📢Good morning,

The Signal
The Fed’s tiny cut trims borrowing costs for the first time since 2024 and helps steepen the yield curve, giving banks slightly more breathing room. Lenders and investors are cautiously optimistic — deal pipelines are picking up and some shelved transactions are reappearing — yet underwriting guardrails remain tight. Cap rates are unlikely to compress more than ~25 basis points absent further cuts or stronger rent growth, and lenders continue to demand conservative leverage and robust debt service coverage ratios.

📊 Quick Dive

Blackstone appointed Katie Keenan, a 13‑year insider and former CEO of Blackstone Mortgage Trust, to lead the $100 B Blackstone Real Estate Income Trust (BREIT) following the shooting death of prior CEO Wesley LePatner in July. Keenan will steer the non‑traded REIT through a difficult market, joined by new co‑president Zaneta Koplewicz and debt‑head Tim Johnson. Despite volatile capital markets, BREIT maintained over 90% occupancy and roughly 3% cash‑flow growth in the first half of 2025, while redemption requests that spiked near 5% of NAV in early 2023 have receded below 2%. The leadership shuffle underscores the depth of talent at large sponsors and signals continuity for investors.

In a classic sale‑leaseback, UPS sold four properties in California’s Inland Empire, suburban Chicago and metro Atlanta to Fortress Investment Group for about $368 M. At least one facility will be leased back by UPS, and the cap rate is reported near 5.8%. The transaction is part of UPS’s $3.5 B cost‑cutting drive amid softer parcel volumes and continues a broader corporate trend toward unlocking capital through real estate sales. Industrial vacancy remains low (~4–5%), and rent growth hovers around 6% YoY, so investors remain hungry for infill logistics assets. Industrial sale‑leaseback volume is on pace to reach roughly $25 B this year, the highest since 2007.

Commercial real estate faces a staggering maturity wall: about $957 B of loans mature in 2025, followed by $539 B in 2026 and $550 B in 2027. Many of these loans were underwritten at 3–4% rates and now face refinancing costs around 6–7%, leaving debt‑service coverage ratios underwater without additional equity. Lenders are typically offering 6.25–7.25% fixed or SOFR + 250–400 bp for core assets and may require 25–35% paydowns on under‑DSCR loans. While regulators encourage banks to extend and amend rather than foreclose, borrowers must act quickly to refinance or restructure before credit conditions tighten again.

The Fed’s modest cut is welcome but not transformative. Owners should view it as an opportunity to tighten underwriting assumptions rather than chase cap‑rate compression. Re‑run your models with only 50–75 bp of rate relief over the next year and stress exit cap rates flat to slightly higher.

The refinancing window is open — use it proactively to extend or recapitalize upcoming maturities; lenders are still demanding conservative leverage and strong debt yields.

For capital allocators, the BREIT leadership transition is a reminder to vet governance depth at sponsors.

Sale‑leasebacks remain an attractive option for corporates seeking liquidity, but investors must scrutinize tenant credit and long‑term functional utility.

With a $2 T wave of maturities on the horizon, discipline in structuring debt and managing cash flow will separate winners from distressed sellers.