412. Refinancing, Right-Sizing, & Repositioning: $5.49B in CMBS Hard Maturities, Camden Heads South, & Apollo's Austin Bet

0:05Welcome to the Trepwire podcast, the show where commercial real estate meets data and insights. This is our Week in Review for the week ending August 7, 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 Stephen Bushbaum, Head of Applied Research and Analytics. This week's economic data delivered a little something for everyone, and not necessarily in a good way. Manufacturing recorded its strongest growth in four years, and surface sector demand remained healthy. At the same time, private hiring disappointed, job openings continue to cool, and businesses reported persistent cost pressures.

0:49Higher rates are also weighing on construction, mortgage applications, and other interest rate-sensitive parts of the economy. In the commercial real estate headlines, today we'll discuss Camden's$1.63 billion exit from California multifamily and its decision to reinvest in newer Sunbelt properties. We'll also look at Best Buy's push into smaller stores, Apollo's decision to establish a second headquarters in Austin, and the surprising rise in lumber prices despite weakening home construction. Then, in our Digging Through the Data segment, we'll examine August CMBS hard maturities and take a closer look at the five largest loans approaching their final maturity dates.

1:32So, Stephen, after last week's volatility in the Treasury market, Did this week's economic data provide any clearer direction? I'm not sure that it really gave us any clear direction. It did, however, clarify some of the tension. The best way to describe this economy may be strong output without much hiring. The ISM Manufacturing Index jumped to 55.6, its highest level in four years, with strong production and new orders. The services data told a similar demand story, with business activity approaching 60 and new orders continuing to accelerate. But employers remained cautious. Job openings declined to 7.36 million.

2:15ADP reported only 44 ,000 new private sector jobs. And services employment index fell back into contraction territory. This still looks more like a slow hire, slow fire labor market than one experiencing widespread job losses. I will call out one additional data point from that ADP print on Wednesday. It was a little bit concerning is that you saw weakness in leisure services. In other words, this is still in the part of travel season. And so seeing weakness in the leisure sector, right, in hospitality services is to me a little bit concerning going into the fall and really highlights just how important it'll be to get that back to school spending.

2:58and then heading into November, the seasonality and holiday sales. The difficult part for the Fed is that softer hiring has not been accompanied by much relief in prices. The manufacturing and services prices index both remained above 70, indicating significant input cost pressure. And the effects of higher rates are becoming more visible. Construction spending declined both monthly and year over year. Multi-family construction weakened and mortgage applications fell as that 30-year rate reached 6.81%. The economy is not rolling over here, but the rate-sensitive sectors are clearly feeling the squeeze.

3:36And that tension, with healthy demand on one side and higher financing and operating costs on the other, runs through nearly every CRE story we're discussing today. Yeah, I was going to jump on the mortgage application nugget there, Stephen. You mentioned the 6.81 % rate. The push-pull for residential mortgage applications has been about 6.6%, 6.7%. When it's gone above that, you really feel the brakes being applied. And I think at 6.81, with really no potential relief in sight, it's going to be a tough slog. And tying some of the residential maybe into the leisure story, I mean, pull up any article you can find on Airbnbs across the U.S.

4:15right now, and they're all for sale. None of them are selling, and prices are just being reduced over and over and over again. And some of them are taking them off the market, trying to wait 30 or 60 days and resetting. But there's going to be a pretty significant slowdown, in my opinion, if rates stay like this across the residential markets. I know we did a kind of deep dive two or three weeks ago, but things have deteriorated even since then. Yeah, I'm really interested to see what Friday's jobs print will look like for this month and what's going to happen with the unemployment rate. If I'm not mistaken, I think labor force participation declined slightly last month.

4:53And so what we could see on Friday is a slight increase in the participation rate that could cause that unemployment rate to break higher. And then if non-farm payrolls comes in on the cooler side, it makes things really interesting for the Fed decision in September. I'll be really interested to see how treasury markets respond. and if things maybe break lower and we have an increase in bets for another Fed hold. Now, obviously, if things come in, even lukewarm to warm on that data, well, yeah, I'm guessing still the chatter about potentially a hike coming in September still is in the cards. But for me, I'm interested to see really if things break on the weaker side, how markets start pricing in that September Fed decision.

5:40So let's turn our attention here to a big story in commercial real estate. I mentioned this earlier, but this week we saw that Camden Property Trust has exited California after 28 years, selling 11 apartment properties, which total 3 ,600 units for$1.63 billion to BlackRock. And this marks the largest U.S. multifamily sale since the summer of 2024. Lonnie, can you walk us through this story? Yeah, this is a great story. And when you say, you know,$1.63 billion, Stephen, I'm going to sound like a broken record because every time we see one of these transactions, I just can't get over the fact that every deal seems to be a billion plus at this point.

6:24This is over a billion and a half. I like the thesis of reinvesting in the Sunbelt. We'll get into the details in a minute. But we put out a paper a couple of weeks ago talking about the comparison contrast of the investment thesis between the Midwest and the Sunbelt. And it feels like Camden is moving into the Sunbelt, even though there's elevated distress in the Sunbelt. So they're exiting California. We talked about this maybe a month and a half ago or so. They've been out there for 28 years. They're selling 11 apartment properties, have about 3 ,600 units to BlackRock. Obviously, BlackRock is not afraid of making big deals.

6:57This is the largest U.S. multifamily sale since the summer of 2024. So this is a pretty nice tailwind headline relative to the negative headlines we've seen for multifamily over the last few months. It includes six properties with 1 ,797 units in San Diego and the Inland Empire and five properties with over 1 ,800 units in L.A. Sales price, when you look at it, equates to about a 5.45 % cap rate based on the portfolio's combined 2025 NOI of about$88.6 million. The average age of the properties is 19 years, and they're roughly 95 % occupied. So really strong performance. These are high barrier to entry markets, even though it's an aggressive cap rate.

7:38Seems like a pretty nice deal for BlackRock, even at the really big price tag. JLL Capital Markets arranged the deal. They put together a$566.6 million agency financing package against seven of the properties. Fixed rate loan requires only interest payments for a five-year term. And then Camden is recycling the California proceeds. And I want to get your thoughts on this, Stephen, into newer Sunbelt properties. It's already acquired five properties for a total of 2 ,061 units for$645 million, plus two additional land parcels for$45 million. These acquisitions span Atlanta, Orlando, Tampa, Nashville, Dallas, Phoenix, and Charlotte.

8:19and they have a lot of additional acquisition activity in the pipeline. Yeah, I like this play because if the deals are penciling today to what maybe looks like high fours, low to maybe mid fives yield percentage, well, guess what? All it's going to take is a slight warmup in Sunbelt activity and those yields could be breaking 6 % pretty easily without breaking a sweat. And so if they're tactical in the way they're redeploying capital, the markets, the properties, I mean, there's a lot of upside potential they can capture, especially given that construction activity we just got done talking about, right?

9:01The forward delivery pipeline looks really weak in some of these markets. And so that's going to break very well for Camden here as long as they are picking, and they will, they will pick the right properties, the right metros with a lot of upside potential to capture here. Well, imagine all the Sunbelt brokers seeing this headline and reading that they want to deploy, you know, a billion dollars plus or minus into the Sunbelt. You don't think they've been making some calls? I mean, they're going to get the best properties in the best locations for sponsors that are maybe a little bit in trouble or need to get out of some deals to support maybe some worse off deals.

9:38This is a great play for them. They're capitalizing big on the California portfolio that they built and maintained over a long period of time. But, you know, 19-year-old average age for the California portfolio is still probably relatively new for California, but they'll trade into much newer, nicer assets in the Sunbelt. I think this is a great play. And it kind of pushes Camden into a new version of itself. I know they had the two co-founders, you know, have not resigned but effectively moved into some long-planned new roles at the firm, and they're kind of handing leadership responsibilities over.

10:11And I think this kind of coincides nicely with this large transaction. And listen, Camden's been around since the early 80s. I mean, this is no fly-by-night group. And in a period where you're seeing every other multifamily headline talking about syndicators and others losing money, Camden has done it right for a very long time. And I think they're a little bit ahead of the curve here as well. Yeah. And this transaction was signaled for a while. We knew Camden was contemplating or likely to exit that California portfolio. So the execution they got, an in-place cap rate of just below 5.5%, I mean, that feels very, very practical on that existing portfolio.

10:53So we have another story here. And I think this is a clear example of the case-shaped economy that we've been talking about. We saw Diamond Rock's earnings results come out recently, and it's really highlighting this K-shaped hotel consumer. So walk us through this, Stephen. What did they find, and how does this tie back to a lot of the themes that we've been sharing on this show? Yeah, this is a fun one because Diamond Rock does tilt toward that luxury end, but the skewness in their earnings results tilts even more so. This highlights exactly what their strategy is. Diamond Rock said its average guest bill exceeded$475 per day during the second quarter.

11:35Hotels with average bills above that threshold generated approximately two-thirds of the company's hotel EBITDA, or earnings before interest, taxes, depreciation, and amortization. This is absolutely wild. Two-thirds of the results were driven by these super expensive hotels. Ones that, like us, we're not going to go spend that per day. Like a$1 ,200 guest bill? I mean, I guess if you're rolling in spa services and stuff, you can hit that pretty easily. But it's not coming from the mini bar, put it that way. In Diamond Rock's five highest ADR hotels, the average guest bill exceeded$1 ,200 per night.

12:13The clearest evidence of bifurcation is the performance gap. Over the past year, Diamond Rock hotels with ADRs above$300 outperformed its lower priced hotels by nearly 300 basis points in total rev par growth. Management expects that trend to continue through 2027. Diamond Rock attributed the strength to higher income consumers' continued willingness to spend on distinctive travel experiences. Resort RevPar increased almost 8%, while urban hotel RevPar rose 6.6%. The strength extended beyond room rates, food and beverage, spa, and parking revenue all increased in the low single digits. And RevPAR growth across the three most recent holiday weekends ranged from approximately 9 % to 12%.

12:58Overall, comparative RevPAR increased 7%, and total RevPAR rose 5.6%. Excluding a one-time property tax benefit, hotel expenses increased only 1.8 % against 5.5 % revenue growth, producing 240 basis points of EBITDA margin expansion. That is fantastic. stick. So this portfolio is just a true representation of the K-shaped economy right now. Affluent travelers remain willing to pay that premium room rate and spend heavily on experiences while lower priced hotels are producing much weaker revenue growth. You know, Stephen, as you go through that story and kind of put some of those numbers out there, you know, one, one, I want to, I want us to start, you know, maybe we need to have a little drinking game here.

13:44If we say bifurcation you gotta take a shot like i think we gotta outlaw bifurcation kind of like we have maturity wall but i i understand the the use here it's it's just crazy i mean like what what percentage of people are spending this kind of money for hotels now i mean i get it you go to new york right now and you can't find a halfway decent hotel room for less than you know 350 to 500 a night so like you know maybe 1200 in some of these markets is it's just not crazy crazy but it It just feels out of touch to me, especially at the scale that they're talking about here. It's just really remarkable.

14:21It just begs the question to me of, can people actually afford this, or are they just living on credit to try to fake it until you make it kind of mindset? Like, I just don't know. If you see a decline of 10 % to 15 % in the NASDAQ, it'll show you exactly where it's coming from. Fair point, fair point. You know, so for our listeners out there that maybe aren't familiar with some of these terms on the hotel space, I want to give you a little bit of definition here. ADR that Stephen referenced is average daily rate. So average daily rate measures the average revenue earned per occupied room. That's the nuance there, per day.

14:58Tells you how much a hotel is charging on average for rooms that it actually sells. It doesn't really consider or account for unsold rooms. So like the formula for ADR is just total room revenue. divided by number of rooms sold. So pretty straightforward calculation. When Stephen talks about REVPAR, that's just an acronym for revenue per available room. And this is slightly different. And it measures revenue relative to the hotel's total available room inventory, whether those rooms are sold or not. So in this case, REVPAR captures both the pricing, which is the ADR and occupancy in a single metric, which really provides a more complete gauge of the revenue performance.

15:38So there's two ways to calculate REVPAR. REVPAR would equal total room revenue divided by total available rooms, or REVPAR equals the average daily rate times the occupancy rate. So just a little bit of nuance there, a little academic 101 in terms of some of those acronyms and nomenclature that we're using to describe some of these things. And for a fun little side story here, why you saw some of those New York City hotels running, I don't know, 300 % RevPAR growth was because when they were housing migrants, the contracts with the city weren't charging per occupied room. It was per head. So if you can fit three or four people in a family in one room, guess what that does to your RevPAR?

16:21Well, yeah, I mean, that's taking the student housing metric to a hotel. It's beds and heads, right? Or heads and beds. And I think over the next 10 years or so, when people actually start auditing some of that stuff, I mean, that's just insane. I mean, insane. It's almost like when you get these, you know, boom towns in the oil fields or whatever, and they start setting up the man camps and everything. And they're just charging, I mean, crazy prices. And the economy works while it's hot. You know, it's kind of like this here. It's like there's money in the markets, and so people are spending it.

16:56But once it dries up, man, those things come down pretty quick. Listen, hotels have been an interesting dynamic. We've talked a lot about on the show. I'm still really surprised, though, that these luxury ones are having the staying power that they have. So moving from the hotel consumer to the retail consumer, we've been talking a lot lately about corporate retailers right-sizing or reassessing their real estate assets. This week, we also saw in CNBC that the incoming Best Buy CEO, Jason Bonfig, plans to expand Best Buy's reach through smaller format stores in communities that cannot support a traditional 30 ,000 to 35 ,000 square foot location.

17:43What do you guys think about this? I personally like it a lot, especially given that Verizon announcement we had the other week. I mean, Best Buy doesn't need all of that traditional space for car stereos and TVs. A lot of that was display space. But I got to say, I mean, it's nice to go in there and play around as a consumer, but you don't always need that in every single store. A lot of the stuff that produces the highest margin for Best Buy takes up a lot less space, especially the small gadgets, right? The smart glasses from Meta, which I don't know if anybody's seen those things or, I mean, heaven forbid you try and buy them.

18:23I don't know if you looked at this, Lonnie, but to actually buy those smart glasses, you can't just buy them off the shelf. You have to make an appointment and demo them and let them show you just how cool they are before you can actually buy them. And you can even go to LensCrafters to do that or Best Buy. So, yeah, to go into these smaller footprint stores that probably have a very, very competitive or possibly even much stronger return on cost, this is a great format. We've seen like Macy's do this as well. So I can't say I'm too surprised to see this out of Best Buy. I don't know that this helps them.

18:56Like I think Best Buy is a dying brand. I mean like I just don't think – I don't think they have staying power. I think that business model is old. It's antiquated. Like I get it. you're going to shrink the footprint. I don't disagree. 30 to 35 ,000 square foot stores is way too big for Best Buy. I mean, I was in Best Buy this week, actually, because my kids have gotten accustomed to having GE Opal Nugget Ice Makers. I'm on my fourth GE Opal Nugget Ice Maker because we use them 24 hours a day and they burn up. I follow the instructions. I sanitize them. I clean the filter. I do all the stuff. They just don't last.

19:38But if we don't have it, it's like we don't have oxygen in the house and the kids can't function. So I'm like at Best Buy. So I went up there this week and this time I have a warranty. I took my one that didn't work back. The gentleman helps me out. He doesn't have any in the store. He orders me a new one. He ships it to the house. It doesn't have the side tank. So that's not going to work. So I have to go back. They have to reorder me a new one. They finally get one with the side tank. So the kids are happy again now because we have an ice maker. But while I'm up there, I mean, like they still have the geek squad in there.

20:12And like these people are like literally bringing up a laptop to have some like random guy at Best Buy, like look at their laptop. And the store's empty. Every time I'm in there, it's empty. They have no registers. They have one customer service register that also acts as the checkout at the Best Buy that I go to. Like there's not even the cashier. It's just like one person that does everything. I don't know, man. I'm, I'm, I don't know how this works for them. There's enough people though, that have just incredible on-demand need for certain electronic components that I think you're going to visit the store.

20:45Now, don't get me wrong. I'm not saying this is a long-term story. I think this potentially goes the way of, I don't know, like a Radio Shack. So I think this could end up going potentially the way of like a Radio Shack, except now in the day of AI, we can probably be a lot more tactical about what we're carrying in store, right? And be very, very tactical on inventory strategy for these smaller store footprints. Because like a Wi-Fi range extender, that's something that you probably would buy in person, right? Because it's one of those, something went out and you need it, right? So I don't know, if you have this framed right.

21:25I could see it working for them, but I hear you. This could break the other way and well, just flat break. We have another big headline this week for office and that's that Apollo has made it official. They've chosen Austin for its second headquarters. So we talked about this one a few weeks ago, Steven, and you know, now it's like official official, you know, they've, they've said they're going to choose Austin. And this comes on the heels of just some more New York blowback where people are looking for alternatives. And we've seen Miami, we've seen Austin, we've seen Dallas, we've seen Charlotte, we've seen a lot of these cities be the benefactors of that.

22:06And Austin, in this case, is going to get Apollo with basically a second headquarters for them there. You know, Apollo is on record as saying that, you know, the reasons for choosing Austin is its focus on innovation, emerging technology, the ability to test new products across Apollo and its retirement services subsidy, Athene. So they already have some temporary space downtown in Austin. They're going to sign a long-term lease in the next several months. Nobody has any insight on the size or location at this point other than just Austin broadly. And it's interesting, South Florida was certainly in the running here.

22:41And so it sounds like, you know, it was a battle between Florida and Texas, as we've seen. But I think Apollo had some really deep tied and long tenured relationships in Texas. And, you know, that benefits them. If you look at the state's concentration of Fortune 500 companies, the growth in semiconductors, defense, energy, advanced manufacturing, I mean, there's a lot to offer in Texas right now. So, you know, the firm's more than doubled its headcount since 2020. And this ties back in. We talked about this when this happened, but the Athene acquisition, which was$11 billion back in 2021, has really helped some of that growth.

23:18So look, another significant corporate endorsement of the Austin office market. And I actually saw a stat. This was a couple of months old, so I haven't had a chance to validate it in today's market. But they said Austin office buildings that were built between 2014 and 2026 downtown are 96 % occupied. Oh yeah. Strong, really strong. I mean, look, it's a quality of life and it's an experience story. Austin has it. I mean, you're going to go into the office when everything around it is awesome. And Austin has that vibe for you. Yeah, it definitely passes the vibe check. And I think, you know, it's also a benefactor benefits, benefactor benefits.

24:03When San Francisco is really hot, which we've detailed how San Francisco office driven by AI has had significant resurgence. The trickle down is that Austin is a cheaper, lesser version of San Francisco, but has the broader ecosystem of just the Texas tailwinds that we've seen. So I think this is great. I mean, this is great for Texas. Listen, And Apollo is going to be a really strong employer, high earners. It's going to be a really great location for those employees that are relocated here, etc. And so this is not an anomaly. I think we're going to continue to see this. And we just had the Texas Stock Exchange actually officially opened.

24:45And you're going to see Austin, Houston, San Antonio, Dallas continuing to lead the pack. And another story that caught our eye this week was cited in the Wall Street Journal, and it surrounded the topic of home building. The headline here said, home building is sputtering, but lumber prices haven't been so high in years. Yeah, this is a really interesting story because I think all of us remember when lumber was through the roof. Get it? Oh, sorry. I couldn't. I couldn't hold back on that joke. But it just absolutely went vertical on the price chart during the pandemic, which was largely, I mean, I won't say purely a demand side issue.

25:26It's part of it was supply constraint as well in terms of what was happening in the supply chain. So anyway, lumber prices reached their highest level in nearly four years, even as home sales, residential construction and renovation spending weakened. The Random Links framing lumber composite reached$535 per thousand board feet in July, approximately 23 % higher than a year earlier. Unlike the pandemic-era surge, the increase is primarily supply-driven. Sawmill closures, Canadian wildfires, reduced log availability, and import duties have constrained production and shipments. Combined U.S. duties on most Canadian lumber rose to approximately 35 % last year, with an additional 10 % tariff layered on top.

26:09Canadian softwood lumber imports were down 15 % year-over-year through May. Homebuilders, including D.R. Horton and Meritage Homes, expect higher lumber costs to increase new home prices later this year. Lumber futures have declined about 11 % from their late July high, however, suggesting prices may be near their peak. Housing is facing an unavoidable combination of weakening demands and rising construction costs. So higher mortgage rates are suppressing development in sales, while tariffs and supply constraints limit builders' ability to offset that weakness through lower material costs. You know, Stephen, I wish I was cool enough to know more about the random links framing lumber composite.

26:50I wish I could reference things in 1 ,000 board feet. That's pretty awesome. That's much cooler than price per square foot. It is. It sounds very cool. I think when you get below the surface, how the industry operates, it's a lot more nuanced than probably what most people would suspect. From what I was told, from what I understand, like the wholesale prices of lumber actually didn't move all that much during the pandemic. It was just simply your typical like supply constraints. Like we can only deliver so much bore feet in the amount of time that you've ordered it. So guess what's going to happen?

27:24Spot prices skyrocket. But in terms of like the wholesale production costs, it didn't really move all that much during the pandemic. It was just simple, regular old logistical constraints. So let's shift from this week's headlines to our digging through the data segment. Each month, we take a closer look at hard maturities that are coming up. So we focus on August CMBS hard maturities and saw that the pipeline gives us a really timely look into where there's pressure and some specific loans that we're watching very closely. So, Stephen, walk us through your analysis here and how many loans we're tracking and how this compares to other months.

28:07Yes, this will be a really interesting month. Warsh's FOMC message introduced that fresh treasury volatility in the markets and pushed longer-term treasury yields higher, which is particularly timely given the size of August's maturing loan volume. So these hard maturities that we're talking about, these are loans where all prior contractual extension options have been exhausted. And these are loans that, well, out of necessity, they need to pay off and refinance in August. So the August hard maturity cohort totals$5.49 billion across 119 whole loans, more than double July's$2.55 billion. So August could be a headline-rich month for us.

28:51On the surface, performance looks relatively stable. 97.5 % of that balance is currently performing. Debt yield, however, tells a more cautionary story. A little over$3 billion, or a little over 55 % of that cohort, carries a debt yield below 8%, while just under 1 billion or about 18 % is below 6 % dead yield. Roughly 962 million of that severely impaired balance remains current today. So this isn't like it's an already delinquent loan story. It's just another potential source of additional delinquency here coming up in August. Now, the rate story also differs by vintage. Legacy fixed rate loans originated between 2014 and 16 carry an average coupon of roughly 4.2%.

29:34well below the low to mid 6 % range for new five-year conduit debt. The 2021 vintage floating rate loans have already repriced to approximately 6.3%, meaning their challenges are really driven less by a sudden coupon reset and more by property performance, leverage, and the ability to satisfy current lender underwriting standards. So if we look at office retail and mixed use, that accounts for the vast majority of total maturing loan volume here in August. Office has about$1.8 billion, retail has$1.77 billion, and mixed use has$1.38 billion. Those shares are about 25 % to one third of that total maturing volume here in August.

30:18So when we actually drill down to the individual property stories, that's when things really start to crystallize for the story and the picture of what's coming due here in August. The largest loan here, or I should say one of the largest of all of them, is the Los Angeles office slash studio portfolio. That's a$1.1 billion mixed-use loan that's current on payments, but it is watch-listed, obviously, due to the upcoming maturity, or at least in part due to the upcoming maturity. The Los Angeles office slash studio portfolio was securitized in a 2021 SASB transaction. It's secured by five Class A office buildings totaling just under 1 million square feet and three studio facilities totaling roughly 1.3 million square feet.

31:06You'll love this, Lonnie. Can you guess who the largest tenant is on this? The Don Netflix. I love it. That's who you want as your tenant right now. So Netflix leases about 75 % of the office space, accounting for about 69 % of the studio space. So I mean, to me, that's a great tenant to have here. It's just a question of, well, how are those leases looking? Now, this floating rate interest-only loan closed in 2021 with a two-year term and three 12-month extension options. All three of those options have now been exercised, leaving its final maturity date of August here upcoming. The debt yield is approximately 6.8%, and that significant Netflix concentration and no remaining extension options and no disclosed takeout.

31:53Now, this leaves a little margin for a straightforward refinancing. But I mean, again, depending on what's happening with that Netflix lease, this could make it a more straightforward refinancing. Now, next loan up is the KinderCare loan. It's a$636.5 million. We're going to classify this as retail. This is not really your classic retail property, though. The good news on this loan is even though it's an upcoming maturity, we already know that refinance proceeds have already been secured for this portfolio. and we'll see it again in an upcoming SASB deal. This loan is backed by approximately 545 net leased, early childhood education and daycare centers across the United States.

32:32They're operated under a single master lease that runs through 2030. So this was a 2021 SASB deal that we're going to see again as a 2026 SASB deal. So the fact that it's already been refinanced, we don't really need to go too much deeper in the details. We'll just set this one aside and save it for perhaps a new loan spotlight here in an upcoming episode. Now, next up, we have International Square, a$450 million office that's in special servicing. International Square is secured by a roughly 1.17 million square foot office complex, comprising three interconnected buildings in Washington, D.C.

33:05The$450 million whole loan is divided among a SASB transaction and three conduit deals, and that's a 2016 SASB deal. The loan transferred to special servicing in May after the Federal Reserve Board issued a termination notice covering space with leases that had been scheduled to run through 2029. The special servicer has retained counsel and opened discussions with the borrower. Now, that loan is scheduled to ensure August 10th. Obviously, with that Federal Reserve notice and the transfer to special servicing, not exactly a good sign for its refinance potential here. It's more or less a foregone conclusion that this loan is going to have to get worked through.

33:45And that Federal Reserve space is, well, up in the air. Now, its prior performance had shown a DSCR of 1.84 times coverage and a debt yield of just under 10%. So if that had held in place, this loan could, could have been a candidate for refinance. But that Federal Reserve termination notice, no good. Warsh put that one on the chopping block. Well, maybe not Warsh. I mean, this could have been before his term. Probably was. definitely maybe always sometimes right something like that exactly yeah it's a little unfortunate too given the the position it was in that this is the one that almost 10 day yield and almost 2x on the tscr that actually looked really solid but you know with these with these governmental leases that's the risk you run so give you a little bit of a breather here steven we got two more that We'll highlight Project James, which is a$377.6 million office loan, secured by eight office buildings in the D.C.

34:45and Alexandria, Virginia areas, securitized through a 2021 deal, reaches its final maturity on August 9th after exhausting all three extension options. It's current, but the property performance, similar to some of these others, has deteriorated. Occupancy has fallen to about 65%. That's in comparison to 81 % at the year-end 2024 reporting and 75.4 % at underwriting. Service are reported a year-end 2024 DSCR of just 0.65x. Most recent DSCRs improved pretty significantly to approximately 1.2x, and the debt yield currently stands at about 8.1%. Commentary indicates the sponsor has not stated whether it could repay or refinance the loan at maturity.

35:30it was delinquent on certain hazard and general liability and umbrella insurance requirements. And just as an aside, I've seen a lot of properties over the last, call it, maybe 180 days, where they are behind, they're delinquent on their insurance requirements. And obviously we know insurance, property level insurance and other things have been a problem, but seeing these things behind on their insurance is really kind of interesting. I don't know if this is just a flash in the pan here or if you have some thoughts around, is this more indicative of what's to come? Yeah, I mean, it's interesting here because if you look at the data we've gotten on line-end financials, the insurance cost growth rates have come down from some of their peak levels in 23 and 24.

36:20but that doesn't mean you're still going to be running into instances like this, where perhaps the policy renewal date just hit. The borrower got the notice of how much the policy cost was increasing. They said, no way, we're not paying that. That's outrageous. You guys can do better. And then, well, guess what? You either have forced place insurance, you can be able to link one on, on your insurance and it just, things can kind of spiral out of control quickly, but you get that notice in the mail as the borrower. And I mean, And something has to happen. The property cannot go uninsured from the lender's standpoint.

36:51Yeah, I mean, this is, you know, forced placement reality. You have lenders that have to have the borrowers with coverage. It's not a good sign. Again, I don't think it's pervasive, but it's just been a noticeable uptick in what I've seen. I mean, this was something that you might see one out of every thousand properties or something, and it's been a lot more prevalent than that recently. And then Westfield Montgomery Mall,$328 million retail property, 836 ,000 square foot. This is a regional mall up in Bethesda, Maryland. This is a 2014 deal. Originally matured in August of 2024, transferred to special servicing several months earlier because of our favorite imminent maturity default description.

37:34Obviously, we're not rooting for maturity default, but the servicer commentary is pretty stark when it says imminent maturity default. They were granted a subsequent forbearance and extended the maturity to August of 2026. They later returned back to master servicing. Its current operating performance remains pretty solid. If you look at the year-end 2025 data, 88 % occupancy, debt service coverage is at 1.81, debt yield was 8.9%. If you look at this one, though, the primary constraint is just the leverage as it is with a lot of these older malls, it's not really a cash flow issue. If you look at the reappraisal that was completed during 2024 special servicing period, it resulted in a current loan to value ratio of approximately 99%.

38:18So there really is no equity cushion at this point to support any type of conventional refinancing. And I think this is, again, not too uncommon, Stephen, for this property sector, where if you're the servicer here, it's covering that service, you're not going to get a higher bid in the market. No one's going to come buy this for more than the debt. And so you probably just do some additional forbearance, extension, modification, something, and let it continue to produce cash flow and hope that maybe some of these values recover if and when people start going back to the mall, missing that nostalgia feeling.

38:55Yeah, we saw a lot of mall activity transferring to special servicing here in July. So this could be just another one that's going to end up transferring back. It's basically just a continuation of the story, another chapter, if you will. So we'll just have to see if maybe they're going to surprise us and they have some takeout financing proceeds, but I just don't see that LTV changing all that much unless something fairly dramatic has changed within mall operations and mall leasing. All right, so the central takeaway here is that the current payment status can materially understate maturity risk.

39:32Four of those five largest August maturities remain current with only one loan appearing to have clearly disclosed a successful refinancing and payoff here for that August maturity. So we could have a lot of loans that we'll be talking about again here in the coming weeks as remit data comes in. We find out with certainty what's happened at maturity. But given some of the details that we've walked through, I will not be surprised if we end up talking about a number of these loans again here in a couple of weeks. We have some other TREP coverage that we wanted to share here today as part of our deals and data segment.

40:09As a reminder, our clients get an exclusive TREPwire newsletter every morning. And in that newsletter, we're sharing alerts about special servicing transfers, appraisal reductions, loss resolutions, and so much more happening in the world of CMBS. But we wanted to share a summary of those stories here for our listeners today and walk through how many loans we tracked this week with any of those categories I just mentioned. So, Stephen, give us a quick rundown of the loans across property types that we tracked here. Yes. This week we had three special servicing transfers, totaling$61.5 million, with the largest one being a Denver office.

40:51We had two appraisal reductions totaling$38.4 million, the largest one being a suburban Chicago office property. We also had one loss resolution covered, which was a Louisville office property that was leased to Anthem Health, which ultimately had a fairly low loss severity against the balance before disposition. So in the scheme of loss resolutions, that was actually breaking pretty significantly to the positive. So all in all, this was definitely a wind down in the month's credit stories because we're getting close to that lovely part of the month where we get all of that updated data for the current month's servicing activity.

41:35Basically, did people pay their mortgage or not? Now, the first story we have here is for the office sector. And Lonnie, this one, it honestly surprised me a little bit, just given all of the big talk that Ken Griffin had been, the big game he had been talking, right? The pushback against Momdani and the positioning of like, don't have to go forward with 350 Park Avenue. So the story here is that Ken Griffin and Vernado are nearing a record$3.3 billion loan for that Park Avenue super tall. Ken Griffin, Vernado Realty Trust, and the Rudin family are close to securing a$3.3 billion construction loan for a new 62-story office tower at 350 Park Avenue.

42:17Vernado said it would likely be the largest single building construction in New York City history. The 1.9 million square foot development is expected to cost approximately $6 billion. Griffin would own 60%, Fernado 36%, and Rudin 4%, although the partners may sell a 25 % stake to help fund construction. Now, what's interesting here is that Citadel and Citadel Securities have increased their planned occupancy from 850 ,000 square feet to 1 million, providing a substantial anchor commitment despite Griffin's recent criticism of New York City's political leadership. Demolition is underway and the tower's upper floors will be marketed to third-party tenants at rents potentially approaching, get this Lonnie,$350 per square foot.

43:06Absolutely nuts. Renato pointed to improving Manhattan office demand. Its occupancy increased from 84.4 % in early 25 to 92.2 % in June of 26, while NOI across its New York portfolio rose nearly 12%. Never bet against the Big Apple, baby. They are roaring back. So that financing would be an extraordinary vote of confidence in Manhattan's trophy office market. And also highlights the growing divide between scarce newly built premier space, which commands exceptional rents, and older office properties still struggling with leasing, financing, and capital needs. Yeah, this one, you know, Stephen, listen, I think Ken Griffin, if you asked him directly, I think he would walk and just move on.

43:52But when you have Ornato, you have Rudin, you have other stakeholders, obviously for them, this is a much different opportunity. And to be quite honest, like being part of something that's at this scale in New York, landmark type of construction, building, square footage, rents, all of those things. Like as much as you might hate the political atmosphere and you may want to just move everything to Miami, you're not passing this up. I mean, like that's just the reality. And honestly, for him, if he builds this and it goes to plan, he will exit at some point and make some crazy multiple on this.

44:28And then he can just do what he wants at that point. I mean, Citadel, Ken Griffin, I mean, I don't think people understand the scale and the size of wealth that that guy and that firm create. I mean, it's and that he has personally. So I don't think the talk is cheap. Like, I don't think he's backing down. I think this is just a once-in-a-lifetime opportunity to do something here in New York that, despite your frustrations, you're not going to pass up. Like, he's a businessman first, as evidenced by his track record career and how successful he's been. And this provides too much of a great business opportunity.

45:04Now, the one thing that I just – when we go through these stats, you know,$350 a square foot, just let that sink in. I just don't know. It's not a price for the building. I mean, it used to be, and in a lot of markets it still is. That's the total price for the land in the building that people pay to buy the asset, not pay for rent. I mean, you have offices in Austin, as an example, that were$70 a square foot triple net that traded at$600 a square foot. This is$350 rents. This is just where, like, I struggle at some level of just understanding how sustainable this is. Like, obviously, in New York, it's going to work.

45:45The economics are there that it'll work. I don't know. It just feels like some parts of the market, as evidenced here, are so inflated. Cost of construction, timelines, capital, you know, cost of capital, your rental rates, like all these things. They're just so far outside the realm of what has traditionally been high-end that I hope it's sustainable, and I hope these things are wildly successful. But it is just – it's remarkable to see these things actually play out. Look, Kin operates at a different level of the stratosphere, and their occupancy of this building is kind of a representation of that place in the stratosphere.

46:31and Ken's recent move this past week to come in and buy those shares at a discount from situational awareness. It basically is already supercharged the funds returns in the prior month, adding, it was like mid 5 % return because he bought those public shares of all these AI companies at a 10 % discount. I mean, this guy is batting where most of us don't even know like these war rooms exist, right? This is fantastic. The stories that they, you know, with him coming in and buying those shares this last week, like it created opportunity for people to tell other similar stories of when he's come in and bought things and like their ability to just scale up over like a 24 or 48 hour period and execute at a level that nobody else in the industry does has given them the opportunity to buy things at a favorable price and discount and scale that just doesn't exist to other players in the marketplace.

47:26And look, it's remarkable just seeing some of these people just execute so well in their craft. I mean, you know, when you see LeBron James or Michael Jordan or Kobe Bryant or these folks, you know, playing their sport, they just operate at such a level that it's a one-of-one type of thing. And, you know, he's built a firm and operates at a very similar level in the business world. And, you know, Vornado is up there too. Look, Vornado, they've done some really nice projects in New York. I'm excited about this. Just, you know, 1.9 million square foot development,$6 billion in cost. Just incredible.

48:04And our last story here is in the data center category. Of course, we need to have a data center story. In BizNow and several other outlets this week, we saw that the world's largest data center hub pursues a development pause. And their headline says, is it even legal? Yeah, this is a really interesting one. Because Luden County, the world's largest data center hub, is exploring a temporary pause on new applications while it studies the sector's effects on energy, infrastructure, costs, health, and residents' quality of life. So the county staff will present possible language and legal analysis on September 15th.

48:41The proposal would allow Luden County to complete a data center impact study expected in spring of 27 before approving additional facilities. However, this legal path is uncertain. Under Virginia's Dillon's rule, localities can exercise only powers authorized by the state, and Luden's own guidance says the county lacks authority to impose a formal moratorium. Other Virginia jurisdictions have instead postponed processing applications while revising zoning regulations, carefully avoiding the term moratorium. And Luden could pursue a similar strategy. Now, I'll just pause here and say something else here, Lonnie.

49:23This is hilarious to me because over the recent weeks, I have seen carefully placed ads and online TV with Virginia touting itself as being a data center friendly state. So we're really mixed message here with basically public advertising saying how great they are and how much they're behind data centers. And then the locality saying, yeah, but we're bearing the burden of it. And we need to maybe take our time here and be a little bit more thoughtful in what we're actually executing on. And the economic stakes are substantial. Ludin had approximately 53 million square feet of data centers in 2025, with at least 40 million square feet in the pipeline.

50:05The industry generated 875 million in 2024 and accounts for 38 % of county general fund revenue. So even a temporary pause could delay a massive development pipeline and redirect investment to competing markets. The debate also captures that growing tension between data centers' tax and economic benefits and mounting opposition over power infrastructure, development intensity, and community impacts. Another week, another data center story, another data center strategic play, another mixed message. I mean, Texas is leading the pack here. Governor Greg Abbott last year, a year and a half ago, was saying that we're rolling out the red carpet.

50:44We're going to be the epicenter for data center construction. Now that it's an election year, he's pulling back and saying we're not letting them plug into our electrical grid. They're going to have to bring their own power. And so just politics at its finest. This train's already left the station, folks. Like Virginia is going to continue to power data centers. It really doesn't matter, in my opinion, what these municipalities or these counties or whatever try to do here. It's too far down the path. I think this is coming to some conclusion broadly. I don't think we're going to see this actually playing out in practice.

51:21The headlines are great. Everyone wants to have local control and the ability to say what they can and can't do. Data centers are here. They're not slowing down. And quite honestly, I mean, we talked about if you just look at the I think last week on the show, Stephen, we talked about GDP growth. You back the data center stuff out of here. It's a much different story broadly for the national economy. And the powers that be are just not going to let that go away. That's right. It's too critically important to overall output and overall economic wealth to the nation, to the states and to the localities, even though, yeah, it comes with a real cost.

51:59But let's face it, I mean, it's powering the world economy at this point. And it's interesting just how headlines drive the narrative. And we know this, we talk about this all the time. But like the water challenge of data centers, I think, have largely been solved. Yeah, but people don't believe it. Like they have this perception of 10 years ago and what was required to power a data center with water and cooling and everything. But now they're basically all, you know, they're closed off systems and they don't, they don't require the water that they did. Now the power is still there. And like we said, we're going to get, I think we're going to get innovation and things that we wouldn't have gotten through normal course of free market.

52:40Like this is creating opportunity for people to push and accelerate innovation. And I think we'll be the benefit, we'll get the benefit of that. But, you know, this is not going away in terms of the headline fodder. Like this is a political campaign. I mean, you know, just in practice, if you look back at Austin, Texas, which we had a lot of story with Apollo this week on the show, they probably have one of the strongest no-growth city councils in the U.S. Absolutely do not want people moving there. They have increased impact fees. They slow real permitting. I mean, it is almost impossible to get something built there.

53:16Yet, what is the market that's had the most multifamily new construction deliveries? where you've seen home builders continue to build, the market overpowers these local municipalities. Austin didn't want growth. They got exorbitant growth because people wanted the quality of life and what it offered. And I think you're going to see with these data centers, politicians can say what they want. Local NIMBYs can say what they want. The markets are just going to push through. Yeah, so it's a good thing we're talking about data centers and AI. My programming note today is a fun one. we've had a lot of our listeners and clients come to us to ask what is TREP doing with AI?

53:55How can we make sure that we're accessing your trusted data in our systems? And we wanted to make sure you can get access to see this in action. So on Thursday, August 20th at 2 p.m. Eastern, we're hosting a public webinar called AI meets CRE data. And this will be a live demo of our TREP MCP, which is our AI connector for CRE and CMBS data. This will be a live webinar. We want to really show you how we can get you our commercial real estate and CMBS data directly within your AI tools or the systems that your team already uses. We'll walk through a lot of different examples on this call and specific use cases.

54:39We'll firstly examine what MCP or Model context protocol is and how it's changing the way that firms are interacting with our data. We'll walk you through how to connect it with your AI tools and then give you the real world applications across underwriting, investment analysis, portfolio management, and market research. So if you've been curious to see this in action and you want access, please reach out to us at podcast.trep.com. We'd love to have you on the webinar and really see this in practice. I'm going to jump in here real quick, Haley, and put my product hat on. This is not hyperbole.

55:14This is real-time AI data connection in action. It's incredible. You can use Perplexity, Copilot, Claude, whatever your LLM of choice is. You can access TREP data directly into your chat instance. You can have it create models, build spreadsheets, DCF, whatever you want to see real time using TREP data directly from TREP. No hallucinations, no red tape, no worry about where the data is coming from. It's just like logging into our front end systems, but interacting with the data in a way that's natural, intuitive, and fits directly into your workflow. You couple this with some other MCP connections outside of TREP, and you have a really, really robust workflow system built out for you.

56:01We're agnostic to who the LLM is. We have this in practice. We have clients already using this. This is not something that we're hoping to kind of get rolling in production. This is something that's already been proven in the marketplace. And so if you have any interest at all, even if you're not ready for this yet, but you're just intrigued by some of the headlines and wanting to understand what some of this stuff means in practice, our team has done an incredible job of being first to market with something that I think is the new reality. This is the future, and the future is today. Thank you, Chief Product Officer Lonnie.

56:35And as always, just reach out to us if you have questions or we say something and you want to see, is that data accessible for my team? what do you have data on podcast.trip.com we would love to work with you and turning to shout outs Neeraj S said great podcast curious to get a copy of your back leverage 101 blog Connor O said podcast team hope everyone is doing well reaching out today in hopes of scheduling a quick call with someone to discuss the trip MCP so thank you Connor we were happy to get on that call with you and we'll make sure you can also get access to our webinar if you need. Michael S.

57:16said, I just finished listening to your July 29th episode and was wondering if I could see the CMBS data and property and loan list that drove the delinquency rate up 51 basis points. Chris M. is a longtime listener but first time reaching out and wanted to say thank you for the consistent weekly coverage. The podcast has become part of my Friday morning routine. Brandon S. was also interested in our back leverage 101 piece that we mentioned on the podcast. He'd love to share it with a few people on his team. As a reminder, if you hear us talking about an in-depth digging through the data segment or a 101, we most likely have that in written form somewhere, and we'd be happy to share that with you.

57:58Brian K said, great episode this week. Can I have a copy of your latest CMBS delinquency report? And I'd love to see what you have beyond this at the loan level. Nick H. said great analysis as always and was also interested in the top five newly delinquent loans. So thank you as always to everyone who reached out and listened and just wanted to say thank you for continuing to listen every week. We know we're about to get into the dog days of August where people are on vacations and traveling and juggling work, but we appreciate you making time for the Tripwire podcast team every week. so 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.trop.com and subscribe to the tripwire podcast with your provider thank you for listening and stay well all right