Episode 61: CMBS & CRE CLOs: What the Data Gets Right (and Misses) with Michael Haas, CRED iQ

CMBS issuance has roared back, yet distress, especially in office keeps building. In this episode, Michael Haas, founder & CEO of Credit IQ, joins us to separate signal from noise across CMBS and CRE CLOs. We dig into what the data shows right now, why CMBS has been winning share from the GSEs, and how five-year structures and bank scrutiny are shaping borrower behavior. Mike explains his firm’s definition of distress (special servicing and/or delinquency), the flight-to-quality dynamic in office, and the early warning triggers their team watches: occupancy drops, DSCR trends, tenant downsizes, and debt-yield thresholds. We also unpack details behind headline cases like Worldwide Plaza and Times Square retail, why small rate cuts won’t fix maturity walls, and where resolutions are getting stuck. The team wraps with a positive scenario that would mark a true market turning point.

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Transcript

[00:00:00] This is the CRE Weekly Digest by Lightbox Affirm transforming the commercial real estate landscape by connecting every step of the CRE process with comprehensive tools and data. I'm Martha Coacher with Manus Clancy and Dianne Crocker. Today we're cutting through the noise on CMBS. And CRE CLOs, what's true in the data right now, where it's heading from here, how rates are intersecting with distress, and whether the rebound in issuance is sustainable compared with past cycles.

[00:00:30] We'll also go beyond the headlines and talk about what signals might. The market be missing. Our guest is Michael Haas, founder and CEO of CRED iq, a platform behind many of the data charts you've seen on CMBS and SIR ECLO Distress issuer league tables, and new issue reads. Mike, it's great to have you with us.

[00:00:50] Yeah, thanks for having me on. This is exciting. My first, uh, podcast. 

[00:00:54] Welcome Mike. You know, I wanna start at a very high level and just ask you, when you think about the phase of the market now, what strikes you as different about where we are now versus where the market was in in 2023 and 2024? Where do you see things improving?

[00:01:11] Where do you see things worsening and what just maybe is moving sideways? 

[00:01:15] I speak with you, Dianne. My, my colleagues Chris Aronson and, and Matt Devo speak very highly of you. So they, they say hello. I think where we are in today's market issuance is still strong. Uh, we're having a great year, about 80 billion across conduit and SASB, and 2020 was, uh, a very strong year.

[00:01:36] That was one of the, probably the highest issuance years since 2007 and 2023 was pretty weak. I think that was around 40 billion of issuance, just to give some high level numbers. So I think this is gonna be another strong year, given everything that's going on with interest rate predictions and, and the 

[00:01:56] fed.

[00:01:57] So let me ask you this, Mike. Normally people that flock to the CMBS market, they flock their partially because it's. The most proceeds, right, the, the highest leverage that a borrower can get. Sometimes it's for the non-recourse element of CMBS and sometimes it's for the best rate that they get out there.

[00:02:18] What would you say is making CMBS so attractive over the last 18 months, even when rates kind of remain naggingly high? 

[00:02:28] Yeah. I think, um, CMBS is a, a strong favor right now given the. Larger scrutiny of the banks and different regulations going on there. It makes it more attractive and especially with the new five year loans that CMBS is structuring these days, is telling that the borrowers are okay with a shorter term loan expecting rates to go down in the near term.

[00:02:51] And I think what's really telling is. How they're taking market share away from the GSEs. We're seeing a lot of multi-family loans that typically go to Fannie and Freddie are going into conduit deals, which is cool to see. Do 

[00:03:06] you have an explanation for that? Why the, the GSEs have become the less attractive landing place for borrowers?

[00:03:13] Yeah, just speaking to 

[00:03:13] a few conduit shops that are, um. Heavy originators, and they, they talked about buy downs. Freddie and Fannie getting tighter with their underwriting guidelines. Just a more attractive financing vehicle for, uh, today's borrowers that are struggling to refi. 

[00:03:31] So I wanna get into a, a couple of contrasts, if you will, o over the next five or 10 minutes.

[00:03:38] The first contrast is. We see parts of the market doing very well. And, and when I say that, I mean the commercial real estate market broadly and the level of distress that you see across all lenders. So when you look at something like industrial, for example, the level of distress is microscopic, but then you turn to the other side of the market, you see.

[00:04:03] A litany of problems in the office space and some problems in the multifamily space. Walk us through what you're seeing in those problem areas of, of office and multifamily in your data. 

[00:04:16] So if you just look at the overall distress rates that we put out, and by the way, the Credit IQ distress rate is everything that's specially serviced and or delinquent.

[00:04:26] That's important to know. So even if a loan is current in payment, but with the special servicer, we still count that as distressed and obviously office has the highest rate and then it's multifamily. Industrials, like you said, is very, very low. Self storage is still crushing it. Manufactured housing is extremely low.

[00:04:48] Retail's kind of humming along. That's actually. Been surprisingly good in my view. And then hotel is seven or 8% distressed. And I think the luxury segment of the hotel, uh, sector is actually doing much better than the lower tier hotels. And, uh, you know, the midscale, the luxury high end, the resorts are still doing well with the increase in, in RevPAR and occupancy.

[00:05:14] Um, industrial obviously, you know, is, is gonna keep on crushing with. Online shopping and everything. 

[00:05:22] So when you talk about office, clearly the problem child, if you will, of the entire segment. Higher le, highest levels of distress at this point. No real surprise when you consider back to office is to use your term hit or miss, depending on which city you're talking about.

[00:05:41] But let me dig into this a little bit. Where do you think we are in this cycle? Are there any green shoots that you're seeing? At this point, or is this gonna stick with us for another five years, just like shopping malls? Did, you know, a decade ago? 

[00:05:57] It's obviously a flight to quality when it comes to offices and the working from home.

[00:06:02] I don't think I, I see that changing. I mean, if anything it's, it's completely remote or it's hybrid. Uh, there's a few, you know, larger companies out there. You know, JP Morgan, they just built a brand new awesome. Office right there in Midtown, I would consider that a green shoot and a positive, but that's just gonna be, you know, put some pressure on all the, the weaker offices that were built a long time ago that don't have the cool amenities.

[00:06:29] So it's just really a flight to quality. We're seeing that, you know, the Worldwide Plaza, perfect example, it's, the listeners don't know, that was a $1.74 billion valued, um, office Tower, about 2 million square feet. That ran into trouble with tenant rollover, a large law firm and banking tenant moved out.

[00:06:52] They tried, uh, they decided to move to elsewhere in the city, and that got reappraised for around 350 million, so that's a $1.4 billion drop in value. That story reminds me of the 1740 Broadway, same exact storyline, the smaller building. But Blackstone was the owner or the borrower, and they decided to hand back the keys, and that ultimately ended up taking a very large loss.

[00:07:20] But you can just see the, when tenants decided to move out, the borrowers hand their keys back. The the value really, really plummets hard. 

[00:07:28] Yeah. And that, that was a big headline, the Worldwide Plaza, so I'm glad that you brought that up, Mike. But what's your take on that, you know, from the data you're looking at is that one building story, are there indicators that suggest that other office, uh, trophy assets from the 1980s vintage could be next?

[00:07:46] What are you thinking? 

[00:07:48] Yeah, I think that whole, the whole sector needs to be looked at very closely. Um, the SASB. SASB loans that are backed by offices in downtown areas. You know, they're between 300 million to a billion dollar loan sizes. And you know, as soon as they go, if they go south, it's, it's bad news.

[00:08:07] And you know, we we're seeing a bunch of these that are already distressed already with the special or they can't refi. But you know, they're in every city. San Francisco, Chicago, you know, there's a ton in New York, Philadelphia Market Street is like. Every other building 1500 Market Street is, is going through it right now when these big offices go bad and the borrower's not willing, willing to keep up with tis to find new tenants and, and create better amenities to attract people back into the office.

[00:08:40] I mean, the values will go really. I mean, a distressed office building will go, you know, 50 bucks a square foot in some cities, New York, it seems like it's around a hundred to 200 bucks. So we're talking substantial drops, and that's just gonna hurt not only the borrower's equity, but also the bond holders that invested in that deal.

[00:09:02] So let's talk about the process a little bit, because when you see a headline like Worldwide Plaza and you get this. Lower valuation. That's usually the last step, right? Normally the symptoms for that kind of write down. Are there months or years before this takes place? Walk us through a little bit about your process, what you're looking for before that kind of disease comes out.

[00:09:30] Right. When. The final strokes of, of, of a property spiraling come, it's a lower valuation. The property's becoming delinquent and it's transferred to the workout specialist, the special servicer. But sometimes there's clues in advance of that. Give us a sense of, of what you're looking at, uh, and your team is looking at as data experts to kind of front run this type of event.

[00:09:55] I love this topic. I spent most of my career working in surveillance groups, um, at rating agencies, and I developed some systems and technologies to find these triggers where they, you're actually the canary in the coal mine, if you will, to spot these, these. Early signals of distress. We have a daily distress alert that we send out right away that show you the properties and loans and all the details behind it of if a occupancy drops from 80% to 60.

[00:10:26] It's a signal that something's going on there. Maybe a tenant moved out or they didn't renew or, um, something else happened. Property damage. We also spot d SCRs, creeping. They could go from 1.5 to 1.3 or 1.1. You see that trend line and, you know, something's going on. Another thing to look at, you can kind of compare over, over the history of the rent rolls.

[00:10:50] You know, maybe a, the large law firm didn't move out completely, but they downsized. That's another indication. So we have all those updated occupancy and cumulative, uh, rollover numbers that are important to basically track over time. Um, but yeah, DSCR is the heart and soul of commercial real estate finance.

[00:11:10] I think debt yield right now is a, is a really important metric, especially with the upcoming and existing distress across loans that are past their maturity and they just can't seem to find a new loan. That works. Given their, uh, existing NOI, we probably have 15 to 20 distress triggers that we 

[00:11:30] track. So Mike, clearly you're an expert in the subject matter, but when you were 10 years old and you were throwing the tennis ball against the wall, breaking in your new baseball glove, things like that, right?

[00:11:42] You probably didn't even know what commercial real estate was. How'd you end up getting here? 

[00:11:48] I was actually a lacrosse player, so, uh, I can't really speak to baseball that much. They stuck me in, in right field 'cause I wasn't good. And I said, this is the most boring sport ever. I wanted to be a, a professional lacrosse player.

[00:12:01] And then I, you know, saw how much money they made and they all had side jobs and so that didn't work out for me. Yeah, I, I started my career at KPMG in Philadelphia, in their, uh, real estate group, uh, where I learned, uh. The ins and the outs of appraisals and valuation reviews. And then they ship me off to Detroit for two years to help on GM's bankruptcy.

[00:12:24] So, yeah. And then after, uh, KPMG, I went to this company called Real Point, and then they were acquired, uh, by Morningstar. Saw a couple guys there, make a lot of money. And then I was recruited, uh, to join Kroll Bond ratings in 2013. 

[00:12:41] Wow. Sounds like you've seen the market from all sides. No, I love that. Mike, I wanna pm back to something that we already talked about.

[00:12:47] Um, you covered the fact that the CMBS sector is going like gangbusters, that they're stealing market share from the GSEs. I always wonder, you know, when, when things are going that strongly, is it sustainable? Um, we've talked a lot on the PO about pivot points in the market cycle, so I wanted to ask if, if you were to.

[00:13:07] Really kind of call a, a turning point in the market. What would you need to see in the next couple of data prints? Would it be, uh, higher cure rates? Would it be maturity, slowing down, maybe shorter watch list times? What's that kind of signal that would make you say, okay, we're in a different phase of the market right now?

[00:13:25] I think the, the current state of the market is just going to be there for a while unless the special servicers decide to start for closing. Right now, it's just a bit of a, kind of a stagflation period of loans just sitting with a special, even if they're paying their, their monthly payments every month, they're still with a special, they're not even getting modified.

[00:13:48] It's because they can't refi. And at some point, you know, they're. The special servicer needs to foreclose on if someone needs to take a loss. My loan sale clients are, are having a great year, but they, they're, they want more, they want more action. There's a lot of dry powder sitting out there that are, that are waiting to scoop up these distress assets.

[00:14:10] And it's really just, I think, delaying the inevitable. You can't really kick or hold the can that long. Um, I think things need to be reset. A basis reset. 'cause some of these loans were just taken out at just the wrong time. They're, they're decent properties, especially multifamily. You know, they're, they're 85, 90, 90 5% occupied.

[00:14:34] Their DSS are 0.5. Like, what are you gonna do there? Even if J Powell, you know, moves the, the interest rate down 25 basis points. Because he's scared Trump's gonna fire him. I don't think that's really gonna save these loans. That's not gonna move the needle. So that's why I like looking at those debt debt yield metrics.

[00:14:56] So I, I think in the, in the shorter term, it's going to be more of the same unless the special servicers decide to start taking some action. Maybe, maybe the operating advisors need to get involved there and start, uh, you know, weighing their, their own opinions on what should happen. I'd like to hear your guys' opinion on kind of the senior bond holders and what their take is and having their money locked up at lower interest rates when they could be earning it elsewhere.

[00:15:23] Well, I think you're spot on. I do think that there's a real difference of opinion on the motivation. Or the, the outcome that people at the top of the stack versus the bottom of the stack wanna see happen. Certainly if you are a first loss type guy, you wanna see the highest proceeds possible, certainly as fast as possible, but more important to you is the highest resolution at the top of the stack.

[00:15:49] You just want your money back. So I think as you know, because you've been in this market a long time, that's been kind of the, the friction. Between different types of bond holders in this market. But I agree if you're sitting on AAA bond that's carrying a two and a half coupon, you'd love to get that money back and then reinvested at six, right?

[00:16:11] If you could. That's not happening nearly fast enough for these guys. But as we talk about this, and you referred to your, your two years in Detroit helping resolve distressed assets, you know how long. The great financial crisis problems lingered, and you know how long it took for lenders to regain their footing and to start issuing bonds again, right.

[00:16:42] We really had an ice age of several years. We never really saw that. We saw a brief dip during early c. Then we saw really a micro dip after Silicon Valley Bank failed. But this market has soldiered on what's the big difference? Why is this market so confident right now, at least for new issuance? 

[00:17:05] I love that the issuance is still high.

[00:17:07] I think a lot of it is a reflection of 10 years ago in 2014, it was a really strong year of issuance. If you look back at the numbers, it was like 80 or 90 billion. So all those 10 year loans. Have to refi and they're, that's what, that's what's happening. And it's fun to, uh, track these because you know, the addresses will change a little bit, the name and they'll try to throw you off, uh, the scent there, 2015 was another rate.

[00:17:35] Year of issuance all things considered. 2009 was zero, I believe, and 2010 things started opening back up. 2011 was pretty weak. That was probably 20 billion 2012. And then 20 13, 20 14 is when things started heating up. And that's why I think we're seeing a lot of deal volume. And I think during the past, you know, 10, 15 years, just general inflation, uh, and asset values have gone up.

[00:18:04] So just the, the sheer amount of dollar volume is higher inflation right now. Like real inflation is 10%. I know they quote, you know, 2%, but if you look at real inflation, it's, we, you know, every, every, everybody's feeling it with their rents, the price of food. It's kind of, it's insane. I don't see it being fixed anytime soon, to be honest.

[00:18:27] When you think about the performing kind of mature loans group, how sensitive do you see those loans being to small interest rate moves compared to actual NOI recovery? Obviously interest rates are very top of mind. I think everybody's expecting the Fed to drop rates at the September meeting. What's the tipping point that you're watching when it comes to the performing matured group?

[00:18:49] The performing matured bucket. It is the largest bucket of our distress statuses that we track. It's about 36% I believe, and then there's another 19 to 22% that are non uh, performing. So they stop making payments and that, you know, that's a tell that they are willing to give the keys back and the special should move in and foreclose the borrowers that are actually making their monthly payments, but they can't refi, I think they're just trying to wait it out.

[00:19:19] But I don't think that's realistic. I don't, I still think there needs to be a loan sale of some sort, or, or foreclosure. I mean, I'm not, I'm not, I'm not ever rooting for people to take losses. Obviously I'm a good guy. Um, but things need to be reset and, uh, there's only one way to do that, and I don't think, even if.

[00:19:40] The rates drop 25 basis points. It doesn't mean the spreads will follow. Um, if there's that much uncertainty in the, in the world and all the political risk going on, I just think they're gonna struggle. And that's why I like to look at that debt yield metric. I bet. I just read a chart yesterday, 55% of, uh, these loans have a debt yield of seven and a half percent or lower.

[00:20:06] Of which 35% are below six, so that's even worse. And yeah, I think lenders today are looking at 10, 11, 12 as as a strong reason to, to refi. So any, any loan with a debt yield and debt yield is NOI divided by the, the loan amount. So you're, you're pulling out, you're extracting out the subjectivity of cap rates in that analysis and you're just looking at, okay, what's your existing loan?

[00:20:31] What's your NOI? Can you make this work? 'cause DSCR is the key metric. I just don't think a, a little, a little rate cut is gonna really solve these, these, uh, problematic loans that can't refi. 

[00:20:45] So let's stick on that for a minute. I've had a thesis for a long time. I've been kind of contrarian in this regard.

[00:20:52] My thesis had been this, that most of these trouble loans that used floating rate debt were made in 2021. At the peak of the market, many of them were multifamily, many of them were value add. The borrower really expected to get in and out within three years, and accordingly, they arranged loan terms that might have a three year initial maturity with maybe two 12 month extensions, something like that.

[00:21:23] And in my mind. The date of reckoning has already come and gone. If you made a loan in 2021 and it matured in 2024, by then, rates were already higher. By then, you already had to buy a new cap. You were already looking at a capital call, going to your LPs to ask for more money. So my thought would've been and has been that distress would've resolved a lot quicker.

[00:21:48] The day of reckoning has already come. They've already had to fill or kill as to whether they're pumping more money into this. Why is it not resolving quicker? Why are these. Loans just living in C-R-E-C-L-O Purgatory. 

[00:22:02] That's a great point. And there's an, there's an example that comes to mind. We were looking at this loan the other day.

[00:22:08] It was, um, a Philadelphia apartment. Really big one, very popular, about $134 million C-R-E-C-L-O loan interest rate was, you know, one month, L-I-B-O-R plus, you know, 200, 300 basis points. And then it shot up to eight, eight and a half percent. Rates and then the DSCR was never able to get above break even.

[00:22:32] But the borrower was successful in refi and the way he did that, this could be a green shoot. I don't know if it was a tricky maneuver or what, but they took out a new loan. They were able to inject additional capital, and then they brought in MES debt too. And they have a lower fixed rate, interest rate 'cause it's in a conduit.

[00:22:54] They're paying about five. 5.96% and that appraised value for that new loan, that new condo loan, that value dropped 30% from the C-R-E-C-L-O valuation. And it's the same exact property. They might have tweaked a few things. You can refi in this environment. You, I, I think you have to get creative, but if the special servicer isn't gonna make some moves and create these, you know, loan sales or foreclosures, I mean the borrower's kind of just sitting and.

[00:23:23] I believe praying for the, the rates to drop a lot. 

[00:23:27] Does it surprise you that the pace has been so slow? Like you bring up this anecdote, which is a great one, and maybe that's a model for other borrowers to pursue. Are you surprised there has been more of that? You know, we're almost in 20, 26, 5 years since peak valuations, it seems to be agonizingly slow for people that want to get their money back.

[00:23:50] I mean, I think it has been really slow. And this example I gave you with them getting creative with, with, you know, additional capital and a Mez piece, they still have to pay that service and all of that. And the only way to do that is with increasing your NOI and your occupancy, and it doesn't help that your expenses are, are skyrocketing all across the board with inflation.

[00:24:15] Insurance. It's another whole podcast you could probably do. But yeah, I mean, there, there needs to be some action taken by the specials instead of just kicking, kicking the can. We had a, we had a great blog from our research team. We said The wall of maturities has morphed into the wave of modifications.

[00:24:35] We were pretty proud of that, uh, clever title, but. It's basically true. It's, you know, the, everything is getting either extended or just sitting there with a special and they're, and they're paying their, their monthly payments. 

[00:24:50] Mike, we know that often the stories behind the headlines are what make these really interesting.

[00:24:55] And we talked about worldwide plazas, latest appraisal, and we have other stories as well. Walk us through a headline that you think is another one that's worth discussing. 

[00:25:06] Another one that hit our, um. The stress alerts. The other week was, uh, the Jared Kushner property in Times Square. Uh, it was a retail condo about, I think it was like four to six floors of retail space across the Marriott Marquee.

[00:25:23] I always check it out when I'm at the FC Conference, and I remember going there for a, a work event at Kroll. They had a bowling alley, so I'm, I'm a big bowler too. But anyhow, it was kind of just a overly priced bad loan to begin with. His tenants never actually moved in. It defaulted pretty early and then it foreclosed, I think the loan, or he, Jared Kushner bought it for 290 or so million, and it just sold for 28 million.

[00:25:53] And when he bought it, the appraised value was like 470 million. So these numbers are just like pretty crazy. That's just another example of. A property taken a monster loss in a typically, you know, strong market. 

[00:26:08] I wanna go back to the conversation about the Los Mike. You know, you talked about the delays and, and the extensions and the restructures.

[00:26:15] You know, if you could redesign one, one covenant or structure in transitional loans to produce better outcomes, what might that be? 

[00:26:23] Yeah, I think the C-R-E-C-L-O market is actually having a great year. We're actually seeing the Arbor News from all from last year. They closed up with, it was actually a positive, some of their more, uh, distressed deals.

[00:26:36] So that was a positive outcome. But I think the issuance this year is strong. What I hear from, uh, kind of the panels and conferences we go to. The sessions is, the reporting for CCOs has always been pretty bad. The existing CREF CIRP package, I'm sure Manus has, has memorized or helped build. It's not really fit perfectly for CRE CLO due to the, you know, unfunded amounts.

[00:27:03] And different, uh, thresholds that, that they need to, uh, to hit as they go on their business plans. But in terms of like covenants and all of that, I think there just needs to be more clarity and better, better reporting and people can underwrite the risk as they see fit. But I think that those shorter term loans are, are popular right now.

[00:27:23] We see Invesco issuing, I, I believe, their first C-R-E-C-L-O this year, which is cool to see. And they're talking to some TPG guys. They did one, so they're back in the mix. And then Arbor just did one a couple months ago, and that was a build to rent, uh, set class, which I, I'm a big fan of. I think that's a, a much needed product with affordability.

[00:27:49] Crisis we have going on, but they're basically single family homes that are newly constructed, um, smaller and you know, basically trying to take apartment renters and putting 'em in a single family home. And they get about 20% higher rents and like a, like quality apartment building.

[00:28:13] Two by four to the back of the head was obviously higher interest rates. And you know, part of the problem was borrowers at Time Zero were buying interest rate caps to immunize themselves against higher rates, but those caps had a finite period of time, one year, two years, and when rates jumped, they really had to come out of pocket to buy very expensive caps.

[00:28:35] To exercise maturity extensions. Are the new CRE CLOs structured in a way that remove some of that risk, or is that still something that people have to contend with? 

[00:28:47] The cost of these interest rate caps was a huge problem. Some of these went from, you know, costing 2 million a year to 10 million. Real and nobody could really afford that, um, without just completely crushing their deal.

[00:29:00] I believe they're still out there today. I'm that interest rate Cap pro there. I know there's, there's companies out there, Chatham Financial, that handle that all day long. And Carol at Derivative Logic, she's a, an expert there. I believe there's still a requirement, uh, for these C CLOs in order to structure them properly.

[00:29:20] I know the, I know the new issue. Ss Bs definitely have them as well because they're all floating. Now, we've talked a lot 

[00:29:25] about distress. We've talked a lot about office. We're probably halfway through ST. Office building, sadly, the window of the post COVID period, we've seen a lot of multifamily distress, a lot of office distress.

[00:29:38] I'm gonna ask you to make a prediction here. When the final epitaph is written on this particular window, and losses are summed up, how will they compare? To the great financial crisis, will this be a blip or will the aggregate losses when you add up all the office problems and so forth, you know, you're talking about a 90% loss on that Kushner property.

[00:30:01] Are they gonna be akin to what we saw in the 2010 to 2015 period? That's a really tough, uh, question to answer. I'm gonna put you on the spot here, Mike. I can't let you go without making at least one prediction. 

[00:30:13] Oh, I love it. Um, I think, uh, the downtown offices are the, are the worst of the worst. I mean, that's the new regional mall, class C, class B, regional mall, especially the older ones that are not getting more, uh, amenities put in or, or getting renovated.

[00:30:31] I don't think that's too bold of a prediction. I believe, you know, historically speaking, loss rates have averaged about 45, 50%. But you have the, the big ones that take 80%. They're usually the malls and the downtown offices. You remember that St. Louis one, I think it was the at and t center that sold for like a dollar a square foot.

[00:30:53] That's how we, uh, that's how we valued the, uh, the General Motors factories that were 5 million square feet and were gonna be vacant now. They should all be data centers worth. A thousand bucks a square foot, but I didn't have that foresight in 2009, 

[00:31:08] right? You could give that St. Louis office building, sadly, as a, uh, secret Santa gift, right?

[00:31:15] It falls within the budget of, uh, $20 and below. I don't know. 

[00:31:18] Mike, one more prediction for you. What is most likely to surprise to the upside by year end? Give us something that none of us is expecting. 

[00:31:30] I'd say the some upside that special servicers are gonna listen to this podcast and they're gonna start getting rid of some distressed assets.

[00:31:38] And then the delinquency rates will go down and then people feel better. And then it's just gonna help the market clean out some of the the wrong timed loans, let's call it. 'cause they're not really all bad properties except for these vacant offices. Love that 

[00:31:55] optimism. 

[00:31:56] And with that, we'll close Mike.

[00:31:59] Thanks for the clear read today on the market, and thanks to our production team of Molly Farina and Josh Bruning. For more from Lightbox, subscribe to the Siri Weekly Digest wherever you listen, as our team shares Siri news and data in context Each week, subscribe and share this episode with your colleagues in commercial real estate and send your comments to podcast@lightboxre.com.

[00:32:21] Thank you for listening and have a great week.

[00:32:27] Let's go.