Hello Brick Brief readers, 

Thank you for reading today’s edition. We’re covering a $2B hotel refinancing from Blackstone and Starwood, affordability pressures weighing on housing, and the growing clash between data centers and U.S. power limits.

📈 CRE Prices Edge Higher in August

Commercial property values gained in August, with CoStar’s index up 2.7% YoY and MSCI’s national all-property index up 2.4% YoY. Strength in retail (+5.3%) and industrial (+5.0%) drove the increase, while apartments and offices posted smaller gains and small-property prices slipped.

🏨 Blackstone and Starwood Secure $2B Refinance
Blackstone and Starwood refinanced nearly $2B of Extended Stay America debt through the CMBS market even as the broader hospitality market continues to weaken in 2025. Lenders backed the firms’ scale and credit strength even as midscale operators face falling occupancy, softer RevPAR, and pressure from short-term rentals.

⚡ Data Centers Collide With Power Limits
Hyperscale AI data centers have pushed local electricity prices up to 267% higher since 2020, straining U.S. grids and household bills. Utilities like PG&E are spending tens of billions on upgrades while energy players such as Fermi raise capital to capture demand, putting both at the core of a $400B infrastructure buildout.

30Y Mortgage: 6.38% 

10Y Treasury Yield: 4.15% (-1 bps)

WSJ Prime Rate: 7.50%

FTSE NAREIT Index: 774.04 

30-day SOFR Average: 4.31%

Fed officials lean toward additional rate cuts as labor risks rise, although mixed views on persistent inflation are keeping consensus divided.

Dollar falls 0.2% on jobs risk – Payroll uncertainty and shutdown fears lift Fed cut bets as yen gains on BOJ hike talk (Bloomberg)

NY Fed’s Williams sees inflation risks easing – Says tariff impact is modest and labor-market risks now match inflation, supporting recent rate cuts (Bloomberg)

Fed’s Musalem open to more cuts – Warns room is limited and policy must stay restrictive enough to fight inflation about 1% above target (Reuters)

Fed’s Hammack urges keeping policy restrictive – Warns inflation could stay above 2% target for 1–2 years, citing rising service costs (Reuters)

 Blackstone and Starwood tapped the CMBS market for a $1.94B refinancing of their Extended Stay America portfolio as the U.S. hotel sector moves deeper into a cyclical downswing. Major sponsors continue to raise capital even while hospitality performance weakens in the second half of 2025.

🧱 The firms’ joint venture, ESH Hospitality, issued a CMBS deal backed by 220 Extended Stay America hotels across 33 states. The portfolio includes 24,560 keys with a 65.4% loan-to-value ratio and an 8.27% cap rate.

🧱 JPMorgan and Citi originated half the debt, while Goldman Sachs, Wells Fargo, Bank of America and Deutsche Bank arranged the balance. The loan runs interest-only for two years, includes three one-year extension options, and carries pricing about 250 basis points above SOFR.

🧱 Blackstone and Starwood locked in an interest rate cap at no higher than 7% to contain volatility. KBRA rated the Class A bonds AAA, giving fixed-income buyers confidence to absorb the top tranches.

🧱 The firms bought Extended Stay America for about $6B in 2021, making one of the largest private equity bets on the budget extended-stay segment. The brand serves cost-conscious travelers who book longer stays, tying its fortunes more closely to midscale demand cycles than to luxury.

🧱 Recent data point to weakening demand. STR measured another drop in RevPAR in September as occupancy kept falling, while August numbers showed RevPAR down 1% YoY with occupancy at 66.1%. Luxury hotels posted modest rate growth, but budget and extended-stay operators absorbed the sharpest hits. International arrivals are set to decline 8.2% in 2025, pushing a full recovery to 2029.

🧱 Broader metrics reinforce the slowdown. RevPAR has declined through the summer as occupancy eroded, while rising costs cut into operating margins. Short-term rentals pulled more travelers away, leaving budget and extended-stay chains with shrinking pricing power.

Takeaway: Blackstone and Starwood secured nearly $2B in CMBS funding even as hotel demand cools in a cyclical downturn. Lenders chose to back sponsor strength while the broader industry falters, with luxury hotels holding firm and budget extended-stay operators absorbing the brunt of the slowdown.

Share of mortgages ≥6% hits 10-year high – 19.7% of U.S. homeowners now pay rates at or above 6%, up from 7.3% in 2022, as the share below 6% drops to 80.3% and buyers wait for sub-6% rates to return (Redfin)

Government Shutdown would halt key housing programs – A federal funding lapse would suspend new flood-insurance policies and USDA rural loans, delaying closings and jeopardizing about 1,300 home sales per day (Realtor.com)

Trump sets 10% tariff on lumber, 25% on cabinets and furniture – Rates rise to 30–50% in January for countries without trade deals (Reuters)

Insight: Affordability remains pressured as nearly 20% of homeowners pay mortgage rates above 6% and new tariffs raise construction and furnishing costs. With Fannie Mae projecting only a modest rate decline to 6.4% in 2025 and 5.9% in 2026, housing costs are likely to remain difficult for buyers.

Guggenheim Partners signs 360K-SF office renewal and expansion at 330 Madison Ave. in New York, NY – Munich Re’s building lands a 17-year deal as Guggenheim grows its footprint from 240K SF to 360K SF, bringing the tower to full occupancy (CommercialObserver)

Texas factory activity weakens – Dallas Fed index drops to -8.7 in September from -1.8, signaling a sharper manufacturing slowdown (WSJ)

89% of supply chain operators faced power disruptions – 70% now use advanced AI, driving energy reliability to the top of site selection and accelerating regional, resilient networks (Bisnow)

Prologis is turning warehouses into energy platforms – Deploying solar, batteries, and microgrids to power EV fleets and strengthen grid resilience, making reliable energy a core logistics advantage (Prologis)

Retailers keep hunting for space – Despite tariff worries, a softening labor market, and higher occupancy costs, LoopNet search activity shows strong demand for new store locations (CoStar)

Beauty foot traffic plateaus while fitness climbs – Beauty visits stay above pre-pandemic levels but flatten as value-conscious shoppers pull back, while gyms gain from rising visit frequency and health-focused consumers (Placer.ai)

PG&E unveils $73B plan through 2030 – Utility to upgrade transmission for surging AI-driven data center demand while expanding wildfire safety measures (Reuters)

Developers struggle to cash out of leased data centers – Sales fell over 50% YoY to under $1B in H1 2025, prompting ABS and CMBS deals like Blackstone’s $1.5B QTS refi and DataBank’s $1B bond (Bisnow)

Fermi Energy REIT upsizes IPO to $715M at $13B valuation – Plans 11 GW of natural gas, solar, and nuclear power for data-center tenants by 2038 with a 5,000-acre Texas “Project Matador” campus backed by Rick Perry (Bloomberg)

AI data centers drive power costs higher – Wholesale electricity prices jumped up to 267% near major facilities since 2020, straining U.S. grids and raising household bills nationwide (Bloomberg)

Insight: Surging hyperscale data center construction is colliding with power limits, forcing utilities to pour billions into transmission upgrades and alternative generation. With AI data centers projected to drive 44% of new U.S. electricity demand by 2028, Fermi is cashing in through a $785M IPO while PG&E invests tens of billions, putting both at the center of a $400B buildout that strains grids and accelerates sector consolidation.

Big-ticket CRE prices rose 1.3% MoM and 2.7% YoY in August – CoStar’s Commercial Repeat-Sale Index shows high-value nonresidential deals driving gains while small-property prices slipped (CoStar)

CRE prices climb 0.9% MoM in August – MSCI’s RCA CPPI National All-Property Index rose 2.4% YoY, led by retail up 5.3% and industrial up 5.0%, with apartments and offices posting smaller gains (ConnectCRE)

Newgard Group and Two Roads secure $513M construction loan for One Brickell Riverfront in Miami, FL – Financing includes a $370M senior loan from an undisclosed lender and $143M mezzanine loan from 3650 Capital to complete the 808-unit, two-tower condo project slated for 2027 (TheRealDeal)

New York Life lends $102M for Otay Business Park in San Diego, CA – Elevation Land Company and Crow Holdings Capital secured financing for the 612K-SF first phase of a planned 1.78M-SF industrial project (CommercialObserver) 

Blackstone and Starwood refinance 220-hotel Extended Stay America portfolio with $1.94B CMBS loan – Debt covers 24,560 keys across 33 states, structured with JPMorgan, Citi, Goldman Sachs, Wells Fargo, BofA and Deutsche Bank affiliates (TheRealDeal)

Hines buys Runway Playa Vista mixed-use district in Los Angeles, CA for $428M – Purchase from Invesco Real Estate includes 420 apartments and 246K-SF Whole Foods-anchored retail, closing below the $475M Invesco paid in 2016 (CommercialObserver)

Union Investment sells 457K-SF 2000 McKinney office tower in Dallas, TX for 218M+ – German investor offloaded the 21-story property anchored by Texas Capital Bank, marking Uptown’s most expensive office trade of the year (TheRealDeal)

Azora Private Solutions buys two office buildings in Coconut Grove, FL for $82M – Purchase from Madison Marquette covers 136K SF across 3250 Mary St. and 3225 Aviation Ave., acquired with financing from Abanca USA (TheRealDeal)

Baker Development lists 189K-SF Elston Retail Collection in Chicago, IL for $72M – Fully leased center anchored by Best Buy, Kohl’s and BMO Bank offers buyers a $58M loan assumption at 3.65% with NOI of $4.6M (TheRealDeal)

Related Midwest and CRG acquire South Side land in Chicago, IL for $58M – Purchase from Blue Owl Capital sets stage for Illinois Quantum & Microelectronics Park anchored by PsiQuantum’s $1B quantum computing facility (TheRealDeal)

Private CRE fundraising up 38% YoY – $85B raised through August puts 2025 on pace for $129B as investors return, led by Brookfield’s $16B and Carlyle’s $9B funds and strong debt-fund demand (Bisnow)

Ohio PERS invests $1.7B in real asset funds – Commitments include $500M to IDR’s Core Property Index Fund tracking the NCREIF NFI-ODCE benchmark for diversified property exposure (IREI)

Veritas faces foreclosure on 66 San Francisco, CA properties after $652M loan default – RBC Real Estate Capital issued the notice covering 1,566 units, with sales possible within 90 days if debt is not repaid (TheRealDeal)

ALICE launches AI scheduling tool – Insights Agent helps contractors analyze construction plans, cutting schedule analysis effort by 50% and saving up to 17% on project duration and 14% on labor costs (Bisnow)