← The TreppWire Podcast: A Commercial Real Estate Show
The TreppWire Podcast: A Commercial Real Estate Show
382. Resilience or Repricing? Private Credit, CMBS Market Sentiment, Office Signals, and Trading Alerts
00:49:13
Loading summary
Transcript51 lines
- [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 27, 2026. I'm Hayley Keen with Trep, a data modeling and analytics firm for the CMBS Commercial Real Estate and CLO Markets. I'm with Lonnie Hendry, Chief Product Officer and Steven Bushbaum, head of Applied research and analytics. This week, the macro picture remained anything but straightforward. Inflation data sent mixed signals. Headline measures cooled, but core PCE is still running above the Fed's 2% target. At the same time, the Supreme Court struck down a large portion of the administration's tariff authority, easing some projected inflation pressure while introducing a new layer of policy uncertainty. Markets pushed higher even as questions remain about how durable this backdrop really is. In this week's show, we'll also dig back into private credit and some of the recent headlines raising broader questions about the space. We've seen secondary loan sales that were technically well priced yet still triggered notable equity volatility. In commercial real estate. We'll cover a major multifamily REIT going private in a $3.4 billion all cash deal. Fresh examples of office repricing, housing demand signals as mortgage rates move lower and what the latest servicer data is telling us across property types. So Stephen, when you take a step back and look at inflation still above target, tariffs in flux, asset prices elevated and credit markets showing early tension, is this resilience or the beginning of repricing?
- [01:47]
B
I think the honest answer is it's a bit of both. The macro read is starting to look more like late cycle stability. As inflation is easing, the labor market is bending but not breaking and that keeps the soft landing narrative alive. But the credit read certainly over the last two weeks is where the tension has shown up. When a private credit loan can clear near par and you still get an equity air pocket from the stock sell off, that's a sign investors are repricing risk premia, not just reacting to headlines. And when you layer in tariffs with lower expected effective rates but higher uncertainty, you get this environment where capital is absolutely still there. It's just getting more selective and more sensitive. So I'd frame it as late cycle macro, early innings repricing and pockets of credit, especially sponsor backed risk and software heavy exposure. It's been a wild, wild two weeks. Lonnie, how have you been like just feeling out this private credit tension?
- [02:55]
C
Well, I think this is a great lead in to this week's episode because last week with the holiday we said Maybe it was a little bit slower. Newsweek this week has been anything but. And it feels like the private credit, which has been a very positive headline for the last couple of years, kind of filling the void, preventing some of this systemic over levered kind of delinquency distress CRE that we thought we were going to see. The private credit markets have really kind of brought stability into the broader economic scene. And I think this is the first time where we're seeing some of that air being let out of the bubble here. And it'll be very interesting just to see if this is kind of a blip on the radar or if this is something more pervasive across investors desks and minds as they kind of look forward. Because the one thing that we know about the markets that we specifically track, right, is that there's a certain layer of transparency that comes across those desks. So cmbs, Freddie Agency stuff, this private credit, both CRE and just broad private credit is super opaque still. And is this maybe the tip of the iceberg to what some of the doomers have been saying for a while? That the private credit narrative is way too positive. There's no way that this actually works. You can't lend your way out of a crisis. I think we're going to start seeing some of this play itself out. I'm still not convinced at this point that this is something that's more broad or systemic and this is something that like the beginning of the end per se. I think this is part of the marketplace. You have heightened risk in some of these deals and sometimes they're not going to go to plan. What we saw over the last couple of weeks maybe is a little bit surprising just given the players involved. But I think this is part of the business model and for me at least at this point I'm still generally optimistic around private credit as an asset class, as a, as an investable opportunity on the go forward basis. But I do think you're going to see some of these pop up just like we've seen with some other lending types of structures over the last couple of decades.
- [05:02]
B
The whole knee jerk reaction kind of bugs me because I sit back and I think, well, shouldn't some of these behemoth companies that are fairly valued at relatively modest multiples be the ones best positioned to do well because they have the scale and the foothold to really make use of this technology at scale? Yeah, there's going to be some kind of growing pains as they change their, their shape and course a little bit. But, but at the end of the day, I feel like they should be the outsized winners. And where the losses are going to be are those really high multiple more speculative or growth companies that really have yet to prove out the business plan and produce the revenue right there. You're going to get just cannibalistic and brutal competition from much lower frictions to entry and much lower cost to entry. But the stable value players, I don't know, I just don't see the value destruction as being warranted like it is. So I like buying into some of these names at relatively attractive levels, but certainly on the lookout for some cracks and credit and concerns should those start to materialize. Because we know once you get some cracks and some crumbles, all of a sudden it could turn into a landslide.
- [06:17]
C
Well, that's just the world we live in today where while these markets are somewhat opaque, information dissemination has never been more scalable. And so to your point, when there's some cracks or there's some rumors or there's some negative press about a certain industry or particular company, you know, you're on full on defense mode immediately because the scale at which that information gets broadcast has never been wider than it is today. I'm with you though. I mean, I think a lot of these companies have strong footholds. It's a little bit of a retrenchment. But listen, those things are good generally. Like if you have good management, you have the right people for the reasons you mentioned, you're not over levered, you're trading at a fair value. Some of these enhancements, some of these things that are being brought to market should actually in the long term, medium to long term be beneficial. We've seen this type of knee jerk reaction across the spectrum, whether it be Liberation Day or any other number of factors where something gets announced, people immediately freak out, things go on sale for a while and then the markets kind of level themselves back off and the people that were productive before are productive after. So at anything at this point, I would suggest a lot of this is just brought on by uncertainty and we're talking about technology and other things that are moving at such a pace now. There's just really hard for people to get their mind wrapped around what's real and what's not. But we would all agree at some level that the pace at which things are moving is never going to be this slow again. Like it's just every day it's increasing in speed, scale, capacity, et cetera. So I don't think this is a headline that goes away. I think we'll be talking about this at some level for the next foreseeable future. But the reality is anytime there's a disruption, it creates opportunity for new market entrance and it creates opportunity for entrenched players to really redefine themselves and create a competitive advantage again. So I'm optimistic that companies will continue to do that and use this disruption as a way to really differentiate themselves on a go forward.
- [08:19]
B
Yeah, what I'm looking forward to is maybe some consolidation, especially with these pullback and certain names. I would not be surprised at all to see some fairly aggressive consolidation take place this year. Name select sectors. But man, the moves have rattled the likes of a vast array of CEOs and strategists. Jamie Dimon is out there again getting the marketplace all whipped up in a worry.
- [08:46]
C
But it's kind of one of those things, Steven, where again the market needs this type of cyclical and spur of the moment type of interaction where you have your long standing metrics. We've talked about inflation, we've talked about some of these things that the markets generally trade on and they look to. But then these intermittent disruptions are necessary to kind of reset in certain instances. And I think for Jamie Dimon and these others, listen, it just gives them a great opportunity to get on stage or get behind a mic and talk their book or talk about how they're differentiated or how they will be differentiated or whatever the case may be. You know, he's been pretty doomer on a lot of things over the last couple of years and at least at this point those things have not come to fruition. I've been on record and I think you agree at some level here, Steven, where the markets are so large and so interconnected at this point. If we were talking about these things 25 years ago, any one of the singular events that we've covered over the last two years by themselves would have taken down wide swaths of the global economy. In today's market, these are headlines. These have some negative consequence in the short term. But data information people, they move too quick at this point for this to be some long, long tail in my mind.
- [10:03]
B
So is it fair to say that if we did a little bit of digging and research here that outside of a recession we would expect to see a positive correlation between a negative talk track out of the C suite and trading revenues at investment banks?
- [10:17]
C
I mean, I think in the, in the most recent history that would have to prove itself out. I mean it's, it's really remarkable. Just kind of what we've witnessed now. I mean, for people that have been in this space and track the markets at a level that we probably, you know, are, are two or three rungs above, you know, I'd love to hear their take on just where we are today versus call it 10 years ago. Just from a fundamentals perspective. I mean, it does feel like we've gotten away from certain fundamental aspects of trading, evaluation of market perception. And there's a little bit more emotion, a little bit more subjectivity, even though those subjective measures may be created by algorithmic or, you know, data based or data backed kind of process. And it feels like there's a lot more nuance in the markets today than, than there has been in the past. And I don't know that that's a bad thing in the sense that technology's enabled people to get better reads on certain areas of markets where before they were just the information wasn't available. But it's, it's kind of interesting for us just to see the transformation of how markets view risk, how they price risk, how they view opportunity, how they price opportunity, how aggressive they're going to be, how defensive they are, how the media plays into all of this. And it's all going on at the same time. And it never stops. Because as soon as you're like talking about what's happened over the last week, inevitably there'll be something else that happens on Thursday, Friday, Saturday, Sunday, that steals the thunder and becomes the next highest priority that people have to deal with.
- [11:49]
B
I got to say what does worry me a little bit about the macro picture is some folks had been pricing into their forecasts some rebate checks associated with tariffs that I think it's pretty. I hate to overestimate the probability here, but I gotta think it's an unlikely scenario that we still get those rebate checks given what's happened with the Supreme Court. And so if that was underpinning some of the economic strength forecast over the first half of the year, how does that reset our expectations for the back half of the year?
- [12:22]
C
Yeah, they're not going to give refund checks based on what the Supreme Court said. They may give rebate checks as a political maneuver, which they had talked about. But I mean, I think Bessant and others have been pretty steadfast in saying the Supreme Court didn't rule that the tariffs themselves are unconstitutional. They ruled that the powers in which the President used to enact the tariffs were unconstitutional and that they've actually given them a roadmap to enact the tariffs under more stable footing on a go forward basis. I mean I think this will be like we're going to look back in 20 years. Like the legal scholars will be debating what's just taken place. I mean like this is another one of those things where like if you're in college or you're a high school student at this point, like this will be one of those things that makes the textbooks of those of us living in the moment today don't fully appreciate or understand like the ramifications of this. It will be studied and talked about ad nauseam for the next several decades in my opinion. But I do think your worries are valid in the sense that people were estimating that this was going to happen and that the tariffs would be refunded and things would revert back to some sort of traditional mean. I don't know that that's going to happen. In fact, I think all this does is just introduce more uncertainty into all of any and everything associated with tariffs. And is that enough to move the needle? I don't know, but it's certainly more uncertain than it was two weeks ago.
- [13:48]
B
Yeah, I think we'll be watching the consumer spending data this summer and that will be the ultimate tell is how much of a downshift do we ultimately see in consumer activity consumer spending? And to the extent that rolls through, I mean it, gosh, it could get a bit dicey but, but we're still in the early innings here. I mean there's, there's a lot of, of green space left before we, we start entering that period of time where if we don't see a pickup or resiliency and spending it's, it's essentially written in the cards that we're going to start seeing more layoffs and more macro weakness that's sure to trickle down.
- [14:25]
C
I just saw some stuff from TJ Maxx parent company come out. You know, their profits and sales have, you know, eclipsed another high for them. Very positive momentum. So that kind of value spend consumer seems to continue to power those type of mid tier retailers, home goods, TJ Maxx, etc. Etc. Marshalls, those are doing fairly well. So again something we'll be watching at this point, kind of like the US Men and women's hockey teams the last week or so. The US consumer does not give up even if it's in overtime. They're, they're willing to fight the fight.
- [15:02]
B
That's right. They will dig deep to spend that dollar and TJ Maxx is proof of that. 18 years of gains. Absolutely nuts. 18 years.
- [15:12]
C
Pretty incredible. And it's so, it's, I mean their stores and their model is so simplistic.
- [15:18]
B
Yeah.
- [15:18]
C
I mean they're not highly organized, they're not sophisticated. They have like some name brand stuff hung on racks, somewhat disheveled and disorganized. Not a great shopper experience. It's a little overwhelming. Yet people find value and I think that's where people are really. It's not too dissimilar than what we see in the commercial real estate landscape. I mean people are willing to, to pay price X if they, if they think there's real realized value potential for them, even if it's in a neighborhood that maybe is a little bit early or et cetera, et cetera. I think you're seeing some of that same translation here with them. It's, it's a pretty impressive streak they have going and quite honestly I think they provide a good service for, for the broad economy. I mean they are a real value play as a consumer.
- [16:05]
B
Now, one retailer that has not had quite the same rosy picture that is just recently announced was Lowe's. The Lowe's CEO said the housing market is still under pressure even as the retailer sales have jumped more than 10%. So, so you're still hearing a lot of caution from them and rightly so. So much of their economic bump comes from housing activity. So Lowe's topped Wall Street's quarterly revenue and earnings expectations and posted more than a 10% sales growth year over year on Wednesday, even as the home improvement market struggles showed few signs of ending. So in an interview with cnbc, the CEO Marvin Ellison said the home improvement retailer is quote, still dealing with a housing market that does not have a lot of tailwind. So a mix of higher inflation, economic uncertainty and elevated mortgage rates have created a lock in effect for us consumers who are staying put instead of buying and selling homes. So for Lowe's, home transaction activity is really the greatest fuel for that industry. When you put your home in the market, the first thing you do when you put it on the market is you fix up your yard, repair your fence, you put paint in your walls. Like you go through all the beautification and modifications for your home. So if those postings aren't happening, that's rolling through straight to Lowe's bottom line. So as the waiting game for stronger home improvement demand continues, said Lowe's strategy is resonating with do it yourself customers and home professionals. He credits some company specific changes such as better digital experiences, flexible delivery options and More installation services. That's helping their bottom line. And they're anticipating roughly flat demand for the home improvement industry due to this year. Its own full year sales forecast is based on expectations that it will outperform the market. They're expecting total sales for the full current fiscal year to range between 92 billion and 94 billion, which would be roughly 7 to 9% increase year over year. And it projects adjusted earnings per share between 1225 and 1275 per share for the full year.
- [18:11]
C
Yeah, just to give some color on the housing side, and I know we're going to transition after this, Stephen, but you know, mortgage rates hit the lowest level in nearly four years. But to your point, you haven't seen the traditional uptick in activity. So just to give you some perspective here, average contract interest rate for 30 year fixed rate mortgage with conforming loan balances which are $832,750 or less, decreased to 6.09% from 6.17%. And you know, you're seeing points that are paid at closing also fall 2.53 from.56, which includes origination fees, etc. For loans with 20% down payments. So this is, these are at the lowest level since September of 2022. Now you are seeing a slight increase in home loan applications up about 4%, but just not, it's not translating, you know. And so I think Lowe's and others, this, this is a real problem for them because I don't see rates materially changing. I don't see values increasing in, in most markets. And so that lock in effect is going to remain in place for the foreseeable future, in my opinion.
- [19:25]
B
Yeah, some recent research from Redfin showed that there are 44% more home sellers than buyers in the current market. And then when you look down at the starts versus completions, I mean, I think we, what I heard this morning was we have 100,000 fewer starts than we're seeing completions. And so that new completion stock is just basically being whittled down. Developers are not putting their money on the line and gambling on any sort of return of demand here in the near term.
- [19:55]
A
So something that might be interesting for us to chat about is that while we're debating the private credit side, we have a team that's been on the ground at SF Vegas this week talking about the structured side and the CMBS market. So at least what we've heard at this conference, and based on what we've been talking about as we ended 2025 with record levels of issuance and some positive momentum in cmbs. It feels like the market is very constructive and active. So maybe you guys can share some of what the team heard at SF Vegas and just some broad color on what we're seeing in the CMBS market.
- [20:33]
B
So yeah, let me start with some of the really fun, timely stuff that we've heard back. Trends in underwriting and issuance so, so capital markets feel wide open again, at least for quality real estate. Panelists expect issuance up roughly 25% year over year, which I think is pretty close to in line with what we had said we expect back in December. Now we might have fallen perhaps a little bit on the low side, but that's very much in line with what we had talked about. Now this is an interesting one, lonnie. They're seeing 20, 24 vintage deals come back to refi. So that whole high friction and higher cost debt has interestingly I think already started to cycle back through the system, which is incredible. I mean that's, that's record speed because you know, it's not going to be terribly cheap to refi your debt two years on now, cre cielo issuance is projected to be up 10% on a year over year basis. And this will be the largest overall issuance levels we've seen since the pre GFC period. And acquisition financing is very active again, including cash in and cash out deals. Solani, you want to talk through some of the new issue trends that we've seen so far this year?
- [21:47]
C
Yeah, so I think, I think I'm maybe a little more cautious on the, the new issuance origination numbers. I mean I 25% would put this year at about 155 billion, which I think we had said maybe like 140, 150 was kind of like our range bound number. So I love the optimism. I'd love for us to get to that point. I think it probably is a little high relative to what we've seen. The cre cielo issuance though at 10%, I think you're going to see actually higher than that. I mean last year we saw about 31 billion in issuance and I think you could see 35, 37, 39 billion in 2026. I mean you could see 15, 20% plus type of origination increase year over year on the CRE CLOS. And if you look at the CRE CLOSLO issuance numbers year to date, we've already seen 10 deals priced even to the tune of about 10 billion. So we're not quite through the first quarter yet and you're already seeing about 10 billion in origination. So I think that number probably conservative on their estimate. And then if you look at some of these other takeaways, they say office loans are pricing well for top tier assets. Tier 2 and 3 office assets are still bifurcated, less industrial than prior years and retail showing surprising strength. I mean, all of those are things we've covered at pretty significant depths across the show and I think aligns generally with what we've thought. I mean, top tier offices for sure, definitely getting favorable financing terms. They have the best tenants, the best locations, the best amenities. They're definitely driving demand across the office sector. The Tier 2 and Tier 3 offices are really still challenged. I mean, I think they're still unresolved. And to your point, on the hard maturity paper that you put out, I mean, these are some of the properties that are going to be most challenged to refi industrial. We've had some guest podcast shows where we've had industrial experts and I think while there's maybe less than prior years, there's still a really strong demand for industrial broadly. And I'm not surprised by the retail showing strength. I think across most major markets we're seeing even with the newer generation trends, there's still an affinity for retail that we haven't seen, you know, outside of the last couple of years in a very long time. And so I think they're, they're pretty generally on the pulse here. You know, I think the cash in refis are going to be interesting because we know that's a part of the market that we predicted would happen the last couple of years and they've been able to get extensions and modifications and other things. But to your point, and I think what you highlighted in your most recent paper that we put out, you know, the times come for some of these to where they're going to have to face the music. And so that's going to mean for some of these properties, legitimate, quantifiable cash in in order to get these deals done.
- [24:33]
B
Yeah, I mean, this is timely commentary because, well, we have one specific deal that we're going to talk about on our market Pulse this week. 2 to 5 Liberty street in Brookfield Place is exactly one of those cash in refis. Brookfield got an $800 million loan to refi 900 million in debt. And when you roll in everything else, it basically amounted to 173 million cash in refi.
- [24:57]
C
Yeah, I mean, and that's the part That I think for a lot of us that are not working these deals on the workout side or trying to get these refis done, when we say cash in, refi, it has a flippant appeal to it where it's like, oh yeah, cash in. 170 million is not like an afterthought. That's not AN oh yeah, 173 million. I mean that's legitimate cash in. You have to have some conviction in the asset to be putting in close to $200 million just to refi the debt out. And so it's, you know, I can't wait for the market polls because I know we'll do a deep dive and we'll kind of get into some of the nuance and what happens in these situations. But this is not like a typical residential mortgage where maybe someone bought it and they have to bring 25,000 to closing. I mean, we're talking about legitimate, you know, hundreds of millions in some cases type of cash in. I mean it's, it's a real, it's a conviction play at some point.
- [25:53]
B
Yeah, but I mean you, you have to do it like you have to grit your teeth and downshift your return pro forma because you have so much on the line. Like back In July of 25 on this deal, Invesco renewed an over 200, 000 square foot lease. And Brookfield's not walking away from that lease without a fight. So going to stroke the check and it's going to be, you know, gritting your teeth to do it, but it's going to happen.
- [26:17]
C
And I think, listen, for some of these guys, they're going to come out on the other end and that's going to look like cheap money play for them. If office comes back across the spectrum, which at some level, give it enough time and it's going to come back. These are just going to be the cost of doing business. And you're going to look back and for the people that didn't write the check, they're going to be kicking themselves because they missed an opportunity. It's, I think for the experienced, seasoned investors that have seen the cycles play out now again, they're going to be selective. Are they going to cut that check on every building? No. But in your example here, when Invesco signs a large long term lease, you're probably hedging your bets and saying, we're going to go with this one and write the check.
- [26:59]
B
Yeah, I mean the one stat here, and we've already talked about it, but the One stat I have a hard time wrapping my head around is the new issuance target of 25%, or about 150 billion. The activity we've had announced or is scheduled to close in the fourth quarter isn't going to get us there. I mean, we're tracking actually slightly below where we were last year on issuance activity. So what has to happen is a very strong game of catch up. I don't know that we're probably going to see the activity come this summer. I mean, maybe a slight uptick, but that basically means this fall is slated to be an incredibly busy calendar. So I'm really interested to see what the second half of this year brings because to have that much conviction around that kind of a forecast tells me they're seeing the debt packages and lining up the deals now for issuance later this year.
- [27:50]
C
I agree with you. You hope that there's enough velocity that the optimism that we felt over the first couple of months of the year doesn't fade. But at some point the numbers are going to start painting the picture and if we're through the end of the first quarter and into the second quarter with less origination volume than what we saw last, that optimism has to face some reality check. And so I'm hopeful that we're going to start seeing transaction velocity pick up. But it is an interesting dynamic where the talk track is still very solidly in favor, as evidenced here, of record setting type of issuance this year. The data still paints a slightly less optimistic picture. Still great. By all means, this year's off to a great start, but not to the record setting level that it would have to be to hit what these projections are.
- [28:39]
A
What happens when a CMBS loan falls apart? In today's market, the CMBS special servicing rate is almost 11% and many securitized loans are struggling. It may be a good time to check in with our friends at the Henley Group. They are experts in CMBS and CRECLO loan modifications and restructures. They have been trusted advisors to borrowers facing challenges with their CMBS loans for over 15 years and they have obtained an extraordinary success rate for their clients. If you are having issues with a securitized loan, they are definitely the team to reach out to. We know the team behind the Henley Group well and they are great people. We are confident they will give you valuable advice. Visit thehenleygroup.com for more info or send us an email and we will connect you with the team. So let's move on to our deals and data Property type segment. I want us to start in the office market this week because our own Andy, who used to be a loyal podcast listener before he became our head of research, has been tracking a property in Chicago for a while. So he sent us a message back in April of 2024 saying he walks by 175 West Jackson in Chicago three times a week. The building isn't done. It's currently getting a facade refresh. Now he's telling us that the building just sold. There was an article in Crane's Chicago business at an 87% loss. So let's talk about what's happening at this building and maybe some of the insights into Chicago office.
- [30:16]
B
So yeah, this is, this is a wild one. This Chicago tower sold for roughly 87% less than its pre pandemic price tag. So a joint venture between New York based 601W Companies and David Warner Real Estate's investment purchased the 22 story building at 175 West Jackson Boulevard for 41 million. According to a person with knowledge of the deal. The seller was Brookfield Asset Management, who, who paid 306 million for the tower in 2018. Brookfield's lender filed a foreclosure lawsuit on its $280 million loan in 2022, according to public records. So this thing has been absolutely brutalized by Covid. I mean, a completely seismic shift in expectations, an 87% loss. I mean, that puts it up there with the likes of San Francisco there. Lonnie.
- [31:14]
C
Well, I mean it's, it's, you know, this is one of those old historic buildings. You know, I, it's funny looking back at Andy's original email because to his credit, you know, you don't think that they're going to be doing such an extensive remodel and tuck pointing and all of these things on something that has effectively a residual value at, you know, some gargantuan discount to what they paid for it. At the end of the day though, the market has spoken that that building is not worth, you know, pennies on the dollar relative to the last transaction price. So, you know, are we seeing a leveling off with some of these Bill, Are we resetting price? Are we finally getting to a bottom? Are we getting to that new basis? Don't know that this one building that's a little bit eccentric, but I do think on the whole this is indicative of some of these buildings kind of being repriced in today's market.
- [32:07]
A
And there was a headline in Biznow this week that American Express is set to move its global headquarters into the final World Trade center tower.
- [32:17]
B
Yes, American Express is moving its global headquarters to 2 World Trade Center. But unlike the other corporate titans that have moved into the rebuilt complex since the 911 terrorist attacks, it is taking ownership of its new skyscraper. The credit card giant announced Wednesday that it will be the sole owner and occupants of 2 World Trade center and nearly 2 million square foot tower at 200 Grinwich Street. Construction is expected to start in the spring with completion estimated for 2031. The Amex CEO said in a quote, our new headquarters will be more than just a building. It will be a place for our colleagues to feel energized, inspired and proud. A home for innovation, interaction and growth. Now this feels a lot, a lot like it was pulled from a page of J.P. morgan's headquarters play. The tower is being developed by Silverstein Properties which has handled the redevelopment of majority of the complex delivering trophy buildings at 7, 3 and 4 World Trade Center. After the Durst Organization developed One World Trade center, the Western Hemisphere's tallest building, Port Authority of New York and New Jersey owns the World Trade center complex which Silverstein properties leased for $3.2 billion. Six weeks before it was destroyed, Silverstein transferred its lease for the two World Trade center to American Express. According to a spokesperson for the development firm, terms of the deal and estimated cost of construction weren't disclosed. American Express has been headquartered a few blocks away at 200 Versey streets since 1986 and it plans to stay there until two World Trade Centers complete.
- [33:56]
C
Yeah, this is a positive story. I mean this has to be viewed favorably, right? I mean this kind of rounds out the, the World Trade center last building there. They've been a long standing occupant in that market for a very long time. And this, you know, it sounds like they're very excited to, to complete this and I think this is a positive story.
- [34:16]
A
So let's talk about another large office building on the other coast. We saw an article from our friend at Laura Waxman of the San Francisco Chronicle and also covered in a lot of other outlets like Biznow talking about the Transamerica Pyramid that developer Michael Shvo renovated into a trophy office tower that commanded market topping rents and this building is now in line to be sold.
- [34:43]
B
So Schvo and his investors a German pension fund which sorry Lonnie, I'm not even going to attempt to say this one like I haven't brushed up on my German in a long time. So we're just going to say it's a German pension fund and Deutsche Finance America. They're planning to sell this property for an undisclosed sum to Yoda plc, an investment firm listed on the Cyprus Stock Exchange, citing anonymous sources. So Schwo and DFA, which manages investments for BVK and other German pension funds, purchased the tower for 650 million in 2020 and poured another Kithislani 400 million in renovations, upgrading the lobby, adding a cocktail lounge for use exclusively by the building's tenants. Just absolutely, absolutely crazy. However, the relationship soured in 2025 after losses piled up on the $1.9 billion in seven investments BVK made with DFA and Scho. So BBK, Germany's largest pension fund, sought to cut ties with Shvo and DFA last month, although Schvo asserted that apart from market fluctuations related to interest rate changes, the investments were performing well. So some unfortunate investor tension there, maybe that was leading up to this, the sale.
- [36:04]
C
So, Stephen, let me give you some color here on some of the rents for this building. So as you mentioned, the 48 story office tower, you have office tenants paying north of $300 per square foot. Again, this is coming to us from trusted real estate sources and the building's operator. They did not identify the tenant, who he said remained wished to remain anonymous. Another real estate source said that the deal was for about 4,000 square foot on the 44th floor. If you look at some other tenants in the building, you have rents well above $200 per square foot. And according to locals, that's the only building in the city that has signed leases over that $200 square foot threshold. And it's only happened over the past year. So it's amazing when you start seeing rents at this price point. I mean, this is, this is unprecedented for San Francisco and you hope it's sustainable, but this is such a high watermark. It'll be interesting to see if this is kind of a one off for some of these smaller, you know, less than 10,000 square foot tenants or if this has some staying power.
- [37:12]
B
I mean, this is wild. They're saying that the pyramid was 85% leased as of December, according to the team over there. So, I mean, I'd love to visit this property and see the work that was done because to command rents like this, I can only imagine what they must have done on the remodel.
- [37:29]
C
We may have to get Laura to come on the show and give us a deep dive on the building. It seems like she's pretty plugged into the players that are here in this instance, so I know she's a listener of the show. Give us a shout. Maybe we'll get you on and do a deep dive on San Francisco office.
- [37:45]
A
And in industrial news this week, Commercial observer had an exclusive that JP Morgan and Zenith Industrial Outdoor Storage have partnered to secure a $130 million senior secured credit facility to refinance a 14 property industrial outdoor storage portfolio.
- [38:05]
B
Yes, this senior secured facility is refinancing a 14 property industrial outdoor storage portfolio, also called an iOS portfolio that spans approximately 130 acres. According to Commercial observer, he bank provided the debts while the Cooper Horowitz team arranged the transaction. Ben Atkins, co founder and CEO of Zenith, told Commercial observer that his team was motivated to make the deal after seeing dramatic improvements in capital markets over the last six to 12 months as well as increased institutional demand and investor support for high quality iOS products. I mean, it's great to hear that because we have been talking about iOS, I mean, gosh, a ton over the last 12 to 18 months. I think our good friend Arrest over at Siri Direct was one of the first to really turn our attention to that property subtype. Atkins said, quote, we felt collectively it was an appropriate time for us to refinance a pool of our joint venture assets. And KeyBank's desire to enter into the iOS space is a strong signal of how the space continues to mature. The 14 assets in the $130 million transaction are currently 98% leased and are located across the Southeast, the Midwest, the Rockies and the west coast, according to Zenith.
- [39:26]
C
Yeah, I mean, I think this, this just fits the narrative that we've seen over the last year or so on these assets, Stephen. Super high occupancy, hard to find. And when you find them or you think that you have a good one, you want to stay invested in those locations because they do have some barrier to entry benefits. And so this is another great example of that.
- [39:45]
B
You know, it's, it's funny, Lonnie. It's almost like land is a scarce resource. We should really value appropriately.
- [39:52]
C
Outside of Dubai, my friend. Outside of Dubai.
- [39:56]
A
And finally, a trip trading alert in the multifamily segment. We reported that a New York City multifamily value was reduced heavily, but the loan is expected to exit special servicing.
- [40:09]
B
Yes, the collateral backing the $318 million Yorkshire and Lexington Towers senior loan was recently reappraised with a 29% value reduction. The asset was appraised at $954 million at securitization in 2022. Before this most recent appraisal valued the property at $678 million. The loan was underwritten with a maturity date of June 2027. We last mentioned this loan in a December 24th edition of TruckWire when it transferred to special servicing due to payment default, according to servicer commentary. After the transfer, the servicer executed pre negotiation letters with the borrower and all four mezzanine lenders received a joint workout proposal and negotiated terms through 2025. By September of 25, all mezzanine lenders had concurred with the modification. A comprehensive modification agreement was executed in November 25, curing defaults on both the senior mortgage and all four mezz loans. Cash flows remain trapped and the borrower continues its unit upgrade program. The loan is expected to return to the master servicer in early 2026. The whole loan has an outstanding total balance of $539.5 million, which is comprised of 18 senior Parapassu notes making up $318 million and two junior notes making up $221.5 million. The collateral for this loan consists of two multifamily properties with a combined 808 units on the Upper east side of Manhattan in New York City. Yorkshire towers is a 615,000 square foot 681 unit multifamily building with a 33,000 square foot 168 space parking garage as well as six commercial and retail units with just under 30,000 rentable square feet. Lexington Towers is a multifamily building comprised of 127 residential units totaling 115,000 square feet and a just under 9,000 square foot parking garage with 36 spaces and 6 commercial and retail units totaling just under 10,000 rentable square feet. The buildings were constructed in the early 1960s. Over the first three quarters of 2025, the loan posted a DSCR based on net cash flow of 0.79 times with occupancy at 90%. In 2024, DSCR was at 2.19 times while occupancy was at 92%.
- [42:30]
A
And in programming notes this week we have another TREP report. We released Our Life Comps Q4 2025 report and for those of you who don't know, Life Comps is our Life Insurance Commercial Mortgage Return Index, which is a consortia of life insurance loans. And in our latest report we found that 2025 annual returns surpassed 8.8%, which is more than double the 2024 numbers. So if you're interested in getting access to this report or learning more about Life Comps. We have information about originations, credit performance and property specific returns. Send an email to podcastrep.com we'd be happy to share the latest findings with you and walk you through all the ins and outs of the consortia. As I mentioned, our team was at the Structured Finance Vegas Conference this week. If you didn't get a chance to to catch us there, send us a note. We'd love to meet you in New York City at our office, in Dallas, in London at our office, or come visit you in your offices. So reach out to us. We're always willing to let you know where the trip team is and catch up with you on the road. We also have a few events coming up that we're taking part in. Our Head of Research Andy Boettcher will be presenting twice at the One Conference, which is Illinois's premier banking conference, taking place at the Bloomington Normal Marriott March 12th and 13th. He'll be talking about lending trends with loan level data and CRE property rents and expenses. If you're interested in learning more about that event, send us a note. We also will have our own Rachel Symanski presenting at the ARIES Florida Conference March 24th and 28th. We will share more details about an academic paper that Steven and Rachel have been working on and some of what they're presenting there in the coming weeks. And we have some updates for our Trep Connect in New York City event. We are almost closing the doors on our early Bird registration rate, so please reach out to us. If you are considering joining us at the event and you want to lock in an early Bird discount rate, we'd love to extend that to you through February. And even if you reach out to us in February, we can give you a few extra days to lock in that rate. We've announced some exciting new speakers since the last time we covered this on the podcast. We will have an exclusive fireside chat with Bill Sexton, the CEO of Trimont. We also have some leading data center and digital infrastructure panelists from Newmark joining us. And as mentioned, we have leaders from Madison Realty Capital, Cushman and Wakefield, Manulife, PwC, Marcus and Millichap and several other experts coming out to speak and talk about what they're doing in their businesses. So please reach out to us if you're interested in learning more about our Trep Connect in New York City conference. We'd love to have you there and make sure we can get you a ticket. Turning to shout Outs we met a lot of people out in Vegas who listen to the pod. Powell R. Is a podcast listener who got to meet with our team there. Shane J. Victoria L. Listens every week and recommends the podcast to all her friends. Michael R. Also said he's always referencing the podcast in his meetings with clients and colleagues in the industry. I wanted to give a shout out to our own Julie D. Who sent me a video. Her baby somehow figured out how to play our podcast on her Apple Watch, so that was very cute to see. We love to see your kids listening to the podcast, you listening to it with your dogs or your family members. So thanks Julie for sharing that video. Peter G. Said he sadly has a conflict for our Trep Connect conference, but loves the content and wants to find other ways to connect so we will reach out to you. Peter Jonathan C. Is an avid listener and said that he knows Trep has been expanding its tech offerings and was interested in some of our AI based reporting functionalities. So we're excited to walk you through that. Michael M. Sent us a great shout out. We're going to look into your message and see if there's ways that we can partner together and maybe more to come on that. Tom B. Shared our January Delinquency Report Layla K. Who is very active on social media, gave us a shout out for our Hard Maturity number that was featured in Steven's latest research report. So if you haven't checked out our CMBS Maturity Playbook, send us A note to podcastrep.com we've had a lot of people extremely interested in that report and even looking to get access to that data on a recurring basis. So if that's something of interest to you, please reach out to us. David L. Thanked us for another great episode and was looking into how to get access to our event happening in May. So we're excited to see you there. And Marty B. Was interested in our CMBS defeasance webinar. So we do have a marketplace webinar that by the time this podcast is out would have already happened. But if you're interested in getting more from the Trep team, send us a note. We always have webinars, research reports, trainings for our clients and just a lot of ways to interact and engage with our data, our insights and our Trep experts.
- [48:06]
B
I just have two quick shout outs for this week. First for Paul P. I appreciate you reaching out on LinkedIn, Paul. It's absolutely fantastic to hear from a quote P1 listener that's been there from the beginning and hasn't missed an episode. I absolutely love that. And then one more Mark Y reached out and is interested in hearing about some market updates that we're seeing in real time at trep. So I love that sort of engagement. I absolutely thrive on it. So thank you all for reaching out and hope to hear from more listeners.
- [48:40]
A
So a lot of great stuff this week, guys. Thanks for pulling it together and sharing all the insights. With that, we'll close. Thanks to our producer, Mariana Sobrana. Join us next week as we look at what's happened during the week and how it may be impacting you. If you have a question or just a comment, send an email to podcastrep.com and subscribe to the Tripwire podcast with your favorite provider. Thank you for listening and stay well.
- [49:06]
C
All right.