← The TreppWire Podcast: A Commercial Real Estate Show
The TreppWire Podcast: A Commercial Real Estate Show
378. Banking Back in Focus: Santander-Webster Deal, SLOOS Signals, Office CRE Delinquency Jump, Industrial & Data Center Deal Desk
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- [00:06]
A
Welcome to the Tripwire Podcast, the show where commercial real estate meets data and insights. This is our Week in Review for the week ending February 6, 2026. I'm Haley 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, Hannah, head of applied research and analytics. This week, attention shifted from the Fed's last decision to what could come next. Markets are digesting President Trump's nomination of Kevin Marsh to succeed Jerome Powell and what that could mean for interest rate policy later this year. A brief government shutdown also disrupted the data calendar, delaying the January jobs report and leaving investors with less clarity around growth and labor conditions at a critical moment in banking. The latest Senior Loan Officer opinion survey showed lending standards remain tight for office and construction, even as multifamily standards showed signs of loosening. We tie those results to Trep's own lending survey data and also discuss some big headlines, including Santander's $12 billion acquisition of Webster Financial, alongside a Chicago area bank failure that highlights continued stress in parts of the system in commercial real estate. Trapp's January CMBS delinquency report showed office delinquencies rising to a new all time high of 12.34%, a headline largely driven by two sizable loans. We'll break down what's behind the number and what it does and doesn't signal about the broader office market. And in a separate segment we hear from an expert from Eisner Amper on what's detailed in the one big beautiful bill and what it means for commercial real estate investors and operators. So Stephen, when you put all of that together, a potential leadership shift at the Fed tight but stabilizing credit consolidation in banking and volatility in delinquency data. What is the through line that you are watching this week?
- [02:06]
B
For me, the big theme tying all of this together is uncertainty around the NEX regime in both policy and credits and how quickly that can filter into CRE pricing and importantly, refinancing. On the Fed side, it's not just whether rates move, it's the market trying to handicap what the reaction function looks like. If leadership changes. Even if nothing happens immediately, just the possibility can nudge term premiums, volatility and expectations. And in CRE that matters a lot because most of the stress we're tracking isn't about today's cash flow, it's about refinancing math and where coupons and exit caps land over the next 12 to 24 months. Then if you layer in credit conditions, the Sluice REIT is basically still tight, but maybe we're not getting worse. And in the margins we're actually maybe getting better. So that was definitely some good news in the margin. So office and construction stayed constrained, and that makes sense. Banks are still cautious where collateral values and demand are the hardest to underwrite. The bit of good news we got was for multifamily. The Sluice reported a modest net share of banks loosening standards for multifamily loans.
- [03:15]
C
But.
- [03:16]
B
But the expectation that demand picks up in 2026 is interesting because that lines up with a world where borrowers have to do something, refinance, modify, sell, or hand the keys back. And that's where the bank headlines fit consolidation, like Santander and Webster says, scale and stability. But that bank failure that we had reminds us that there's still stress in the system, especially for smaller institutions with concentrated exposures. Finally, on the CMBS delinquency print, 12.34% is.
- [03:48]
D
Wow.
- [03:49]
B
One of those wow headlines. But the story is concentration and loan level drivers. If two big loans can move, I don't want to say the entire metric, but I mean, it was at least half the metric. It's a reminder to focus less on the single number and more on where the stress is clustering by property type, property quality, market sponsorship, and market timing. So if I had to sum it up in a period of headline volatility, but the real signal is still in the trenches. The refinancing pipeline, lender behavior, and asset level dispersion.
- [04:21]
C
Yeah, so I don't disagree with anything you've said, Stephen. I think this has been a theme for a while and it'll continue. And I think, you know, the one optimistic part of this equation potentially is just that the refinancing stuff has proven to work itself out over the last couple of years. So while the math hasn't changed necessarily for a lot of these owners, I do think the sentiment around the market generally has changed around some of these property sectors where, you know, you might have looked at some of these properties three years ago and just seen nothing but trouble. Now, in those local markets or for some similar properties, you've seen some transaction activity, you've seen some leasing velocity, you've seen some things that maybe make a lender feel a little more comfortable, even if. Even if the math is still not favorable. So we'll see how those things play itself out over the coming year. But I didn't Want to circle back? I mean, after we had our episode last week, you know, the one beautiful thing about our industry is that the headlines don't stop, the deals don't stop. There was a lot of activity after last week's episode, and one that I think is pretty topical and interesting is that President Trump, you know, officially nominated Kevin Warsh for Fed Chair. And so obviously his nomination doesn't mean that he's the new Fed Chair. He starts to go through the confirmation process in the Senate. But supposing that that goes through, you know, he would replace power. His expiration of May 2026. So, as we've been saying that, you know, that June time frame, you know, it's interesting, there's been a lot of takes around Marsh and kind of his previous work experience. Kind of some people thinking that he's brought a hawkish tone to the, to the FOMC and that he'll provide some stability for the markets. And in fact, there's, you know, I would say more than half of the respondents and things that I've read over the last week that feel like he won't be cutting interest rates, I am not so sure about that. Like, I, I think that Trump had plenty of options where they could have been inserted to cut rates. And I don't think with the pressure he's put on Powell and the rest of the FOMC that he is going to put someone in that's not going to cut rates. So maybe they'll be more measured, maybe they'll be more controlled, maybe they'll be more, less market jolting or whatever. Like the dynamic will be better. But I feel like anyone that's saying that he's going to come in and maintain his hawkish tone, I'm going to have to see that before I believe it. He has some Wall street experience, and so he was a, he was an investment banker at Morgan Stanley. He's been a fellow at Stanford's Hoover Institution. He's very well known. All the major players in the industry know who he is. A lot of them are excited to get to work with him. Um, you know, Toby Cobb from 3650 Capital says, We think Kevin Warsh will be an excellent Fed governor, and frankly, for the real estate industry, he would be helpful. You know, there were a couple of others that said, you know, they don't think that there's going to be any, like, real needle movement until he actually takes the role. But the headlines are interesting for now, so I want to get your thoughts on that, but, you know, I'm more of a C before I believe or maybe trust but verify. But happy to hear what you think.
- [07:27]
B
Well, I think his, you know, both deep ties to the Trump administration, but also to Wall Street. This is where it makes it hard to read at this juncture. I'm with you. Like, I'll believe it when I see it. If he, if he does maintain interest rates and keep more of a hawkish tilt, I think if he does that, maybe the opening line of his speech is I'm bullish, not hawkish. I'm taking that from somebody that gave a really fun inter about his take on rates in 2026 this morning in Bloomberg Surveillance. And I think that's spot on. Bullish, but not hawkish and basically saying, look, the Trump administration has made the economy so strong, I can't cut interest rates. Now, I'm with you. I don't see how that plays well given what Trump has said about Powell. But hopefully through all of this, the fact that he has stronger ties to the Trump administration maybe brings down some of the tension and we get back to a more normal working relationship and more Fed independence than what we currently have. I mean, what we currently have is not sustainable. So my hope is that the administration ties, even if we stay hawkish or perhaps a little bit more dovish and cut rates, I just want to see a return to a more independent Fed and some of the tension dial down.
- [08:46]
C
I think it's lost on some folks that Trump actually appointed Jerome Powell to the position back in 2017. And so there was definitely some connection there. And obviously there were some similarities, I think, between Powell and Wash in terms of what people thought they might do when in the role. So, you know, I'm optimistic. I think the markets would benefit from having things go back to normal, having the independence of the Fed, having data drive the decisions, having less political influence, whether it's actually influencing them or not, just having that cloud hanging over and people questioning is not good for the markets. So I'm optimistic that, you know, to your point, maybe the close ties and maybe some of his previous experience on the street helps kind of get things back to normal. It just would be such a pivot given how hard pressed Trump has been with this current, you know, group that's there. It's, it's. But listen, he's made pivots before and, and you know, I think he's shown an ability to do that. And I think the markets will benefit. I mean, especially I like your framing of saying he's Bullish. Because for all of notwithstanding the refinance math outside of that, all the other signals for 26 and beyond are screaming bullish to me in the CRE landscape.
- [10:07]
B
Yeah, I mean, the macro environment looks somewhat like the 90s where you had Greenspan basically saying, look, I'm not going to hike rates. We want to let this productivity and this growth run so that the economy can benefit from it. We don't need to try and tamp down inflation. And I think some of that strategy maybe we'll see with the Fed later this year. It's all too soon to tell, though. I mean, heck, we've had so much red in the street this week for the tech industry and specifically software. But again, you had some folks on throughout the day today saying, look, I know we had some announcements saying we're not hiring any engineering labor, any coders, but maybe that was too soon. Meta is actually back out there hiring software engineers again because some of these AI tools are not there yet. So I'm optimistic, I'm hopeful, and I think the bullishness maybe is really what perhaps keeps us from being able to cut rates. But I don't know. I'm with you. I don't see the pressure just evaporating overnight, but maybe it's a longer pivot and we do stay where we're at. We'll see.
- [11:14]
C
You know, it's. We're talking about this, you know, just from last week's show to now, now to June is a lifetime, you know, so, I mean, a lot of things can dramatically change and so I think we shouldn't rush to conclusions. Obviously it's fun when an announcement like this is made, especially when there had been some drama attached to the, you know, who's going to be the nominee. And listen, he's taught us to make it through the process and there's definitely people that are going to try to keep him from being confirmed into the role. So more to come on that, you know, it is interesting that we're talking about, you know, a nominated Fed chair and then in the same breath, you know, the government shut down again this weekend. You know, we lived through that. This last turn that was really challenging. Longest in history prevented data from going out. It just kind of put everyone's hands behind their back relative to making decisions based on data. Hopefully we thought we had gotten past that, but the reality is there was another short government shutdown and they've now passed funding. So they're going to fund the government for a while now, with the exception of Homeland Security, which they still have to work through. I think they got like a two week extension on that. But as it pertains to the data, you know, the BLS did not report their January data due to the shutdown. We're hoping that they're going to report maybe just on a delayed basis, but it was rescheduled and it's. Emily Liddell, Associate Commissioner for Publications and Special Studies said the release will be rescheduled upon the resumption of government funding. So we'll see what that actually means in terms of practice. If that comes out this week, if that comes out next week, what that looks like.
- [12:51]
B
Yeah, my guess is they're going to try and slot it in next week because you don't have any conflicting major releases. And the resumption happened so quickly. I feel like they should, you know, just for the good of the markets, try and slot this in just with a one week delay. Now, the ADP data we got this morning definitely loads the spring a little bit tighter for the market reaction to the jobs prints we'll get on a delayed basis because it was disappointing. I mean, gosh, you had a miss to the low side on the ADP number and a downward revision for prior month jobs and basically all of the hiring, it's still in the education and government sector. So it's not like a terribly positive jobs economy right now and it hasn't been for a while.
- [13:39]
C
Yeah, I mean, that's the central theme for the last several months is it's just not great news on the employment front. I mean, not terrible, but you don't want education and government being the leading job growth sectors or where the jobs are being placed. That's not, that's not where we want to see the growth. But at the same time, to your point about the, the tech industry, it does feel like maybe they overreacted with some of these job cuts and we might start getting some of that tech, you know, push coming back. So definitely something to keep an eye on. And there's just so many moving parts to everything at this point. I wouldn't be shocked if we see something over the next couple of weeks where, you know, jobs actually start to turn in a positive direction. But I wouldn't be shocked if we see another two or three months where it's just muted. I mean, it really is that type of fragile market right now where one or two things going one way or the other can really have outsized impacts across the macro scene.
- [14:37]
B
Yeah, I mean, some of the details that you've heard from software engineers are not too surprising for anybody who's worked with code before. So I mean on the margin where the starting pay is for those positions and what that could mean for the economy, that's a nice little lift we might see here come mid year if the doom and gloom doesn't play out as bad as it's been priced in so far this week. Yeah, the software sector for The S&P 500 has just been absolutely beating the snot. You're seeing some single names sell off like 8 to 10% on a one day basis. It's been ugly this week.
- [15:13]
A
As part of this week's episode of the Tripwire podcast, we wanted to take a closer look at one policy development with meaningful implications for commercial real estate. The so called One Big Beautiful Bill. The bill is a sweeping tax package that made several key provisions from prior legislation permanent, including bonus depreciation, the Section 199A deduction, and changes related to interest deductibility. We had the chance to sit down with Ryan Severs, partner at Eisner Advisory Group of Eisner Amper, to understand what the bill actually does, what it doesn't change, and which provisions matter most for investors, sponsors and fund managers across commercial real estate. We started by asking Ryan what from a commercial real estate perspective is actually in the bill and just as importantly, what was left out.
- [16:06]
D
Sure. So things that were included that are noteworthy. Bonus depreciation. That's obviously large for real estate investors, real estate operators. 199A. You know, I think one of the main themes of One Big Beautiful Bill or OB3, a lot of things were just made permanent. And so that's less exciting than a lot of new things, but it's still very relevant in terms of planning. Even where things were made permanent, there were some tweaks that were made that can impact how you might think about things going forward. So bonus is huge. 199A being made permanent that's significant for particularly certain segments of real estate investment. Debt funds I think would really benefit from that, especially where Reter involved. 163J, which is the interest expense limitation provision, was also adjusted slightly. And then one that I think really embodies where there is change to a degree is qualified opportunity zones. You know, there was a finite period for the original version. It's now been extended but made permanent. And so how do those rules play into effect? Potentially as important as what is in the bill is what is not in the bill. And I think there are two things that fit that the first one is carried interest every cycle. Carried interest is always, I don't want to say on the chopping block, but it's on the list of things to be negotiated in this won the beautiful bill. Trump was noted as insisting repeatedly that carried interest be addressed in the final legislation. 1061 is still applicable. It's not super applicable to real estate generally and that has not changed. So I thought that was fantastic news. What I think is also interesting about carried interest is at this point it's a relatively small revenue raiser compared to some of these other provisions. In other words, I don't remember the exact numbers over the 10 year budget window, but carried interest is very small. And then the other one would be 1031. So that one was again kind of narrowed under tax cuts and jobs act where 1031 was limited to real property. And that again remains the case. And so that wasn't altered as well. So I think both of those are very positive for the real estate industry and kind of the fund space in.
- [18:08]
A
General, though at a high level. The bill didn't introduce sweeping new incentives, but it did lock in several tools the real estate industry already relies on. One of the most impactful is bonus depreciation. Bonus depreciation allows investors to immediately expense qualifying capital investments rather than depreciating them over time. Let's hear what Ryan had to say.
- [18:34]
D
Sure. So bonus obviously can have a huge impact. Throughout my time in public accounting, bonus is something that gets tinkered with constantly. It's 100%, it's 50, it's 100, then it steps down to zero. Interestingly, one of the policy reasons behind the scenes as to why bonus being present and going away is potentially viewed as a good thing is when it's temporary, it creates like a sense of immediacy. In other words, we have 100% bonus today, but it's going away. So if I'm going to go buy this equipment, I better go do it now. So what does that do? It pulls forward demand, it increases spending, it does all the things that that Congress wants our economy to do to grow under this. OB3. It permanently extends 100% bonus for property acquired and placed in service after January 19th of 2025. There is no sunset provision. So that is just now the law. Everybody gets really excited about millions and millions of dollars of deductions. But there are a couple things to think about. If you're creating a deduction, can people actually use it? Are you creating passive losses or do you have basis issues that you're going to create losses that people don't use immediately. They may be there someday, but they're not there today. The other one is state ad bucks. And this is a potentially a very large issue in that a lot of states do not conform or adopt bonus depreciation. And even more of a double whammy is if you create a federal deduction in year one but don't get to use it, most states will start with federal income and then do your state back, add back from there. So you can have a large federal loss or maybe not, and then you can end up with a much smaller state loss or even state income. You know, there's a couple of things that just beyond everyone getting excited about 100% bonus is there's, there's more to it than, than that. Can you use it, can you utilize it? And strategically, what assets should you bonus in which maybe, maybe it doesn't make sense to bonus.
- [20:21]
A
Another provision that quietly became permanent but has major implications for how funds are structured is section 199A. Section 199A allows many pass through businesses, including real estate partnerships and certain REIT investors to deduct up to 20% of qualified business income, effectively lowering the tax rate on eligible income.
- [20:43]
D
Yeah, so this is one where frankly nothing changed. So it's not super exciting. What's exciting is that it didn't go away. So this is the provision where qualified business income, you receive a 20% deduction of that income. So effectively you're paying ordinary tax on 80% of your income. That's kind of the way to think of it. And so that was made permanent. I think where 199A is interesting is for REITs and particularly mortgage REITs. You know, in a typical real estate fund, if your income surpasses certain thresholds, you have to have property characteristics to support the deduction. You have to have wages inside the activity or you have to have qualified basis. So real property building and things like that to support the basis. And generally most real estate funds, you're probably not going to get the wages, but you're probably going to get the basis. And so therefore it supports your deduction. And debt funds usually don't have either of those. You don't have wages and you don't have basis because you have loans. And so what's great about REITs is the dividend that comes out of a REIT is automatically given the 20, I call it super status. It doesn't rely upon wages or basis, it just comes out and it's automatically qualified. You know, debt funds that don't have these support characteristics, they can convert what would be, let's call it ordinary or portfolio type income that's going to be taxed at a 37 rate to individuals. That now goes down to 29.6. Just because you put it in a REIT. If anybody was holding out to see if it was going to stick around or not, now you know, and now you know that those structures can be beneficial.
- [22:10]
A
So here our takeaway is that the common theme across these changes is certainty. Investors didn't necessarily get brand new incentives, but they did get clarity. And in an environment where underwriting assumptions, capital allocations and after tax returns matter more than ever, that certainty can meaningfully impact how deals are structured going forward. One other provision worth flagging is interest deductibility. Under section 163J, the rule that limits how much interest expense businesses can deduct, depreciation and amortization add backs were reinstated, which may change the analysis for sponsors who made elections under the prior rules. So thank you again to Ryan Seavers of Eisner Amber. That's just a quick policy spotlight for the week. And now we'll turn back to some of our deals and data for the week in review episode. So while the government shutdown might have temporarily delayed a few of the data releases this week gave us a few very different signals from the banking sector and together they paint a very nuanced picture of credit in 2026. So we mentioned Sluice earlier, we mentioned the Santander news, but let's really dig into it. I think we can start with the January 2026 Senior Loan Officer Opinion Survey which provides an early read on how banks are thinking about credit availability, standards and demand. And there are some useful tells in there for commercial real estate.
- [23:44]
C
So you mentioned this a little bit Stephen, on your intro. So may just throw a few stats out there and you get we get your deep dive thoughts on this. So as Hayley mentioned, the Senior Loan Officer Opinion Survey, also known as sluice, put out some, some interesting nuggets here. So you know, I think the overarching theme for some of these numbers here that lending standards are stable but still tight. In the most recent quarter, about 17% of banks reported tightening standards on CRE loans, but 78% said standards were unchanged. You know, so overwhelming majority, 5% did say that they've seen some easing. So you know, that's not a huge number but it's, it's something that says they're seeing an easing in some of the, you know, standards pertaining to loans. You know, some of the other interesting things Stephen, I want to get your thoughts on is, you know, if you zoom into office in particular, you know, the tightening was really pronounced. About 23% of banks tighten standards for office loans, making it the most restricted property type. So that's not news in and of itself, but pretty sizable number of banks on a percentage basis that are still tightening standards. I would have probably guessed that to be a lower percentage given some of the optimism around the sector. And then last number here, and I'll let you opine, construction and land development remain cautious. About 20% of banks reported tighter standards. So on the whole, you know, like we said, stable. But there's definitely still some, some tightening going on across the different lending markets.
- [25:09]
B
Yeah, for me, I almost wanted to read this report in backwards sequential order and start with the special outlook questions first to see if that helps explain any of the changes in, you know, the regular questions. So in the special outlook questions, banks on balance, so they expect standards to remain basically unchanged in 2026. But when you break it down by bank size, and this was consistent with, I believe, the standard questions, the larger banks were really more optimistic either for loosening standards or for stronger loan demand, whereas the smaller banks were either going to be remaining unchanged or tightening standards or expected weaker to mand. And so really to me, what this hints at is some balance sheet bias that banks that are performing well, have worked through their troubled loans, have provisioned well, et cetera, et cetera. They're the ones that are out there being aggressive, loosening standards, taking advantage of the current environment. Whereas institutions out there that really still are facing a pretty, I don't say overwhelming, but it's certainly not a great credit pipeline if a troubles they still have to work through. Yeah, they're not out there looking to be aggressive. They're maybe even tightening on average. So this is probably not something that is a huge surprise to any balance sheet lender out there and has probably been going on for the last couple of quarters ultimately in the data. But I think to see some standards loosening for multifamily, that is reassuring given what we heard at CREF C for some of the multifamily, you know, caution or doom and gloom.
- [26:49]
C
Yeah, I think that was overblown in Krebsy and we talked about that. I mean I think it's very sponsor specific. It's, it's geographic concentration and on the whole, I think multifamily is going to be just fine. But it is interesting to see that the contradiction here. And I think that just, you know, for those of us that live in the data every day and we feel pretty strongly about the way that we view the market or view the data, seeing these different opinions across some of these surveys and other things I think is a little bit refreshing. I mean, because depending on where they're they're at, depending on what their, their book looks like, you know, some of them are going to be more bullish and some of them are going to be more bearish or more conservative. And that's how the market works. Now I will say, you know, the overarching thing coming out of Cressy was just that no banks in particular were going to get back into the mix at scale. And so we'll see if that actually materializes. And so look, stable seems to be a pretty good mantra. If we can keep things stable, whether it's interest rates, whether it's standards on underwriting loans or whatever, I think that's a good sign because that's the one thing that's been missing over the last five years is stability.
- [27:54]
B
So let me just tie the January sluice reports to our Trepi balance sheets lending spreads because I think this report does have a really nice tie in with the lender survey that we conduct on a weekly basis. So the January sluice reports that the net percentage of banks tightening standards for multifamily loans fell for the 11th straight quarter. The January value of -5.5% indicates 5.5 percentage more banks are loosening standards than tightening standards for these multifamily loans. So the last time more banks were loosening than tightening standards was March of 2022. So to put that in context, I mean that's a pretty bullish signal for multifamily lending. Now to tie this into the trepidata, this weekly survey that we conduct breaks down lending spreads by property type and LTV bucket. So if we look at the 60 to 65% LTV bucket in the Trepi survey, the current spread has tightened down to now about 160.7 basis points, which get this Lonnie, it's only 3.2 basis points off the all time record tight that we had back in February 20. So the sluice aligns very nicely with what we're seeing in our lending spreads survey and I think is a lot more bullish for the multifamily sector and some of the anecdotal news headlines that maybe some of our listeners are hearing out there now.
- [29:24]
C
I love when the data and the commentary aligned like this. I mean, it just kind of shows how these decisions are being made, not in a vacuum. And it's great for us to have access to this data to be able to to back up some of the the commentary from the market.
- [29:39]
A
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- [30:47]
B
Yeah, this was a major, major announcement by the Spanish bank on Tuesday. Now, Santander first entered the US market in 2005 when it bought Sovereign bank and is currently one of the biggest lenders in its auto lending business. It expanded into corporate investment banking in 2023 after hiring more than 100 staff from collapsed lender Credit Suisse. So this transaction is strategically significant for their US Business and remains a bolt on transaction for the overall group. And this quote was from the Santander chairman in a piece from Reuters. The chairman said the acquisition would allow the bank to strengthen scale and profitability, improving the bank's funding mix and economics, including lower fund costs. So Santander is offered a little over 2 of its shares and $40.75 in cash for each Webster share. The deal is expected to close in the second half of 2026. Centerview Partners, Goldman and Bank of America advised Santander on the deal. The acquisition will put the bank on track to deliver a return on equity ratio of about 18% in the US by 2028, putting it among the top five for profitability within the 25 largest US commercial banks, with a target of more than 20% by 2028 at group level. So Lonnie, this is a massive, massive, massive merger to kick off 2026 in the banking sector I can't say I saw this one, this one coming. But I also can't say that I'm very surprised given that we've really been expecting more bank mergers to occur here over the last, gosh, call it 18 months.
- [32:31]
C
Yeah, I agree. I mean, I think we've covered in detail what we thought would happen, maybe more on the consolidation like merger of kind of forced activity versus some of these more opportunistic growth plays. I mean the last couple we've covered, you saw a bunch of acquisition activity where they're acquiring market share in Texas and other states for growth across some of these bank mergers. And in this case here, creating a top 10 retail bank is nothing to sneeze at. I mean 12.2 billion significant. So not surprised. And I think it's good news. Again, like this is a bullish sign for just, I think general market commentary. Now it has to be balanced at some level. Nothing to the same scale. But I'm a little bit jealous that you get to talk about some of the positive story on the bank sector this week. But we did have a bank failure that was reported, the first one to go under in 2026. So this was Metropolitan Capital bank and Trust out of Chicago, which was the first bank failure this year and Chicago's second in as many years. If you look at the Illinois Department of Financial and Professional Regulation closed the bank down based on concern over his financial stability. Now where they don't really correlate to your really nice open here is that the bank had a 261 million in assets kind of balance sheet here. So nothing close to what we were talking about. First Independence bank of Detroit has taken over including all deposits. So, you know, while we're seeing some positive merger acquisition activity, doesn't mean the sector is still out of the woods, albeit this is a one off, you know, on a relative basis with a really small bank, all things considered.
- [34:13]
B
So there was a Biznow article on this bank failure that this was a good job in journalism reporting. They did some digging because really there was no publicly identified direct cause of the failure and no FDIC post seizure analysis has been released yet. But Biznow reviewed court records and enforcement filings over the weekend and they showed that the Chicago bank had a long standing exposure to a real estate loan tied to the largest default in the federal government's skilled nursing facility lending program. Now this might not sound like a large loan to some balance sheet lenders. It was a $4.5 million loan originated in 2014 that was used to restructure debt on 13 Rosewood branded facilities in the Midwest. So court records show that Metropolitan capital bank modified its loan with the borrower five times between 2014 and 2017 as the borrower struggled with cash flow across their Rosewood Care center's portfolio. And in the first four modifications, the bank extended repayment terms without requiring additional collateral. During a fifth modification, Metropolitan accepted collateral already pledged to another borrower controlled entity. And an Illinois appellate Court ruled in 2020 that the borrower made material misrepresentations. The bank failed to conduct adequate due diligence that would have revealed the conflicting lien, leaving it without recourse on the loan. So that $4.5 million exposure was a significant portion of Metropolitan's loan book. Regulators imposed a consent order in 2019 requiring management changes, higher capital levels, and restrictions on substandard lending, citing, quote, unsafe and unsound conditions and an impaired capital position. So, you know, this is not hard and fast evidence, but it's hinting at perhaps some real estate stress under the surface behind this bank failure.
- [36:10]
A
Then we have one last headline here on the topic of banks. We saw an article in Bloomberg this week that Miami's top office tower is pushing to evict a failed Brazilian bank. Bankomaster.
- [36:22]
B
Yes, Miami's most exclusive office tower is trying to evict Banco Master over months of unpaid rents after the Brazilian financial firm imploded amid allegations of fraud. The Brazilian central bank is liquidating Banco Master amid what may be the country's largest ever bank fraud. In July 2024, Master signed a deal to pay roughly 58 million of rent over 10 years for the space at 830 Brickell Plaza, setting a Florida record at the time. Fellow tenants include Citadel Securities, Microsoft, and the private equity firm Filma Bravo. But the bank never built out or occupied space there and beginning in September, failed to make monthly rent of just over 423,000. The December 4th eviction complaint alleges the landlord terminated the agreement soon after Varcaro was arrested and removed Beco Master from the signs outside the building.
- [37:14]
C
I think my overarching takeaway thus far, Steven, would just be that we're in for a really interesting year. Even as it pertains to the banks. I don't think that after the first two months, this is going to be all that we see in the banking space across 2026. So hopefully we get some more mergers in a positive way where we can grow the bank footprint, consolidate some of these smaller banks into something that provides more availability of capital to. To more participants in the market. But I think we'll probably continue to see some of these banks that maybe have, you know, some overexposure to some bad property loans that maybe unfortunately bring them down. So we'll definitely be top of top of the stack headline tracking these and keeping our listeners informed.
- [37:57]
A
So let's turn our attention here to the latest trap CMBS delinquency report. We just released our report for January 2026 and found that the overall rate increased again about 17 basis points to 7.47%. And the increase was driven by a net increase in delinquent loans of almost 1.6 billion, primarily driven by the office sector. We also reported that office has now hit another all time high of 12.34%. So Stephen, walk us through the report what this new Office headline means and maybe give our listeners some additional context and perspective on delinquencies and the delinquency rate.
- [38:43]
B
Yeah, we had two really large office loans that went delinquent in January. One was a $940 million loan and the other one was an $835 million loan. And probably no surprise here, a lot of this was New York centric. And really what this boils down to is you had two major office loans that were driving, I think it was like over half of the basis point increase here for office. So the office rate increased 103 basis points to an all time high of 12.34%. I mean that sounds massive, but I really wouldn't be surprised if we saw at least a 25 basis point decrease next month just for one one of these two loans becoming current again. We should see a modification get executed and the loan probably returned to current on payments as soon as next month. So there's going to be a lot of volatility in the headline delinquency rates throughout 2026. At least that's what what I am prepared for. And we're going to have to do a lot of digging beneath the headline rates to understand what's going on. Now the second largest rate increase was multifamily which was back up by 30 basis points in January to 6.94% following a decrease of a similar magnitude the prior month. The retail rate increased by 12 basis points to 7.04%, still 78 basis points off its recent peak of 7.82% in March of 25, but the sixth monthly increase since the beginning of 2025. Lodging saw its largest retreats down 105 basis points to 5.56%. Down to its lowest level since March of 2024 when the rate was 5.0.45%. And the industrial delinquency rate broke its three month streak of increases and dropped 18 basis points to 0.62%.
- [40:34]
C
I think it's interesting here, Stephen, with the hike in the office, it just doesn't have the same level of oomph given where we are just with the broader market sentiment. Like when everything was uncertain and nobody knew what was going to happen with rates. Every time you'd see a significant jump, even if it was just tied to a couple of properties, you know, the psychological sentiment was that, man, the office is really, really struggling here. We're at an all time high, first time over 12%. I think you can justifiably walk it through like you just did. This is tied to a couple of properties and this doesn't have the same type of, you know, shock value is what I think we would have expected having seen this number if it had come out 12 months ago.
- [41:13]
B
Yeah, I mean, at this point I'm asking the question of, okay, how close are we to peak, at least for office and you know, how long are we going to stay there before we start to see a believable inflection in that delinquency rate? And it takes a long time for some of these problematic loans to resolve. Now the modifications are coming in about two to three months, typically sometimes as much as six months. So we should see a good amount of churn in that rate. But my hope is that we'll see that inflection at some point in 2026. But you know, it wouldn't surprise me also if we hit maybe mid 12% before that happens.
- [41:54]
A
So if you're interested in seeing this delinquency report, please send an email to podcastrep.com we also have a lot of additional resources, delinquency 101 pieces, some additional context about what this report means, and we have a lot of clients who ask us for all of the historical data that we have around CMBS delinquencies. If you're looking for a data cut around that or want us to work with you specifically on delinquencies in your region or an asset class that you're interested in. Send us a note to podcastrep.com and we'd be happy to work that out with you. So let's turn over to some of the deals and data of the week. I want us to start in the industrial segment. There was a big headline in the Wall Street Journal and a release from Brookfield that Brookfield Asset Management is set to buy industrial real estate investment trust Peakstone Realty Trust in an all cash deal valued at about $1.2 billion. Walk us through the deal and I know it's been a busy week for Brookfield. There also was just a headline that Brookfield Asset Management has promoted Connor Teske to CEO. So lots of headlines for the firm this week.
- [43:08]
B
Brookfield is buying the industrial real estate investment trust Peakstone Realty in an all cash deal valued at $1.2 billion. The companies entered into a definitive agreement under which Brookfield would be buying all of Peakstone's outstanding shares for $21 each, marking a 34% premium to the last closing price. The purchase expands Brookfield's industrial real estate platform with an investment trust that owns and operates industrial outdoor storage, or iOS, and traditional industrial properties. Peakstone's chief executive, Michael Escalante said the company's board of trustees along with the external advisors determined the offer achieves the best value in other terms reasonably available for shareholders. And quote says, this transaction recognizes the value of our industrial portfolio and the progress we have made expanding our iOS platform. Now, as a condition to the transaction, Peakstone agreed to suspend payment of its regularly scheduled quarterly dividend, effective immediately. The agreement with the New York based asset manager includes a 30 day go shop period during which Peakstone can actively solicit and consider alternative proposals. The deal with Brookfield has been unanimously approved by Peakstone's board and is expected to close by the end of the second quarter.
- [44:23]
C
Yeah, I think this is a, this is a big story. I mean, it's over $1 billion. We've seen some bigger deals over the last year or so, but this is something that's, that's definitely newsworthy. You know, my question, Stephen, on this is just are we starting to see some of the slowdown, pullback, resetting in industrial. Going to lead to some more of this type of activity where you might have some folks that are a little bit overexposed or over levered or not seeing the returns. And some of these bigger players can come in and, you know, purchase an entire portfolio. What they think is, you know, a good play for them on a go forward basis.
- [44:56]
B
Yeah, I don't see why not. I mean, more consolidation at this point absolutely makes sense when maybe some of the frictions these firms are facing are not frictions ultimately the acquiring or parent entity is going to face.
- [45:09]
C
Yeah, I mean, I think Brookfield's definitely in a different position than Say, Peakstone. Right. From a cost of capital perspective and others, I like the fact we had Rick from Clarion on with us on our guest podcast the other day, and he was really talking about how bullish he was on the industrial outdoor storage and how difficult it is to acquire those at scale. Right. And so when you buy a portfolio like this for Brookfield, I mean, you're effectively cutting out all of that legwork to try to get to that scale. You're basically getting scale in one transaction. So it's interesting to have had that commentary from Rick and then see this announced very quickly after. Obviously, two different firms, but I think it confirms the thesis that those iOS properties at scale are definitely appealing for people.
- [45:55]
A
So let's pivot here to our next topic, which surrounds data centers. There was an article this week in Biz now that Oracle is aiming to calm investor fears with a 50 million dollar AI funding plan.
- [46:10]
B
Yeah, part of me just wants to laugh about this one. Hey, we're gonna go raise 50 billion in our debt to. To build what a lot of people are worried about. And I get it. Oracle has some funding needs, but this is a massive, massive fundraise for them. So Oracle aims to raise between 45 and 50 billion in 2026 to fund skyrocketing capital spending tied to the aggressive expansion of its data center footprint. The financing effort, detailed in a pair of securities and Exchange Commission filings, includes a bond sale launched Monday that could raise as much as 25 billion, alongside an equity distribution agreement that would allow Oracle to sell at least 20 billion of new shares on the New York Stock Exchange. The software and cloud computing giant published its fundraising plan amid growing concerns about the company's financial health. While the world's largest tech companies are all pouring tens of billions of dollars annually into building data centers and other infrastructure to support AI, Wall street has perceived Oracle's efforts as particularly high risk. The company alluded to these fears, as well as its tenuous credit rating in a statement Sunday announcing the financing plan.
- [47:16]
C
Yeah, I mean, this is just another story, Stephen. It was almost the haves and have nots. I mean, you. You have fomo, you push your balance sheet, you try to do things to keep up with everyone else that very quickly gets perceived as risky. Then you have to start pulling out all the stops to try to, you know, get people to feel a little bit less nervous about your situation. All the while, you know, making this announcement probably doesn't make people feel less nervous about their situation.
- [47:41]
B
Yeah, I mean, there's a reason why Some people have been very bearish on Oracle, but the capital has to come from somewhere. I get it. I just hope for their sake that they're able to pull this off.
- [47:53]
A
So a lot of news this week and I know we had several other topics on our outline that we plan to talk about, but we will work them into our next few shows. I'll turn this to some programming notes. The Trep team has been on the road all winter long and we have several more conferences that we'll be attending next week. February 8th through 11th our CRE and lending teams will be in San Diego at the NBA CREF 26 conference. We know this is a huge event for the industry, so if you'll be there, send us A note to podcastrep.com we'd love to meet with you. We have people who have been in the industry for a long time that are excited to chat to walk you through any of our solutions to hear about where you see the market in 2026 and just get an update on CRE and lending performance, underwriting activity and any market trends. So we'd love to meet with you there. Reach out to us if you'll be in San Diego after MBA, we'll have teams at the SF Vegas conference February 22nd through 25th. This conference will have representation from our Structured Products groups. We'll have CMBS and CLO product experts there talking about all of our solutions and providing updates on those markets. If you'll be in Vegas that week, send us a note. We'd love to meet with you there. And then, of course, we are gearing up for our TREP Connect in New York City event taking place May 6th and 7th in Rockefeller Center. We have some exciting speakers that are lining up. We've locked in exciting venues and we have a lot of our podcast listeners already coming to town to attend the event. So reach out to us. Make sure you get that early Bird discount rate. We'd love to have you there. Turning to Shout Outs, Brad was interested in our Marketplace webinar. We had a webinar last week and we recorded that. So if you missed the webinar and are interested in seeing what we covered, send us an email. Tom D. Said, great podcast as always and was interested in our Eisner Amper Research Report. We put together a joint research paper with the team at Eisner Amper and we're happy to send that to any of our listeners if you're interested. Abby M. Shared our CRE Cielo Issuance Report and said Capital is clearly returning but with sharp selectivity. The rebound in Cre cielo issuance shows that liquidity is back. Yet the collapse in office exposure highlights how underwriting has shifted toward assets with more durable cash flows like multifamily. If you are interested in the CRE cielo market, you want to see our data and our coverage reach out to us. We have a lot that we can share with you there and we're happy to walk you through it. Charles C. Shared some of our data across about effective versus Asking rents. Brett B. Shared some information about manufactured housing, CMBS delinquencies and our friend Mr. Awesome over at Macro Edge gave us a nice shout out on X saying Trep reports on all asset classes. Very knowledgeable and good folks over there. They have great data. So thank you to the team at Macro Edge. We've done a lot of work with them in the past and are excited to continue to follow what they're doing regarding macroeconomics reporting. Ricky S. Reached out and said he loved the episode with Rick Shoup of Clarion Partners. So if you haven't heard that one, look it up on Spotify or Apple or wherever you listen to podcasts or we can send you the link and he was interested in a discount code for Trep Connect, so we're excited to see you there. Scott P. Was also interested in getting involved in Trep Connect, either as a speaker or a sponsor, so we're excited to figure out a way to work together. And Lonnie, I know you're back on the road this week speaking at the Houston CCIM chapter. Lonnie, Steven and our experts speak across the country at so many different events, panels, webinars, keynote presentations. So if you get to see Lonnie this week, send us an email and maybe we can give you a shout out on next week's episode.
- [52:14]
C
Yeah, so it'll be an exciting event tomorrow. It's their CCIM forecast event, so they have a lot of different brokers and people from their market kind of give their perspective on what they think is going to happen. I'll give an opening presentation. I did have one shout out, Hayley, that I had forgotten. So if you remember, last week on the show I had done a call out if anyone had had access to or seen anything or memorabilia to the Gordon Growth Method for Steven. And our friend Joel R. Who's been a longtime listener, sent us in a really cool photo with with an autograph that Steven, I think is planning to print off and hang in his office. We'll see if that happens. Or not. But it's really awesome, and it just shows the power of the show and how closely connected all of us really are. So I know, Stephen, that meant a lot to you, and really cool thing for Joel to do to send that over, having heard us request it on the show.
- [53:07]
B
No, that was. That was super, super cool to see, you know, the signature there in print. I just have to figure out how I can replicate the Fed seal. You know, I might be there, like, putting the indentions in by hand on the piece of paper just to make it look, you know, extra authentic.
- [53:23]
C
Yeah, it's really cool. Yeah, we'll figure that out. I mean, look, it doesn't have to be too authentic. You got the autograph. You know, that's right. So we were hoping for.
- [53:32]
A
Oh, and guys, are you watching the super bowl this weekend?
- [53:36]
C
Yeah. But I will say I saw a little bit of the Pro bowl last night. I'm not sure if you saw that, but it's now a flag football game, like in a warehouse. Not even on a real field. Like, not even with real stands. Like crazy. I mean, look, I'm a Cowboys fan. The Cowboys obviously didn't even make the playoffs. It's kind of nice seeing the Seahawks and the Patriots play. I don't know. I think the Seahawks probably win. Their defense is really, really good, but not really rooting for either team. Just hoping it's a good game.
- [54:04]
B
And let's face it, I love the commercials. I'm a sucker for the commercials. I always have been. I'll watch the game, but, you know, I like seeing what. What people have spent millions or billions of dollars on.
- [54:15]
C
We gotta talk to Simon H. I don't know why we don't have a Tripwire podcast commercial in the Super Bowl. That'd be pretty nice.
- [54:22]
A
Well, I'm excited to look at our super bowl boxes from the Trep team. We have our own Alan D. Who runs the boxes every year, and he always makes a joke that he's the Boa bank of Allen when we need to pay him for the boxes, but that'll keep us going and watching this game. So hope everyone has a great weekend and we'll see you next week. With that, we'll close. Thanks to our producer, Mariana Sabrana. 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 podcast at trep. Com and subscribe to the Tripwire podcast with your favorite provider. Thank you for listening. And stay well, all right.