1Q Newsletter - 2018

Despite the extended winter weather during the first quarter of 2018, business activity has been boiling at Medalist Capital, where we achieved record volume with 34 deals totaling $497 million! The current pipeline is also very robust and we want to thank our loyal clients and capital sources whose efforts also helped us surpass $10 Billion in loan volume since the inception of Medalist Capital in 2004!
As treasury yields have increased, we have seen a tightening in spreads that helped keep the low end of the coupon range around 4%.  One take away from our MBA conference in February was the general theme that low mortgage origination volume from 2008 will translate to fewer loan opportunities in 2018 and create intense competition among lenders to deploy capital. We are seeing that competition play out already particularly at the lower leverage points.
Libor is currently 1.89%, and the 10-year treasury yield is 2.82%.  The Fed raised rates in March 25 basis points at their first meeting with Jerome Powell as Chairman.  The fed target rate is currently 1.50-1.75%, and they currently anticipate 2-3 more hikes in 2018 with futures showing the odds of a June hike at about 88%.  Even with the improved outlook, the fed minutes published recently showed concern among fed officials that certain headwinds like trade tariffs and recent turbulence in financial markets highlight risks to growth.
The renewed anticipation for rising interest rates over the last several months has spurred an increase in the number of early payoff requests from borrowers.  In many instances we are analyzing the potential benefits of refinancing loans prior to maturity, even when there may be a prepayment fee, in order to capture the interest savings from locking in today’s interest rate versus waiting and potentially ending up with a higher rate in the future.  We are running this feasibility analysis in conjunction with our affiliate company, Medalist Defeasance, who many clients have used for the prepayment services of CMBS loans.  Please put us to work if you have loans maturing in the next 18 months and are interested in this analysis.  Many lenders will forward rate lock as far as 12 months, and some can even lock at par with 4 to 6 months which drastically improves the interest savings analysis.
We look forward to continuing to build on the momentum from the first quarter, and we hope that the spring weather pattern we are finally seeing in our markets, hits everyone’s radar soon.
Best Regards,

Roger Montague

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