🚨Good morning,
The Fed’s first quarter-point rate cut in years has reignited the CMBS market. AAA bond spreads tightened to ~78 bps over Treasuries, enabling lower loan coupons (~6.6% vs. 7.7% a year ago). Year-to-date issuance already hit $80B, putting 2025 on track to surpass last year’s $104B total.
📊 Quick Dive
CMBS conduit loan coupons now average 6.5% — about 100 bps cheaper than 2024.
Issuance is projected to top $110B in 2025, signaling revived liquidity.
Underwriting remains disciplined: ~60% LTV caps and DSCR ≥1.5×.
Survey: Affordable Housing Crisis Worsens
More than half of U.S. renters are cost-burdened, and 12M households spend over 50% of income on rent. Homeownership fell to 65.1%, its first decline in eight years, while a 1.5M-unit housing shortage persists. Developers cite construction costs up 20% since 2019 as projects remain hard to pencil.
Value-Add Milestone: $1.1B Apartment Fund Closes
Dallas-based Milestone Group raised $1.1B for its sixth multifamily value-add fund, targeting Sun Belt and Mid-Atlantic markets. The oversubscribed raise, one of 2025’s largest, signals strong institutional appetite for discounted apartments. Initial acquisitions in Florida and Colorado were secured at ~20–25% below replacement cost, with sub-60% leverage
RXR Launches $3.5B Office Rescue Fund
RXR Realty unveiled its “Gemini” venture with backing from Baupost and Liberty Mutual. The fund consolidates prime Manhattan towers — including 590 Madison and Starrett-Lehigh — acquired at 60–70% discounts. Strategy: recapitalize “digital” offices and provide liquidity for owners of quality assets under distress.
Sunwest Pivots from Office to Industrial
Dallas landlord Sunwest Real Estate Group acquired a 36,000 SF shallow-bay warehouse in Arlington, TX — its first industrial buy after two decades in office. DFW small-bay industrial rents have surged 41% since 2020, with vacancy near 3–4%. Sunwest plans further infill acquisitions across Texas and the Southwest.
Starbucks to Shutter Stores in $1B Overhaul
Starbucks will close ~150 underperforming North American stores (≈1%) and cut 900 corporate jobs in a $1B restructuring. The move trims redundant and costly outlets — even the Seattle Reserve Roastery — to refocus on drive-thru, digital ordering, and new store formats.
5,000+ NYC Rent-Stabilized Units Hit Bankruptcy Auction
Joel Wiener’s Pinnacle Group filed for Chapter 11 on 93 rent-stabilized buildings (5,000+ apartments) after defaulting on $564M of Flagstar Bank debt. The portfolio will head to auction — a major test for NYC’s regulated housing sector where values have fallen up to 67% since 2019 rent law reforms.
Today’s signals highlight a pivotal moment: cheapening debt is reviving deal flow, but fundamentals diverge sharply by sector. Multifamily value-add remains a magnet for capital, while rent-regulated housing in NYC shows the risks of rigid policy without subsidy. Office is in triage mode, with RXR’s rescue fund offering a new model for stabilization.
For practitioners, the takeaway is clear:
Seize the debt window — refinancing or acquisitions can now pencil with ~6.5% fixed coupons.
Follow the capital — value-add multifamily and shallow-bay industrial are where institutional dollars are flowing.
Stay disciplined — underwriting remains tight, and distress cases like Pinnacle remind us that policy and cost structures can upend even scaled landlords.
Fed Policy: Further cuts could drive loan coupons into the high-5% range.
Fundraising: Expect more mid-market multifamily funds to launch following Milestone’s close.
Office Bottoming: 2025–26 likely marks the pricing floor; rescue funds may expand beyond NYC.
Retail Strategy: Watch Starbucks’ footprint reset as a bellwether for urban vs. suburban store economics.
Housing Policy: Pressure mounting for legislative tweaks as affordability hits crisis levels.
showing the rebound in CMBS issuance from 2024 to 2025.
1
