait a minute, you guys run the Tripwire podcast. So that was cool to interact in person. We met a lot of young professionals and students in the industry who listen to this podcast to learn, educate themselves, and use it as a resource when they're going to get internships or jobs or just be more advanced in the industry. So it was so great to meet so many of you. I'll share some names here. Benjamin J. Christopher F. Michael L. And David S. Of the University of Miami, Ohio. We met with a lot of students and professors at Florida State University. Leah Marie D. Collier E. Gage S. Hannah S. And Daniel B. And then we got to meet with clients Ed P. And Eddie P. Who were very excited to meet us. And it was so great meeting with them and chatting through all that they're building and doing and the ways they're using our data. They reached out after we met and said it's always nice to put a face to the name. We also got to meet Michael L. Who is a huge fan of the show. I think his colleagues were even joking that it was his dream to meet the Truck team, and he's always talking about our episodes and trying to get others in his firm to listen. He listens every week and I know that we might have more ways that we're going to collaborate in the future. So it was great to meet you, Michael. And then we Got an email this week from Alex T. Who said he who said they're a longtime fan of the podcast and has loved the recent coverage on AI. My question relates to the long term prospects of AI. With the potential for large job losses across the board driven by AI, are we worried about the impact this could have on multifamily and how do we think this will affect other sectors and what do we see as potential opportunities to take advantage of these trends? So Alex, we might have to make this a whole segment on next week's show.
- [54:42]
C
I think you're right, Haley. We probably should do a full segment on this. But I just wanted to let him know the question is timely because this was a topic of discussion at the industry roundtable and high level synopsis, kind of two sentence answer is yes, AI is going to reduce certain jobs. The counter to that is that AI is going to create new jobs. And so I think that the consensus was this is to be determined where and what happens. But everyone is watching this so we can, we can do a deeper dive in an upcoming show. But I think that the question is very timely and prudent.
- [55:18]
B
Yeah, I'm myself very curious about the displacement and distributional effects that'll, that'll have because I don't expect to be a one for one backfill. So the question becomes, okay, where exactly where I'll be? Where will be our targeted winners and losers?
- [55:35]
C
So before we close out this week's show, Haley, you, you kind of keyed on this a little bit in the intro. Steven's got a new title, Head of Applied Research and Analytics at trep. So for those that have been longtime listeners of the pod. Steven was our research director for a while at trep. Then he moved to South Carolina and took a role at Clemson and he's back full time at TREP in this new role and he's going to be driving a lot of additional research initiatives and deeper dives in the data. We're very excited to have him back full time. He's been working with TREP continuously. There was no departure where he wasn't part of the team beyond just the podcast. He was obviously on the podcast the entire time, but he was still doing research related functions. But now he's, he's back in a newly created role and we are very excited for what this means for Trep, for our listeners, for our readers, for our should be clients in 2026. So glad to have you back in a new and expanded role, Stephen.
- [56:34]
B
Yes, glad to be back. We've Got some incredibly, incredibly fun and amazing things loaded up in the pipeline. So now it's just a matter of rolling up the sleeves and getting to it. So I just wanted to give a shout out to some people that reached out on LinkedIn and share some love out here. So I want to give a shout out to Nick H. Allen A, Andy C. Franklin P. Sri R, Matthew S, Caroline P. Clement O, Chris H. Bob H H, Michelle W, Cynthia W. Rushet G. Bennett M, Jen S. And Julia.
- [57:06]
C
M. I think Stephen had more likes on this than I have friends, so that was pretty impressive, man. Like, yeah, we're, we're super pumped to have you back and I know, look, the continuity we've had on the podcast has paid significant dividends and yeah, 2026 for us, I mean we, we obviously started the show and spending a large portion of today's episode on the optimism around CREF C. But I think, you know, for myself, for you, for Haley, we're just as optimistic about where Trep's going in 2026 as well. I mean, we are on the precipice of some really incredible AI related releases. The new research initiatives that we have and the way we're setting that up, I think people that have gotten used to us being cutting edge are going to be blown away by how much farther we can push the envelope. And we're getting ready to do some really great things. Carly C. And myself have a few things in the hopper too that'll be coming out very soon. And so a lot of really cool and exciting stuff hitting the, hitting the airwaves, the, the emails and the, the platform here in the coming months.
- [58:12]
A
And if you're in engineering, data science, AI analytics, I think we have seven or eight job postings available. I didn't say six, seven, but it might be six or seven on our LinkedIn. Check those out. If you or someone you know is in the industry looking for a new role or reach out to us directly, we'd be happy to connect you with our hiring teams here at trep. But yes, Stephen, congrats on the gig. This just means you can't get rid of us. You're going to hear more and more of us in 2026. So with that, we'll close. Thanks to our producer, Mariana Cebrana. 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 podcastrep.com and subscribe to the Trepwire Podcast with your favorite provider. Thank you for listening, and stay well.
- [59:02]
B
All right.