422. From the Fed to FedEx: Warsh’s First Rate Hike, $6.6B in Amazon/FedEx Exposure, and Three Paths for Office

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 September 18th, 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, the Federal Reserve unanimously raised interest rates by 25 basis points, bringing the federal funds range to 3.75 % to 4%. It was the Fed's first rate increase in three years, and 16 of 18 officials now expect at least one more hike before year-end.

0:48The decision came after the 10-year Treasury crossed 5 % for the first sustained period since 2007. But the economy isn't exactly rolling over. August retail sales rose 1.2%, beating expectations, while the control group used in GDP calculations jumped 1.4%. So consumers are still spending, the labor market remains resilient, and growth estimates are moving higher. At the same time, energy costs are climbing, businesses are struggling to set prices, and the Fed is tightening again. That's a tension worthy of enough discussion to fill an entire episode, but we'll keep it tight today as we have a lot to cover this week.

1:28On today's show, we'll also discuss a new$1.1 billion office credit fund, emerging risks for properties leased to the federal government, and the anchor tenant exposure hiding inside industrial CMBS. That includes$6.6 billion tied to Amazon and FedEx and a potentially important rollover risk within the FedEx portfolio. So, Stephen, was the quarter point hike itself the big story this week, or was it the signal that the Fed may not be finished? Well, the quarter point hike was largely priced in. Ahead of the meeting, markets had assigned it a more than 90 % probability before the announcement, which was amazing because we had started out, I think, maybe at 60 % a few weeks before that, and it just ratcheted up higher and higher.

2:16The more important signals were the unanimous votes and the fact that nearly every Fed official expects at least one more increase this year, or if we want to call it this cycle. I don't know that we can call two to three hikes a cycle, but let's pretend that it's a cycle. The Fed is looking at an economy that remains strong enough to tolerate higher rates. In fact, in the press conference, Warsh even said, and he said this multiple times, I think dating back to Jackson Hull, this doesn't look like we're in an economy with restrictive monetary policy. In other words, We can hike and it might cool things a bit.

2:54We're not in restrictive territory. Unemployment has fallen to 4.1%. Hiring is stabilized. And the 1.4 % increase in the retail control group led economists to raise their third quarter GDP forecast between 3 % and 3.5%. But inflation has stopped improving. The war with Iran has pushed oil and diesel prices higher, while AI and data center build-out is adding investment demand at a time when power, equipment, and construction capacity are already constrained. The difficult part is that higher rates can't produce more oil, it can't expand refining capacity, and it can't meaningfully slow AI projects where the capital is already committed.

3:34What the Fed can do is cool the rest of the economy, and CRE remains one of the most rate-sensitive places where tightening shows up. The 10-year Treasury has already moved above 5 % before this decision, raising more than 20 basis points in the five days leading up to that point. At that level, refinance proceeds shrink, fewer acquisitions pencil, and extending a loan doesn't necessarily solve the underlying capital gap. but I wouldn't automatically treat 5 % as a permanent floor. Long-term inflation expectations haven't moved dramatically and the latest increase appears to have been driven primarily by expectations for higher short-term policy rates.

4:15If energy prices ease or the Fed restores confidence that inflation is under control, long-term yields could actually come down really quickly. And that's where I want to pause here for a minute, Lonnie. Things could go a number of different directions. Oil has just been on a blast up this past week, and it doesn't look like those tensions are going to ease. I'm sure you've read some of the similar headlines I have. There's a lot of doom and gloom out there about oil. So if oil and rates are fairly heavily intertwined for the short term, where do we go from here? Do you think we persist? Do you think we could actually take another leg up if oil goes to 120?

4:54How are you feeling about state of affairs? Well, let me kind of go through a few of the points you brought up first, even then we'll get to the oil stuff. But I think your highlighting of the vote being unanimous is probably underrated in the headlines. I mean, in this instance, there's so many different contentious forces like Iran, oil, AI, CapEx, all pulling in different directions. I think you'd expect at least one dissent. You know, getting everyone to agree really just highlights that I think the committee overall sees inflation risk is real and immediate. And so, you know, I think that part has to be pointed out.

5:30We've seen over the last couple of months that there wasn't always a unification in terms of where people thought things were. and that came this month. You know, I think the can't produce more oil concept or framing is a really interesting thing to look at because, as you know, monetary policy is really a blunt instrument on the supply side inflation. So the Fed is not able to unstick supply chain or free up, you know, more oil production or a turbine order backlog or whatever. It can just try to squeeze demand everywhere else in the economy, which for the CRE folks, as you mentioned, like these are rate sensitive and usually like, you know, levered assets, which feel that pain very quickly.

6:15And so I think that's going to be an interesting construct. You know, the oil distinction and stuff that you're asking about here, I mean, it's just for me, I mean, I have a diesel truck.

6:32It's to$175 at the pump and it didn't fill my truck up. Oh, oh, that hurts me. And so it's like, just think of the downstream implications for all of the supplies and goods and everything that we transport that rely on diesel fuel, train, locomotives, trucking, et cetera. That has a real implication. I think that the tensions in Iran, there's, you know, like we've had talks, there's been some optimism, we've said things are good, then they're not, then they're good, then they're not. Like, I think at this point, it feels like they're not and they're not going to get better. So I'm kind of on the camp of I think this like higher price pressure of oil is going to be more persistent.

7:15And I think it, you know, as we've talked about back in May, which feels crazy back at our TripConnect conference, oil was the topic. And it was like, if it's at 120 or 130 a barrel for this many days, it's going to put us into a recession. I think you're going to see that talk come back. Yeah, it's absolutely been a wild ride. Saudi Arabia, it's in a massive pinch right now. I think they said something like seven days left on some capacity. Anyway, yeah, reserves are drawn down. We're at a much more precarious level than we were when all of this started. Reserves have been drawn down. So it's not going to take much to push us past that tipping point And to see as wild as the price increase has been this far, we could actually see it take a somewhat hockey stick move up again, right?

8:04If we get one or two more severely negative headlines. And J.B. Hunt actually came out. The trucking company came out this week and said to expect much lower profits here for this coming quarter because of fuel costs. And their shares dropped. I think it was something like 10, 12, 13 % on the heels of that because of the diesel prices you just mentioned. So it's been a wild ride. Now, back to the Fed. I just want to share some interesting little tidbits, right? Because this was a very, very different meeting. And I think it speaks to the ground the Fed is trying to claw back, right? Because there's been a lot of criticism out there about lack of forward guidance.

8:44And Warsh hates forward guidance, you know, and is trying to tighten things up. So a couple of the interesting things he did, he rearranged all of the journalists. He put them in alphabetical order. He didn't allow follow-up questions. And he just straight out tanked a couple of them, right? So if you asked what in his book was a non-starter, it was like one and done. Sorry, we're moving on. And so the width of journalists he covered was really interesting. And I think importantly here, the length of his response was dramatically shortened, much more concise. So this was a really telling meeting for Warsh, right?

9:21Like tightening up messaging, making it concise, and basically keeping it so that there could be no doubt about his commitment to bringing down inflation. I like that. I like that. Yeah. To your point, the unanimous vote, I think, was a massive part of that signal, right? He basically came out and told everybody, like, look, you could position however you want, but you're not jockeying for my seat anymore. Now we're positioning ourselves to help the economy. Let's do what's right here. I actually respect that he's implementing some of these changes. I mean, something as simple and subtle as organizing the press in an alphabetical frame, right?

9:58On a surface level, it doesn't seem like that big of a deal, but it's a psychological disruption for how those meetings are held and how the proceedings take place. And I think it just shows that he wants to control how things go out. And to your point, the shorter answers, the just not messing around with things. I think that actually bolsters kind of his strategy and role as to what he thinks this should look like. And change is hard. Change is not something that people like. We had gotten used to Powell and the way things had been. And I think he's really kind of put his flag in the ground and said, here's how we're going to do this.

10:36And the markets will adjust. I mean, like we were joking a few months ago about play the ball or play the ref. and the initial pushback and reaction was not favorable for him. But I think you're going to see that that dynamic shifts some. Now, I mean, we haven't really got into it, but we could talk all day about his 25 basis point rate hike actually do anything. I mean, obviously, it spurs a ton of activity on LinkedIn and Twitter and everywhere else where everyone's pontificating about what's going to happen today, tomorrow, the next day in CRE because they've raised rates of 25 basis points.

11:09But it is interesting, Stephen. I mean, above 5 % on the 10-year, you start getting like math problems exacerbated on the CRE side. And like you could make a very doomer case that this is completely terrible for us and that federal funds rate going up is not what we need for the market, et cetera, et cetera. At the same time, the logical part of my brain says, like, if deals didn't work where they were, or if they did work where they were, they should work now with a 25 basis point hike. It's not going to have that some dramatic effect immediately. So I don't know where you fall out on this. But for me, it's this is a little bit of performative posturing.

11:51It's real. The vote was unanimous. It's great. We kind of reestablished kind of where the strategy is. but I don't know that it's going to have these like immediate CRE implications or impacts that maybe some of the people online are saying it will. I'm with you. This was a confidence hike. This was necessary to restore confidence and credibility. Had to have. It was priced in. So in a funny way, he was saying, play the ball, not the ref, but the ref is now playing the players and not the ball. Don't hate the player, hate the game. And the reason why here, we'll get to it in just a second. This is what gives me an extremely difficult time believing that anybody's forecast can have credibility.

12:36When you have a headline from the Wall Street Journal saying that American businesses have no idea how to set prices right now. If the underlying engine is having difficulty figuring out exactly what mixture to run on, how can we eat velocity? I don't get it. We can't possibly have any confidence about direction right now with the volatility that's going on in the Middle East and what that means for oil prices. It's just inherently difficult to predict this. So there will inevitably be on the margin, some tightening of financial conditions, right? 30-year mortgages for residential homes will take another leg down in terms of applications.

13:18Prices are going to be really struggling to continue grinding higher in residential space. On the margin, we might see a little bit of that play out in CRE. But to your point, a lot of this recalibration is happening due to lower reset basis and deals. And that, to some degree, is going to blunt the effect of higher interest rates. And you can buy interest rate cap. So the engine will continue grinding on, will continue pushing forward. And it's just the speed that becomes more and more uncertain. I do want to get to some data this week, though, that I have been eagerly waiting for. And I'm excited to go through because this gave us some clarity on the strength of the underlying consumer.

13:57The robust U.S. sales report that we got. U.S. retail and food service sales increased 1.2 % in August to 773.9 billion, the largest monthly gain since March and above economists 0.8 % forecast. So July's decline was revised from 0.6 to 0.5. So less negative. sales were 6 % higher than a year earlier. So let me just pause here and just say the overlying theme here is that retail sales came in significantly stronger than what economists had forecast. And this is the important month where we had the back to school spending. So we didn't see the blunting that I was wondering whether it was going to show up in a broadening out.

14:41I mean, it was a little bit there under the surface, but by and large, this was much more bullish than what economists had largely expected. Now, these gains, again, were broad-based. Non-store retailers increased 2.6%. Electronics and appliance stores rose 1.6%. Restaurants and bars advanced 1.2%. Even furniture stores gained 0.9%. One of the decliners was building materials and garden equipment sales declined 0.2%. So that's speaking to just that incredibly low volume of residential transactions out there and how much that hurts. Say like Lowe's, Home Depot, building supplies, and a lot of what goes into home maintenance, home renovation, home construction.

15:24Higher fuel prices contributed to the headline increase with gasoline station receipts rising 3.1%. However, that strength extended beyond energy and likely also reflected that back-to-school shopping I just mentioned and the reversal of July's Prime Day-related timing effects. The retail control group, which excludes autos, gas, building materials, and food services, feeds more directly into GDP, that surged 1.4%. Its strongest gains since September 2024 and well above the 0.4 % forecast. Absolutely wild. That report prompted stronger third quarter growth forecasts. Goldman Sachs raised its estimate to 3 % annualized pace.

16:05JP Morgan increased its forecast from two and three quarters to three and a half percent. Absolutely wild. money. I mean, this is the strength that we just keep saying, like, this is remarkable, given everything that's going on, right, and how much we get hung up on the bottom part of that K-shaped economy. The strength is there. The strength is real. And so long as the S &P 500 can continue showing resiliency, the stock wealth effect and those stock gains will continue showing up and spending. Yeah, I mean, this is something that I think you and I have been shaking our head at for the last year and a half at this point.

16:40I mean, it's like every time you think you're going to see a pullback or a slowdown. The numbers surprise to the upside every single time. And it's just indicative of where we are in this market cycle broadly and on the macro. It's like, pick your stat or pick your headline. You can make a very doomer case for why the market is, you know, coming apart with all the oil pressure. You can make a very strong case that the consumer is still undefeated and they're continuing to spend and buy. And even amidst the uncertainty, it's not slowing things down and the market is really really strong and both things are proven to be true at this point you know which one wins out i think will remain to be seen i mean there's a lot of political pressure on upcoming elections to keep the economic engine running you're going to see this this push and pull between the president and their administration you know i saw after the meeting yesterday you know one percent federal funds rate is what he wants you know and it's it's really interesting we all thought that when powell left they were going to get someone in there that just cut rates and it's not happened.

17:41It adds to the intrigue. I mean, this is almost like a great movie script where you just don't know what's going to happen and it's playing itself out in real time. You know, I think for retailers, these numbers are super encouraging. I mean, the restaurant and retail, you know, we thought that there had been a significant pullback in some of the restaurant spending, and this is a positive sign to the opposite of that. For me, you know, the term is still uncertainty. The term is still how long can this last? And to your point on the K-shape, I mean, certainly the lower end of the economic spectrum are feeling this significantly more than everyone else that maybe they don't have the exposure to the wealth effect from the stock markets.

18:22But at this point, it hasn't seemed to reach a level of critical mass where it's really slowed things down. So I'm as confused today, I'm as distraught today, and I'm as excited and optimistic today as I was last week. I think all of those emotions are running high. So now let's get to that Wall Street Journal article about American businesses and the price setting difficulty they're facing right now. Because I think this is an important factor to chew on when we think about what direction is the economy going, what's going to happen with interest rates, and just the general backdrop of the American economy right now.

18:58So this is a lovely article from the Wall Street Journal. So businesses are struggling to determine whether elevated energy and input costs are temporary shocks that can be absorbed or lasting pressures that require immediate price increases. The uncertainty is being driven, obviously, by the Iran war, the disruption of the Strader Hormuz, trade volatility and diesel prices exceeding$6 per gallon for the first time. Some companies have reached their limit. Ambix manufacturing raised prices by 10 % to 21%. Campbell's is increasing prices across more than half its portfolio, and Clorox is raising prices on products such as Glad Trash Bags as resin costs climb.

19:35Other businesses are holding prices steady to protect market share and retained cost-conscious consumers. Walmart, for example, has reduced prices on more than 10 ,000 items despite forecasting billions of dollars in additional fuel-related costs. The trade-off is increasingly stark. Companies that pass through costs could reinforce inflation, while those holding prices steady face shrinking margins and potentially greater financial stress. And that disagreement complicates Federal Reserve policy. Inflation may prove persistent if businesses increasingly conclude that energy and trade related shocks are structural rather than temporary.

20:14So if businesses are forced to choose between protecting margins and protecting demand, that really could set us up in a difficult position for months or potentially a year, year and a half, two years to come. To some extent, I feel like that's why we saw what we saw in the dot plot from the SEP. And this bugged some folks on the street with a number of FOMC members projecting much more stubborn inflation that if you believe that you'd say, well, why shouldn't we raise rates by say like half a point instead of a quarter point? But to our discussion earlier, that hike isn't going to do anything right now for a supply side problem.

20:58This is a really difficult conundrum. I mean, what's transpired in the last week or so, Iran has activated the Houthi rebels in Yemen, and the Red Sea is now in a state of disarray, right? That had been the outlet for a massive amount of oil flow and was kind of like the relief valve for Saudi Arabia, that's been shut off. If that persists, we're in a very difficult spot. And I don't know if you saw this other headline this week, Lonnie, back to our defense dividend discussion and what that could mean for Texas growth. They've burned through a lot of their interceptor missiles, right? So this is a very difficult position to be in for the military.

21:35What I will say is a positive out here, just if anybody's looking for a company to follow for fun in the defense sector, a new one came out recently called Covenant that was founded in 2024. And it's nuts how quickly they've ramped up development and already production of long range ballistic missiles that are basically the budget tomahawk. Like if I had to pick one company, I would plow money into head over heels, it would be this one if I could. It's a really, really interesting company. And I think you're going to see some headline, you know, absolutely banner contracts awarded to this company.

22:11The missiles is true. Yeah, two quick points, then we will transition to the rest of the show here, Stephen. Like one, I think that kind of alternative cheap defense contractor, that's going to be a byproduct of just where we are with technology. Like the blue bloods of that industry are in for a reckoning here because people can create tech and weaponry and other things at a fraction of the cost of the existing players. And I think you're going to see, you know, not just this company pop up, but there's going to be a hundred of these where they just they disrupt the entire system in a positive way.

22:44And I think the other thing that just we can end the intro on, right, is just this question of persistent inflation. I mean, if there's not an agreement in place at this point, the inflation is persistent and it is stubborn and it's not going anywhere. Like we have two years, three years, four years worth of evidence at this point that it is just that. And so, you know, some of these articles where they're talking about this strategy between passing on pricing or squeezing margin, like, this is nothing new. We've been living this. And guess what? Inflation's not going anywhere anytime soon. The Fed's doing what they can, but it's just where we are.

23:24And I wish that some of this would just be like, we've got to get to the acceptance stage so that we can actually get a real strategy that maybe attacks this more concertedly than what we are today. So let's move away from rates and some of the macro here. There was another risk story this week that we mentioned earlier, but it caught our attention. And this one is coming from federal government leases. So let's walk through how Trump's DEI crackdown could create new risks for landlords that lease to the government. Yes, the Trump administration has added anti-DEI provisions to new GSA leases and asked existing federal landlords to accept bilateral amendments requiring compliance with the new policy.

24:10Attorneys warn that violations could allow federal agencies to terminate leases, potentially turning historically non-cancelable government leases into contracts with an additional exit mechanism. And that exposure is significant. The GSA lease is approximately 180 million square feet nationwide, with more than$10 billion of CMBS debt backed by federally occupied properties. These properties were already showing elevated stress. We found in some previous research that more than 18 % of CMBS loans backed by federal tenants were delinquent in March of 25, roughly twice the overall office delinquency rate at that time.

24:46The requirements may apply broadly across landlords' hiring, contracting, and charitable activities. while flow down provisions could make owners responsible for the compliance of property managers, maintenance providers, and other subcontractors. This is a really broad scope that can create some legal tension. So I'll be interested to see how long it takes before we see first this mechanism activated. And second, what if any kind of legal pushback we get to the court system to say, no, no, no, that's not how we can interpret this lease amendment or the lease termination contract. So some landlords have refused to sign the amendments, and there's no evidence of enforcement against them yet.

25:29However, potential consequences include lease termination, exclusion from future government contracts, and false claims act liability. Federal tenancy can no longer automatically be treated as bond-like credit. Between ongoing space consolidation and new compliance-related termination risk, lenders and investors may need to reassess lease durability, financing proceeds and valuations for government-occupied offices. That's a whole lot, Stephen. I mean, it's interesting. This current administration is really trying to shrink the GSA footprint. They tried it with Doge. Now they're trying it with this.

26:04They tried it with buyouts and layoffs and all of the stuff that they did with the employee side of the equation. I don't think they've been very successful in any of their attempts. In fact, you know, I thought Doge was going to wreak havoc on D.C. And we were going to see massive, you know, delinquencies and distress and foreclosures and all this stuff pull back. And we just haven't seen it yet. So I think this is another headline that's going to get a lot of clicks. And it's going to get a lot of people like us talking about it. And it's going to be something that people are like, oh, my goodness, the legal challenges, if this actually gets implemented at scale, would be unprecedented.

26:38And I think it's just another attempt to try to say, like, we need to shrink the footprint, which I don't disagree with. I mean, if you look at the utilization of these buildings where GSA is a tenant, the utilization rates on these are abysmal. So, like, they definitely have too much space under lease, and that's costing all of us as taxpayers money that we don't need to be spending. I don't know that this is the way to get the desired results, and I don't think this will actually go anywhere. It's headline fodder. It gets the GSA discussion back in the mix, which maybe gets a more reputable kind of strategy to get this portfolio shrunk to size.

27:16But I don't think this isn't going to be the lever that works. No, maybe three to six over the next two years, best guess. I mean, yeah, I'm with you. I don't see many of these being executed because this is a selection issue. The landlord or owner most likely to be impacted is going to be the one least likely to sign. Agreed. So let's stick on the topic of office, but move from the tenant side back to the capital side. We saw a pretty significant vote of confidence with a headline this week, or at least a significant pool of capital for office credit. And that comes from Heinz and Rialto set to close an office credit fund at$1.1 billion.

27:59Yes, this$1.1 billion came from 126 investors, with Heinz and Rialto Capital significantly expanding the fund's$700 million first close in 2024. The partnership will target U.S. office credit opportunities through new lending and debt acquisitions, positioning the fund to capitalize on refinancing challenges and other complex situations facing office owners. The fund has already provided a$228.9 million bridge loan on Manhattan's textile building, purchasing nearly$100 million of loans secured by three Midtown Manhattan properties and completed office financings in New Jersey and San Diego. So if you notice there, there's a lot of location selection bias there, where the fund will probably be targeting the locations that have shown the quickest and the strongest rebound from the office bottom, if we can actually confidently say we've passed the bottom.

28:58Hines argues that the current refinancing cycle is increasing the importance of asset-level underwriting. Attractive yields alone are insufficient without understanding the collateral's value, operating performance, and ability to withstand additional pressure. So in summary, the fund is another indication that capital is available for office properties, but increasingly through private credit strategies designed to obtain lender protections and benefit from market complexity, not through a broad return to conventional office financing. Look, this is just a continuation of what we've seen where strategic allocation, strategic placement, strategic investment in the office sector, you can get outsized returns.

29:34We've had multiple guests on our show talking about this exact same strategy. I mean, I think it adds a little bit of credibility when you get Heinz and Rialto kind of headlining this. And no$1.1 billion fund is nothing to sneeze at. So I'm excited to see this. I think we're going to start seeing more of these well-known, well-established players come back with a similar strategy and broadcast that because the narrative around office generally has changed. I don't think that the, to your point, Stephen, the conventional office financing or conventional traditional office play is necessarily back at scale yet.

30:09But there's significant opportunities and people are starting to capitalize on those. So this is good news for the sector and with some folks that clearly know what they're doing and can execute. And so I'm glad to see it. So I think our main theme throughout a lot of our episodes recently and really the entire show of looking beyond the headline numbers takes us perfectly into our digging through the data segment of the week. Industrial has generally been one of the stronger performing commercial real estate sectors, but that doesn't mean every industrial loan carries the same risk. This week, TREPS research team and our own Tom T dug into the anchor tenants behind securitized industrial properties and found that an unusually large amount of exposure is concentrated in just two companies, and one of them is actively shrinking its real estate footprint.

31:01So let's walk through what the data shows. There are really two numbers that frame the story, 9.5 % and 28.6%. Those numbers stand for 9.5 % of securitized industrial loans have Amazon or FedEx as the largest tenant. And we should caveat that we're excluding industrial loans or properties where the primary tenant is anonymized. So that'd be cases where it's listed as tenant one or customer one, two, three. Now, that second number is perhaps the more dramatic of the two. Of the loans where FedEx is the largest tenant, 28.6 % have a FedEx lease that expires before the loan matures, and that percentage is by loan balance.

31:46So this is an economically meaningful risk. So to circle back on that first stat, Amazon and FedEx together anchor$6.57 billion of securitized industrial loans on a balanced basis. So that represents 9.5 % of the industrial CMBS balance for which TREP can identify the anchor tenant. And that exposure is greater than the next 10 largest name tenants combined. Amazon is the larger of the two, anchoring$3.64 billion across 98 properties. FedEx anchors another$2.93 billion, but that exposure is spread across 177 properties. The distinction matters because the risk is not simply how many dollars are tied to each tenant.

32:24It's also the type of building they occupy when their leases expire and what each company is doing with its logistics network. For Amazon, only 9.2 % of the anchored balance has a lease expiring before the underlying loan matures. For FedEx, the corresponding figure is 28.6%, representing approximately$837 million. Measured by property count, the FedEx exposure looks even more pronounced. 84 of the 177 FedEx anchored properties, or 47.5%, have a lease expiring before loan maturity. I love when our research team digs through the data like this, Stephen. I mean, this is exactly what separates TRIP because on a surface level, these numbers probably don't jump off the page unless you do a little bit of digging.

33:10But our team noticed that Amazon and FedEx represent a meaningful composition of the sample. and started doing a little bit of digging and came up with this, what I think is pretty significant insights around some of the risk here. And so if you look at the reason why the property count is so much higher than the balance share on the FedEx side is because their locations are relatively small. So again, this is kind of some very granular in the weed stuff, but the median FedEx anchored property in the data set is only about 144 ,000 square feet. If you look at that same comparison with Amazon, they're sitting at about 233 ,000 square feet.

33:51Roughly a third of the FedEx properties are actually smaller than 100 ,000 square feet. Profile is important because FedEx is in the process of combining its historically separate FedEx ground and FedEx express networks through what they're calling its Network 2.0 initiative. Most recent February investor day, FedEx said it expects to close more than 475 stations by the end of 2027, or roughly 30 % of its US and Canadian facilities. More than 200 locations had already been closed at that point. So that mismatch that you were talking about of lease expiration coming before the maturity, coupled with this strategy of consolidation, is probably a little unsettling for some of these property owners.

34:37So the risk is that the properties are not currently struggling. In fact, several of these locations have really healthy looking DSCRs. It's just that the smaller single tenant facilities eventually become redundant as FedEx combines their operations, which will lead to an additional round of consolidation, which is not great news for the borrower owner in this instance and or their upcoming refinance requirements. So to try and make things a little bit more tangible, this research piece looked at three specific examples of FedEx locations just to kind of understand the disconnect between today's financial performance and tomorrow's rollover risk.

35:21So importantly, none of these properties appear on a published FedEx closure list, and we are not predicting that FedEx will vacate any particular building. These are just simply examples because each is a fully occupied FedEx property with a lease that expires before the CMBS loan matures. So the first that we highlighted here is the FedEx Ground Lansing in Michigan. The property is 147 ,000 square foot facility securing an$11.8 million loan and a 2023 securitization. The DSCR is 1.91 times and its LTV is only 47.7%. Those metrics look strong, but the FedEx lease expires in September 2032, approximately four months before the loan matures.

36:03It is also specifically identified as a FedEx ground facility, which is part of the network being combined with Express. The second is the FedEx Distribution Center in Groveport, Ohio, in the Columbus market. That property secures a$21.1 million loan in a Wells Fargo 2018 deal with 2.10 times DSCR and a 66.6 % LTV. The lease expires in August of 27, roughly six months before the loan matures in March of 28. Columbus is a major logistics market where FedEx operates multiple facilities, making it the type of market in which combining overlapping locations could make strategic sense. The largest of these three is the FedEx Redmond outside Seattle.

36:48The 210 ,000 square foot property secures a$45.1 million loan in a 2020 securitization. It currently reports a 2.18 times debt coverage. Its lease expires in July of 28, approximately 17 months before the loan matures in January 2030. This loan has the greatest dollar exposure of any that we highlighted, although it has more time before the lease decision becomes urgent relative to the refinance. So how does the Amazon exposure compare? Amazon presents a different risk profile. It anchors more industrial CMBS by balance than FedEx, but 90.8 % of the Amazon anchored balance does not have a lease expiration before low maturity.

37:30Amazon is also expanding and investing heavily in larger, highly automated fulfillment centers rather than publicly targeting a major reduction in its overall facility count. The longer-term question is whether Amazon's older and smaller conventional warehouses will still remain competitive within a network increasingly built around enormous, highly automated facilities. But based on the lease schedule in this data set, that risk is not nearly as immediate as the FedEx rollover risk. The broader takeaway is that current loan performance does not necessarily capture tenant strategy risk. A property can be fully occupied, generate a DSCR above two times coverage and still face a meaningful future credit event if its only tenant is reassessing whether that building belongs in its network.

38:15For industrial CMBS surveillance, we therefore need to look beyond today's occupancy and DSCR and ask three additional questions. When does the anchor lease expire relative to low maturity? How specialized or reusable is the building? And is the test of the lease consolidating? So in the case of exposure, high rate of prematurity lease rollover and a publicly announced facility consolidation program are all intersecting at the same time. As you're going through some of those numbers, Stephen, maybe I was dozing off a little bit into my own world of data center comparison here. It's like as we're talking about the largest FedEx Redmond,$45.1 million loan, it's just crazy in my brain.

38:58That doesn't even seem like that big of a deal anymore. and maybe it's because I did a data center presentation this week where we were talking about you know every deal in the billions and I know 45 million dollar deal in Redmond is is a big deal like that's a big deal and that has some real ramifications but I don't know I've become a little bit numb to some of this where it's like oh 40 million that's just like a rounding error and so as you were talking through this I found myself just kind of chuckling internally of I don't want to become so desensitized because of some of these new data centers, which we almost went an entire episode without mentioning data center until I just brought it up.

39:36But it's just amazing how it just changes the lens of even some of this where, you know, three years ago, this type of story and these types of numbers would be like, oh, my goodness, this has some real, you know, downside risk. And now it's just not that big on the scale of things. It is interesting, though, because Amazon and FedEx do represent such a large cohort of tenancy in the industrial sector. So we'll see what happens here. I mean, I think we could do an entire segment on Amazon and the single tenant credit risk of these initial build-to-suit 15-year leases, 20-year leases, that when they roll, those buildings become obsolete if they don't renew because land-to-building ratios are off.

40:23and there's really not another tenant to come in and fill them. So I think you could do a lot of analysis on Amazon and just kind of the systemic risk they may pose for this entire sector, especially as technology, logistics, and some of this last mile distribution continues to change. So thanks, guys. That was a lot of coverage for today's pod. But we always want our listeners to get access to these digging through the data segments in written form or in report form if they'd like. So reach out to us at podcast.trip.com if you want access to this story and any of our other industrial coverage that we've been releasing on our blog or in our newsletters lately.

41:04So let's turn here to deals and data, our property type stories. And I think office is a good place to start because we have three very different outcomes this week. First, we can start with 100 Wall Street, where the strategy isn't to abandon the office entirely, but to convert the weaker part of the building and preserve the office space that's working. So walk us through this first story here, Stephen. This first story is Northwind lending$219 million for partial conversion of Manhattan's 100 Wall Street. So this$219 million loan to finance the partial conversion in Lower Manhattan plans to turn the building's lower 10 floors into 168 apartments.

41:48The 482 ,000-square-foot office building was built in 1969 and is owned by a venture of David Warner Real Estate Investments and BLDG Management, which bought it for$116 million in 2024. Northwind was already involved in that acquisition, providing$95 million of financing for the purchase. The latest$219 million loan is now funding the conversion and redevelopment. The ownership group plans to keep the top 15 floors as office space, and those floors are currently about 95 % leased. Office tenants were relocated to the upper floors to make room for the residential conversion. The building's physical characteristics make it well-suited for a partial conversion.

42:31It doesn't directly adjoin neighboring buildings, giving the property four sides of light and air, which is advantageous for residential units. The residential portion is expected to include a swimming pool, fitness center, sports simulator, theater, and rooftop deck with an outdoor kitchen. This is becoming a significant strategy for Northwind. The lender recently provided$208 million for a partial conversion of 141 Willoughby Street in Brooklyn, and it has now financed eight office-to-residential conversions in the New York area. The bigger takeaway is the growing role of private credit in office-to-residential conversions.

43:09North Wind is providing sizable loans for projects that repurpose only part of a building, allowing owners to preserve viable office space while converting lower performing portions to apartments. So I like this because it's preserving cash flow and it's not basically a binary as binary of an outcome. Still significant credit risk in play here, but I do really like this strategy. It's very targeted and it appears like there is a proven track record of execution. Yeah, this is another great story of somebody that's figured out the office to resi conversion. And, you know, we've had a couple of guests on that talked about this strategy.

43:48And, you know, I love that my mind has been changed about this generally. I was pretty adamant at first that this was not something that would work at scale. But I think if you right size the scale, in this case, they've done eight. Maybe this firm ends up doing 20. That's a success for them. And that's something that can really move the needle. So great to see, and hopefully they're successful here, especially given some of the negative connotations recently on some of these conversions. So our next story here had a very different solution, which was to extend. The$1.1 billion Los Angeles office and studio portfolio got another 15 months despite 100 % occupancy and a major tenant in Netflix.

44:31Lonnie, walk us through this story. Yeah, so you took the headline here, Haley, of$1.1 billion extension. This is a 15-month extension, and this came to us from our very own CRE Direct reporting. We also mentioned this loan back in August of 2026, and I believe Stephen's hard maturities report that we put out, this was the largest maturity within the cohort. We also saw this in our August special servicing report upon its actual transfer. If you look at the extension now, the loan matures in November of 2027. This was a property that had an original loan maturity of August of 2023, but did carry three one-year extension options.

45:14Obviously, they exercised each of those. The interest rate cap has also been extended as part of the modification. And as part of the agreement, the venture established a$20 million reserve to fund leasing costs and capital improvements at the property. with excess cash flow after debt service continuing to be swept into that reserve. The collateral is an eight-building portfolio, so it's comprised of five office buildings, which total just under a million square feet,$967 ,000 to be exact, and three studio properties that total 1.27 million square feet at addresses along West Sunset Boulevard, North Gower Street, North Las Palmas Avenue, and Seward Street in Los Angeles.

45:56As you mentioned, Haley, Netflix occupies roughly 1.25 million square feet across the portfolio on leases that don't roll until September of 2031. So in this case, that rollover exposure falls outside of the maturity window. So it's good for the landlord. Hopefully they can get this one figured out. We've seen a lot of these extensions and modifications over the last several years. Just to give you some perspective on this one, Stephen, if you look at this property when it was securitized back in 2021, it had a value at$1.9 billion. If you look at its performance, first quarter of 2026, it still had a 1.45x DSCR and occupancy, as Haley mentioned, at 100%.

46:41So this is one where on paper looks pretty good. The math just does the math, I guess, on the refinance. That's right. There's some stuff beneath the surface that have obviously kept it from being able to refinance, but this was a really, really quick extension or modification. So that tells you that the underlying credit issues, obviously, are something that's solvable, basically for the owner to quickly and confidently get this executed. This should trend toward the more positive, just needs a little bit more time. Our next office story here takes us into special servicing, we saw a$396 million CMBS loan against Manhattan's 85th 10th office move to the special servicer.

47:25Yes, so this transfer is ahead of the loan's December maturity. The 632 ,000 square foot office building is owned by Related and Vernado and sits between the Chelsea and the Meatpacking districts. The senior loan is split across three CMBS transactions and also includes$229 million of mezzanine debt. The property was 98 % occupied in the first quarter and generated$4.5 million of net cash flow, putting on a pace for about$18.1 million annually. The cash flow is enough to cover interest on the senior loan by about 1.83 times, but when the entire$625 million debt stack is considered, the property's debt yield is only 2.89%.

48:10The senior loan alone has just over a 4.5 % debt yield. The building has an unusual history. It is part of Nabisco's original manufacturing complex and is where Oreo cookies were produced. It was later converted to mixed use, included a telecom facility that would today be considered a data center. Google leases nearly 300 ,000 square feet through February 2034, providing a major long-term tenant. The building also has 18-foot ceilings, an unobscured Hudson River view, and Manhattan views as well. So the takeaway is that the pressure is on highly leveraged office assets, even when occupancy remains relatively strong.

48:53At 89 % occupancy, 8510th is not an empty office building at all. But the$625 million debt stack leaves its current cash flow producing a relatively low debt yield, should say extremely low debt yield. with that senior loan now headed to special servicing ahead of maturity. So let's move back to industrial and talk about data centers this time. We saw Brookfield acquire a minority stake in a developer with more than 32 million square feet of hyperscale projects in its pipeline. Yes, Brookfield Asset Management's affiliates agreed to acquire an undisclosed minority interest in American real estate partners with the transaction expected to close during the fourth quarter.

49:35AREP is developing more than 32 million square feet of hyperskill data centers nationwide. The firm has deployed or committed over$30 billion and acquired more than 40 million square feet of real estate across several sectors. The investment combines AREP's development pipeline and expertise with Brookfield's global capital, power, and infrastructure capabilities as both firms position for a multi-decade AI infrastructure build-out. AREP also closed a$309 million fund in February of 25, its largest to date, targeting data centers and suburban residential investments. The transaction continues Brookfield's rotation away from traditional office properties and into digital infrastructure.

50:16Brookfield manages more than$1 trillion and already backs hyperscale operator, C-Square. Institutional capital increasingly wants exposure not just to completed data centers, but to development platforms capable of controlling land, power, and execution at scale. Brookfield's investment reinforces the sector's long-term growth thesis, although C-Square's unsubscribed IPO shows that investor demand is becoming more selective rather than indiscriminate. And finally here, we wanted to talk about a story in the retail sector. our own CRE Direct also reported that Regions Bank has provided$99.5 million of financing for Fairborn Properties,$122 million purchase of Village Crossing, which is an over 700 ,000 square foot retail property in Illinois.

51:08Lonnie, walk us through this story. I want to give you credit there, Haley, for not trying to say the city where this is located at, because I'm not going to try to say the city where this is located at either. It's S-K-O-K-I-E. I guess Skokie? Oh. Skokie, Illinois. You got a story, Stephen? Skokie, man. Everybody knows Skokie, Illinois. I don't know Skokie. Obviously, Haley doesn't know Skokie either. But now we know Skokie. All right. So if you look at the purchase price, it works out to about$175 a square foot. And the loan represents roughly 82 % of the acquisition price. So pretty favorable for the borrower in this instance.

51:41Draper and Kramer arranged the financing while CBRE brokered Fairbourn's acquisition from Nuveen. Village Crossing is 95 % leased and anchored by a jewel Osco with other major tenants, including AMC Theaters, Barnes & Noble. Great to see them making a comeback nationally. Dick's Sporting Goods, Ulta Beauty, and Best Buy. Not sure if you guys saw the Pokemon craze at Best Buy this week. There are people sitting outside the stores across the U.S., which is kind of unique in 2026. The tenant roster is also getting stronger as Burlington and Marshalls have leased additional space and preparing to open stores in the center.

52:17Property is located at 5601-5699 West Toohey Avenue in Skokie, giving Fairbourn a large grocery-anchored retail center in the Chicago market. Biggest takeaway for me is a combination of high occupancy and substantial acquisition financing at that 82 % LTV. Fairborn is buying a 95 % leased retail center, financing roughly four-fifths of the purchase with a bank loan. So pretty interesting here. I think the addition of the two new tenants, Stephen, probably lessened some concerns for the lender. Grocery Anchored has been preferred subtype in the sector, and adding those two new tenants with a pretty strong roster of AMC, Barnes & Noble, Dix, and Ulta, probably just made this palatable for them, even at that high LTV.

53:03Oh, absolutely. This is that winning tenant combination. And I'm sure if you were to drive by this thing on a midday afternoon, the parking lot would be as busy as I'm hoping to imagine it would be, right? Especially at that leverage point. If you're going up to that 82 % of acquisition LTV, yeah, I want to see a packed parking lot six to seven days a week. So really the common theme that we saw this week in the stories, and we could probably plug this every week, is that capital is available, but it is selective, more structural and more dependent on the strength of the collateral and the credibility of the business plan, right?

53:45Everybody's picking their targets. And importantly, as we've seen with the price points for some of these, the confidence is clearly showing through, right? It's selective and with confidence. You know, I would just echo that and supplemented a little bit, Stephen, was saying singular data points no longer drive the narrative. So we've seen properties here with 100 % occupancy with positive DSCR almost at 1.5X that can't get refinanced. And so that selective nature is real because the numbers on a lot of these properties look good, but there's underlying challenges that below the surface that are maybe making lenders pause a little bit.

54:25All right. A few programming notes here before we close. We have several webinars and events coming up. The first one I wanted to mention is exclusively for our TREP clients. And that's kind of a part two for our initial TREP MCP webinar that we hosted several weeks ago. We had such strong interest in the demo webinar and also in our AI capabilities in general that we wanted to host a second edition to really take the conversation further. So on Tuesday, September 29th at 2 p.m. Eastern, our TREP experts will dig even closer into TREP MCP, which is TREP's AI connector that brings trusted CRE and CMBS data directly into your AI workflow, which really just enables you to do faster research, data retrieval and analysis within your own system.

55:17So if you're a TREP client and you want access to that webinar, send an email to podcast at TREP.com and we'll get you signed up. If you're not a TREP client and you've been curious about our data sets and really how to make it tangible and actionable for your firm, send us an email. We'd love to walk you through our solutions, our front end platforms, and now how you can get our data directly in your tools. The next day on Wednesday, September 30th at 2 p.m. Eastern, we'll have a webinar open to everyone, as we always do, our MarketPulse webinar. We'll be digging into office line item financials, multifamilies regional divide, and self-storage across markets.

55:59So if you'd like to join us for our next edition of the MarketPulse webinar, podcast.trep.com will get you the registration link. We see hundreds and hundreds of you all joining us every month. So we're excited for this next edition. And if you ever have suggestions or comments or topic ideas that you'd like to hear from us, email podcast.trep.com. We're always open and willing to work that into a segment on the show or the MarketPulse. Turning to shout outs, Neil S. was interested in our banking market snapshot webinar that we hosted. Steve D wanted to also get access to that webinar as well.

56:39John R sent us a really interesting research paper from the Federal Reserve Bank of Philadelphia and Florida State University about CRA CLOs and wanted to see if we could dig into the paper and the sector. And we definitely can. We're always looking into CRA CLO performance and would be happy to do an extra segment on this. So stay tuned, John, and we'll get back to you and walk you through our thoughts there. Last week, if you missed it, Lonnie, Stephen, and I were at the Western States Cref Conference in Las Vegas. It was such a great event. So cool to be hosted by the California NBA team. And we got to do a live episode of the podcast.

57:20So if you missed it, go check out last week's episode. That was actually recorded live in front of their audience as the keynote lunch and it was very in-depth we got through a lot of content in our 50 minutes but we had slides available that we shared so if you didn't get access to those slides send us an email to podcast.trep.com and we'll give you all the materials that went along with it but we had several people that we met or had reached out to us after that so i'll run through those quickly Reed G is a big time fan of the podcast and loved the session so wanted the access to the slides Clay A wanted the slide deck as well.

57:59Scott M asked for the slide deck and said, nice job on the podcast every week. We got to meet Mitch G again at the conference. He's been a loyal listener forever, and it's always great to catch up with you, Mitch. He loves the show, listens every week, and said he thinks he has some guest episodes that he has to catch up on. Jason B, Elizabeth B, and the entire team at Slack Capital. It was really cool to meet you all in person. They're big fans of the show and the presentation. And we've got to talking about small balance loans and data. We met Craig E., who is a huge fan, and Abbas S. It was so cool to meet you.

58:41He's a huge fan of the podcast and the MarketPulse webinars and is a client. He loves our data. And he was raving that it's the most trusted in the industry. So we so appreciate that. And he was intrigued by some of the work we're doing with AI. So hopefully we'll follow up with you about that, Abbas. We gave you a podcast hat and hopefully we'll see you at another event soon. Matthew M. really loved the episode and was interested in the slides that went along with it. He thanked us for the consistently thoughtful analysis. Our loyal listener, Jerron R., really enjoyed the live recorded episode.

59:15He said it was a data and information packed session that I gleaned a lot from. So keep up the good work. and Dan T also wanted the deck. He said, great work and information as usual. We also had Diane C post and share our episode with Spencer Levy of the Weekly Take, CBRE's show and said, every professional in commercial real estate should listen to Spencer's advice about being diligent in your preparation to start conversations at industry events. We got a lot of great feedback on that episode with Spencer as well. So if you haven't heard that, that was a really cool one. The Weekly Take is a huge show in commercial real estate, and we were excited to partner with them.

59:56So more to come on that. I have a couple of shout outs this week, Hayley. One, we'd be remiss if we didn't mention that the Tripwire podcast ranked number two again on CREI's annual list of top podcasts. So this is the third year in a row that TREP has held down that number two spot. So thank you to Ken Ashley and the team at CREI that put in all the work to rank the top podcast. We're very appreciative of the opportunity to be number two in CRE podcasting on the list. And so we'll do our part to keep the great work up on our end. And we appreciate the recognition as evidenced. And, you know, this week I had an opportunity to meet with a few folks.

1:00:33So Shane M. and his team, we're going to get together here the next week or so. Shane's been a longtime client, a longtime listener, although he admitted on our call this week he had missed a few episodes. So I'm putting this little Easter egg out there for you, Shane. and hopefully you hear it and looking forward to catching up and taking you to dinner this next week or two. And last night, Haley, you know, I went to one of our friends, Happy Hours, Madison Realty Capital, and hung out with a couple of our good friends now, Rafael and Samir. And I'll tell you, you know, being in the same room with those guys, like as much as I love real estate, I love real estate and hanging out with them even more when I'm with them.

1:01:11Like two guys that just, they get what we're doing. They get what CRE is about. They run an incredible platform and program at their place, and I could sit there and talk CRE with them and marketing and strategy for hours and hours. So shout out to them. I also gave them some podcast hats. So Rafael said that they'll be posting some pics of themselves wearing those hats at some point. So hopefully we'll get some more love on the podcast swag. And, yeah, it's been really great. The Western States, just incredible event. We love being there. Cody is going to be on our show at some point from Slot Capital.

1:01:48And, you know, that network effect is very real. We love being a part of those process and events. And it just bolsters our reach and makes new friends for us. So thank you for everybody that allowed us to come out there and do that. And more to come from us. As always, we have several really great guests lined up. And I think we have 15 conferences in October. So we'll round some of those up for our listeners in the next few weeks. and try to connect with you while we're traveling all across the country. So 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.

1:02:25If you have a question or just a comment, send an email to podcast.trip.com and subscribe to the Tripwire podcast with your favorite provider. Thank you for listening and stay well. All right.

1:02:43Thank you.