Q4 2023 Walker & Dunlop Inc Earnings Call

Operator: The Bulletproof Executive, 2013 All Rights Reserved, www.globalonenessproject.org Good day and welcome to the Q4 2023 Walker & Dunlop Inc. Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Kelsey Duffey, Senior Vice President of Investor Relations. Please go ahead.

Yeah.

Speaker Change: Good day and welcome to the Q4, 'twenty twenty-three Walker and Dunlop, Inc. Earnings call Today's conference is being recorded.

Speaker Change: At this time I would like to turn the conference over to Kelsey Duffey Senior Vice President of Investor Relations. Please go ahead.

Kelsey Duffey: Thank you Karen good morning, everyone. Thank you for joining Walker and Dunlop fourth quarter and full year of 2023 earnings call I have with me. This morning are chairman and CEO, Willy Walker and our CFO Greg for Koski. This call is being webcast live on our website and a recording will be available later today.

Kelsey Duffey: Thank you, Taryn. Good morning, everyone. Thank you for joining Walker & Dunlop's fourth quarter and full year 2023 earnings call. I have with me this morning our chairman and CEO, Willie Walker, and our CFO, Greg Glorkowski. This call is being webcast live on our website, and a recording will be available later today.

Kelsey Duffey: Both our earnings press release and our website provide details on accessing the archived webcast. This morning, we posted our earnings release and presentation to the investor relations section of our website, www.WalkerDunlop.com.

Kelsey Duffey: Both our earnings press release and website provide details on accessing the archived webcast. This morning, we posted our earnings release and presentation to the Investor Relations section of our website Www Dot Walker Dunlop Dot com. These slides serve as a reference point for some of what Willy and Greg will touch on during the call.

Kelsey Duffey: These slides serve as a reference point for some of what Willie and Greg will touch on during the call. Please also note that we will reference non-GAAP financial metrics, adjusted EBITDA, and adjusted core EPS during the course of this call. Please refer to the appendix of the earnings presentation for a reconciliation of these non-GAAP financial metrics. Investors are urged to carefully read the forward-looking statement language in our earnings release. Statements made on this call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe our current expectations, and actual results may differ materially. Walker & Dunlop is under no obligation to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, and we expressly disclaim any obligation to do so. More detailed information about risk factors can be found in our annual and quarterly reports filed with the SEC. I'll now turn the call over to Willie. Thank you, Kelsey, and good morning, everyone.

Kelsey Duffey: Please also note that we will reference the non-GAAP financial metrics adjusted EBITDA and adjusted core EPS. During the course of this call. Please refer to the appendix of the earnings presentation for a reconciliation of these non-GAAP financial metrics investors are urged to carefully read the forward looking statements language in our earnings release statements made on this call which are not historical facts may be.

Kelsey Duffey: Forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095 forward.

Kelsey Duffey: Forward looking statements describe our current expectations and actual results may differ materially Walker and Dunlop is under no obligation to update or alter our forward looking statements, whether as a result of new information future events or otherwise and we expressly disclaim any obligation to do so.

Kelsey Duffey: More detailed information about risk factors can be found in our annual and quarterly reports filed with the SEC I'll now turn the call over to Willie.

Thank you Kelsey and good morning, everyone.

William M. Walker: 2023 was a challenging year for the commercial real estate industry, and the fourth quarter started out with the same headwinds that we saw throughout the year. But the lower-than-expected CPI print in November drove a 100-basis-point rally in rates, and the deals in our pipeline held together for the first time all year, resulting in $9.3 billion of total transaction volume in the quarter. This was still down 17% from Q4 of 22, but up sequentially from the third quarter and our highest quarterly volume of the year. A nice way to end the year.

Willie: 2023 was a challenging year for the commercial real estate industry.

Willie: In the fourth quarter started out with the same headwinds that we saw throughout the year.

Willie: But the lower than expected CPI print in November drove a 100 basis point rally in rates and the deals in our pipeline held together for the first time all year.

Willie: Hoelting and $9 3 billion of total transaction volume in the quarter.

Willie: This was still down 17% from Q4 of 'twenty two.

Willie: Sequentially from the third quarter, and our highest quarterly volume of the year.

Willie: A nice way to end the year.

William M. Walker: As you can see on slide 3, our Q4 financial performance was solid across the board, including total revenues of $274 million, down just 3% from Q4 of 2022, and diluting per share of $0.93. However, EPS was off more than other metrics, largely due to two transaction-related adjustments unique to Q4 of last year. Adjusted core EPS, which strips out a good deal of non-cash revenues and expenses, was up 1% from the same period last year.

Willie: As you can see on slide three our Q4 financial performance was solid across the board.

Willie: <unk> total revenues of $274 million down just 3% from Q4 of 'twenty two.

Willie: And diluted earnings per share of <unk> 93.

Willie: EPS was up more than other metrics largely due to two transaction related adjustments unique to Q4 of last year.

Willie: Adjusted core EPS, which strips out a good deal of noncash revenues and expenses was up 1% from the same period last year.

William M. Walker: Finally, reflecting the strength of the W&B business model, adjusted EBITDA grew each quarter throughout the year from $68 million in Q1 to $88 million in Q4, down only 5% from Q4 of 22. The Q4 results were a nice uptick after a very challenging 2023 when full-year total transaction volume was down 48% to $33 billion. Yet due to our underlying business model, significant cost management, and the exceptional WMD team, full-year adjusted EBITDA was $300 million, down only 8% from 2022. We are hopeful that we have effectively weathered the Great Tightness and that as rates stabilize and potentially head down, we are extremely well positioned to benefit from the market's eventual recovery. The market's belief that the Fed is done tightening and will start to ease in 2024 is welcome news and very constructive for the commercial real estate industry. Yet there are clearly questions around when and by how much the Fed will ease, and the answer to those questions will have a dramatic impact on the market.

Willie: Finally, reflecting the strength of the <unk> business model adjusted EBITDA grew each quarter throughout the year from $68 million in Q1 to $88 million in Q4 down only 5% from Q4 of 'twenty two.

Willie: Q4 results were a nice uptick after a very challenging 2023, when full year total transaction volume was down 48%.

Willie: The $33 billion, yes.

Willie: Due to our underlying business model significant cost management and the exceptional WMD team full year adjusted EBITDA was $300 million.

Willie: Only 8% from 2022.

Willie: Hopefully we are hopeful that we have effectively weathered the great tightening and that as rates stabilize and potentially head down that we're extremely well positioned to benefit from the market's eventual recovery.

Willie: The market's belief that the fed is done tightening and we will start to ease in 2024 is welcome news and very constructive for the commercial real estate industry.

Willie: There are clearly questions around when and by how much the fed will ease and the answer to those questions will have a dramatic impact on the market.

Willie: We are currently seeing a slow start to the year as investors and developers try to incorporate rate cuts or not into their business planning.

William M. Walker: We are currently seeing a slow start to the year as investors and developers try to incorporate rate cuts or not into their business planning. As shown on this slide, we started 2023 with a 3.88% 10-year, which moved up to 5% over the subsequent three quarters, only to rally back down to 3.88% in Q4. That type of rate volatility makes it exceedingly difficult for buyers and sellers of commercial real estate to establish prices, determine their cost of capital, and compute an IRR on the sale or acquisition of an asset.

Willie: As shown on this slide we started 2023 with a 388% tenure, which moved up to 5% over the subsequent three quarters only to rally back down to 388% in Q4.

Willie: That type of rate volatility makes it exceedingly difficult for buyers and sellers of commercial real estate to establish pricing determined their cost of capital and computer and IRR on the sale or acquisition of an asset.

Willie: If the fed begins easing in Q2 and continues to ease we would expect a nice uptick in transaction volume this year.

William M. Walker: If the Fed begins easing in Q2 and continues to ease, we would expect a nice uptick in transaction volume this year and also an improvement in the credit landscape. Our multifamily property sales team closed $2.9 billion in sales in the fourth quarter, bringing our full-year volume to $8.8 billion, down 55% from 2022, slightly less than the broader market decline of 61%. As a result, we increased market share from 6.7% in 2022 to 7.4% in 2023. However, debt brokerage volume declined 34% in Q4 to $2.9 billion and was down 55% for the full year to $11.7 billion.

Willie: And also an improvement in the credit landscape.

Willie: Our multifamily property sales team close to $9 billion of sales in the fourth quarter, bringing.

Willie: Bringing our full year volume to $8 8 billion down 55% from 2022.

Slightly less than the broader market decline of 61%.

Willie: As a result, we increased market share from six 7% in 2022 to seven 4% in 2023.

Willie: Debt brokerage volume declined 34% in Q4 to $2 9 billion.

Willie: And it was down 55% for the full year to $11 7 billion.

William M. Walker: Our GSE volumes and market share remain strong, once again finishing the year as Fannie Mae's largest dust lender for the fifth consecutive year at $6.6 billion, and Freddie Mac's third largest partner at $4.6 billion of loan deliveries. Our focus on affordable housing and small balance lending added significant loan volume to our GSE totals. Our research arm, Zelman, provided W&D with stable subscription revenues, as their research continues to be known as some of the very best covering the housing industry.

Willie: Our GSE volumes and market share remains strong once again, finishing the year as Fannie mae's largest dust lender for the fifth consecutive year at $6 6 billion.

Willie: And Freddie Mac's third largest partner at $4 $6 billion of loan deliveries.

Willie: Our focus on affordable housing and small balance lending added significant loan volume to our GSE totals.

Willie: Our research arms Zelman provided W. D was stable subscription revenues as their research continues to be known as some of the very best covering the housing industry.

William M. Walker: We also expanded Zelman's investment banking capabilities into the commercial market in 2023. And in the fourth quarter, the investment banking team closed three transactions, albeit all in the single-family sector, that boosted revenues and expanded the W&D brand significantly. I mentioned our Small Balance Lending Group's importance to our GSE volumes, and thanks to the team and technology we've invested in that business, we ended 2023 as the third-largest small balance lender with Fannie Mae and the fourth-largest with Freddie Mac, expanding market share nicely with both, and our other tech-enabled business, Apprise, grew faster than the market last year, ending the year with 11% market share Thank you, Willie, and good morning, everyone.

Willie: We also extended zelman investment banking capabilities into the commercial market in 2023 and in the fourth quarter. The investment banking team closed three transactions, albeit all in the single family sector that boosted revenues and expanded the WMD brand significantly.

Willie: I mentioned, our small balance lending groups importance to our GSE volumes and thanks to the team and technology. We've invested in that business. We ended 2023 is the third largest small balance lender with Fannie Mae and the fourth largest with Freddie Mac <unk>.

Willie: <unk> market share nicely with both.

Willie: And our other tech enabled business apprise grew faster than the market last year, ending the year with 11% market share up from 6% in 2022.

Willie: Now I'll turn the call over to Greg to review, our quarter and full year financial results in more detail Greg.

Greg: Thank you Willy and good morning, everyone.

Greg Glorkowski: This was the Year of Persistent, Volatile Marketing that depressed commercial real estate investment and transaction activity. However, the sharp decline in long-term rates during the fourth quarter and the positive sentiment that followed the Fed's November remarks led to increased transaction activity that drove improved performance in our capital markets sector. When coupled with the continued strength of our servicing and asset management segment, we delivered our strongest quarterly results for 2023. I will spend a little time on our quarterly segment performance before recapping our annual consolidated financial performance and finishing with our current outlook for 2024. Beginning with our Capital Markets segment on slide 6, this segment delivered the strongest quarterly financial results of the year due to the sequential uptick in total transaction volume.

Greg: This was a year of persistent volatile market conditions that depressed commercial real estate investment and trade.

Greg: Jackson activity.

Greg: However, the sharp decline in long term rates during the fourth quarter and a positive sentiment at all or is that no other.

Greg: Our remarks led to increased transaction activity that drove the improved performance at our capital market segment.

Greg: When coupled with the continued strength of our servicing and asset management segment, we delivered our strongest quarterly results for 2023.

Greg: I will spend a little time on our quarterly segment performance before recapping, our annual consolidated financial performance.

Greg: And finished with our current outlook for 2024.

Greg: Beginning with our capital markets segment on Slide six this segment delivered its strongest quarterly financial results of the year due to the sequential uptick in total transaction volume.

Greg Glorkowski: Total revenues were $129 million, down 5% year-over-year but up 10% from the third quarter of 2023. Revenues benefited from a stronger gain on sale market compared to the same quarter last year due to the mix of transaction activity that was weighted more heavily towards agency financing volume this quarter. Personnel expense for this segment declined 17% year-over-year due to a decline in variable compensation.

Greg: Total revenues for $129 million down 5% year over year.

Greg: Up 10% from the third quarter of 2023.

Greg: Revenues benefited from a stronger gain on sale margins compared to the same quarter last year due to the mix of transaction activity that was weighted more heavily towards agency financing volume this quarter.

Greg: Our sale expense for the segment declined 17% year over year due to a decline in variable compensation.

Greg: Our capital market segment benefits from a high proportion of performance based compensation and in periods of lower transaction activity and associated revenues, we recognized lower variable compensation costs.

Greg Glorkowski: Our Capital Markets segment benefits from a high proportion of performance-based compensation, and in periods of lower transaction activity and associated revenues, we recognize lower variable compensation costs. This is reflected in adjusted EBITDA, which improved to a loss of only $2 million this quarter, compared to a $16 million loss in Q3'22, but down from positive adjusted EBITDA of $6 million in the fourth quarter last year. The Servicing and Asset Management sect, or SAM, produced revenues of $140 million this quarter, as shown on slide 7. This is driven by our $131 billion servicing portfolio and $17 billion of assets under management. Revenues for this quarter were down $7 million compared to the same quarter last year.

Greg: This is reflected in adjusted EBITDA, which improved to a loss of only $2 million this quarter compared to $16 million loss in Q3, 'twenty three but.

Greg: But down from positive adjusted EBITDA of $6 million in the fourth quarter last year.

Greg: The servicing and asset management sector or.

Greg: <unk> produced revenues of $140 million this quarter as shown on slide.

Greg: Driven by our $131 billion servicing portfolio and $17 billion of assets under management.

Greg: Revenues this quarter were down $7 million compared to the same quarter last year.

Greg Glorkowski: Typically, the fourth quarter is the strongest quarter of revenues for Walker & Dunlop Affordable Equity, formerly Alliance, due to the gains realized from the disposition of maturing tax credits. However, macroeconomic challenges caused the pace of dispositions to slow meaningfully at the end of this year compared to the last two years, and as a result, investment management revenues were down quarter over quarter. These deals remain in our portfolio, and we expect to dispose of the assets when market conditions become more favorable. Our affordable equity team did have its most successful year of equity originations in its history, though, indicating $688 million of new equity during 2023. Our servicing activities, including recurring servicing fees and related placements, generated Q4 revenues of $121 million, up 18% year-over-year, offsetting the majority of the decline from investment management. But the operating margin for this segment was still down 4 percentage points to 30%, while adjusted EBITDA declined 3% to $111 million.

Greg: The fourth quarter is the strongest quarter of revenues for Walker and Dunlop Affordable equity, formerly alliance due to the gains realized from the disposition of mature and tax strategies.

Greg: Macroeconomic challenges caused the pace of dispositions to slow meaningfully at the end of this year compared to the last two years and as a result investment management revenues were down quarter over quarter.

Greg: These deals remain in our portfolio and we expect to dispose of the assets when market conditions become more favorable.

Our affordable equity did have its most successful year of equity originations in its history, indicating $688 million of new equity during 2023.

Greg: Our servicing activities, including recurring servicing fees and related placement fees.

Greg: Q4 revenues of $121 million up 18% year over year offsetting the majority of the decline from investment management fees.

Greg: But operating margin for this segment was still down four percentage points to 30%.

Greg: While adjusted EBITDA declined 3% to $111 million.

Greg: Before I discuss our consolidated annual performance I want to touch on credit, which continues to hold up well.

Greg Glorkowski: Before I discuss our consolidated annual performance, I want to touch on credit, which continues to hold up well. As shown on slide 8, we ended the year with 3 defaulted loans in our at-risk portfolio, totaling $27 million, or just 5 basis points. We are currently estimating losses of $3 million on the defaulted loans, which compares to our overall risk-sharing allowance of $32 million at year-end, leaving sufficient reserves to cover any other potential defaults that may materialize during the cycle. In addition to these defaulted loans, last quarter, we reported that Fannie Mae requested we repurchase the $13 million loan, and we expect to complete that repurchase in the first quarter. We do not expect to incur any loss on the loan, and our asset management team is working with the borrower to resolve the outstanding issue that led to the repurchase. We also carefully monitor loans that are more than 60 days delinquent.

On slide eight we ended the year with three defaulted loans in our at risk portfolio totaling $27 million.

Greg: Or just five basis points.

Greg: We are currently estimating losses of $3 million on the defaulted bonds, which compares to our overall risk sharing allowance of $32 million at year end, leaving sufficient reserves to cover any other potential defaults that may materialize during the cycle.

Greg: In addition to these defaulted loans last quarter, we reported that Fannie Mae requested we repurchased $13 million loan.

And we expect to complete that repurchase in the first quarter.

Greg: We do not expect to incur any loss on the left and our asset management team is working with the borrower to resolve the outstanding issues that led to the repurchase.

Greg: We also carefully monitor loans that are more than 60 days delinquent.

Greg: And as of January 2024, we had only seven such loans compared to three last year.

Greg Glorkowski: And as of January 2024, we had only 7 such loans, compared to 3 last year. The remainder of our APRIS portfolio is performing very well, as illustrated by the credit fundamentals on this slide. The weighted average debt service coverage ratio of the at-risk portfolio remains over two times, the underwritten loan-to-value was just over 60%, and only $3.4 billion of at-risk loans are maturing over the next two years.

Greg: The remainder of our at risk portfolio is performing very well as illustrated by the credit fundamentals on this slide.

Greg: The weighted average debt service coverage ratio of the at risk portfolio remains over two times.

Greg: Underwritten loan to value was just over 60%.

Greg: And only $3 $4 billion of average loans are maturing over the next two years.

Greg: As it relates specifically to the maturing loans the weighted average debt service coverage ratio of those loans is also over two times.

Greg: And only 12% are floating rate loans.

Greg: In short we have maintained a consistent disciplined approach to credit for over 30 years as a dust lender and we continue to feel good about the broad credit fundamentals of our at risk portfolio, given where we are in the cycle.

Greg Glorkowski: As it relates specifically to the maturing loans, the weighted average debt service coverage ratio of those loans is also over two times, and only 12% are floating rate loans. In short, we have maintained a consistent, disciplined approach to credit for over 30 years as a Duff lender, and we continue to feel good about the broad credit fundamentals of our at-risk portfolio, given where we are in the cycle. Turning back to our consolidated financial, the full year total transaction volume of $33 billion was down 48% year over year. However, our scaled servicing and asset management platform contributed significantly to our revenue, which totaled 1.1 billion dollars, down only 16% for 2022. Diluted earnings per share continued to be impacted by lower transaction activity and was $3.18 per share for the full year, down 50% from 2022.

Greg: Turning back to our consolidated financial results full year total transaction volume of 33 billion was down 48% year over year.

Greg: Our scale servicing and asset management platform contributed significantly to our revenues, which totaled $1 1 billion down only 16% for 2022.

Greg: Diluted earnings per share continues to be impacted by lower transaction activity.

Greg: It was $3 18 per share for the full year down 50% from 2022.

Greg: However, the durable recurring cash flows generated by the servicing and asset management segment supported our adjusted EBITDA and adjusted for EPS two.

2023, adjusted EBITDA of $300 million was down 8% year over year, while adjusted core EPS totaled $4 68 per share down 16%.

Greg Glorkowski: However, the durable recurring cash flows generated by the servicing and asset management segment supported our adjusted EBITDA and adjusted core EPS. 2023 adjusted EBITDA of $300 million was down 8% year over year, while adjusted core EPFs totaled $4.68 per share, down 16%. Finally, operating margin was 13% and return on equity was 6%, compared to 21% and 13%, respectively, in 2022. We have a fantastic business model that generates strong cash flow, and we ended the year with $329 million of cash on hand. Our tax position only decreases in the first quarter as we pay company bonuses, repurchase shares connected to employee stock vesting events, and settle our tax liability.

Greg: Finally, operating margin was 13% and return on equity was 6% compared to 21% and 13% respectively in 2022.

Greg: We have a fantastic business model that generates strong cash flow and we ended the year with $329 million of cash on hand.

Greg: Our cash position always decreases in the first quarter as we pay company bonuses repurchase shares connected to employee stock vesting events and settle our tax liabilities.

Greg: This year, we will also pay another earn out installment to alliance as they have now achieved 47% of the aggregate earn out and remain on pace to achieve the smaller amounts over the next two years.

Greg: Given the stability of our cash earnings yesterday, our board approved a quarterly dividend of <unk> 65 per share a 3% increase.

Greg Glorkowski: This year, we will also pay another earn-out installment to Alliance, as they have now achieved 47% of the aggregate earn-out and remain on pace to achieve the full amount over the next two years. Given the stability of our cash earnings, yesterday, our board approved a quarterly dividend of $0.65 per share, a 3% increase from the previous year, and authorized a $75 million share repurchase program. This is our sixth annual dividend increase since we initiated the dividend in February 2018 at $0.25 per share and represents a cumulative increase of 160% over the last six years.

Greg: And authorized a $75 million share repurchase program.

Greg: This is our sixth annual dividend increase since we initiated the dividend in February 2018 at 25 cents per share and represents accumulative increase of 160% over the last six years.

Greg: Our 2023 cash generation is a testament to the strength and durability of our business model in a downturn, giving us confidence to increase the dividend yet again, while still retaining capital to support the business.

Greg: Over the past year, we start the cautious tone with respect to the market. We actively managed our business to withstand the sharp decline in transaction activity by cutting personnel and G&A costs refinancing and upsizing, our term loan and preserving capital and while we exited 2023 and a strong financial position we remain.

Greg Glorkowski: Our 2023 cash generation is a testament to the strength and durability of our business model in a downturn, giving us confidence to increase the dividend yet again while still retaining capital to support the business. Over the past year, we have struck a cautious tone with respect to the market. We actively managed our business to withstand the sharp decline in transaction activity by cutting personnel and G&A costs, refinancing and upsizing our term loans, and preserving capital. And while we exited 2023 in a strong financial position, we remain cautious entering 2024. For starters, Q1 is going to be slower than last year from an earnings perspective, likely in the range of $0.40 to $0.60 per diluted share, as transaction activity is off to a slow start, and we will not repeat the $11 million net benefit for credit losses resulting from the annual update to our CECL methodology.

Greg: Cautious entering 2024.

Greg: For starters Q1 is going to be slower than last year from an earnings perspective.

And the range of 40 to 60 per diluted share as transaction activity is off to a slow start and we will not repeat the $11 million net benefit for credit losses, resulting from the annual update to our seasonal methodology.

Greg: Nor will we replicate the $7 $5 million investment banking transaction, we closed in Q1 last year.

Greg: As it relates to our full year outlook, Fannie Mae and Freddie Mac has stated they expect their 2020 for lending volumes to be similar to 2023.

Greg: That would be a disappointing outcome given the potential for stable and maybe even declining interest rates. This year, but we cannot disregard the view of our two largest partners.

Greg: Finally, there are many macroeconomic drivers that we do not control, including interest rates political elections in inflation that will undoubtedly impact our business this year.

Greg Glorkowski: Nor will we replicate the $7.5 million investment banking transaction we closed in Q1 last year. As it relates to our full-year outlook, Fannie Mae and Freddie Mac have stated they expect their 2024 lending volumes to be similar to 2023. That would be a disappointing outcome given the potential for stable, and maybe even declining, interest rates this year, but we cannot disregard the view of our two large partners. Finally, there are many macroeconomic drivers that we do not control, including interest rates, political elections, and inflation, that will undoubtedly impact our business this year. Those are the challenges.

Greg: What are the challenges.

Greg: But there are opportunities.

There are over $450 billion of multifamily loans maturing over the next two years, we are leveraging our data and technology to understand those deals meet with those customers and win their business.

Greg: Added 17, bankers and brokers to our platform in 2023 through our recruiting efforts, giving us a clear opportunity to gain market share this year.

Greg: There are over half a million multifamily units under construction that are being delivered in 2024 and our team will assist many of those developers with selling recapitalizing their assets.

Greg: Last year was also challenging for life Tech dispositions, but we're focused on reviewing opportunities with our developers and evaluating ways to make 2020 for a better year for our clients.

Greg Glorkowski: But there are opportunities. There are over $450 billion of multifamily loans maturing over the next two years. We are leveraging our data and technology to understand those deals, meet with those customers, and win their business. We added 17 bankers and brokers to our platform in 2023 through our recruiting efforts, giving us a clear opportunity to gain market share this year. There are over half a million multi-family units under construction that are being delivered in 2024, and our team will assist many of those developers with selling or recapitalizing their assets. Last year was also challenging for LIHTC positions, but we are focused on reviewing opportunities with our developers and evaluating ways to make 2024 a better year for our clients.

Finally, we generated strong cash flow from operations had a solid capital base that will allow us to invest in our business and raise capital to meet the market demands.

Greg: Just as we did when we announced the first close of our new desktop in February that raised $150 million of capital and then lever will allow us to fund $1 billion of resistance.

Greg: We have a terrific team that has performed over the long term and that team is focused on the opportunities that will help us return to growth in 2024 as a result as shown on slide 12, our full year guidance is for diluted earnings per share adjusted EBITDA and adjusted core EPS to increase in the mid single digits to low teens this year.

Greg: While the challenges of 2023 are not in the rearview mirror, we move into 2024 with the business model and the people brand and technology to continue exceeding our client's expectations.

Greg Glorkowski: Finally, we generate strong cash flow from operations and have a solid capital base that will allow us to invest in our business and raise capital to meet market demand, just as we did when we announced the first close of our new debt fund in February that raised $150 million of capital and, when levered, will allow us to fund half a billion dollars of Brisbane. We have a terrific team that has performed over the long term, and that team is focused on the opportunities that will help us return to growth in 2024. As a result, as shown on slide 12, our full-year guidance is for Diluted Earnings Per Share, Adjusted EBITDA, and Adjusted Core EPF to increase in the mid-single digits to low double digits this year. While the challenges of 2023 are not in the rearview mirror, we move into 2024 with the business model and the people, brand, and technology to continue exceeding our clients' expectations, executing on our long-term strategy, and generating extremely strong cash flows to set our business up for long-term success. Thank you for your time this morning.

Greg: Executing on our long term strategy and generating extremely strong cash flows to set our business up for long term success.

Thank you for your time this morning, I will now turn the call back over to Ed.

Ed: Thank you Greg.

Ed: As you've just heard our solid Q4 financial performance was thanks to the rally in the debt markets and the prospects of rate cuts in 2024.

Ed: And while those two macro shifts drove top and bottom line performance in Q4.

Ed: Do not explain why our balance sheet is so strong our credit book remains healthy and why our brand and team are so exceptional.

Ed: And those metrics takes years of consistent investment in performance.

Ed: Our balance sheet and cash position are so strong because we have built a wonderful business model over decades.

Ed: Applies us with durable revenues and earnings.

Ed: And we've continuously invested in businesses like Zelman and alliance.

Ed: <unk> broadened our client offering and diversified our revenue and earnings away from our core debt financing sales businesses.

Ed: Our credit book is healthy because we have taken the conservative thorough underwriting perspective throughout both bullish and bearish market.

Ed: 92% of our at risk portfolio was fixed rate loans, we have no exposure to close and we have no credit risk on commercial real estate asset classes outside of multifamily.

William M. Walker: I will now turn the call back over to Will. Thank you, Greg. As you just heard, our solid Q4 financial performance was thanks to the rally in the debt markets and the prospect of rate cuts in 2024. But while those two macro shifts drove top and bottom line performance in Q4, they do not explain why our balance sheet is so strong, why our credit book remains healthy, and why our brand and team are so exceptional. Performance on those metrics takes years of consistent investment and performance.

Ed: And our brand and team are so strong because we are continually innovating and investing in them both.

Ed: We take a long term view of our business and this long term view has not only benefited our company and financial performance, but also our investor returns.

Ed: As you can see on slide 13 over the past one 510 years Walker and Dunlop has generated total shareholder returns greater than any of our direct competitors in the commercial real estate services specialty finance and real estate technology space.

William M. Walker: Our balance sheet and cash position are so strong because we have built a wonderful business model over decades that supplies us with durable revenues and earnings. And we have continuously invested in businesses like Zelman & Alliance that have broadened our client offering and diversified our revenue and earnings away from our core debt finance and sales business. Our credit book is healthy because we have taken a conservative, thorough underwriting perspective throughout both bullish and bearish markets. 92% of our at-risk portfolio is fixed-rate loans. We have no exposure to CLOs.

Ed: Note that we arent cherry picking here these are global firms and domestic firms services firms and specialty finance firms lenders and technology companies.

Ed: And we aren't selecting a convenient time period Wmd's outperformance is over the short medium and long term, thanks to establishing bold highly ambitious business plan, focusing our exceptional team on achieving those goals and then executing.

Ed: We grow faster than the competition through cycles due to a business model that allows us to invest when others pull back.

Ed: We have scale and brand in the multifamily market. It is a competitive advantage every day and.

William M. Walker: We have no credit risk on commercial real estate asset classes outside of multifamily. And our brand and team are so strong because we are continually innovating and investing in them both. We take a long-term view of our business, and this long-term view has benefited not only our company and financial performance but also our investor return. As you can see on slide 13, over the past 1, 5, and 10 years, Walker & Dunlop has generated total shareholder returns greater than any of our direct competitors in the commercial real estate services, especially financed, and real estate technology space. Note that we aren't cherry picking here.

Ed: And we have avoided making investments and taking balance sheet risk in the office retail and hospitality sectors.

Ed: Long term outlook bold highly ambitious business plans never.

Ed: Never stop investing in people and technology.

Ed: And be mindful that it is often equally as important what you didn't do as what you did do.

Ed: That is what has made <unk> such an exceptional company to invest in and we will continue to generate shareholder returns going forward.

The market run up over the last few months reflected widespread views with the fed tightening is over and that is easing as near in.

Ed: While we believe 2024 will be a better financing and sales environments in 2023.

Ed: It is way too early to predict when market conditions return to normal.

Ed: Just two weeks ago, we saw New York community Bank dramatically increase their commercial real estate loan loss reserves and cut their dividend.

William M. Walker: These are global firms and domestic firms, services firms and specialty finance firms, lenders, and technology companies. And we aren't selecting a convenient time period.

Ed: Similarly, the publicly traded multifamily REIT saw average rent decline of three 4% in Q4.

William M. Walker: WND's outperformance is over the short, medium, and long term thanks to establishing bold, highly ambitious business plans, focusing our exceptional team on achieving those goals, and then executing. We grow faster than the competition through cycles due to a business model that allows us to invest when others pull back. We have scale and brand in the multifamily market that is a competitive advantage every day. And we have avoided making investments and taking balance sheet risks in the office, retail, and hospitality sectors.

Ed: And while Wmd's credit outlook is very solid and $3 four negative rent growth in no way and payers any loan in our portfolio.

Ed: These market data points, clearly reflect a market in transition not stabilized.

Ed: Therefore, as Greg just outlined our outlook for 2024 is optimistic yet cautious.

Ed: As we demonstrated in 2023, when our financing and sales volume fell by almost 50%.

Ed: We have the business model active management and exceptional team to generate solid results.

William M. Walker: Long-term Outlook, Bold, Highly Ambitious Business Plans. Never stop investing in people and technology, and be mindful that it is often equally as important what you don't do as what you do do. That is what has made W&D such an exceptional company to invest in and what will continue to generate shareholder returns going forward. The market run-up over the last few months reflected widespread views that the Fed's tightening cycle is over and that easing is near. While we believe 2024 will be a better financing and sales environment than 2023, it is way too early to predict when market conditions will return to normal. Just two weeks ago, we saw New York Community Bank dramatically increase their commercial real estate loan loss reserves and cut their dividends. Similarly, publicly traded multifamily REITs saw an average rent decline of 3.4% in Q4.

Ed: As in $300 million and adjusted EBITDA on the year, only 8% below 2022 in challenging markets.

As we stated throughout 2023, we remain focused on our current five year growth plan to drive the 25, including.

Ed: Including growing our debt and property sales volumes scaling our servicing and asset management businesses.

Ed: And scaling our newer businesses of small balance lending appraisals and investment banking.

Ed: Through 2022, we were on path to achieve the financial targets that would drive the 25, including $2 billion of total revenues and $13 a diluted earnings per share.

But the market condition set up set us off course in 2023.

And as we sit here today in a market that still has numerous headwinds generating $13 of EPS in 2025 is going to be extremely challenging.

William M. Walker: And while WND's credit outlook is very solid, and 3.4 negative rent growth in no way impairs any loan in our portfolio, these market data points clearly reflect a market in transition, not stabilized. Therefore, as Greg just outlined, our outlook for 2024 is optimistic, yet cautious. Yet, as we demonstrated in 2023, when our financing and sales volume fell by almost 50%, we have the business model, active management, and exceptional team to generate solid results, as in $300 million in adjusted EBITDA for the year, only 8% below 2022 in challenging markets. As we stated throughout 2023, we remain focused on our current five-year growth plan, the Drive to 25.

Ed: Yet we know we have the people brand and technology to achieve $13 a share of earnings and a robust market, which is very exciting.

Ed: We also have a long history of making significant strategic acquisitions 18 in total we have accelerated our growth such as when we acquired CW capital in 2012, doubling the size of WMD and fully achieving our first five year highly ambitious business plan.

Ed: It's fundamental for investors to understand is that the business strategy underpinning the drive to 25 is the right long term strategy for <unk> and then our team will continue to focus on achieving our ambitious goals with or without a strong macro environment.

Ed: I'd like to finish this call with a couple of points on people and culture.

Ed: Our President Howard Smith retired at the end of the year I want to once again, thank Howard for all of his contributions to WMD and for being such an outstanding executive Steward of our culture and partner to me over the past 20 years.

William M. Walker: Including growing our debt and property sales volumes, scaling our servicing and asset management businesses, and scaling our newer businesses of small balance lending, appraisals, and investment banking. Through 2022, we were on the path to achieve the financial targets of the drive to 25, including $2 billion of total revenues and $13 of diluted earnings per share. But the market conditions set us off course in 2023, and as we sit here today in a market that still has numerous headwinds, generating $13 of EPS in 2025 is going to be extremely challenging. Yet we know we have the people, brand, and technology to achieve $13 a share of earnings in a robust market, which is very exciting. We also have a long history of making significant strategic acquisitions, 18 in total, that have accelerated our growth, such as when we acquired CW Capital in 2012, doubling the size of W&D, and fully achieving our first five-year highly ambitious business plan.

Ed: I want to reiterate my excitement about our current management team. We are blessed to have a wildly talented group of executives at WMD, who love both what they do and the people they work with everyday.

Ed: Third we've been fortunate to recruit some exceptional banking and brokerage talent TWD over the past year from some of our largest and most formidable competitors and their perspective on being part of <unk> is super exciting.

Ed: One broker who joined <unk> at the beginning of the year Rote. It's bunte quote it's abundantly clear that the velocity intentionality level of energy and spirit of growth at WMD is remarkable and unique in the industry. We joined the best platform and are thrilled about our new home.

Ed: <unk>.

Ed: As I reflect back on 2023, I'm deeply thankful for all the hard work and results our team achieved Walker and Dunlop is blessed to be a great company when the most dynamic commercial real estate market on Earth.

William M. Walker: What is fundamental for investors to understand is that the business strategy underpinning the Drive to 25 is the right long-term strategy for W&D and that our team will continue to focus on achieving our ambitious goals with or without a strong macro environment. I'd like to finish this call with a couple of points on people and culture. Our President, Howard Smith, retired at the end of the year.

Ed: The team brand and technology to continue delighting, our clients, beating the competition and growing well.

Ed: We plan to do just that in 2024.

Ed: You all for joining us this morning, I'll now ask Karen to open the line for any questions.

Karen: Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you were using a speaker phone. Please make sure that your mute function is turned off to allow your signal to reach our equipment.

William M. Walker: I want to once again thank Howard for all of his contributions to WND and for being such an outstanding executive, steward of our culture, and partner to me over the past 20 years. Second, I want to reiterate my excitement about our current management. We are blessed to have a wildly talented group of executives at WND who love both what they do and the people they work with every day. Third, we've been fortunate to recruit some exceptional banking and brokerage talent to W&D over the past year from some of our largest and most formidable competitors, and their perspective on being part of W&D is super exciting. One broker who joined W&D at the beginning of the year wrote, "It's abundantly clear that the velocity, intentionality, level of energy, and spirit of growth at W&D is remarkable and unique in the industry."

Karen: Again, you May press star one to ask a question.

Karen: Well pause for just a moment to allow everyone an opportunity to signal.

Karen: We will take our first question from Jade Rahmani with K VW. Please go ahead.

Jade Rahmani: Thank you very much I appreciate the balanced commentary about the outlook I think that's the prudent thing to do wanted to ask about credit how it's holding up I think Greg in your remarks, you did cite seven loans delinquent as of January 2024, how are you all feeling about the outlook.

Jade Rahmani: Have you looked at the portfolio strategy buying by 2021 to 2022 vintages and focusing on geographies with excess supply.

William M. Walker: We join the best platform and are thrilled about our new home. As I reflect back on 2023, I'm deeply thankful for all the hard work and results our team achieved. Walker & Dunlop is blessed to be a great company in the most dynamic commercial real estate market on earth. We have the team, brand, and technology to continue delighting our clients, beating the competition, and growing. And we plan to do just that in 2024. Thank you all for joining us this morning.

Speaker Change: So, yes, I think look.

Speaker Change: Got it.

Speaker Change: No no no great Joe.

Speaker Change: Yes.

Speaker Change: Just going to say look I think that.

Speaker Change: As I said in my remarks, and as we've said for the last few quarters.

Speaker Change: Our credit is holding up well I think seven delinquent loans in our at risk book is on a book of close to 3000 pounds. So.

Speaker Change: We're feeling really good about how our borrowers are performing and how they're capitalized and how their assets are doing.

Operator: I will now ask Karen to open the line for any questions. Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment.

Speaker Change: We are looking at different markets, but most of the ones. We have are going to be longer term longer duration. So the 'twenty one to 'twenty three vintage that you cited there is really going to be.

Operator: Again, you may press star 1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to... We'll take our first question from Jade Rahmani with KBW. Please go ahead. Thank you very much.

Speaker Change: Maturing in five to 10 years.

Speaker Change: That's much farther out them in deals where.

Speaker Change: We're looking at that are maturing in the next two years that are likely our focus just given where the macro it is right now.

Jade Rahmani: I appreciate the balanced commentary about the outlook. I think that's the prudent thing to do. I wanted to ask about credit, how it's holding up. I think, Greg, in your remarks, you did cite seven loans delinquent as of January 2024. How are you all feeling about the outlook? And have you looked at the portfolio stratifying by 2021 to 2022 vintages and focusing on geographies with excess supply? So, yeah, I think, look, God will. No, no, no, Greg, go.

Speaker Change: So again I'll just reiterate what we said on the call and what we've been saying which is <unk>.

Speaker Change: Got real cash flowing assets with over two times debt service coverage ratio low going in Ltvs and limited maturities over the next two years and I think that that has us feeling good about where were positioned at this point of the cycle.

Speaker Change: Yeah, I'd only jumped in behind that and just say, 92% fixed rate.

Speaker Change: So many of the problems that people are seeing right now are on floating rate debt on our at risk portfolio and 92% are fixed rate.

Greg Glorkowski: Yeah, no, Jay, I was just gonna say, look, I think that, as I said in my remarks and as we've said for the last few quarters, our credit is holding up well. I think seven delinquent loans in our at-risk book are on a book of close to 3,000 loans. So we're feeling really good about how our borrowers are performing and how they're capitalized and how their assets are doing. We are looking at different markets, but most of the loans we have are going to be longer term, longer duration. So the 21 to 23 vintage that you cited there is really going to be maturing in five to 10 years.

And then as Greg just said.

Speaker Change: They're not 'twenty, one and 'twenty two vintages are all longer term fixed rate loans.

Speaker Change: And then we only have three point what was a $3 2 billion of loan maturities in the portfolio in 'twenty four 'twenty five so we don't even have significant refi risk in the portfolio on a fixed rate loan that was done at 3% needs to be redone at six 5%. So.

Greg Glorkowski: So that's much farther out than the deals we're looking at that are maturing in the next two years, which are likely our focus just given where the macro is right now. So again, I just reiterate what we said on the call and what we've been saying, which is we've got real cash flowing assets with over two times the debt service coverage ratio, low going in LTVs, and limited maturities over the next two years. And I think that that has us feeling good about where we're positioned at this point in the cycle.

Speaker Change: Generally speaking feeling extremely good but as you well know from covering the broader industry.

Speaker Change: The multifamily industry has credit concerns to it today and particularly deals that were fans in 'twenty, one and 'twenty two with floating rate debt on them and we are very fortunate to not have done a lot of that.

Speaker Change: Okay, and then in terms of the seasonal reserve I know you have to <unk>.

Speaker Change: Factor in.

Speaker Change: Current expectations and the period of loss look back is probably two decades, a period during which there's very.

William M. Walker: Yeah, I'd only jump in behind that, Jade, and just say 92% fixed rate. So many of the problems that people are seeing right now are with floating rate debt. On our at-risk portfolio, 92% is fixed rate. And as Greg just said, The 21 and 22 vintages are all longer term fixed rate loans.

Speaker Change: Strong multifamily credit performance for lots of different reasons, but then when you look at prior periods.

Speaker Change: And early nineties, clearly there was a lot of pressure there.

Speaker Change: Is it reasonable to expect.

Speaker Change: A general uptick in seasonal reserves in the coming quarters. In 2023, there are a lot of releases that took place.

William M. Walker: And then we only have three point, what was it? $3.2 billion of loan maturities in the portfolio in 24 and 25. So we don't even have significant refi risk in the portfolio on a fixed rate loan that was done at 3%, needs to be redone at 6.5%. So, generally speaking, feeling extremely good, but as you well know from covering the broader industry, the multifamily industry has credit concerns today, and particularly deals that will advance in 21 and 22 with floating rate debt on them. And we are very fortunate to not have done a lot of that.

Speaker Change: Yes, I think I would.

Speaker Change: I would say.

Speaker Change: I look back at the last 10 years, which included even during the GSC actually look at it over our entire history and these loss our losses on defaulted loans total in that 30 year period $15 million.

Speaker Change: So we've had an excellent track record of credit.

That includes some of the cycles that youre talking about and included the GSC is included.

Speaker Change: Post Covid and I think ultimately.

Greg Glorkowski: Okay, and then in terms of the Cecil Reserve, I know you have to factor in your current expectations, and you know, the period of loss look back is probably two decades, a period during which there was, you know, very strong multifamily credit performance for lots of different reasons. But then when you look at prior periods, you know, the 80s and early 90s, clearly, there was a lot of pressure there. So is it reasonable to expect a general uptick in Cecil Reserves in the coming quarters? In 2023, there are a lot of releases that's, Yeah, I think I would, I would say, I look back at the last 10 years, which included even during the GSC, right, actually look at it over our entire history, and we've lost our losses on defaulted loans. In total, over that 30 year period, $15 million.

Speaker Change: Our seasonal reserve today is greater than that by <unk>. So we feel like we've got adequate reserves given history, we're absolutely going to continue to moderate monitor the market and the fundamentals one of the reasons.

Speaker Change: I gave the guidance for Q1.

Speaker Change: Was that we arent going to have a release of reserves like we've had the last two or three years.

Speaker Change: And we're expecting to at least maintain that level of reserves.

Speaker Change: On a forward look basis.

Speaker Change: We will continue to take a forward look as you said right now I think our forward look reserves for the next year or two or six or seven times, our average historical loss rate.

Greg Glorkowski: So, we've had an excellent track record of credit that includes, you know, some of the cycles that you're talking about, and it included the GFC, and it included, you know, what happened post-COVID, and I think, ultimately, our CECL reserve today is greater than that by 2x. So, we feel like we've got adequate reserves given our history. We're absolutely going to continue to monitor the market and the fundamentals. One of the reasons I gave the guidance for Q1 was that we were going to have a release of reserves like we've had the last 2 or 3 years, and we're expecting to at least maintain that level of reserves on a forward look basis. We'll continue to take a forward look, as you said.

Speaker Change: So we'll keep an eye on that for sure, but right now I don't see anything more than normal growth.

Speaker Change: Absent some change in the credit fundamentals that we just went through both willing I just talked through.

Speaker Change: Thank you very much.

Speaker Change: Well move to our next question from Kyle Joseph with Jefferies. Please go ahead.

Kyle Joseph: Hey, good morning, Thanks for taking my questions.

Kyle Joseph: First one probably for Greg just wanted to kind of get a little bit more on guidance.

Kyle Joseph: From what from your commentary it sounds like you guys are.

Kyle Joseph: And then kind of flattish agency volume so just wanted to get a sense for <unk>.

Kyle Joseph: Incremental growth there in 'twenty four is that a function of servicing or that.

Kyle Joseph: On the other channels of origination opening up more so than agency.

Speaker Change: Yes, I think.

Speaker Change: Oh, great the area.

Greg Glorkowski: Right now, I think our forward-looking reserves for the next year or two are six or seven times our average historical loss rate. So we'll keep an eye on that for sure. But right now, I don't see anything more than normal growth absent some change in the credit fundamentals that we just went through. You know, both Willie and I just talked. Thank you very much.

Speaker Change: Thanks for joining us. This morning, I think couple of things one as I mentioned, we added 17 bankers and brokers last year, so even even as the market was shifting honest, we were still bringing on talent and making sure that we were bolstering our bankers and brokers. So we think we have an opportunity to gain share even in a flat environment.

Speaker Change: I think importantly.

Speaker Change: There's a lot of deliveries coming online in 2024, and theres going to be an opportunity for our investment sales team.

Greg Glorkowski: We'll move to our next question from Kyle Joseph with Jeffries. Please go ahead. Hey, good morning, Willie, Greg.

Kyle Joseph: Thanks for taking my questions. First one, probably for Greg, just want to kind of get a little bit more guidance from what you said in your commentary. It sounds like you guys are baking in kind of flattish agency volume. So just want to get a sense for, you know, the incremental growth there in 24. Is that, you know, a function of servicing? Or is that kind of other channels of origination opening up more so than agency? Yeah, I think... Kyle, great to hear from you. Thanks for joining us this morning.

Speaker Change: To get involved in some of those deals for merchant builders and help them capitalize those assets.

Speaker Change: There's there's likely to be more capital markets transactions. This year is that in <unk>.

Speaker Change: Prior year, so whilst any I'm sorry, you may not be as active there's certainly market data. The MBA is projecting the market to increase to 350 billion up from multifamily perspective in 'twenty. Four so there is going to be transactions likely brokered or capital markets, obviously behalf.

Speaker Change: Talented team there as well so we will capture our share and I think there is many different ways for us to try to take the diversified platform we have.

William M. Walker: I think a couple of things. One is, I mentioned we added 17 bankers and brokers last year. So even as the market was shifting on us, we were still bringing on talent and making sure that we were bolstering our bankers and brokers. So we think we have an opportunity to gain share, even in a flat environment.

Speaker Change: Deliver those results to generate that growth, even if fannie and Freddie.

Speaker Change: Our flat year on year.

Speaker Change: Yes got it very helpful and then just.

Speaker Change: Let me if I can just add one other quick thing, which is as Greg said I want to reiterate one thing that Greg said in his in his commentary it is ridiculous.

Greg Glorkowski: I think importantly, there's a lot of deliveries coming online in 2024, and there's going to be an opportunity for our investment sales team to get involved in some of those deals for merchant builders and help them capitalize those assets. And I think there's, there will likely be more capital markets transactions this year than in previous years. So while Fannie and Freddie may not be as active, there's certainly market data. The MBA is projecting the market to increase to 350 billion from a multifamily perspective in 24. So there's going to be transactions, likely broker capital markets. Obviously, we have a very talented, talented team there as well.

Speaker Change: That Fannie and Freddie are signaling to the market that their volumes are going to be flat between 2023 and 2024.

Speaker Change: They are in the market to provide counter cyclical capital their role is to provide counter cyclical capital to the market and their capital is needed in this market.

Speaker Change: So while we are reflecting to everyone on this call. What we are hearing from Fannie Mae and Freddie Mac as it relates to their outlook for 2024 and as Greg said, we can't do anything about that outlook other than work with them I just want to underscore the point that as Fannie Mae's largest partner and Freddie Mac's third largest part.

William M. Walker: So we'll capture our share. And I think there are many different ways for us to try to take the diversified platform we have and deliver those results to generate that growth, even if Fannie and Freddie are flat year on year. I want to reiterate one thing that Greg said in his commentary.

Speaker Change: We are seeing the opportunity in the market to meet refinancing needs in a year, where refinancing is up dramatically in the multifamily market as it relates to demand. There is no reason that Fannie and Freddie volume should be the same in 2024 as they were in 2023.

William M. Walker: It is ridiculous that Fannie and Freddie are signaling to the market that their volumes are going to be flat between 2023 and 2024. They are in the market to provide counter-cyclical capital. Their role is to provide counter-cyclical capital to the market, and their capital is needed in this market. So, while we are reflecting to everyone on this call what we are hearing from Fannie Mae and Freddie Mac as it relates to their outlook for 2024, and as Craig said, we can't do anything about that outlook other than work with them, I just want to underscore the point that as Fannie Mae's largest partner and Freddie Mac's third largest partner, seeing the opportunity in the market to meet refinancing needs in a year where I got it. That's helpful.

Speaker Change: Got it that's helpful that makes sense.

Speaker Change: That's a good segue to my next question just on on Slide 11, and the maturity wall.

On multifamily.

Speaker Change: And given your knowledge of the market any any any sort of color you can give us on that.

Speaker Change: On the.

Speaker Change: Quality of this portfolio, whether it's floating versus fixed class a class b and geographic areas and then specifically if there is any I don't know geographic area, you're looking to avoid or target.

Speaker Change: As a result of this upcoming maturity.

Speaker Change: Ladies.

Speaker Change: So if you look at the overall.

Speaker Change: Maturities in 2024.

Kyle Joseph: That makes sense. But yeah, that's a good segue to my next question, just on slide 11 in the maturity wall on multifamily, just you know and given your knowledge of the market, any any any sort of color you can give us on the quality of this portfolio, whether it's floating versus fixed, class A, class B, and geographic areas, and then you know specifically if there's any I don't know geographic areas you're looking to avoid or So if you look at the overall maturities in 2024, Per the Mortgage Bankers Association, in 2023, the 24 number for total commercial real estate refinancing was somewhere in the $600 billion number, $620 billion.

Speaker Change: Per the mortgage bankers Association in 2023, 24 number for total commercial real estate refinancings with somewhere in the $600 billion number 620 billion.

Speaker Change: And about $300 billion of loans that were scheduled to be refinanced in 2023 were pushed to 2024. So the 2024 total commercial real estate refinancing volume is over $900 billion now that's going to present, a significant challenge to the market to find enough.

Speaker Change: Capital across the spectrum to meet that need for financing, particularly as we see banks pull back.

Speaker Change: <unk> had growth in 2023, you probably expect to see continued growth in <unk> life insurance companies had been very very consistent at doing about 10% of the market volume through cycles, even in good times and bad times, when they could actually expand out beyond 10% and the interesting part about the 2020.

William M. Walker: And about $300 billion of loans that were scheduled to be refinanced in 2023 were pushed to 2024. So the total commercial real estate refinancing volume in 2024 is over $900 billion. That's going to present a significant challenge to the market to find enough capital across the spectrum to meet that need for financing, particularly as we see banks pull back. CMBS had growth in 2023. You'd probably expect to see continued growth in CMBS. Life insurance companies have been very, very consistent at doing about 10% of the market's volume through cycles, even in good times and bad times when they could actually expand out beyond 10%.

For refi is that the agencies Fannie and Freddie have a very small amount of deal flow in their own books that is maturing in 'twenty four and so the opportunity for us in 'twenty four is to go out and take refinancing opportunities from the competition.

Speaker Change: And to your specific question Kyle.

Speaker Change: What those loans look like.

Speaker Change: How much new equity needs to go into them to refinance them or preferred equity.

Speaker Change: Sure.

Speaker Change: A recapitalization is the real question.

William M. Walker: And the interesting part about the 2024 refi is that the agencies, Fannie and Freddie, have a very small amount of deal flow in their own books that are maturing in 2024. And so the opportunity for us in 2024 is to go out and take refinancing opportunities from the competition. And to your specific question, Kyle, what those loans look like, how much new equity needs to go into them to refinance them, or preferred equity, or a recapitalization is the real question.

Speaker Change: And I think that.

Speaker Change: We've got the team we've got the capital as it relates to both first trust financing as well as anything above that whether it be in AR.

Speaker Change: And Ah mezz mezzanine or preferred equity.

Speaker Change: Our position.

Speaker Change: To be able to meet borrowers needs.

Speaker Change: But theres no doubt that a lot of those deals that are coming up for maturity in 'twenty four.

Speaker Change: Unfortunately, not in our portfolio, but a lot of them are going to need some type of structured finance to get them refinanced out.

William M. Walker: And I think that we've got the team, and we've got the capital as it relates to both first trust financing as well as anything above that, whether it be in a mezzanine or preferred equity position, to be able to meet borrowers' needs. But there's no doubt that a lot of those deals that are coming up for maturity in 24, fortunately not in our portfolio, but a lot of them are going to need some type of structured finance to get them refinanced. A really helpful caller. Thanks for taking my questions. If you find that your question has been answered, you may remove yourself from the queue by pressing star 2.

Really helpful color. Thanks for taking my questions.

Speaker Change: If you find that your question has been answered you may remove yourself from the queue by pressing star to once again, if you would like to ask a question you may join the queue by pressing star.

Speaker Change: Well move to our next question from Steve Delaney with citizens JMP. Please go ahead.

Steve DeLaney: Thanks, Hey, good morning, everyone and great news on the dividend increase in the buyback Willy I was wondering on the buyback I'm looking back to the end of 'twenty, one you haven't repurchased any shares over that period.

Operator: Once again, if you would like to ask a question, you may join the queue by pressing star 1. We'll move to our next question from Steve DeLaney with Citizens JMP. Please go ahead.

Steve DeLaney: Obviously, the last year or so it was sort of uncertain environment, that's understandable, but as far as your execution as you're talking to the board.

Steve DeLaney: Good morning, everyone, and great news on the dividend increase and the buyback. Willie, on the buyback, looking back to the end of 21, you haven't repurchased any shares over that period. Obviously, the last year or so was sort of an uncertain environment. That's understandable.

Steve DeLaney: Should we think about the buyback as being opportunistic or programmatic given where you sit today. Thank you.

William M. Walker: Good morning, Steve always nice to have you on the call.

William M. Walker: But as far as your execution, as you're talking to the board, should we think about the buyback as being opportunistic or programmatic, given where you sit today? Thank you. Good morning, Steve, always.

Steve: Yes, Sir.

Speaker Change: We talked about just this issue yesterday as you know, Steve because you've covered us for.

Speaker Change: Quite some time.

William M. Walker: It's nice to have you on the call. Yes, sir. We talked about just this issue yesterday. As you know, Steve, because you've covered us for quite some time, we have a track record of being opportunistic in buying back stock. As Greg underlined in his comments, our cash position at the end of the year is very strong, and as he just reiterated in the response to Jade's question on credit, we feel very, very good as it relates to our credit provisions and our credit outlook. So with that said, the board said we would authorize $75 million of potential share buybacks. I would not think it would be programmatic, Steve, as we see how the year goes.

We have a we have a track record of being opportunistic in buying back stock.

Speaker Change: As Greg underscored in his comments, our cash position at the end of the year is very strong.

Speaker Change: And as he just reiterated in the response to Jades question on credit we feel very very good as it relates to our credit provisions in our credit outlook.

Speaker Change: So with that said the board said, we were authorized $75 million.

Speaker Change: Potential share buybacks.

Speaker Change: I would not think it will be programmatic Steve.

Speaker Change: As we see how the year goes I would also say to you that if we start to see the growth that we expect as rates come down and as transaction volume picks up.

Steve DeLaney: I would also say to you that if we start to see the growth that we expect as rates come down and as transaction volume picks up, we could find ourselves in a more programmatic situation. But for now, the authorization, I would say, is more opportunistic than programmatic. Got it. And Greg, you gave me a figure. I probably didn't get that right.

Speaker Change: We could find ourselves in a more programmatic situation, but for now the authorization I would say is more opportunistic than programmatic.

Speaker Change: Got it.

Speaker Change: And Greg you gave a figure I, probably didnt get these right I know Willie commented on $13 of EPS by 2025, you mentioned 300 million I believe of earnings for 2024 in both cases are you referring to the earnings or the.

Greg Glorkowski: I know Willie commented on $13 of EPS by 2025. You mentioned $300 million of earnings for 2024. In both cases, are you referring to earnings or EPS on a gap basis, as we, I think, all tried to convert to over the second half of last year? For clarity, on whether we're talking about GAP or some other measure.

Speaker Change: EPS on a GAAP basis, as we I think all tried to convert to over the second half of this of last year.

Speaker Change: Just for clarity on if we're talking about GAAP or some other measure.

Greg: Yes, Steve when we gave the Jonathan Yes, we have not yet implemented adjusted core EPS. So we're trying to balance the transition from GAAP to adjusted core, but we're continuing to refer to GAAP as we we give guidance, but in my remarks I did give.

Steve DeLaney: Yes, Steve, when we gave the job, yeah, we had not yet implemented the adjusted core EPS. So we're trying to balance the transition from gap to adjusted core, but we're continuing to refer to gap as we give guidance. But in my remarks, I did give similar full-year guidance for adjusted EBITDA and adjusted core EPS to gap diluted EPS, all in the mid single or mid single digits to low TPS. Got it. And just for clarification, when you define your at-risk portfolio, I assume that's your bridge book, as well as your Fannie Mae law sharing. Is there anything else in there that I'm missing?

Greg: Similar full year guidance for adjusted EBITDA, and adjusted core EPS too.

Greg: GAAP diluted EPS all in the mid single mid single digits to low teens.

Speaker Change: Got it and just the final thing for clarity.

Speaker Change: When you define your at risk portfolio I assume that Youre Bridge book.

As well as your Fannie Mae loss sharing is there anything else in there that.

Greg Glorkowski: That's exclusively, we have $40 million of bridge loans left on our balance sheet. And then the vast majority of our at-risk book is the Fannie Mae portfolio, nearly $60 million. We got it. Willie, I know, you know, there are 20 some of these commercial mortgage REITs out there. Like everything in life, there's some really good and some really bad. Most of their problems are obviously office or maybe some hotel, not so much multifamily.

Speaker Change: I'm missing.

Speaker Change: That's exclusively we have $40 million of bridge loans left on our balance sheet.

Speaker Change: And then the.

Speaker Change: The vast majority of our at risk book as the Fannie Mae portfolio nearly $60.

Speaker Change: Got it.

Speaker Change: Theres 20, some of these commercial mortgage Reits out there like everything in life, there's some really good in some some really bad.

Speaker Change: Most of their problems are obviously office or maybe some hotel not not so much multifamily, but I think both with see them reach and even the commercial banks.

Steve DeLaney: But I think both the CM REITs and even the commercial banks are in kind of a pullback, hunker down mode on anything other than residential real estate. Is this a year or the next two years for WD to maybe step up a little bit in non-agency multi-family or single-family residential housing, given the fact that capital flows from those two industry sectors are likely to be constrained? I would say, Steve, yes, but with a very significant asterisk or caveat to that statement, which is just that... We've been super disciplined in the risk that we've been willing to take. And as, again, I'd reiterate, you know from watching us at various times over the past 13 years as a publicly traded company, there have been lots of opportunities for us to step in and do office loans, to do floating rate CLO And at every turn, we've sort of said that's just not the risk profile of WND, and it has paid massive benefits. And believe me, I met with, you know, plenty of investors in 21 and 22 who watched what some of the CLO originators were doing and said, oh, you're missing market share. You're not growing fast enough.

Speaker Change: I think there'll be there's they're in kind of a pullback hunker down mode on anything other than residential real estate.

Speaker Change: Is this a year or the next two years for W. D. Two.

Speaker Change: To maybe step up a little bit in <unk>.

Speaker Change: Non agency multifamily or single family residential housing given the fact that.

Speaker Change: Capital flows from those two industry sectors are likely to be constrained.

Speaker Change: I would say, Steve, yes, but with a very significant.

Speaker Change: Asterix or caveat to that statement, which is just that.

Speaker Change: We've been Super disciplined in the risks that we've been willing to take.

Speaker Change: Again, I'd reiterate you know from watching us in various times over the past 13 years as a publicly traded company.

Speaker Change: There have been lots of opportunities for us to step in and do office loans to do.

Speaker Change: Floating rate CLO loans.

Speaker Change: And at every turn we've sort of said that's just not the risk profile of <unk> and it has paid massive benefits.

And believe me I met with plenty of investors in 'twenty, one and 'twenty, two who watch what some of the CLO originators were doing and said Oh, you're missing market share youre not growing fast enough.

William M. Walker: And we said, that's fine. That's not a risk that we want to take. We don't like the fundamentals of that business when interest rates are this low and the credit loss that you would incur by doing those loans is that high. So I think the bottom line, as you well know, we're not going to look at anything; we'll look at everything. And we have plenty of other capital providers coming to us saying, hey, you've got the distribution network; can we give you a pool of capital to go deploy? And depending on the risk sharing agreement, depending on how much we're getting paid for the risk we're taking, we will obviously underwrite all of that and make decisions on what we will and won't do. But I think your general comment is exactly right.

Speaker Change: And we said that's fine that's not a risk that we want to take we don't like the fundamentals of that business. When interest rates are this low and the credit loss that you would incur by doing those loans is that high.

Speaker Change: So.

Speaker Change: I think the bottom line as you will know we're not going to not look at anything we'll look at everything and we have plenty of other capital providers coming to us, saying, Hey, you've got the distribution network.

Speaker Change: When we give you a pool of capital to go deploy and depending on the risk sharing agreement depending on.

Speaker Change: How much were getting paid for the risk were taking we will obviously underwrite all of that and make decisions on what we will and wont do.

Speaker Change: But I think your general comment is exactly right I think there will be plenty of opportunities, but I would also reiterate to investors that you're invested in a company that takes a very conservative credit outlook and while the opportunity may present itself that does not necessarily mean that W. D is going to do it.

William M. Walker: I think there will be plenty of opportunities, but I would also reiterate to investors that you're invested in a company that takes a very conservative credit outlook, and while the opportunity may present itself, that does not necessarily mean that W&D is gonna do it. Thank you both for the color and congratulations on a solid close to a difficult year for everyone.

Speaker Change: Well. Thank you both for the color and congrats on a solid close a solid close to a difficult year for everyone.

Speaker Change: Thanks, Steve Thanks, Steve.

Steve DeLaney: Thanks, Steve. We'll move to our next question with Jay McCandless from Wedbush Securities. Please go ahead. Hey, good morning, everyone.

Speaker Change: So I'll move to our next question with Jay Mccanless from Wedbush Securities. Please go ahead.

Jay Mccanless: Hey, good morning, everyone. Thanks for taking my questions. Greg could you talk to the I think you said.

Jay Mccanless: Thanks for taking my questions. Greg, could you talk about the, I think you said, potentially for 1Q somewhere between 40 to 60 cents in earnings, maybe talk about what would have to happen to get to the high end versus the low end of that range? Yeah, thanks for joining us this morning, Jay. Certainly, I think ultimately it's a matter of what transaction activity is going to look like in the first quarter, and then whether some of our other businesses, whether it be investment banking, can generate some fees in the first quarter, or what our dispositions or syndication activity looks like in our affordable business. So there's a range there because we've got obviously different opportunities within the platform, but those are the big variables. I'd say it's transaction activity and then the likelihood of other revenue streams from either affordable or investment banking coming through.

Jay Mccanless: Tinsley for <unk> somewhere between 40 to 60 cents in earnings maybe talk about what what would have to happen to get to the high end versus the low end of that range.

Greg: Yes, thanks for joining us.

Greg: Jay.

Greg: Certainly I think ultimately it's a matter of what transaction activity is going to look like in the first quarter and then whether some of our other businesses.

Speaker Change: Whether it be investment banking can generate some fees in the first quarter, what our dispositions were syndication activity looks like in our affordable business. So there's a range there because we've got obviously different opportunities within the platform.

But those are the big variables I would say.

Speaker Change: As transaction activity.

Speaker Change: And then the.

The likelihood of other revenue streams from either affordable or investment that can come through.

Okay.

Speaker Change: And then maybe just.

Greg Glorkowski: And then maybe just for the full year and underpinning some of the full year assumptions, maybe talk about where you guys think the 10-year ends up and are we going to continue to see some of this volatility we've seen, just trying to get a sense of what your assumptions were for the full year guide regarding EPS and EBITDA. So, I'll jump in there. Good. So, Jay, the... A couple things.

Speaker Change: For the full year and underpinning some of the full year assumptions maybe talk about.

Speaker Change: Where are you guys thinking the 10 year ends up and are we going to continue to see some of this volatility we've seen just trying to get a sense of.

Speaker Change: What your assumptions were for the full year guide regarding EPS and EBITDA.

Speaker Change: So I'll jump in there Greg.

So Jay.

Greg: A couple of things first of all.

William M. Walker: First of all, I talked about this on the Walker webcast yesterday with some of my colleagues. We were out at NMHC, the National Multifamily Housing Council, meeting with a number of W&D clients who are sitting on a pile of capital. There's so much equity capital sitting out there to be deployed. And in one of the meetings, one of the clients said, you know, we're not active right now because we don't like negative leverage. And my question to the individual was, okay, let's play this out. We get a Fed funds rate cut; the Fed funds rate comes down. Do you really think the 10-year rallies much from here if the Fed starts to cut?

Greg: I talked about this on the Walker webcast yesterday with some of my colleagues we were out at an MHC. The national multifamily housing Council meeting and meeting with a number of W. And the clients who are sitting on a pile of capital pile of capital. There's so much equity capital sitting out there to be deployed and then one of the meetings one of the clients had.

Speaker Change: We're not active right now because we don't like negative leverage.

Speaker Change: And my question to the individual was okay, let's let's play this out we get a fed funds rate cut the fed funds rate comes down do you really think the 10 year rally's much from here if the fed starts to cut the client sort of said, maybe a little bit I said, great. So do you think that cap rates are gonna stay standstill, when you get a rally in.

William M. Walker: The client sort of said maybe a little bit. I said, Great. So do you think that cap rates are going to stay still when you get a rally on the short end of the curve as well as the long end of the curve?

Speaker Change: In the short end of the curve as well as the long end of the curve and the clients had to me know and I said. So then when do you think youre going to get yourself back to a positive leverage position.

William M. Walker: And the client said to me, "No. And I said, "So then when do you think you're going to get yourself back to a positive leverage position?" And the client said, Well, you know, you make a good point. And then the client said, we probably ought to be taking a look at acquisition based on IRR and on replacement costs, and not so much on negative leverage. And I think that we're seeing more and more people realize that if you want to deploy capital into this market, you should probably assume that the 10-year sits somewhere in the band that it's been in for, you know, the last month and a half, which is obviously it's gotten down into the high threes, but just say four to 425 to your specific question of where do you think the 10-year goes this year. 10 years shouldn' It really shouldn't have.

Speaker Change: And the client said well you make a good point.

Speaker Change: And then the client said, we probably ought to be taking a look at acquisition based on IRR and on replacement cost and not so much on negative leverage.

Speaker Change: And I think that we're seeing more and more people realize that if you want to deploy capital into this market that you should probably take into assumption that the 10 year sit somewhere in the band that it's been in for the <unk>.

Speaker Change: Last month, and a half which is obviously, it's gotten down into the high threes, but just say four to $4 25 to your specific question of where do you think the 10 year goes this year 10 year shouldn't move that much as the short end of the curve comes down.

Speaker Change: It really shouldnt I have a big bet with one of our clients. He thinks the 10 years at $3 50 at the end of the year I think it's closer to 450 at the end of the year and as I said to him I win both ways. If you if it's at $3 50, we're going to be doing a ton of business and I'm happy to pay you my losses and if it support the FDI win the bet.

William M. Walker: I have a big bet with one of our clients. He thinks the 10 years at 350 at the end of the year. I think it's closer to 450 at the end of the year. And as I said to him, I win both ways. If you give him 350, we're going to be doing a ton of business, and I'm happy to pay you my losses. And if it's 450, I win the bet.

William M. Walker: The point being is I think that the amount of dry powder sitting on the sidelines realizes that it needs to move. There is a dramatic amount of refinancing volume that is deeds capital this year, which is why I underscore the point that Fannie and Freddie say they think they're going to do the same amount of volume in 24 as they did in 23, which to us is a ridiculous statement. And then the final piece to it is that if you do get rates coming down, it is going to provide some relief to floating rate borrowers, which will make the credit outlook better, which should then stabilize the sales market and get transaction volumes coming back bigger. But that is not a prerequisite to overall financing volumes picking up in 24 from 23, just based on the volume of loans that need to be redone.

Speaker Change: The point being there is I think that the amount of dry powder sitting on the sidelines realizes that it needs to move.

Speaker Change: There is a dramatic amount of refinancing volume that is the capital this year, which is why I underscore the point that Fannie and Freddie saying, they think theyre going to do the same amount of volume in 'twenty four 'twenty three to us as a as a.

Speaker Change: Ridiculous statement.

Speaker Change: And then the final piece to it is that if you do get rates coming down is going to provide some relief to.

Speaker Change: Floating rate borrowers, which will make the credit outlook, better, which should then stabilize the sales market and get transaction volumes coming back to bigger but that is not.

Speaker Change: A prerequisite.

Speaker Change: Two overall financing volumes picking up in 23 from <unk> 24 from 23, just based on the volume of loans that need to be redone and so the name of the game for 'twenty for us is refinancings and going out and getting them and as we have underscored in these comments and in our public statements we.

William M. Walker: And so the name of the game for 24 is refinancing loans and going out and getting them, and as we have underlined in these comments and in our public statements, we don't have a lot of refinancings in our portfolio. So what we need to do, and have done very consistently in the past, is go out and refinance loans that are sitting in other people's portfolios. And in one instance, fortunately, with banks, some of them don't want to redo those loans, so those aren't difficult in the sense of trying to pull them away.

Speaker Change: Don't have a lot of refinancings in our portfolio.

Speaker Change: What we need to do and have done very consistently in the past is go out and refinance.

Speaker Change: Loans that are sitting in other people's portfolios.

Speaker Change: And in one instance, fortunately with banks some of them don't want to redo those loans. So those arent difficult in the sense of trying to pull them away and other situations, where there are other lenders who have as you know.

William M. Walker: In other situations where there are other lenders who have as solid a company as Walker & Dunlop and as positive an outlook as Walker & Dunlop, there's stiff competition to win those deals away from them and will be competing for them. Great. Thank you, Willie.

Speaker Change: As solid a company is Walker and Dunlop and is positive and outlook as Walker and Dunlop their sip competition to win those deals away from them and what can be competing for them.

Speaker Change: Great. Thank you Ali.

Speaker Change: With all the Buzz recently about rent regulated properties in New York City is there any exposure on Walker and Dunlop is balance sheet to those regulated entities and <unk> R.

Jay Mccanless: With all the buzz recently about rent-regulated properties in New York City, is there any exposure on Walker & Dunlop's balance sheet to those rent-regulated entities, or are there going to be some potential opportunities with the debt fund you recently raised to get involved in that market? On number one, no, as it relates to our agency portfolio, first of all, we don't have a lot of exposure to New York in our agency portfolio. Agencies have never been terribly competitive in that market.

Speaker Change: Are there going to be some potential opportunities with the debt fund you recently raised to get involved in that market.

Speaker Change: Number one no as it relates to our first of all we don't have a lot of exposure to New York and our agency portfolio agencies had never been terribly competitive in that market. So as it relates to our Fannie Mae at risk portfolio.

William M. Walker: So as it relates to our Fannie Mae at-risk portfolio, I don't have an actual number in front of me, but from having been in this company for a very long period of time, we do not have a lot, or anything in that. I can't say anything. We have very limited exposure in our at-risk portfolio on Fannie Mae loans in New York City.

Speaker Change: I don't have an actual number in front of me, but I can tell you from having.

Speaker Change: Having been in this company for a very long period of time, we do not have a lot of anything in that I can't say anything, but we have very limited exposure in our at risk portfolio on Fannie Mae loans in New York City as it relates to our bridge portfolio I'm quite certain we have none so no rent control risk as it relates to New York City is it a market that we'd like to.

William M. Walker: And as it relates to our bridge portfolio, I'm quite certain we have none. So no rent control risk as it relates to New York City. Is it a market that we'd like to dive into? That's a good question.

Speaker Change: Dive into.

Speaker Change: Yeah, It's a good question.

Jay Mccanless: In the affordable housing space, we actually love the affordable housing space, and with operators who understand how to work in a rent-controlled market, those are great loans. On more market-based deals, you got to make sure that you're lending to the proper operator who understands the market they're in. And so while there are probably opportunities, I go back to what I said to Steve previously. We're going to look at everything. If we like the risk-adjusted returns, we'll do the deal. But investors shouldn't expect Walker & Dunlop to back up the bus on risky deals in challenging markets just because we can make a loan. Great. And then the last question I had...

Speaker Change: The affordable housing space.

Speaker Change: We actually loved the affordable housing space and with operators, who understand how to work in a in a rent controlled.

Speaker Change: Market.

Speaker Change: A great loans.

Speaker Change: On more market based deals.

Speaker Change: You got to make sure that you are lending to the proper operator, who understands the market they're in.

Speaker Change: And so while there is probably opportunities I'd go back to what I said to Steve previously, we're going to look at everything if we like the risk adjusted returns we will do the deal.

Speaker Change: But the investors shouldn't expect Walker now off the back up the bus on risky deals in challenging markets, just because we can do alone.

Speaker Change: Great and then.

Speaker Change: The last question I had.

Speaker Change: Thank you.

William M. Walker: I think it. You know, when I asked you about this before, Willie, you were kind of... Not as positive as some people, but office conversions continue to be a topic of conversation in the general press, and it looks like there's some funds being committed toward it. Would love to get your updated thoughts on that space, and are there opportunities for Walker & Dunlop to get involved there if you feel like, if you have a more positive outlook on that now? Look, I mean, we did a deal in Q4, Jay, that was in L.A.

Speaker Change: When I've asked you about this before Willy you were kind of.

Speaker Change: Not as positive as some people, but office conversions continues to be a topic of conversation in the general press and it looks like Theres some funds being committed towards that would love to get your updated thoughts on that space.

Speaker Change: Are there opportunities for Walker and don't want to get involved there. If you feel like if you have a more positive outlook on that now.

Speaker Change: Looked at I mean, we did a deal in Q4 J that was.

Speaker Change: In L. A.

William M. Walker: It was an office conversion, and we did the takeout loan. Wells Fargo had done the actual construction conversion loan, and we did an agency takeout on the property. Fantastic property. It had a couple very unique things about it. The owner had owned it since the early 1990s, so the cost basis in the building was exceedingly low.

Speaker Change: It was an office conversion and we did that take out loan.

Speaker Change: Wells Fargo had done the actual construction conversion loan and we did a we did an agency take out on the property fantastic property.

Speaker Change: <unk> had a couple of very unique things to it the owner had owned it since the early 1990, so the cost basis in the building was exceedingly low.

William M. Walker: The second piece to it is that it had a small footprint, so the conversion from office to multi-unit was very, if you will, applicable or doable given the smaller footprint. And the final piece to it is that he had the zoning to be able to do it. And we love doing that, and we will continue to do that with people who are as talented and successful as that borrower has been in the office to multi-conversion. I think that the reason I've been somewhat, if you will, tempered in my comments about it is just that a lot of people are saying, Oh, that's the solution for all this office inventory. And I don't believe that it is. There are a ton of office buildings that are impaired because of the footprint, because of the location, and because of the cost base.

Speaker Change: The second is it was a small footprint. So the conversion from office to multi was very.

Speaker Change: If you are applicable or doable, given the smaller footprint.

Speaker Change: And the final piece to it is he.

Speaker Change: He had the zoning to be able to do it.

Speaker Change:

Speaker Change: And we love doing that and we will continue to do that on people who are as talented as successful as that borrower has been in the office to multi conversion I think.

The reason I've been somewhat.

Speaker Change: He will tempered on my comments about it is just that a lot of people are saying Oh, that's the solve for all this office inventory and I don't believe that it is there is a ton of office buildings that are impaired because of the footprint because of the location and.

Speaker Change: And because of the cost basis.

William M. Walker: And so what I'm just saying is people shouldn't think that this is the panacea for creating a whole bunch of new supply and multifamily by converting these office buildings into multifamily properties. But I do see an opportunity for us to do good loans like we did in Q4 on the one that I just outlined of a takeout loan on a very good conversion. And then the final thing is, would we put construction debt into the actual conversion process? Sure, with the appropriate operator and with an asset that was primed for conversion, we'd find the capital and put it into that type of a deal to help someone get that done.

Speaker Change: So what I'm, what I'm, just saying is people shouldn't think that this is the panacea for creating a whole bunch of new supply in multifamily by converting these office buildings into multi family properties, but I do see an opportunity for us to do good loans like we did in Q4 on the one that I just outlined.

Speaker Change: Take out loans.

Speaker Change: Very good conversion.

And then the final thing is would we put construction debt into the actual conversion process sure with the appropriate operator, and with an asset that was prime for conversion.

Speaker Change: We'd find the capital and put it into that type of a deal to.

Speaker Change: To help someone get that done.

William M. Walker: Great. Very helpful, guys. I appreciate it.

Speaker Change: Great very helpful guys I appreciate it.

Speaker Change: Okay.

Speaker Change: Thank you. It appears there are no further questions at this time I'd like to turn the conference back over for any additional or closing remarks.

Operator: There are no further questions at this time. I'd like to turn the conference back over to you for any additional or closing remarks. I thank everyone, particularly those who asked questions this morning. Thank you very much for your time and interest in W&V. Congratulations again to the W&V team on a very solid Q4 and 2023. And we look forward to talking to you all after Q1 2024. And I hope everyone has a great day. This concludes today's call. Thank you again for your participation. You may now disconnect. Have a great day!

Speaker Change: I think everyone, particularly those who ask questions. This morning. Thank you very much for your time and.

Speaker Change: And interest in WMD, Congrats again to the WNBA team on a very solid Q4, and 2023 and we look forward to talking to you all after our Q1 2024 and I hope everyone has a great day.

Speaker Change: This concludes today's call. Thank you again for your participation you may now disconnect and have a great day.

Speaker Change: [music].