1Q Newsletter - 2020

First and foremost, we sincerely hope that everyone and their families are safe and healthy.  We want to extend our heartfelt thanks to all of those in the medical communities fighting COVID-19, as well as to all the workers who continue to provide services to those who have the luxury of staying at home.  As I noted in quite a few social media posts, many of our parents and grandparents were sent off to war.  It should not be too great a sacrifice to ask us to stay home for the short term and follow CDC guidelines regarding social distancing and proper sanitary practices.

The entire economy has been affected by the current health crisis which struck very quickly, and the commercial real estate sector is certainly no exception.  Medalist Capital currently services 467 loans totaling approximately $3 billion out of our Atlanta office.  To date we have received relief requests on 86 loans.  As expected, most of the requests are coming from the hospitality and retail sectors.  It is a little less clear at this point as to the degree which multifamily, office and industrial may be affected.  On the multifamily front, one would speculate that work force housing will be harmed more than properties whose tenants are employed in office or professional settings.  In any event, we anticipate additional requests in the coming months as many borrowers followed our advice and made April 1st payments in order to give both lenders and borrowers additional time to assess the situation.

As it relates to relief requests, please be patient as both borrowers and lenders are in uncharted territory.  Most of our correspondent lenders have a different process and informational needs.  We are here to facilitate to the best of our abilities and the bottom line is that although we may have certain opinions, we will execute requests from both sides as instructed. At this time I would like to acknowledge the tremendous job that Patrick Simpson, our Servicing Manager, has done in handling the barrage of requests by borrowers and lenders.  Patrick is assisted by Julie Eisma and Lindsay Barnett in our servicing department.  Due to the volume of work, we have also enlisted Clyde Nelson, Lyle Farrar and Abby McDonald to help process the requests. The entire team is doing a great job working so diligently from remote locations.

On the origination front, Medalist Capital had a record first quarter closing $415 million of loans in 31 transactions.  Most of these loans were signed up prior to the current health crisis, but 11 of them were funded in March, so thanks are due to the sponsors and lenders who saw these transactions through during a difficult time.  We still have a healthy pipeline and have signed quite a few new applications in the first quarter, but we do expect a slow down as lenders and borrowers assess the impact that the virus is going to have on their portfolios.  For those life insurance companies that are quoting new business, rates seem to be in the high 3%- low 4% range for most terms.  As liquidity increases in the bond markets due to actions by the Fed and US Government, we anticipate that loan spreads may tighten in the coming months.

In closing, I would like to borrow the headline from a communication that I received from a school here in Atlanta – No matter how long the night, the dawn will break.  Although it is tough to watch the evening news every night, I am heartened by how hard our country is fighting this pandemic.  We will get past this crisis and our economy will come back strong.  We are hopeful that one of the end results of this event will be even closer and more meaningful relationships with our customers and lenders, as well as within our own company.

Best Regards,

Scott Kenney

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