3Q Newsletter - 2018
Now that the summer and its heat has passed, I hope everyone is excited about the cooler fall temperatures but can also look back on some memorable summer adventures. Obviously, the big event this past quarter for those of us in North Carolina was Hurricane Florence. Although the storm delivered a serious blow to the eastern region of our state, the strength and resiliency of our community has been remarkable. Also notable is the overwhelming desire of so many people not directly affected by Florence to help our eastern neighbors, either financially or by volunteering their time for cleanup efforts. We Carolinians are a tough bunch, and we are making that evident right now! Please continue to keep those affected in your thoughts and prayers.
Medalist Capital had a productive 3rd quarter, closing 20 loans with a total volume of approximately $193 million. Retail accounted for 40% of our 3rd quarter volume, followed by office (25%), multi-family and industrial (15% each), and self-storage (5%). Loan sizes ranged from $1.5 million up to $21 million with an average of $10.2 million. For the remainder of 2018, our pipeline is very robust, and October is shaping up to be our most active month of the year. Year-to-date we are on par with 2017. With the strong 4th quarter pipeline, we expect 2018 to be one of our best years-to-date, closing over $1.1 billion. We are incredibly thankful for our clients and capital sources that have helped us reach this level.
In preparing for this newsletter, I surveyed a handful of our life insurance companies for an update on their year-to-date production versus allocation and predictions for 2019. There was a wide range of responses – a few are behind on their 2018 allocation and are getting aggressive while playing catch up. Most are on pace, continuing to lend through year-end, and a small handful are ahead of schedule and “tapping the brakes” for the remainder of the year. A common theme for 2019 was the expectation of higher allocations for commercial mortgages given their relative value, but with a concern over the volume of quality deals to compete on. For our borrowers this is good news, as it appears competition among life companies will be fierce for quality deals in 2019.
Treasury yields ended the quarter higher after a fairly quiet start. The 10-year Yield began the quarter at 2.87% and stayed in the 2.80% - 2.90% range much of July, until the end of the month when it rose to 2.96%. That was the high mark for August and the first half of September, until 9/11 when it hit 2.98% and a peak of 3.10% on 9/25. It closed out the quarter at 3.05%, compared to 2.46% at the start of 2018 and 2.33% at the end of 3rd quarter 2017. As of the date of this writing, strong economic data released at the start of October shot the 10-year up to 3.19%. Despite the rising yield environment, coupon rates are still attractive as spread compression is prevalent given the intense competition among many lenders to close out the year strong.
Medalist Capital continues to have the broadest sources of debt and equity capital in the Southeast, and we appreciate the trust many of you have put in us to assist you with your financing needs this year. We are eager and ready to be a part of your team for any debt or equity needs you have as we close out 2018 and head into 2019. Please let us know how we can help and let’s all finish out the year strong!
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