3Q Newsletter 2020
I will speak for all of us here at Medalist Capital in saying that we hope this update finds you and your family healthy and safe. It goes without saying that Covid-19 has taken a massive toll on our nation’s overall health and economy this year. 2020 continued to pile on in the 3rd Quarter with historic storms in the Gulf and devastating wildfires out West. We all have family, friends and colleagues that have been impacted in one way or another. We send out prayers to all of those impacted and a heartfelt thanks to the healthcare workers, firefighters and first responders that continue to put themselves in harm’s way for others.
As difficult as all the aforementioned has been, I dare say that there seems to be a tad more “normal” in the world than there was a few weeks ago (just humor me and ignore the presidential debate when you read that). It feels good that many of us are back in the office on a consistent basis, carefully seeing business clients and associates and that our children are back in school (in some form or fashion). And simple pleasures like cooler fall temperatures, our college teams being back on the gridiron and seats at our favorite restaurant patio are welcomed. Let’s be grateful for all of those things.
I’d say the same thing from a business standpoint. While certainly not normal per se, we saw a significant uptick in deal flow and transaction activity after the July 4th holiday. Many of our clients expressed urgency to either buy or sell assets prior to the November elections (or certainly by year end) and a more stable economic outlook, relative to the 2nd Quarter, led to an uptick in deal flow. Likewise, our lenders have a higher bandwidth for new business after having been significantly preoccupied for much of the 2nd Quarter (PPE for the banks and relief requests for the life insurance companies). As such, we closed 29 loans in the 3rd Quarter (two more than we closed in 3Q 2019) and have a strong closing pipeline going into the last three months of the year. We feel that it is important to point out that 60% of these closings were retail or office properties. While not the preferred product type for many lenders in this environment, there is ample capital for high-quality, moderately leveraged retail and office product. Industrial, multi-family and self-storage assets rounded out the remainder of the property types we closed in 3Q with a handful of these being ground-up construction loans. Capital sources were diverse with life insurance companies, agencies, banks, debt funds, credit unions and bridge lenders all utilized in 3Q to find the best execution for our borrowers.
Without a doubt the most noteworthy attribute of the current lending environment is the historically low all-in interest rates that we are seeing for quality assets. In the last two weeks we have locked 10-year fixed rates with life insurance lenders in the 2.30% range and have seen many sub 2.50% deals quoted. These rates have primarily been reserved for lower-leveraged multi-family and industrial assets but we are seeing sub 3.0% rates for high-quality product of all types. Higher leveraged deals are pricing in the low-to-mid 3.0% range. With rates this low, we are also seeing many permanent lenders offer prepayment flexibility on the backend of loan terms as well. While remaining disciplined from a credit perspective, we expect that lenders will aggressively pursue loan opportunities for the remainder of the year in order to meet 2020 goals. There has never been a better time to consider a long-term, fixed rate option if you are in the acquisition market or have a near-term refinance need.
While we certainly have MANY uncertainties going into the home stretch of 2020, we at Medalist Capital feel very confident that our debt capital sources are positioned to provide aggressive capital to the market. That being said, the debt landscape is not easy to navigate at the moment. More than ever a valued partner like Medalist Capital can help you steer through the next three months and into what we hope is a great 2021. We look forward to working with you.
And one more thing to be grateful for…The Masters starts in four weeks!
A. Bryan Brooks