433. Power, Politics, and Property Values: The Macro Overlay & Midterms, Data Center Referendums, NYC Affordability Pressures

0:04Welcome to the Trepwire podcast, the show where commercial real estate meets data and insights. This is our Week in Review for the week ending November 6, 2026. I'm Haley Keenwith-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. Coming out of the midterms, Democrats have won control of the incoming House and Senate, and the initial market reaction to divided government is part of this week's backdrop. We'll start with last week's GDP report, then look at business activity, hiring, construction spending, and what banks are saying about credit availability.

0:50We'll also spend some time today on New York City's rent-stabilized housing market, reports of tougher agency underwriting, the response from the FHFA, and how the rent freeze and COPPA debate affect financing and owner equity. In our digging through the data section, we'll look at industrial CMBS issuance approaching last year's total, the growing data center share, and the preliminary results of local data center ballot measures. Then our property stories take us from a Brooklyn apartment refinancing and a Boston office foreclosure to a Seattle retail acquisition, a Scottsdale resort sale, and a Miami construction loan.

1:33So Stephen, what connects all of these developments? for you? Let's start off with, it's been one heck of a week and we're just barely halfway through. So the economy is growing at a faster rate than really what we had expected and certainly faster than the lending recovery. Last week's GDP number was amazing. Third quarter GDP rose 3.4 % at an annualized rate and private domestic final sales grew by almost 5%. But when we turn to the labor market. ADP's 86 ,000 private job gain is just modest. Service sector orders slowed and input price pressures remain elevated. That combination supports a selective view of tenant demand and the income available to service debt.

2:20And probably more importantly for those that maybe have concerns or optimism coming out of the midterms, depending on which way you want to view it, on the concern side, you could argue that maybe the mixture is tilting a little bit more toward a stagflation environment. That would be the pessimistic look on it. The optimistic look would say, well, really we're a checks and balances government. This is just kind of a self-correcting action. And the result of the midterms was clearly a referendum on affordability. So yeah, we might be slowing down the growth engine, but perhaps we're gonna elongate it and have some discipline to this buildup.

2:56Who knows exactly which way this is gonna break. Now let's turn to the bank survey data, right? The hard stuff. because right now I've been waxing philosophical on soft data. I want to turn back to the heart. The bank survey data gives us another piece of this picture. Multifamily standards moved from modest net easing in July to net tightening in October while demand weakened. Now, this is interesting because remember, this is looking in a rear view mirror. So we had some tightening and also weaker demand ahead of what I think will be a little bit more pessimistic fourth quarter. So this trajectory and that momentum is building toward the fourth quarter, which could look not so great in the next sluice release.

3:40So that helps explain how we can see these large transactions close at the same time that many borrowers are facing less leverage and a larger refinancing gap. And New York is an especially great market to highlight this tension, this issue, because it makes the cash flow issue especially clear. FHA has been disputing a blanket agency lending freeze. I mean, you've had lots of news articles, Lonnie. I mean, you're going to discuss this, I think, at length here. But you have these news article tensions saying there's a freeze, but then the FHA is coming out and saying, no, there's not. And so we should distinguish whether a lender is open for how much debt a building can actually support versus maybe what's happening behind the scenes, which is harder to put your finger on and probably is not something we're going to see in the news, right?

4:26The way an agency acts versus the way they have to speak publicly can be two different things. So the question for regulated housing are how those frozen rents are going to interact with operating costs, who supplies the repair capital, and what resources support the ownership changes COPA's backers want. And that same distinction matters for data centers. Holy smokes, Lonnie. Look at what mattered to the public and how they voted. I have not seen this sweeping of a response to a nationwide ballot issue. Like we're talking like 70, 80 % of the vote swung strongly against data centers, whether it was in support of a moratorium or we also had some places that were looking to support data centers.

5:10And those got shot down overwhelmingly versus the moratoriums that got held up. So these restrictions on future developments are going to affect an operating facility differently from a project that still needs power permits and expansion rights. So across today's stories, We'll be talking about income assumptions behind the financing and how much new equity is needed to make the transaction work. Because this is continuing to be the tension and the lending environments that hire for longer again narrative that will be playing out through year end. Listen, Stephen, I've said it for a while now.

5:40It's no longer the hire for longer narrative. It's the hire for longer reality. And I think these numbers that you just went through, like there's no relief in sight for borrowers. And, you know, you break it down from, you know, total U.S. macro to like these individual markets like New York and rent control and stabilized apartments. And within those smaller subsects, it's like even worse. I mean, Fannie, Freddie, FHFA can say what they need to say publicly. But if they just, you know, adjust the rudder a little bit and say that we're going to require that you have X more in reserves because you don't have the ability to grow rent.

6:15or we're going to underwrite a different debt service coverage ratio or debt yield metric. I mean, effectively, you're turning off the spigot without officially saying we're turning it off. And as we know, Fannie and Freddie have underwritten, backstopped probably 50 % of all multifamily mortgages in the U.S. for a very long time. It just is, it's kind of like a reckoning is happening, at least with the rent control rate of stabilized stuff in New York City. And we'll get into that, but we're past the point of pleasantries and philosophical differences in terms of what these measures mean for affordability.

6:50And we're now getting down to like the actual just math behind it. And when you only cap one side of the equation, guess what happens? Like it doesn't work. And we're starting to see that play out. The GDP number for me is what jumps out. It's just crazy at 3.4%. I think to your sentiment on the voters, they didn't vote as if they thought the economy was rocking and rolling. I mean, like, in fact, it was quite the opposite. I think, like, the strong GDP has just been masked by the conflict in Iran, higher diesel and gas prices, inflationary pressure at the grocery store and everything else. All of the things that the current administration ran saying they were going to fix that have not changed and, in fact, probably made people even more resentful that they're still in place.

7:32And so it's a very interesting time period. It's no different really than what we saw the last couple of months, except now you kind of have this definitive stake in the ground where the American people have spoken and said, we're kind of fed up with what's going on. We want something different. But my small-minded brain, right, is reminded that two years ago, it was just as aggressive and defiant for the other party. And so to your point, like, the split political system potentially is working as intended. I think the nuance for me is that they don't really control everything. You end up with this, like, non-action.

8:09And that's what we've seen over and over, whether it be at the local level or whether it be at the national level, is you have such a wide divide that nothing gets done. And that's not good for any of us. And so love to talk a little bit more on the data center stuff, because I think that's a huge, you know, downstream implication kind of second order effect of things to come, because that's propping up a lot of this positive macroeconomic stuff that we've seen. But to your point, the voters spoke very directly that they don't want it. I think we referenced this a couple of weeks ago. I did a presentation on data centers recently.

8:41And in my research, there was a nugget from Gallup that said they did a poll in May of 26, and 71 % of people were opposed to data centers. And I thought there was no way that that could even be close to accurate. After this week's election, I have to take a different position there. I think people really are opposed to it, even though it doesn't make sense to me. Really, all of the polling issues, what bubbled up to the top and was going to be a no-brainer for Democrats to use to win this wave was affordability, right? I mean, they could play on the swing vote so easily. And they did that without bungling it, even though some of those jurisdictions looked like it was going to not play out.

9:23Those areas that were of concern, I mean, you look at the margin, the wind margin, it was wild. And to me, I mean, gosh, I don't want to get too political here, but it's a little bit interesting when you think about the identity and the values of the swing voter and how they voted. I don't want to go too far down this road, but it's like, wow, I mean, affordability trumped all. Values that you think might have pushed the vote into the other camp in elections past were put strongly aside, and the pocketbook won full out hard stop. The nuance there is, if you overlay that to CRE, Stephen, is the policies enacted by the incoming party in charge actually work against affordability.

10:05That's the part that just is so, it's so hard for me to get my mind wrapped around it. I understand people's pushback for affordability because we've seen it in local elections for the last several years. But these policies that have been enacted just don't actually resolve the problem. Not suggesting the current party in place has done anything to resolve the problem either. But there's been decades worth of documentation around, you know, the Democratic Party and affordability not being able to solve any of that. So, look, I think people are just fed up. And unfortunately, when you have a dominant two-party system, sometimes you don't get a great choice.

10:44You know, you get to pick something from two and sometimes neither are great, but when you're really fed up with one, you just think it's time for a change to the other. So we'll see how it plays itself out. Yeah, I think another part of the economic picture that we should talk about today is what's kind of happening underneath the headline numbers. We also got the latest manufacturing and services data this week. So what are these reports telling you, Stephen, about business activity? Well, it's an interesting mix. We have expansion with persistent price pressure. Manufacturing PMI rose to 55.5 from 54.5.

11:21It's a modest increase. Production reached 59. New orders were 55.5. Employment remained elevated above 50 at 52.4. And prices paid eased a little bit to 75.2 from 77.9, but that is a massive elevation. Now turning to the services side, that eased to 54.5 from 54.9. Activity slowed to 53.8 and new orders went to 55.9, while employment improved to 51.4. services prices registered at 73.3 down from 74. Again, those are massively elevated price levels. So we have both sectors expanding, but slower service orders and ongoing input costs argue for selective underwriting. PMI levels measure the breadth of the change.

12:12And a reading of 73 does not mean prices rose 73%. Remember the baseline is 50. Anything above 50 is expanding. And as you get to 73, that means that prices are increasing rapidly. Anything below 50 is contraction. So, I mean, we have a lot of price pressure baked in here. And when we look at the decay rate from these levels, it's going to take a while to pull down. So what happens in the Strait of Hormuz over the coming two months before we have the change of guard, I think will matter a lot for what is possible or what plays out over the coming 12 to 18 months. So we shouldn't take that lightly.

12:48Let's also not forget some of the chatter that's going on over in Poland with Russia, some movement of troops. There's some interesting geopolitical tensions brewing in the background. What's the impetus at this point, Stephen, for the current administration to stop the conflict in Iran? I mean, like, if they were already conceding last night that, you know, that Iran costs them mightily, what is the impetus? I mean, like, I don't know that we're going to see a relief here, like, because at this point, I felt like there was probably some desire to get some sort of resolution, permanent, you know, resolution in place before the midterm.

13:24So now that the fact that it's over, the results are what they are. Do you see just a continuation of what we've seen? When I'm rubbing my crystal ball, I think about what started this all to begin with. You have a regime that chanced death to America and an executive branch that wants to put an end to that. I don't see them walking away easily. I also don't see the other side coming to the table in good faith at all. So if anything, I feel like it's going to break hard toward kinetic warfare over the short term, and it's going to break ugly. That's just how I feel. But could be wrong. I hope I'm wrong because the hard break to the hard line means a lot of loss of life.

14:06When I think about the likelihood of outcomes, I just don't see the back down unless you have concern about the tension with Congress and what kinetic warfare might mean in 27 as, you know, things turn over. But gosh, I don't want to go too far down this path. But I mean, I think that the person who is going to take the fall has already been kind of put in place here. And of course, another part of the economic picture is the labor market. We got the latest job openings data and ADP's private payroll numbers this week with the official jobs report still ahead. So are we seeing signs of hiring picking up or is the labor market still moving pretty slowly?

14:49I don't know about you guys, but every time I open LinkedIn, I'm seeing a lot of layoff announcements as well. Yeah, it's an interesting one, right? Like you see this mix of layoffs and then when you dig through the posts of what's getting hired, it's a high technical skill and experienced background. It's not the entry-level jobs, it's the high technical expertise that's, well, part and parcel to the AI push. At least that's how I feel. Yeah, look, I think to Haley's point, there's been a lot of announced layoffs. There's been a lot of announced cutbacks and other things. You don't know if that really contributes that scale to some kind of overarching.

15:26I mean, the fact that, you know, ADP reported a 6 ,000 tepid. I don't know what you might want to use to describe that. I mean, modest, et cetera. It's not catastrophic. We're kind of just muddling along here. Kind of like you've covered for the last couple of quarters, Stephen. It's like selective hiring, selective firing. then I think we're going to see some more of that. Look, the AI stuff is going to be the linchpin here in the sense that investment feels like it's going to start pulling back if they don't start seeing some ROI on some of this spend. That ROI has to come in the form at some level of either increased product or decrease in staffing levels.

16:05And I don't know which one of those is going to win out, but to me, it seems logical that one of those two has to come to the forefront as the clear winner. either they realize the returns one or the other way. I don't see any other way around it. I mean, based on what I see posted and granted, anytime your search history is playing into this, you're going to have a biased view. But when I try and put my finger on the pulse of what is kind of the hiring wave looking like and what are the layoffs telling me, I think it's going to be a mixture. We're going to get the seasoning out, the aging out of the labor force, the incentivized early retirements or on-time retirements.

16:41And then that's going to be backfilled with a reduced size, highly tech skilled labor backfill. So in other words, you might be taking a handful of seasoned folks and replacing them with half as many mid-tiered, more junior that are tech enabled that might actually be a force multiplier. So productivity could increase at the same time. Labor force participation remains meh. And ultimately, total labor force draws down a little bit. It's going to be interesting to watch. So we had openings. August openings were revised to 7.2 million. September were 7.5. So there's still a lot out there. It's not statistically changed.

17:22And it's going to take years for this transition to play out. What I think, who I think suffers the most in this AI transition, it's going to be the entry-level jobs. So if you thought it was K-shaped for undergraduates and graduate school employees already, I think that K-shape strengthens even more. And we're gonna have to build out more of a true blue collar old school labor force to actually find jobs. Because right now, yeah, everybody can find a job. They might just not be happy with the size of the paycheck or the industry they're getting placed into. But you can definitely earn a fair wage.

17:58And if you need, you can pick up all the hours you want and work more or less as much as you want. I mean, that's really the resounding message we're getting from the labor force right now or the labor economy. Yeah, I mean, I kind of feel at some level though, like when they say what's new again is old or what's old again is new is one of those things, right? It's like, this is not a new phenomenon. Like, okay, the impetus this time is AI or the catalyst, but we've seen this type of labor dynamic and shift in the past. Now, the one interesting caveat, And look, TREP is at a size that it's probably not indicative of the broader market, but maybe it is for that fintech space.

18:36With our AI efforts, I think it's going to increase our headcount. Like we're actually increasing productivity, but that increases opportunity for us to do deeper analytics and deeper insights. And we need more seasoned and more knowledgeable, like the subject matter expertise, human intelligence element. is actually an additive when you couple it with the tools. So for us, I actually think that it's gone, at least in a very short sample, the other direction where AI has actually increased our headcount. So I don't know if that extrapolates or if that's something that you can bank on, but I do think it's for some companies or industries, you're actually going to see the combination of two where you actually need more seasoned workers leveraging and creating more value using some of these efficiency and productivity tools.

19:28I mean, that was part of the sell-off opportunity that was created with the SaaSpocalypse. It wasn't that long ago when we were saying, oh, all these startups are just going to absolutely blow these existing companies out of the water, which was a joke, right? It is not easy to change vendors for an established enterprise. So if you can get more out of that existing contract, even if you're not able to reduce the price, if it's a force multiplier and you can provide more services at that same cost point, I mean, it's silly to think that, say, like Adobe, is going to go away. They're not going away.

20:00I guarantee you they're working very heavily in the background to build that product to blow you away. I know we're going to talk a little bit about some of the data center stuff here in a second, Stephen, but I don't know if you saw this headline today. Oracle supposedly cancels $7 billion chip leasing deal with Tencent. So if that's proven to be true, is that one of the dominoes of many that we might start to see fall out given what we've witnessed this week and kind of all of the stuff we've talked about in the intro today. Play the counterparty risk drum roll. I mean, that's basically what we're building up here too, right?

20:35If we wanted to have shades of GFC past, the circular financing is really just another form of counterparty risk that we've yet to fully put our finger on and is kind of similar to the Lehman Brothers AIG hedging falsehood that we thought we had protection around. Gosh, I mean, I just hope that NVIDIA is as strong and bulletproof as everybody thinks they are because that's where a lot of this stuff has landed. Some of the fringe players, yeah, we're probably going to see them, it takes some knocks and in some cases go bankrupt. The longer this takes to play out, the less profitably comes, the more likely it is that we're going to see a near-term failure within 27 and 28.

21:14Okay, so let's shift over to lending because the Fed released its latest senior loan officer opinion survey this week. And there were some interesting findings for commercial real estate. particularly in multifamily. If you remember, we had started to see some easing in lending standards earlier this year, but the latest survey suggests that that may be changing. Stephen, what stood out to you and what does this tell us about where banks are right now? Well, banks reported tighter standards and weaker demand across all three CRE categories, construction and land development, non-farm, non-residential, and multifamily.

21:53In multifamily, eight of 57 banks tightened and three eased, a net 8.8 % tightening, net demand weakened by 22.8%. And these are respondent shares, not changes in loan balance. So we really have to make sure to caveat this carefully. Now, standards also tightened for lending to non-bank financial institutions, including mortgage intermediaries and private equity funds. So we could bridge this to the New York City stuff that we have coming up here in just a bit. Cost of credits and the amount available can move differently even with healthy GDP. And importantly, remember, this is a quarter lag.

22:35So we're going into what's been a more pessimistic and a tighter fourth quarter environment. So keep in mind the trajectory, the momentum. And if we extrapolate off of this, it'll be an interesting next couple of quarters. And finally, we want to talk about what's happening right here in New York. Not right here for you guys, but right here for me. Because there's been a lot of attention on rent-stabilized housing market, following the city's rent freeze, and now with all the election talks. And then we're also seeing reports of changes to how Fannie Mae and Freddie Mac are approaching financing for these properties.

23:14Although there's been some pushback on those reports. So, Lonnie, why don't you walk us through what's happening? and then we can get into what this means for the owners of these buildings and what both sides of the equation are discussing right now. I think what's happening is what we probably expected to happen. The only thing that was uncertain was maybe timing, and I think the timing is now. And, you know, you have Bill Pulte, the FHFA director, that basically says, listen, there's no lending freeze. Both Fannie and Freddie are open for business. Like, this is all a story about nothing. If you dig a little deeper, you see things like Fannie starting to underwrite four to eight years worth of flat rents and increasing expenses at about 5 % annual.

23:59So if you just do the simple math on that, like NOIs go down, unless you see some sort of commensurate reduction in cap rates, values go down. And if values go down, then loan amounts or proceeds available go down. And this is not something that's a small figure. I mean, a 5 % annual expense increase compounded over four to eight years with no rental rate growth really puts into question the viability of some of these properties. Now, again, these are things that we've seen play out real time. And we've had people join us at either TREP Connect or we've written stuff or we've had people on the podcast that talked about this.

24:36Like, none of this is new. I think it's just the reckoning of these lenders finally coming to terms with the fact that if they're going to protect themselves, they have to change the methodology and the way that they underwrite these assets. And when doing that, it probably renders most, if not all of these assets, unfinanceable. And so it'll be very interesting to see what this actually means. And Stephen, like, you know, the cynical part of me makes me wonder, like, I think this was the hope with this new administration. Like, this is what they were hoping would happen is you effectively freeze rents.

25:16You then freeze out the lenders. You pass COPA. You create a secondary, which becomes a primary market for these nonprofits. profits, then you effectively establish some form of quasi or whatever you want to frame in government ownership of a lot of these assets. And maybe I'm, that cynical part of my brain is taking this too far. Maybe it's not going to go to that extreme, but I just don't see any way out of this. Like, I don't know how you can cap rent, have no cap on expenses, have two of the largest lenders back out or, you know, quiet quit, whatever you want to call it, lending. and this ends up in a way that actually is beneficial for owners or tenants.

26:00Something's going to have to change here. There was some talk last week, we didn't really get into it. I think it was in Seattle where someone finally came to terms with the fact that there can only be so much government intervention before it becomes a taking, which New York has tried multiple times with the Supreme Court and failed. But hopefully, you know, maybe this pushes us to that like rock bottom where some logic has to come back into the equation. Yeah, I mean, we're flirting with the red line here in terms of government taking because the only way for this to work out is for there to be, I mean, you could use the economic term and say sufficient value destruction.

26:36The grounded reality is there has to be massive value destruction in order for zero rent increases and the cost expense pressure and just the reality of operating in this area. You have to buy these things at such an incredibly low level, leverage them up only modestly in order for them to make sense and work. And I mean, shoot, we've covered on the podcast in episodes past that you have some nonprofits, some foundations that had operated in this space basically give up. So the organizations, the foundations that Copa is targeting have already said up to this point, we give up. So I don't see how this works when you already have a strong signal from some of these foundations saying, look, I still can't make it work.

27:25I still can't operate in this environment because there's no trust. When there's no trust, there's no dollars flowing. Well, look, to your point, Stephen, like, if you can only borrow X because it doesn't make it financially doesn't work. So you can't go to market terms, you can't get market finance. Like we see multifamily deals from Fannie and Freddie outside of this cohort, all day, every day at that 64 to 67 % LTV. There's no way in the world you're able to do that with these assets. It changes from like a viable ongoing concern, like a real asset to just a short lived commodity here. I mean, like these things don't have residual value if this continues to play out the way that it has.

28:05Now, if you look and you want to quantify this at some level, here are some numbers. There's about a million units registered as stabilized according to 2025 city tax records. OK, it's 966 ,000 to a million plus or minus. If you use the$1 million number at$1 ,681 a month in monthly rent times 12 months, that gives you an approximate$20.2 billion of annual scheduled rent as an order of magnitude illustration. I mean, this is significant. And just some of the political fallout, I think, from this most recent election cycle is you're going to see more jurisdictions trying to mirror or create similar types of guidelines.

28:48But let's keep hammering on those numbers a little bit. So I'm going to say 20 billion to me feels like a little bit on the low side. I'm going to round this up conveniently to 25 billion. You put a 10 cap on that, what do you get? 250, right? So if you just approximate the value of the stock at about 250 billion, go back to 2019 and figure that, all right, with 10-year term loans, with granted, some of these are fully amortized, let's just play the game of about one-tenth historically of these mortgages outstanding would get refinanced in a given year. So in 2019, amazingly, it was$27.6 billion of buildings that were at least half regulated had mortgages originated on them.

29:26Fast forward to 2025, that number dropped to$11.3 billion. I mean, it was slashed by more than half, declining. It was almost 60%. So that financing flow tells you what the trajectory has been, where the momentum is at. We're starting from a very low level, and that was before the rent freeze, right? This could get even uglier before it gets better. And if you really dig deep on some of the agency delinquency numbers, I don't think we've published all of these, but it looks really bad. Yeah, like crazy multiple, like 10, 12 times on the delinquency side when you start factoring some of this stuff in.

30:07So we'll dig a little deeper on this and we'll talk about this as things play out. I mean, hopefully we can get some reasonable minds together across the different vested stakeholders here and come up with something. I do think significant change sometimes requires radical action. And if Fannie and Freddie effectively pull out of this market, that's a pretty significant force of change that's going to rattle this set of industry participants. And we'll see what ramifications, positive or negative, come of this. I mean, we've highlighted some of the negative ones, but maybe some positive is that people actually sit down with a pen and paper or a calculator and do some of the simple math that you and I walk through here and just say, this doesn't work.

30:53This is a crash. There's no soft landing in this example. This is bad. this is bad. No, if we already had close to 50 ,000 units being held offline and not rented actively, I mean, it wouldn't surprise me to see that number double over the next 18 months. And that's a bad look for an administration that was touting affordability and more units coming online. So the pressure is going to build. The motivation should be there. Hopefully, collaborative heads will come together and produce a more ideal outcome than what's been proposed currently. And if any of those that are in a position of influence need some data, reach out.

31:30Podcast at trep.com. We've done a lot of research on this. We have a lot of data. We have a lot of insights. We'd love to be part of the solution. So if you're listening to this and this is something that you have your hand on the pulse of and there's some value that Trep can create here to just create a win-win-win, lenders, owners, tenants, let us know. AI is only as reliable as the data behind it. And when you're managing investor relationships in a competitive capital market, that data has to be accurate every time. InvestNext MCP connects the AI your team already uses directly to InvestNext, a platform purpose-built for investment management.

32:13Find your top investors, see how a fund is tracking, build a custom report, get briefed before your next investor call. All in seconds. Grounded in data direct from the source. Invest Next MCP. AI doesn't know your investors, Invest Next does. Connect your AI to your data. See how it works at investnext.com. All right, guys. So we're finally at our digging through the data portion of the podcast today. You both have been itching to talk about data centers all episode long, and that's very fair. So I know we've spent a lot of time talking about the growth of data centers and all the capital flowing into the sector.

32:57We've also discussed some of the worries and fears and pushback on the sector as a whole. And Stephen, you found an interesting connection to this week's elections that could also have some implications for future development. So walk us through what we're seeing and what some of the data shows us around industrial CMBS and data centers. Sure. Capital has been flowing into data centers while local voters are tightening the path to new development. So this segment is connecting industrial CMBS financing with preliminary midterm outcomes and the implications for lenders and existing collateral. So we took a look first at the broader industrial sector, and we're going to carefully group data centers and kind of pull them out, but still rope them into the broader industrial landscape.

33:45I know some folks call this digital infrastructure or infrastructure, but we're CRE folks. Lonnie and I are simple folks. And let's just face it, if we just look at the size of these boxes and the nature of them, they fit probably best in the industrial sector if we have to group them and make that choice. So industrial and data center commercial mortgage-backed securities, or CMBS issuance, reached 24.7 billion through October 29th. or this was 22 % of private label CMBS issuance this year. Only 2025 and 2021 were larger years since 2015. In 25, we had 28.9 billion. In 21, we had 27.4 billion.

34:23Another roughly 4.2 billion would bring 2026 to last year's total. Now, when we look at where this breakdown goes, warehouse financing came up at the top at 11.1 billion or 45 % of the share. Data centers, second at 6.1 billion or 25%. Manufacturing at 3.2 billion, 13%. Flex and R &D at just under 1 billion or 4%. And then we had the nebulous other or not yet classified at 3.4 billion or 14%. Sometimes it can take a while to clarify the classifications. And you can imagine the slush fund of quote, other things that would exist in the industrial space that are not easy to categorize. And if we dig beneath the surface to the warehouse sector, warehouses representing 67 % of combined issuance in 2021 versus 45 % this year, it's interesting to look at how this has shifted.

35:18So warehouse, single asset, single borrower, SASB issuance fell from$16.5 billion to$9.6 billion across these two periods. Among those balances with reported loan purpose, acquisitions accounted for 54 % in 2021 and refinancings were 28%. This year, that share is 8 % for acquisitions, 91 % for refinancings. So in other words, strong securitization volume, increasing in reflex, financing for existing owners, and is not signaling a recovery in property transactions. Now, data centers have become a massive part of the CMBS exposure landscape. Data center issuance increased from$3.2 billion in 24 to$11.5 billion in 25, followed by$6.1 billion through October 29th of 2026.

36:09So keep in mind that 2026 figure is a partial year. We could still see another one, maybe two deals come to market this year. My guess is we'll probably only see one, if at all. This might actually get pushed out into 2027. that's a topic for another day. That's something we'll be discussing in an upcoming MarketPulse webinar about what the conduit and SASB and series CLO pipelines are looking like through year end. So turning to the credit implication here, performance is depended heavily on relatively small group of transactions. Keep in mind, Blackstone is a massive part of this. When we look at where the balances are coming from, of the 17.6 billion securitized in 2025 and in 2026, 63 % came from Blackstone-sponsored deals, while 99 % was financed through SASB transactions.

36:56I mean, this is really interesting in terms of where the dollars are coming from and where they're flowing to within the sector. So CMBS is also capturing only a part of the lending landscape. Remember, we still have private credit. You still have ABS. There's a lot more to this landscape, but I personally like CMBS. It's transparent and it's disciplined. The structures you have in CMBS really haven't been used as heavily in the ABS sector. So when you talk to some of these trading desks, I've heard directly from some folks saying that, yeah, we really haven't bought into the ABS sector because the discipline and the structure is not there, giving us the same protections that we get in the CMBS sector.

37:34So Lonnie, data centers were front and center of last night's election. Do you wanna walk us through what we saw on the election side? Yeah, so I mean, look, I wanna just add quickly, I think that you'll see CMBS vying for more and more of this issuance, like as a percentage or share. To your point, they can tout some of these transparency and structure things that actually are valuable to the marketplace that some of the other options maybe don't provide. And I think you'll see CMBS going after aggressively more of that data center market. However, kind of to your point on the election stuff, that market may be smaller today than it was last week.

38:11If you look back at the November 3rd election, 41 local data center measures and 38 jurisdictions across 10 states were on the ballot. In 28, yes would impose restrictions or additional requirements. In 13, yes would permit or support development. Nine questions were advisory. If you look at the results here, there were 24 that passed with restrictions or additional requirements. There were 11 that were defeated. So across all measures, 24 were yes, which again would impose additional restrictions and additional requirements. Eleven were no, and there were six pending. So, you know, again, we talked about the voice of the voter coming through.

38:53Data centers did not fare well here. And, you know, I think for me, a couple of just general thoughts on this, Stephen, I'd love to get your insight as well. It's like, we've highlighted that data centers have had a marketing problem. And I think they underestimated at some level what local control actually means in practice. When you have local municipalities, when you have county governments, when you have state governments that can impose local controls and statutes that require certain things of a developer, and they can take it to a ballot, that's not a place you want to be in as a developer.

39:29You got to avoid that at all costs, because once those things pass, it's almost impossible to move past them. And so for these folks here, by not having a clear strategy around just marketing of what they're offering, selling the value proposition to the community. And we're going to have a guest podcast that we'll be releasing here shortly with a data center expert from Newmark where we get into some of these questions. You know, I think they're dealing with the ramifications here of whatever upward slog they thought they've had the last five years. It's now some multiple more difficult relative to what they've gone through, because at this point, they have codified voter support for pushing back on these.

40:12And so for me, the question is, I don't think that we're, I think we're past critical mass. And I've said this multiple times on the show in terms of just our consumption of the compute required and that we're going to have to build data centers. In your estimation, does this lead to just the markets that were open to this? Do they just get the influx of all of this new development on an ongoing basis and they have to figure out the power and other things? Or does this pushback from the voters actually kill momentum at a level that I think we probably would have thought was unprecedented six or eight months ago?

40:50It's a little bit too early to tell because I have a great map of where these votes took place versus where the CMBS footprint of existing data centers exists. And you don't have a lot of overlap. You do have some overlap, but you don't have a lot. So in other words, the places that have figured out how to develop these, put them in their communities, and honestly, in some cases are benefiting massively, right? The teachers getting 10, 15,$20 ,000 bonuses and electricity maybe has gone up on the margin. But I mean, this is something that is being actively worked toward mitigating. I mean, this is something that cannot persist.

41:29And I strongly believe we'll have a private market solution where that electrical cost will be absorbed and not passed on to the consumer because it is not tenable for the consumer. It's a non-starter. It's a no-brainer. So in other words, will the action of some of these areas that didn't have data center footprints influence or bleed into the areas that do install development? It's too early to tell yet. And certainly with the change in seats, I mean, that's maybe something we should have or could still overlay on this map is to show the change in political party, right? To maybe read between the lines and see where those delays could take place.

42:08Because honestly, that's maybe one of the easier things to get done in a state or local office. Time will tell. Okay. And to close here today, we have several stories in our deals and data segment. Let's start with a Brooklyn multifamily story. We saw Affinius Capital provide a sizable refinancing for a newly completed apartment tower. Lonnie, walk us through this story. Yeah, so as you mentioned, Haley, Afinius Capital provided$226 million in financing against House 55. This is a recently completed 295-unit apartment tower at 55 Willoughby Street in downtown Brooklyn. Shout out to our friends from Brooklyn.

42:53The 42-story building was developed by a venture of Lana Serra Partners and Rubina. The new loan allowed the developers to retire a$128 million construction loan that had been provided by Santander Bank and City National Bank in 2023. It means the new financing is$98 million larger for those that are doing the mental math than the original construction debt, providing additional capital for the property stabilization. This property offers studio, one - and two-bedroom apartments. Some of the nicer features are nine-foot ceilings, floor-to-ceiling windows, in-unit washers and dryers, and Samsung and Bosch appliances.

43:29Asking Rince here, and Stephen, maybe you can give me a feel for what you think this looks like. Start at$43.40 a month for a 362-square-foot studio and about$12 per square foot per month if you break it down, which is roughly$144 per square foot on an annualized basis. Seems pretty strong to me, but maybe in that market, this is kind of what prevails. Brooklyn has been on fire. I mean, you've had a lot of migration, a lot of strong, positive talk about movement, rents, momentum in that market. So it doesn't surprise me all that much. But then I think about what a 362 square foot unit actually looks like.

44:07And I'm struggling to imagine the bunk bed and splitting that rent because that's what it might take for some folks. It's the tough reality of studio units in New York City. Wow, 4340. But hey, I mean, the plus side is, and this is a strong plus, you got in-unit washer and dryer. I mean, that is, that's really important. Okay, let's move over to Boston because this next story is a pretty interesting example of how much the office market is changing. Rock Point just bought back an office tower that it previously owned, but at a dramatically different valuation. So Stephen, walk us through what happened here.

44:48So Rock Point Group, which previously owned the property, won a foreclosure auction for 100 Summer Street, a 32-story office tower in downtown Boston, with a$260 million bid. Now, Rock Point was the sole bidder at the auction. Wells Fargo had foreclosed on the property in September, putting the building back on the market through the foreclosure process. The price represents a steep decline from Rock Point's previous purchase. The firm paid$806 million for the tower in 2019, meaning the auction price was about 68 % below that amount. The building is near Boston's South Station, a major commuter rail and transit hub.

45:25The property was approximately 72 % leased at the time of auction, leaving more than 330 ,000 square feet of space available for lease. This transaction is another example of pressure on older office assets, particularly properties carrying valuations and debt levels established before the markets shift toward hybrid work. Now, Rock Point's return as an owner also raises questions about its plans for the building and whether it sees an opportunity to reposition the property at a substantially lower basis. The tower contains approximately 1.1 million square feet across 32 floors. It was developed in 1980 by Cabot Cabot and Fords.

46:03It sits at Summer and High Streets, a short walk from South Station. The property includes about 100 underground parking spaces. Its tenant roster includes SimpliSafe, Geode Capital Management, Bullhorn, and Ironwood Pharmaceuticals. The Massachusetts trial court also leased more than 79 ,000 square feet for administrative offices. The$260 million auction price works out to approximately$236 per square foot and is about 39 % below the building's current assessed value of$425.4 million. Rockpoint has said that the decision to default was driven by the decline in the office property values, not a lack of confidence in the building's operating performance.

46:44The firm is funding the repurchase with a combination of its own equity and new third-party financing. Rockpoint is considering property upgrades, including potential enhancements to the building's amenities. Auction materials also identify the possibility of adding a rooftop deck. So this is an interesting one. Not as old as some of those older office trophy assets that have just been decimated value-wise, and not something you see too often with Rockpoint coming back around. Right, Lenny? This is a bit of an atypical. Yeah, I agree with you, Stephen. I think this is a little bit atypical right now.

47:18I think anytime you see foreclosure auction in the headline, right, it gives you a little bit of pause. But on this particular deal, that transit-oriented component maybe has some value. And so we'll see if that is enough to maybe pull this one back up. Okay, in retail this week, we have Simon Property Group, agreeing to acquire University Village in Seattle. I know we've talked quite a bit about the resilience of certain retail assets, and we've had guests on who have talked about shopping centers and particularly open-air retail centers. So walk us through this acquisition, Lonnie, and maybe what stands out to you.

47:58Well, I think it's great news to see after the passing of David Simon, that they're still doing deals, the REIT still making transactions and getting them done. So you mentioned this is in Seattle. Obviously, Simon is an Indianapolis-based REIT. The purchase price or expected closing date has not been formally announced at this point. The seller, though, is an affiliate of Stuart M. Sloan, co-founder of Egghead Discount Software, which was once the country's largest computer software reseller. 19 building property sits on nearly 24 acres near the University of Washington's main campus, about three miles northeast of downtown Seattle.

48:38Center was developed in phases between 1956 and 2019, 95 % occupied as of June. If you look at some servicer data that TREP has, it shows that the property generated$32.01 million of annualized NOI. Major tenants include RH Gallery, which occupies just under 44 ,000 square feet, has a lease that runs through January of 2032, Crate and Barrel with just over 31 ,000 square feet with the lease running through January of 2036. Room and Board with 28 ,400 square feet with the lease running through September of 2032. And Apple also operates a store at the center. So anytime you have Apple with a storefront location in your center, you know that drives a lot of foot traffic.

49:21University Village was appraised back in 2019 at$650 million when it was expected to generate$29.46 million of NOI at that time. So that previous appraisal would imply a 4.5 % cap rate at that time. The latest annualized NOI, as mentioned previously, is about$8.7 million higher than the figure used in the appraisal. So the value probably is going to come in a little bit steeper than that$650 million back in 2019. Property is currently encumbered by a$380 million mortgage with a 3.3 % coupon. and a maturity date slated for December of 2029, split across a couple of CMBS transactions. So this adds a prominent, highly occupied, open-air center to Simon's portfolio.

50:05That's proximity to the University of Washington, and a really strong tenant mix obviously drive value here. I think this is a really positive story, Stephen, on multiple fronts. I mean, it bodes well for Seattle, just a large institutional player being willing to come in and make a transaction here. It's a center that seems to be producing really positive, you know, NOI growth, despite some of the macro headwinds. Then it's good to see Simon, you know, back in the transaction business. And I just can't help myself on the foot traffic joke with Apple's Foldgate. I mean, you're going to have probably more foot traffic coming through this place with consumers with disposable income.

50:44I'm assuming that means you're sticking with Team Android here, Stephen. You know, after seeing those screen cracks develop, I was interested in that device. And yeah, Samsung Z Fold now wins again. We got to see the foldable phone in person this week in the TREP office. Shout out to our own Andrew C, who has that phone. And every single person in the office passed that around just to see what it was like. Very crazy, but kind of cool. We used to call that a COVID event. Exactly. All right, lodging. Here we have another sizable acquisition involving the Four Seasons Resort in Scottsdale. Stephen, walk us through the story.

51:24The venture of Sixth Street Partners and Riller Capital paid$372 million, or approximately$1.77 million per room, for the 210-room Four Seasons Resort Scottsdale at Troon North in Scottsdale, Arizona. The buyers acquired the 27-year-old resort from Braemar Hotels and Resorts, which has been selling assets as it works to become a self-managed REIT and reduce its reliance on its external manager, an Ashford Hospitality Trust affiliate. Bremar purchased the resort in 2022 for$267.8 million and invested another$12.9 million in upgrades and capital improvements. The latest sale represents a roughly 39 % increase over its original purchase price before accounting for those additional investments and selling expenses.

52:10The property sits on 38 acres at the base of Pinnacle Peak, includes 22 suites averaging just over 1 ,200 square feet each, each with a patio or balcony, along with almost 36 ,000 square feet of meeting space and three restaurants. Other amenities include a 9 ,000 square foot spa, a multi-level pool complex, four pickleball courts, and two tennis courts. The resort also provides shuttle service to two nearby golf courses, including Troon North Golf Club. The property has another 13 acres that could be redeveloped into additional rooms, giving buyers potential expansion opportunities. Operationally, the resort reported 60.22 % occupancy and average daily rate of 867.26 in 2025, producing RevPAR of 522.22.

53:00EBITDA totaled$28.02 million for the year. Braemar said the sales price represents a 6.2 % capitalization rate based on NOI for the 12 months through August. The hotel generates$5.39 million of EBITDA in the second quarter. The acquisition is the third resort the 6th Street Riller Venture has purchased from Braemar. The buyers previously acquired the 142-room Pier House Resort and Spa in Key West for$190 million and the 193-room Park Hyatt Beaver Creek Resort and Spa in Colorado for$176 million. Buyers secured new financing from Aries Management, arranged by Eastdale Secured, replacing a$180 million mortgage from Aerial Capital that was not scheduled to mature until August of 2028.

53:48The new loan terms were not immediately available. Yeah, as you were covering that story, Stephen, I thought to myself, I think these guys have done a couple of deals before. So it's good to see them continuing that positive relationship here. It seems like they've kind of found a niche that works well for the Sixth Street Partners Group, and it obviously has worked well for the sellers. And finally, let's head to Miami, where Centennial Bank provided construction financing for a new hotel and entertainment development along the Miami River. We haven't had many stories lately about Miami, but it's still pretty hot down there.

54:22Centennial Bank provided$145 million construction loan for Riverside Wharf. This is a two-building hotel in entertainment development. As you mentioned, Haley, along the Miami River in downtown Miami. It's being developed by Driftwood Capital, which is based out of Coral Gables, MV Real Estate Holdings of Miami, and Merrimack Ventures of Fort Lauderdale. So it's got a lot of Florida support here on the development side. 167-room Dream Miami Hotel, a 30 ,000-square-foot nightclub, and a 12 ,000-square-foot event hall. along with multiple dining ventures. So this is a really great story. Construction is currently underway.

54:58Completion is scheduled for fall of 28. And the$145 million loan is notable for a hospitality entertainment project in downtown Miami. So Stephen, I guess this would probably go under a mixed-use header. Yeah, I mean, it seems appropriate. Mixed-use, heavy hotel tilt. And let's not forget, there's an important public aspect to this. There's going to be an expansion of the Wharf, Miami, a publicly accessible riverwalk along the Miami River. And so I feel like, you know, that kind of draw that public interaction is probably an important aspect of trying to make this project work. All right, guys.

55:31So, you know, it's a busy macro week when we don't even get to do a segment on our delinquency report, which we also released this week. So I'll add that as a quick programming note here. For anyone listening, the TREP CMBS delinquency rate fell 15 basis points to 7.87 % in October, 2026, down from 8.02 % in September. That improvement was largely driven by the return to current status of a$975 million loan backed by a portfolio of showroom properties in High Point, North Carolina and Las Vegas. We have a lot of other details in our report. Of course, if you haven't read it yet, reach out to us at podcast.trep.com.

56:16We'd be happy to share a copy with you. And we're also working on our special servicing report for the month of October 2026. And I know there's some interesting nuggets in there, Stephen. So we'll get to that next week. As another plug for our research, we just had a great call today as a research and marketing team. And we're really building out our annual year-end magazine. This year, we're focusing on the cost of capital. We'll be looking back at how capital moved through commercial real estate in 2026, what's changed across the lending and investment landscape, and where the market may be headed in 2027.

56:55We're also planning to bring in perspectives from industry leaders alongside our own research and data. We have a lot of really interesting advertising opportunities as well where you'll get in front of not just the TREP audience, but the audience at the CRE Finance Council Conference in Miami, the MBA conference, the NMHC conference. So just a quick plug for that right now. I'll go into more detail on another show. But if you'd like to take part in our magazine that really has a lot of reach across all TREP's channels and beyond, send us an email and we'll make sure you're on the early access list to get involved there.

57:34You still have time if you're a graduate or you're graduating in December 2026 for our Future CRE Leaders Program. As a reminder, I've been talking about this on the past several episodes, but this is our program that highlights undergrad, graduate, and PhD students who are entering the world of commercial real estate. The deadline to apply is Wednesday, November 11th. So reach out to us at podcast.trep.com if you've been thinking about it or if you need more details. And still to come in November, we have more webinars. We're not letting the Thanksgiving holidays stop us. On Tuesday, November 17th at 2 p.m.

58:14Eastern, we're doing a TREP CRE targeted training for our clients to help them get the most out of our front-end TREP CRE platform. We are consistently releasing new enhancements, new features, new webpages, new datasets. This will be a training where you can get an easy-to-access workflow on everything that's new. We'll walk you through practical workflows depending on your use case or what you do in the business. And this is just going to be the first edition. From there, we'll host more specific trainings just based on you. if you are a client of Trep CRE and you want your own customized training, send us an email.

58:56We'd be happy to come to your office or host a webinar specific for your team. In our public facing webinars, we have our next edition of the Trep Market Pulse webinar where Lonnie and Stephen will talk about the CMBS and CRE CLO pipeline for the rest of the year. We'll dig into how secondary and tertiary markets stack up. And we'll do a deep dive on the industrial market. We have a lot of listeners always asking for more industrial content. So if you've been wanting that, sign up for this webinar. It's taking place on Thursday, November 19th at 2 p.m. Eastern. We haven't sent the invite out yet when we're recording this podcast, but when it's live, you might have it in your inbox.

59:41If not, send us an email to podcast at trip.com. And turning to shout outs, people liked your haunted house last week, Stephen, although it was very spooky for people in the industry. Paul R. reached out and wanted a copy of it. If you liked that segment or if you haven't heard it yet, go check out last week's episode or go to our research and insights section on our TREP website and you can find that in written form as well. Christy shared on social media, everyone is watching office vacancy and interest rates. I'm watching something else, margins. Trepp found that operating expenses are growing roughly twice as fast as revenues for office properties with CMBS debt.

1:00:23So he's quoting our recent office operating expenses report. If you haven't seen that yet, send us an email and our team will get that to you. Matthew D. was interested in our October CMBS delinquency report. Ryan C. said, great podcast as always, and wanted to see the breakdown of the largest loans behind the delinquency report. We have that too. If you're interested in that, reach out to us. Jonathan P. thanked us for our Q3 quarterly data review magazine. He shared it with his team and is excited to read more from our team. And Lauren C. thanked us for the regular podcast and is enjoying the TREP CRE rundown emails as well.

1:01:06So as always, a lot from the TREP team. Reach out to us if you have any questions, comments, feedback. Like and share our posts on LinkedIn, please. And go rate us five stars on Apple or Spotify. We appreciate all the support as always, and we will see you next week. With that, we'll close. Thanks to our producer, Carly Cento. Join us next week as we look at what's happened during the week and how it may be impacting you. If you have a question or just a comment, send an email to podcast at trep.com and subscribe to the Trep Wire podcast with your favorite provider. Thank you for listening and stay well.

1:01:42All right.