434. The Half-Point Debate, Data Center Bonds, Mall Math & Shifting CRE Risk

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 November 13th, 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. We're recording a little early this week because of Veterans Day. And to all our listeners who have served and to veterans everywhere, thank you for your service. And we wish you a meaningful Veterans Day. But even though it's a shortened week, we have two big reports to work through.

0:44Friday's jobs report came in well above expectations, and this week's inflation report has markets asking whether the Fed could go bigger in December. We'll look at which industries are hiring and what the last three months of inflation tell us, with the October year-over-year numbers missing because of last year's shutdown. In our Digging Through the Data segment, we'll follow up on the local development votes, check how data center bonds held up during last week's stock sell-off, and look at what mall sales per square foot tell us about two Simon refinancings. Then we'll get into some of the recent notable deals, from a bank selling San Francisco apartments to a Chicago office foreclosure filing, a Fresno mall maturity default, and two hotel acquisitions by host.

1:33So Stephen, what changed for you between Friday's jobs report and today's CPI? Brian's report gave the Fed more room to raise rates. I mean, unambiguously over the top, market is now pricing in at a minimum two rate hikes. And if you listen to the street, some folks are now calling for three. Like I think Mark Lozetti was out at Deutsche Bank on Tuesday calling for three hikes now. So let's move to the jobs first. We got 165 ,000 jobs, beats just absolutely blew out of the water, the market consensus. And we had also upward revisions to the prior two months and a strong month for professional and business services.

2:12Today's CPI put the size of the hike in play. The headline cold is energy eased, but core inflation is running at a 3.8 % annualized pace over the last three months. In Tuesday morning's snapshot, the CME FedWatch tool now has a quarter point increase at about an 85 % chance. And get this, Lonnie, there's now a 15 % chance of a half point move, which I think is kind of aggressive, But interestingly, before the CPI data came out, Waller was actually out with his Fed speak and said if the CPI came in hot, he would find it hard for the Fed not to raise rates by 50 basis points and still retain credibility.

2:54And then after the CPI data, remember Logan was already on the hawkish side. Well, she was out basically saying that, I mean, at a minimum, we probably need to move in consecutive months at 25 basis points. But I still don't think that closes the door on a 50 basis point hike that Waller threw up. And let's just wrap all of this up with a nice bow and remember that the Fed isn't doing forward guidance anymore. Ha ha ha ha. So for Siri, the question I'm watching is when a lender sizes up a loan today against the property's cash flow. I mean, under what rate forecast conditions are they doing it, especially if it's a floating rate loan?

3:29And what's this going to do to the cost of given various strike prices for those interest rate caps on floating rate loans? I mean, it's going to go through the roof, I suspect, because we'll get into the rate moves that we saw in the market just a little bit. But those rate moves put in significant volatility. and let's all not forget options 101 from undergrad. When volatility goes up, the cost of an option goes up. Sigma matters a lot. So in our property type stories and financing, we have lots of interesting stories to work through this week that are gonna bring a number of the different themes that have come out across the last, say, week and a half, two weeks.

4:09I think a very nice, crystal clear, like through line for this episode. So I'm excited to get into it. Lonnie, how are you feeling after that jobs report and Tuesday's CPI release? I really don't know how to feel about this, Stephen, if I'm being completely honest. I mean, I think we're entering this era of anything goes at some level. You got Waller out there putting out 50 basis points. And like my gut feeling is like that's not that crazy, honestly, especially if you have people calling for three 25 basis point rake hikes or whatever. Like, why wouldn't you just make a 50 basis point move in December and see what happens?

4:49I mean, it feels like the Fed has tap danced its way into this corner that they're in. And it's time to maybe make some sort of a bigger move. Now, given what we saw with the last 25 basis point rate hike, I mean, the market reacted in all sorts of different ways. And the volatility that you mentioned is not going away as evidenced. And even though we've had the election cycle, it's kind of like we had this discussion two years ago with the current administration that got voted in when there was a red wave. It was like you have all these lame duck politicians, like what's really going to get done?

5:21And I think we have the same scenario playing out here. So it'll be interesting to see where things actually play out. I mean, it feels like CPI and jobs reports and all that stuff gives the Fed room to make a move. just do they have the the fortitude to go ahead and do it or are they going to continue this tepid kind of either no movement or 25 basis points because as we've said i don't think a 25 basis point move either direction really does anything for the market maybe psychologically it does but mathematically it's not a huge huge lever one thing i wanted to get your opinion on steven was on these jobs reports and the revisions that continue to be made to them every time these reports come out, there's some significant revision to the previous numbers.

6:07And I've brought this up at some level in the past, but I mean, at what point do people just stop trusting the as-reported numbers? And do we get ourselves in a position where you have to wait for the revised numbers before you actually take them at face value? Nah, this is just the age-old game, Lonnie. It's the same data, same crap, different economy. We're going to keep playing this game, man. And traders are going to keep just swinging for the fences. And, you know, the economists, bless them, they have an impossible job trying to project this stuff. As noted, like they had a 65 ,000 projection for this past month that came at 165.

6:45Honestly, I'm a little bit surprised that that 165 beat everybody's estimate and that nobody had a guess to the upside because you had Amazon come out and say, hey, we're hiring like over 200 ,000 people, right? I mean, the pull forward in employment's massive, consumer spending's up. We would have thought at least like some economist who's going to be brash and, I don't know, just pencil something ridiculously high to go opposite the Myron move, right? So I don't know. I'm a little bit disappointed in the rogue economists out there that maybe reined it in too much for October payroll estimates.

7:15Fair summary, Stephen. Fair summary. Now, let's dig into where those gains came from. So 159 of the 165 ,000 came from the private sector. As we mentioned, the BLS also revised up their August from 53 ,000 to, wait for it, 186 ,000. September was revised up from 31 ,000 to 60 ,000. So that puts the August to October average at 137 per month. When we were just talking like a month or two ago about the break-even being, I don't know, something silly like 30 ,000, 25, 30 ,000 jobs, right? Low hire, low fire. Well, that just got thrown out the window. I mean, it's that window that we're still looking out of that's told by the Fed that we should be.

7:57Gosh, this window, I hopefully, has got some pretty scenery out there to go along with the ugly, I shouldn't say ugly data, but if you're short rates, it's pretty. If you're long rates, it's ugly. Digging even deeper, professional and business services led, which is worth flagging for office listeners. The sector added 70 ,000 versus its prior 12-month average of 15 ,000. We have to wonder how much of that is AI-led, AI-driven, AI-incentivized. Professional, scientific, and technical services added 33 ,000. Administrative and support services and related industries added 28 ,000. And management of companies added 9 ,000.

8:34Temporary health accounted for only 19 ,000. You would have thought that would have had a little bit bigger boost relative to that office sector, which is at least my personal take and the surprise in this sector. So that mix in the report is more encouraging for office demand than a healthcare-led print alone, which we had been seeing, right? It's mostly like teachers, health, and to some extent like government. So turning to healthcare, parcel delivery, and durable manufacturing, where the other standards stood, we had 42 ,000 led by hospitals, transportation and warehousing added 25 ,000, but 17 ,000 came from couriers and messengers.

9:09So that's the seasonal bump for like the UPS, FedEx, maybe if some of the Amazon hires can get carved out. But my guess is that's mostly like the typical parcel delivery companies that you would expect, not as much driven by the Amazon boost. Manufacturing added 19 ,000 with 25 ,000 in durables, offset par by 6 ,000 lost in non-durables. So the four leading sectors together accounted for roughly 95 % of the net payroll gain. Still, that private sector hiring diffusion index rose to 57.6 from 54.2, indicating a wider balance of industries adding jobs than in September. Layer on top of that, just some of the chatter about pay.

9:52And we have a little bit warmer, I won't call it hot, but a little bit warmer now pay wage inflation concern, probably working its way into Fed discussions. What do you think, Lonnie? I think you do. And I was looking up the definition of revision as you were speaking, because when something is revised 3x or 2x, in the context of a written document where you have someone that comes in and provides you revisions, this feels more like a rewrite than it does a revision. And I just, I know we've already talked about that and you gave a nice explanation of playing the same old game. When you start going through the numbers like that in real time, it's more of this stuff where, you know, large-scale decisions are being made on information that's being compiled and disseminated in a fashion that maybe was good enough 50 years ago, but in no logical sense should be used today when you have significantly more technologically advanced capabilities available.

10:51So, yeah. Sorry I'm not adding a bunch of deep thought to this today, Stephen. I can't seem to get past the revision numbers here relative to where the market is. No, that's absolutely a fair hurdle to get over because if we can't wrap our head around what's driving those numbers, can we really have confidence in how we're weaving the theme into our forward projections? It makes it very difficult, right? Like I want to believe these numbers as they stand and try and tweak my forward forecast to say, personally, I feel like in my own forward projections for 27, maybe I've been a little bit too bearish on the slowdown in AI coming out of the election.

11:33I don't know that yet. It's still too soon. But with this jobs print, I have to wonder, maybe, maybe I need to dig a little bit deeper into the forward construction estimates of data centers, the broadening out in employment, and maybe I do need to elevate my rate forecast, right? Because I just got done filling out my Fannie Mae price index estimates for the fourth quarter, and they were asking specifically about 2027 issues. I won't get into them because I don't want to spoil the surprise for anybody that's going to read the release of that Fannie Mae survey from Pulseonomics. But I feel like perhaps I was maybe a little bit more bullish than some of the economists out there in the survey, but not as bullish as I maybe I could have been on the rate forecast.

12:20Well, that's just where I get kind of hung up. And you said that much more eloquently. That's what I was trying to say. And thank you for reading my mind. We've done enough of these episodes at this point that you can take my slow southern country dialect and turn it into something that sounds polished and I appreciate that it's just if you don't believe the numbers it's really hard to forecast anything and the data center stuff I know we'll probably get into it at some point here but I would almost say like we probably haven't been bearish enough broadly I mean like with everything coming out this week with NVIDIA you have all of the moratoriums and all of the legislative stuff that came out that we talked about last week on the data center votes.

12:58It'll be very interesting to see how you square all of that up with some of these jobs numbers here. So now that we've covered the jobs print, let's move into inflation, which had some pretty big moves for treasury yields on Tuesday. Boy, did it ever. Lonnie, I want to get into the CPI numbers, but I'm going to work backwards here a little bit. And let me cover the rate moves first, because I feel like that will help put context around just how massive this inflation print was. I was looking at treasury yields early in the morning and then right like five minutes after the CPI print broke. So I wanted to see that like immediate snap reaction.

13:39Yields weren't up that bad. We were up like maybe a couple of basis points ahead of the report, but then we were up five, eight basis points, like a modest move. And then once treasury traders had actually had their morning coffee and settled into the implications of this report, it was off to the races in an ugly, ugly way. By about mid-morning, call it like 10.30-ish, we had a pretty sizable sell-off. And by sizable, I mean, we went from being up roughly like seven basis points in early trading, maybe five to seven, maybe five on the 10, seven on the two, that accelerated to 15 to 17 basis points by mid morning, right?

14:19That 830 CPI data release absolutely caused a paradigm shift higher in yields, like broke through the ceiling in a big way. And that bear move continued. What we had on Tuesday was a very significant bear steepener. The two-year yield line moved higher than 20 basis points north. I think the high on the day was above, I mean, it was like 4.82 maybe, right? And it backed three, four basis points off that to close like three, four basis points off that midday high, which it reached by noon, right? So around lunchtime was like peak bearishness. We pulled back off of that by about four basis points, but we sustained that move for most of the day.

15:01The 10-year increased by about 12 basis points. I think the peak, I mean, we broke well through 5%. I say well through. We broke through 5%. I think we hit like 5.03 or something like that, 5.02. And we closed the day around like 4.98, 4.99-ish. So we're right back at that five-handle, 10-year level, that age-old resistance. So it's going to be interesting from here because the entire street now is rethinking and repricing their Fed rate hike probabilities in a very big way. People calling for three, people saying three may not be enough. And I'm like, whoa, whoa, whoa, whoa, folks. Like we haven't even brought in the new Congress yet.

15:43We don't know what we're gonna whittle down this one-legged stool to two years out. Like let's not get too far ahead of ourselves. Let's also not forget, like oil has come down pretty significantly and we're still not clear on how much of that diesel price inflation has bled into prices. In my opinion, I feel like this month's data was the first big show through. And some of the people were being a little bit too conservative and saying that this wasn't diesel driven, that this is broadening out inflation. I'm still not convinced. Diesel bleeds into everything. 18 wheelers drive every freaking component out there, right?

16:16So when you're seeing an 18 wheeler fill up with 200 gallons, which is about a thousand bucks, that 18 wheeler, I mean, at least, right? Good day if you're filling up for a thousand. Yeah, that's going to make its way into electronics. It's going to make its way into groceries, it's going to make its way into construction deliveries and house prices. It's in for everything. So, gosh, Lonnie, should I get into the numbers now? Yeah, I think you should. I was interested to add a little anecdote here. My dad works for a very large business in the U.S. that does a lot of freight movement. And he said over the last couple of months, every single vendor that they work with is now charging a additional fuel surcharge and it's not an inconsequential amount.

16:59I mean, it's in some instances an additional $400 ,000,$800 ,000,$1 ,500 charge for shipments to be delivered before they can be shipped off. And it's to your point, like it's not just that at the pumps, it's being felt across the spectrum. And so it's great to see that we're seeing a little bit of pullback on the diesel cost. But I think for all the statements I just made earlier about these technological advancements in the world we live in, freight moves generally by two methods. It's rail or it's diesel truck. And there's a lot more trucks than there are train cars. It's pretty pervasive. It's finding its way through the market at scale.

17:39Now, we shouldn't forget that. Well, I mean, there's technically two more, right? You got air and you got water. But I just wanted to throw in a little funny quip that by water, the Russian tanker that was delivering low sulfur diesel, I think, to New York, at least it was scheduled to, just like changed course and now it's like zigzagging. There's something going on there. Oil traders are watching that one like a hawk. So that was an interesting evolution on Tuesday as well. Yeah, yeah, for sure. So headline CPI rose four tenths of a percent month over month above the three tenths. Now, what's funny here is we don't have any year over year numbers to give you because remember, well, last year the government was shut down.

18:15So we'll get to some of the rolling averages and annualized numbers here in just a little bit to do our best to bridge that gap. Energy slowed sharply from a seven-tenths increase from 5.2%, while food accelerates to half a percent from flat. Gasoline accounted for more than half of September's headline increase and contributed only about 0.04 percentage points to October. So, I mean, oil did pull back a good bit. Shelter mattered, but the pressure extended beyond it. Shelter rose three-tenths, accounting for just over 30 % of the headline increase. Primary rent rose two-tenths. Owner's equivalent increased three-tenths.

18:51Lodging away from home increased six-tenths, down from 2 % in September, fortunately. Outside shelter and transportation services rose eight-tenths. Motor vehicle insurance rose seven-tenths. Medical services rose three-tenths. Non-energy services, excluding shelter, contributed to roughly 0.10 percentage points to the headline CPI. So almost as much as shelters, 0.11 point contribution. Core goods had more pressure than aggregates suggest. Core goods rose two-tenths, even with used cars and trucks down 1.2%. Excluding used vehicles, core goods rose four-tenths, up from two-tenths in September.

19:32New vehicles rose two-tenths. Household furnishings and supplies rose seven-tenths. Core CPI, excluding shelter, so that's super core, rose four-tenths up from three-tenths in September. So this is really the strongest evidence we've had of broadening out in this report. And even as like the published core rate held at three-tenths for the third straight month, this is still not good news for the Fed. So I mentioned we didn't have annualized numbers, but we can look at the rolling three and six months annualized numbers to give a little bit of help here. So Lonnie, let me use the headline six-month annualized right here, going from July, August, September, and October.

20:13The headline six-month annualized rate rose at 3.9%, 4.1%, 3.7%, and 3.1%. So if we're looking at that September to October move on a six-month headline annualized, you'd say like, well, it's better, still really elevated, but here's where you really start to see issues. So when you look at the core three-month annualized and the core six-month annualized, from September, we had 3.4 % or 2.9%, depending on if you're using the three or six month. Well, in October, that core on a three month annualized basis increased to 3.8%. On a six month basis, it dropped from 2.9 to 2.7. So depending on which way you're trying to split these hairs, the trajectory on a three month basis still looks pretty bad.

21:00On a six month basis, say, well, we're still at like the high two's pushing that, you know, almost 3%. It's not great, but it's not terrible. So I think just overwhelmingly, right, the joke of this data break is that this makes the Fed's hold in October look like a mistake. To me, that's what the read is. Yeah, I agree with you. There was very low downside risk for them if they had just made a 25 basis point move in October. I mean, I get it. There's probably some political fallout or pushback or people would have made an assertion. But to your point, this makes it look like they probably should have taken that risk because the data suggesting that it could have potentially changed the course.

21:40Now, I understand that we detailed this when we talked about them not making a move, that they hadn't really had enough time to see if their previous rate hike had actually played its way through the system yet. But it puts them in a tougher spot now where, I mean, they're basically, in my opinion, forced to do something here in December. and people will be judging whether it's enough or if it's another one of these like tepid kind of reactive responses. So let's get into our digging through the data segment. Last week, we looked at local votes on data centers. And by Thursday, November 5th, after the Democrats won both chambers of Congress, the Nasdaq fell five and a half percent as investors weighed what greater scrutiny could mean for the AI buildout.

22:25That matters beyond tech stocks because the build-out has been supporting business investment. So before we get into what happened in bonds, let's go back to the ballot. Lonnie, did voters take the same approach to housing and other development? Yes, I'm glad that you asked. So as it pertains to local development votes, Haley, they were more selective. So first, a quick reminder on the numbers that we used last week. We tracked 41 local data center questions across 38 jurisdictions. In that snapshot and its follow-up discussion, we found that 40 of the 41 measures or advisory questions were voted against the data center.

23:03So they went against data centers with only one jurisdiction voting in support of data center development. Some of those votes were advisory. Nick on our research team at TREP looked at the other local development measures. Of the 29 with a clear direction, 11 went or were tracking in developers' favor. The ones that directly added housing did better. Six of 10 went the developer's way. At the same time, 11 of 13 measures tightening development rules passed or were on track to pass. Voters could back more housing and still want to say in where and how it gets built. This is a tale as old as time.

23:38Take Davis, California. Voters approved 1 ,250-home Willow Grove project, including at least 250 deed-restricted affordable homes. In Prescott Valley, Arizona, voters were on track to reject annexation for a 3 ,500-home development that would leave the site under county jurisdiction. For the developer, that difference can change the approval path and the timetable. Just one last note, affordability funding had broader support. So nine of 11 measures funding affordable housing or homebuyer aid passed or were on track to pass in the November 5th review that Nick completed for us. So, Stephen, I think this is a very interesting, again, none of this comes as a complete surprise to me.

24:21I mean, like if we're waving pom-poms and cheering success for pro-development with six out of 10 ballot measures are in favor of developers, that's a very slim win, if you want to call it that. And then when they maintain additional controls around affordability components or deed restricted components or other things, it still makes it much more difficult for developers to actually get these projects built. So much better results than the data centers, undeniable at that point, but still not something that I would say is super favorable, especially if you actually believe that there is an affordability crisis in America and there is some sort of housing shortage.

25:05I think I'd like to see a lot more of these go in favor of the developer where we can actually build some new supply to offset some of these challenges. You know, at the same time, I am a little conflicted at some level, Stephen, of we're turning into like a renter nation. And I don't think that's good long term either. Like, I think over the last, you know, 100 years or so, generational wealth has been created through ownership, ownership of either businesses or in a lot of cases, real estate and not just income producing real estate. Even though we could argue back and forth and there'll be plenty of listeners that kind of sit on either side of this, I think of like, is your personal residence an investment?

25:46Technically probably doesn't meet the definition, but in practice for a lot of people, it does build up a nice nest egg security for them later on in life. And if you make it prohibitive for people to be able to buy, it does create kind of this odd scenario where you have, you know, a market that we're in now where you just have a disproportionate number of people that are long-term renters to the point that you have developers building at scale built to rent properties. I'm not against them, but it's something that I don't know that the research would adequately be able to speak to today because we haven't seen this type of proliferation, at least that I'm aware of, at any other time in our recent past.

26:27Oh, boy. Oh, boy. You opened up Pandora's box here, man. You breached the topic of Bushbaum's soapbox for lectures, man. The is owning a home an investment? And the renter stuff. So, okay, here's my two-minute take. I'm going to be as efficient and non-preachy as I can. Your home is only an investment if you recognize the CapEx, you save for it, and you maintain it appropriately. If CapEx is an afterthought and you're not actively fixing the things that are wrong with your property, you cannot call your property an investment. That's Bushbaum's take because let's be fair, with investment property, the stuff that's gone the most wrong in our data has clearly been the ones that have CapEx neglects.

27:12if you are in that cap X neglects category, it's not going to turn out well. And we're going to see that with the coming silver tsunami in the housing turnover. So this is where I think things get interesting over the next five to 10 years, is you have so much of the stock in the US, I mean, a massive, I think it's like 40, 45%. At the low end, it's 35%. I want to say it's close to 40 % held by that generation that's going to turn over in theory in the next decade. So what will that mean for home prices and home ownership during that transition? It's a topic that needs more discussion. It does.

27:47It does. Because you can make the case, obviously, if especially now with arbitrage on renting being so much cheaper than buying, that if you're disciplined and you rent and invest the difference, that you could come out significantly better in the long term. I think the challenge in life, as we've seen by all this consumer spending and everything else, is that are people disciplined enough to do that? And I think in practice, even with the CapEx discussion, and it's valid, on home ownership, it's almost like a forced savings account at some level. So that would be my position is I agree with you.

28:23It's not technically or from a definitional perspective an investment, but it does require some sort of forced diligence in the form of payment that then amortizes down versus renting an incumbent on that individual to go ahead and make investments with the difference. For a lot of people, though, that part's easy and they play on arbitrage and they're renting a better house or apartment than what they could ever afford to buy. And they're investing in the difference and they're benefiting from it. We should probably move on to data center and conduit spread since we promised we would. So let me transition this here, Lonnie, because one thing that I wanted to cover this week is if you looked at the equity movements last week, I mean, you had just blood in the streets from AI.

29:08NASDAQ almost hit a circuit breaker on Thursday with all of that data center moratorium talk slowing down and whittling down that one-legged stool in equities. And so my natural gut reaction was to say, well, wait, what happened in fixed income, right? The data center bonds take another leg down because the data center buildup is increasingly becoming a debt-funded issue. And so it'd be natural to just wonder, does that increase the default risk and maybe increase the credit spreads for those data center bonds. Well, let me just cut to the chase here and not spoil it with too much talk. They didn't blow out.

29:45You didn't have dramatic remarks on Thursday and Friday, like you might've guessed based on the equity move. So this was a good thing. The fixed rate AAA data center spreads actually ended up tightening about two basis points while the floating rate AAA widened about six, but on net, I mean, this was basically like a non-event for data center bond spreads. So did we see credit spreads change at all? Because that was a material credit crack that opened up last week. The short of it is we did. And it was in the conduit market where deals pull loans across properties. Now get this, Lonnie, the median BBB conduit spread actually ended up widening about 12 basis points for the week, which isn't that bad, honestly, in context, the historical context for the BBB tranche.

30:28Like this stuff can move around. It's super whippy. It could move 50, 70 basis points in a day. And at least your seasoned street traders would not blink an eye of that. Be like, well, yep, that's just a really bad day for triple B, but it does happen. So 12 basis points wider in the week and 98 % of those bonds were marked wider. So it was a wide breadth remark. Now the median triple A conduit bond widened by only two basis points. The low rate part of that market took the most hit. So this was the classic accordion move. So on whole, the data center bonds had already repriced in October. The fixed rate AAA spreads were about 60 basis points wider on the year.

31:07On October 23rd, 52 wider through Friday of last week. And so it's really been more of a story about the prior crack that opened up, what that means for data center spreads on a go forward basis. And hopefully we'll see more of it in CMBS because honestly, from what I've heard from traders, they do tend to like the structural protections you get in the CMBS market more than what you've seen, at least tended to see in the ABS market. So since we've covered a pretty good width here, and we are talking about spreads, let's move into one sector that's had some recent earning calls that I think is interesting and timely for our listeners.

31:46And that's the REITs mall earnings that we've seen and what we've actually been able to glean from some of these talk tracks on mall performance on a price per square foot basis across various operators. So I know, Lonnie, you love talking about sales per square foot, right? I do love talking about sales per square foot. Let's get into it. Let's do it. So for our audience out there, this is looking at the retailers within the mall and what their price per square foot looks like. So if you look at Simon, their U.S. malls and premium outlets combined, their core retailers, the people that occupy their malls and outdoor centers, did$852 per square foot in sales in the 12 months through September.

32:29Get this, Stephen, that's up 14.8 % from a year earlier. Simon's comparable retailer sales rose 4.9 % in the third quarter. Mace Rich reported$943 per square foot for tenants in spaces under 10 ,000 square feet, up from$867 per square foot a year earlier. On a comparable basis, those smaller tenant sales rose 3.5 % over the trailing 12 months. CBL reported$463 per square foot on same center basis, up 3.6 % over the same period. The property and tenant mix obviously matters when you compare those numbers. For Simon, that was looking at everything inclusive. For Mace Rich, it was looking at stuff just under 10 ,000 square feet, etc.

33:14et cetera. For landlords, sales per square foot also help gauge whether tenants can afford to pay the rent and what they can actually pay in rent. In fact, not just rent, but their property tax pass-through, their insurance pass-through, all of their CAM, you know, common area maintenance charges, et cetera. So let's give you an example. Let's take Colorado Mills. The smaller stores did $362 per square foot last year, up from$324 when the previous loan was originated in 2014. The mall secured a$93 million 10-year refinance at about 6.84%, up from the 4.28 % coupon on the old loan. Annual debt service still fell from about$8.1 million to$6.4 million.

33:56The new loan is interest-only, so the borrower has a smaller annual payment, and the principal is still due at maturity. And Stephen, I know we have a couple of additional examples. Maybe you want to walk us through this Arizona Mills one. Yeah, it's smaller stores. were looking a little bit weaker relative to that prior property talked about. They did$274 in sales per square foot and total sales of the property climbed to about$235 million in 2025 from$221 million in 2023. Now, Simon refinanced the property at roughly$89 million with a$135 million new loan, 10-year interest only. The rate went from 3.82 % to 6.66.

34:38Not exactly a lucky number there. but Simon still took out about 44.5 million after fees and reserves. So that's a pretty nice cash out and that's consistent with some of the refinance purpose and proceeds work that we've done. So even at a much higher rate, the property could obviously still support the loan. So for lenders, the question really depends on the deal in front of you. For a new project, can it get approved or can it get approved on schedule for an existing loan? Where's the market pricing risk? And for a mall coming up on maturity, what loan can the property's cash flow support, and specifically, how are the tenants performing?

35:14Lenny, I saw an interesting little quip. We talked about this, gosh, a number of podcast episodes ago, but warning out from Costco, noting that they're seeing a change in consumer behavior going into the holidays. So really interested to continue following up on that Costco insight because, right, that shift from beefed to canned meat, not a good sign. Where's the beef? I don't know if you remember that commercial, Stephen, but I got something here hot off the presses that I wanted to circle back to. And if you look at Texas, we're about to have a legislative session here starting in January on January 12th.

35:49So they can start filing bills this last Monday of this week for the 2027 Texas legislative session. OK, there's been 16 rental housing bills filed on day one. So let me give you a couple of these, Stephen, and it fits in nicely with the topics today. On the rental side, there's been proposals for city rent control for tenants 75 and older, a 14-day eviction notice instead of three days, a security deposit cap of one and a half times the monthly rent, limits on rent pricing software, fee disclosure rules, and a registry for corporate single-family rental owners. On the tax side, you have HJR 35, which would let lawmakers cap yearly appraised value increases on non-homestead property, rentals and commercial included, as low as 8%.

36:42So effectively, it could cap reassessment or reappraisal values at 8 % across the spectrum. Any cap change would go to voters in November of 2027. So these, again, are just filings. Did they word that carefully, like on the 8 % cap? Like, did they carve out transactions? I hope so. In Texas, it's a two-step process. The assessment office has to determine market value as defined by sales price or trade, but they also have to do an equal and uniform analysis, which means that properties are equally assessed regardless of what it just sold for. But they already had in place a 10 % cap, I thought.

37:19So only on homestead. So this would apply to non-homestead and commercial, right? This is effectively a Prop 13-like cap, a little bit higher than California, but very significant. This is a paradigm shift for Texas, if it were to be enacted, obviously. There's still plenty of time to be had on this. Texas still bans local rent control outside of the cleared disaster, so there's going to have to be some changes to make that happen. So anyway, it's just something I wanted to bring in as we were talking about some of this discussion around$1 ,000 down payments, rental versus owning. There's a lot of transition.

37:57Like this is just one example here of not like direct voter approval on developments, et cetera. But you start putting rent control measures in place. We've seen what happens to local investment from the market participants. Oh, boy. So guys, even recording on a Tuesday, we have so much to talk about. I want us to get into deals and data now, but let's make this more of a quick hit this week. Talk through the headlines and then what it means and why these stories caught our attention. So let's start in multifamily. This is an interesting story we saw in the real deal that Fort Point Real Estate Partners has bought 59 San Francisco apartment buildings for$440 million.

38:39Yeah, this is an interesting one. Royal Bank of Canada, or RBC, was the seller following its takeover of the properties through a deed in lieu of foreclosure. That$440 million purchase price works out to about$474 ,000 per unit aboard this 59 apartment building portfolio containing 928 units across San Francisco. I mean, Lonnie, does this surprise you at all as like an opportunistic play, given what we've heard coming out of San Francisco? I mean, I think I'm pretty bullish on San Francisco. I know it's driven largely by office and AI, but I think they made the corner here. I think San Francisco is a market where I would say the next three to five years look pretty strong.

39:20If I'm an investor, I like my chances of growing revenues and having a positive outcome here. Well, that's good because in my survey, I did pick San Francisco as outperforming the national average. So now we're talking. All right, let's get into office. We've talked about Chicago office a lot on this podcast in a new article from Crane Chicago. The owner of Chicago's 35 West Wacker office faces a$236 million foreclosure lawsuit. So walk us through this story. This is an interesting one, Stephen. An affiliate of Community America Credit Union filed a$236 million foreclosure lawsuit against the property at 35 West Wacker, as Haley mentioned.

40:04For context, it's a 1.1 million square foot office tower located right in downtown Chicago. The credit union assumed the debt through its merger with Unify Financial Credit Union, which originated the loan back in 2022. The lawsuit alleges that Opal Holdings, a New York-based owner, defaulted after missing mortgage payments beginning in July. The complaint also cites an involuntary Chapter 7 bankruptcy petition filed against Opal CEO, Avron Prager, in April as a separate event triggering the default. So maybe you can add a little color on that just a second, on just what that means technically.

40:39Opal acquired the 50-story building in 2021 for$415 million. Current foreclosure claim is about 57 % of that purchase price, although the loan balance and original acquisition price are not directly comparable measures of property value. Following the acquisition, Opal separated the building from the underlying land and placed the property under a 99-year ground lease. The$236 million mortgage is secured by the leasehold interest, not by the land itself. The building is currently 63 % leased, which in Chicago terms is actually not terrible, with significant tenant departures and available space weighing on its occupancy.

41:16Law firm Winston & Strawn recently vacated approximately$357 ,000 as it relocated its operations to 300 North LaSalle Street. Publicist group is also seeking to sublease more than 250 ,000 square foot that it leases on a lease that runs through the end of 2030. So Community America has asked the court to appoint a receiver to oversee the property as the foreclosure case proceeds. And I know we're supposed to be moving through this fairly quick, Stephen, but maybe just give us a quick summary of why a Chapter 7 bankruptcy petition could potentially create a triggering of a default. Well, in most instances, the lender does not want the borrower, and specifically the borrower's finances, to interfere with the property.

42:01The building and its cash flow support the loan. The borrower's finances should be separated. So you want, ideally, the property's ownership entity to be a bankruptcy remote entity. So that means if something happens with one of the founder's owners, the CEO, and they file for bankruptcy, the entity that owns the property is bankruptcy remote and doesn't get dragged into bankruptcy. Now, for any of you who lived through the GFC and remember the lovely GGP bankruptcy filing that dragged all of the theoretically bankruptcy remote SPEs, basically these were supposed to be bankruptcy remote vehicles that get dragged into bankruptcy, GGP shocked the world and pierced the bankruptcy veil, supposedly protecting the collateral.

42:43And so all bets can be off in these bankruptcy situations depending on the state, the situation, blah, blah, blah. Standard caveat, I'm not a lawyer. Go talk to a lawyer about this because they will talk your ear off for an hour. Shout out to Shlomo Shop. And in retail, our colleagues at Commercial Real Estate Direct wrote a story about a$325 million CMBS loan on the Fresno Fashion Fair Mall, which has defaulted at maturity. Yeah, this one is divided among six conduit transactions. collateral is 536 ,000 square foot mall, which the mall is actually 950 ,000, almost 958 ,000 square feet. But the collateral for the CMBS loan is just 536 square feet of that total footprint.

43:30Most of the time, a lot of the mall anchors might be carved out and are not considered part of that core mall collateral for the loan here. And so this is an open air property. The mall is owned by Mace Rich, which disclosed the default during its most recent earnings call and said it was in discussions with the lender. So classic case of a REIT identifying a property as a non-strategic or non-core asset, and they're looking to either give it back or maybe, maybe could make sense to modify it and eventually sell the asset. There's a lot of different ways this thing could play out. This is a 56-year-old property that was 94 % occupied, generated just over$6 million in net cash flow during the first quarter, according to our data.

44:11So this will be an interesting one to watch because again, Mace Rich just highlighted this in their earnings call. I mean, the property still looks like it's performing relatively well, but obviously Mace Rich is no fool. They're making this decision for very strategic reasons. I think we've entered that phase of the cycle or we've kind of strengthened the position of that phase of the cycle. We're going to start seeing a lot more of these strategic defaults and other things to really putting pressure on the lenders to kind of say, are you really not going to give me something here. I'm not putting any more money into the deal.

44:39Where are we going to reach a compromise? And malls have been doing this for a long time. We'll see if it continues through some of these other asset classes, as I suspect it will. And finally, in lodging, we have a story here in Plano, Texas, about Host Hotels and Resorts, which is a Bethesda, Maryland-based hotel REIT, which is paid$172 million, or approximately$558 ,000 per room, for the 308-room Renaissance Dallas at Plano Legacy West in Plano, Texas. Any other details from this story that caught your guys' attention? One, that was a mouthful. The Renaissance Dallas at Plano Legacy West in Plano.

45:21Say that five times fast, but the Legacy West is where everything is at right now. I mean, like, that's super exclusive, very high-end, nice location where you want to be. It's the haves and the haves and have-nots. This one is interesting, Haley, just for some nuggets. Operated at 68 % occupancy during the previous 12 months through June. Generated$15.77 million in NOI. Based on that, implies a cap rate of about 9.17%. The company said its purchase price represents a 7.9 cap based on its full year estimate of revenues and expenses. So this is a fairly newer property built in 2017 that also underwent recent upgrades.

46:02So they added additional guest rooms and renovations to its bars and restaurants. So great play here, a very strong sub market. And I think they'll see some continued growth here. Yeah, it sounds like a really interesting mixed use development. So, I mean, this is kind of sounds like a very, very good play in a long term strategic location. It's going to continue winning, especially as we've talked about some of those departures from downtown, some of those moving out Plano's way. So I think that just kind of builds the momentum and support for a very strong, high baseline level of rents for this hotel.

46:36And did you guys see there was other news about Host Hotels this week? They also paid$202 million for the one hotel for the 195 room one hotel Brooklyn Bridge, which they purchased from Starwood Capital Group for$202 million in cash. Yeah, interestingly, Host valued this acquisition at an 8.2 % cap rate or 10.2 times EBITDA based on its estimates for 26 revenue. And that purchase price is net of$4 million in FF &E or Furniture Fixture and Equipment Reserve. host expects the hotel to generate$615 in revenue per available room or RevPAR and$1130 in total RevPAR in 2026, approximately$100 ,000 EBITDA per room.

47:26So I mean, this is a really well-performing asset. It expects to rank among its 10 highest performing assets. So I mean, they're batting strong for this one. I like it. Plus, let's face it, Brooklyn's been on fire, right? Can I say it again for the second week in a row. So turning to programming notes before we close today, you still have time to sign up for our two upcoming webinars. On Tuesday, November 17th at 2 p.m. Eastern, TREP CRE clients can join us for a TREP targeted training. We'll really be walking through all our new capabilities, enhancements. We'll talk to you about our AI features and make sure that you feel like you're getting the most out of the platform.

48:06If you're not a client, but you're curious, reach out to us at podcast.trep.com, and we will host your own session for you and your colleagues or see if we can get you access to join. Also that week on Thursday, November 19th, Lonnie and Steven will be hosting our MarketPulse webinar for November. We'll talk CMBS and CRE CLO pipeline, how secondary and tertiary markets stack up, and we'll do a deep dive into industrial. Turning to shout outs, Sam G let us know that he tunes into our podcast often and gave us some color around what he's seeing in the world of distressed CRE and specifically the multifamily market.

48:50So thank you for all that color. Tom D is a regular listener of our Market Pulse webinars and the podcast in general. And it was great to see, Lonnie, that he actually found us and saw that you were a guest on our friend Seth Glasser's New York City Multifamily podcast. And it found us that way. So it's great to see the connections. We love and support all of Seth Glasser's work and that show as well. So Larry C. reached out to us and was interested in our research on SASBs that we spoke about recently. He's looking to cite our data at a conference and dig into our analysis. Brandy B. said she loves our podcast and recommends it to anyone and everyone.

49:33So thank you, Brandy. She also said she hopes we have a great end to the year. So she's looking ahead. We have way more that we have to get done this year, guys. at TREP. We'll probably have 18 more podcast episodes, the year-end magazine, and a lot more to come. So stay tuned. Andrew H. was interested in the latest CMBS special servicing report. If you didn't get a copy of that or haven't seen the data yet, reach out to us at podcast.trep.com. We released that last week and would be happy to share the details. Chris T. was interested in the Marketplace webinar. He missed us in October and wants to make sure he catches us again this month.

50:12James F. saw our recent research on bank theory lending and was interested in seeing how credit performance is changing across regional banks. Ryan L. said he really enjoys the podcast and has a whole team of people who listen every week, so thank you so much. Jonathan R. thanked us for the podcast and regularly shares the episodes around his office. And Danielle S. loves the show. She works in CRE Finance and has gotten a few of her younger team members listening too. So thank you to everyone who reached out. As always, a lot more to come from the TREP team, as I mentioned. So stay tuned for more research, webinars, podcasts.

50:52We have some great guests lined up. So those will be released over the next few weeks. And 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 trip.com and subscribe to the Tripwire podcast with your favorite provider. Thank you for listening and stay well. All right.