Good morning from Charleston where the weather still can’t seem to make up its mind – 70-degree golf weather one day, followed by 45 degree chills the next. I know I won’t get much sympathy from those reading this in the mid-west, so I’ll jump right into it.

Two weeks ago, Medalist Capital attended the 2025 Mortgage Bankers Association Commercial Real Estate Finance conference in San Diego, as we do every year. Like NMHC for multi-family or ICSC for commercial, this conference is the largest event of the year for finance professionals across all asset classes. A dozen Medalist producers spent time meeting with CMBS, Agency, Debt Fund, and Life Company lenders to gain insight into their 2024 production and 2025 goals.

While overall attendance was down by many of our national platform competitors, we took full advantage of the opportunity to meet face-to-face with over 50 lenders during the three-day event. These meetings strengthened our relationships allowing us to better serve our clients and continue to provide the best execution in the market.

Key Takeaways

• Positives: Spreads have tightened, more lenders are offering creative solutions to meet today’s demand, and capital availability is not an issue.
• Negatives: Concerns remain about production goals with transaction volume still uncertain.

The commercial real estate market has been on a rollercoaster over the past three years. Coming out of Covid, commercial property sales reached a record $775 billion in volume in 2022, with mortgage borrowing and lending reaching an all-time high of $815 billion, according to Trepp. However, both sales and lending volume dropped by 50% in 2023 with 2024 following a similar trend.

A key factor in this slowdown was the 10-year Treasury, which climbed from 1.72% on March 1, 2022 to above 4.00% a year later, halting most of the market. Continued inflation, political and geo-political concerns, coupled with further treasury widening, resulted in continued market apathy. Though the market experienced relief when the Fed met its goal of cutting short term rates by 100 bps in 2024, longer term rates actually increased over that same time.  

That said, while we haven’t returned to 4-handle coupons, the 10-year has remained relatively stable since the beginning of the year, falling most recently to 4.24% today: 5-year 4.03% (2/28/2025). During the conference, the MBA released an article confirming 20% ($957 billion) of the $4.8 trillion of outstanding commercial mortgages held by lenders and investors will mature in 2025, which is an increase from 2024. A common sentiment of many at the conference was that 2025 could trigger a capital event for many projects that have been extending with their lenders, hoping for a better environment. The combination of these factors will likely result in an increase in sales activity and hopefully production for the industry.

Fortunately, whether you’re seeking acquisition financing or to refinance your loan, lender feedback at the conference was encouraging:

CMBS

Spreads have come in and they are hungry for more loans. CMBS lenders are able to size loans at even more competitive debt yields than previously depending on asset class. This will likely be the most competitive execution for higher leverage office and hotel executions in the near term, but they can also consider significant cash out, full term IO, and 70-75% LTV on all other asset classes if supported.

Agency (FNMA/Freddie/HUD)

• Spreads continue to be aggressive and even more so for MF deals with affordability factors. They continue to offer rate buy down options and can consider 35-year amortizations now through a traditional FNMA/Freddie execution versus previously offering that through the 223F HUD product.
• HUD is now sizing 221d4 construction loans to a 1.15x DSCR on a 40-year amortization or 87% LTC up to $125 million.
• Please note that Medalist Capital has joint venture relationships with DUS Licensed Originators such that our involvement comes at no additional cost to our clients. Please reach out to discuss how your loan will size for this execution.

Debt Funds

I don’t mean to sound like a broken record, but yes spreads have come in significantly as well. These lenders are sourcing a lower cost of capital from banks providing warehouse lines which is filtering down to their pricing. For example, construction take out loans for MF deals at CO were being priced in the high 200’s to low 300’s last year. We heard pricing today is now 75-100 bps lower.

Life Companies

• Medalist represents a wide array of life companies who can consider loans from ~$1 million with no stated maximum for larger transactions and portfolios. There is too much to information to capture in this email, so I will highlight the most interesting takeaways...
• Small Balance
  • Most life companies seeking small balance loans materially increased their production the previous two years as their direct competitors (banks) have generally been out of the market. We’re still closing a significant amount of business with these lenders that banks would otherwise compete for.
• Construction Products
  • There are only a handful of life companies offering this execution however we did hear that spreads have come in with most competitive floating rate pricing starting as low as the high 200’s and the ability to consider leverage up to 70% LTC, non-recourse available. Longer term Construction to Perm pricing varies.
• Stretch Senior/Bridge Light
  • We heard a number of life companies underwriting to more aggressive coverages or willing to consider deals earlier in lease up. While not directly stated, I believe this is in an effort to capture business due to the transaction volume concern I mentioned earlier. Many are also seeking higher yielding opportunities to barbell the low spreads they’re quoting on more conservative deals.
  • For lease up MF deals, this is also likely an effort to capture business before the extremely competitive agencies can consider it needing more trailing stabilized history. The most aggressive example was offering a fixed rate execution for a MF deal signing the deal up at 20% leased and closing at 40% leased with structure to get to stabilization.
  • For stabilized deals, some mentioned underwriting to an ~8% debt yield or 1.0x amortizing coverage with the ability to get more aggressive if there is further value-added upside.
  • To further the above, we are now hearing from more life companies than ever who have the ability to consider more transitional profile requests, albeit at more conservative levels than their debt fund competitors. For example, a multi-tenanted industrial deal with short WALT and the strategy to mark rents to market requiring IO, structure, etc.
• Additional Notes
  • We heard from more life company lenders who are back in the market for office, even marketing it as an asset class of which they’d like to see more. They will still be selective for the top profile office properties, but it was positive feedback, nonetheless.
  • Medalist secured more permanent and construction financing for hotels in 2024 than we have in the previous three years. We also heard from many life companies who are actively considering hotel requests.
  • I would say roughly half or more of the life companies we met are considering rate buydowns.
  • There is plenty of liquidity for short term, fixed rate (3-5 year) requests with prepayment flexibility.

Over half of our production in 2024 came from Life Company lenders, who remain competitive and diversified. Unlike our competitors, Medalist differentiates itself by continuing to develop deep relationships with these lenders — some dating back 20 to 30 years—ensuring our clients receive the best terms and highest level of attention.

The beauty of our business is that every deal is different. However, that also makes it tough for me to capture information that applies to every borrower’s specific needs above. I encourage you to reach out to your Medalist contact to discuss any specific questions or financing needs.

While predicting where rates will go in 2025 is above my pay grade, the feedback we received at this conference gives me confidence this year will be a step forward.

I wish everyone a prosperous and productive 2025!

Tom McHugh